2017 (9) TMI 450 - AT - Central Excise

Remission of duty - Rule 21 of CER, 2002 - due to the bursting of outlet valve of Tank No.2 on 08/04/2008 58365.56 Qtls of Molasses was lying in the open surface on sandy soil around the tank - Held that - Rule 21 of the CER, 2002 provides for remission of duty where the goods have been lost or destroyed by natural causes or by unavoidable accident or are claimed by the manufacture as unfit for consumption or for marketing, at any time before removal - reliance placed in the case of U. P. State Sugar Corporation Ltd. 2012 (6) TMI 758 - CESTAT NEW DELHI wherein it was held that nobody deliberately would indulge in an exercise which may result in huge loss and that the view while interpreting Rule 21 of the CER, 2002 the authorities are required to be liberal and that the restrictive construction to Rule 21 would make it inoperable and redundant - the present case is fit for remission of duty under Rule 21 of the Central Excise Rules, 2002 - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Appeal against Order-in-Original rejecting remission application for Central Excise duty.
2. Interpretation of Rule 21 of the Central Excise Rules, 2002 regarding remission of duty.
3. Assessment of whether the goods were lost or destroyed due to unavoidable accident.

Analysis:
The appeal was directed against an Order-in-Original rejecting a remission application for Central Excise duty amounting to ?45,08,739.51 due to damage to Molasses stored in Tank No.2. The appellant's application for remission was made under Rule 21 of the Central Excise Rules, 2002, citing damage caused by an outlet valve body failure. The Revenue issued a Show Cause Notice alleging negligence by the appellant. The Original Authority held that regular examination could have prevented the damage, and the appellant failed to establish that the goods were unfit for consumption or unmarketable. Consequently, the duty demand was confirmed in the impugned order.

During the hearing, the appellant's counsel presented a report from the National Sugar Institute, Kanpur, highlighting the reasons for the valve failure. The counsel relied on a previous tribunal case and emphasized the need for a liberal interpretation of Rule 21 to avoid making it redundant. The counsel argued against the Commissioner's observation regarding the marketability of the goods based on contradictions in the Show Cause Notice.

After considering the arguments and facts, the Member (Technical) assessed whether the remission application under Rule 21 should be granted. It was noted that the Molasses had become unmarketable as admitted by the Revenue. Following the precedent set by the President of CESTAT in a similar case, the Member concluded that the case warranted remission under Rule 21. Consequently, the impugned Order-in-Original was set aside, and the appeal was allowed, entitling the appellant to consequential relief as per law.

In conclusion, the judgment focused on the interpretation of Rule 21 of the Central Excise Rules, 2002, in the context of remission of duty due to unavoidable accidents or goods becoming unfit for consumption. The decision highlighted the need for a liberal approach in such cases to prevent making the rule inoperable and redundant.