2017 (11) TMI 274 - AT - Central Excise

Remission of duty - penalty u/s 11AC - Held that - The estimate given by the appellants is an estimate of the stock it had before the flood and after the flood, which does not mean that the goods have been destroyed in flood. This difference would also include the goods which could not be accounted for various reasons. In these circumstances, no option but to rely on the estimate given by the insurance company. The appellants would be entitled to the remission of the quantum estimated by the insurance company and for the balance they would be required to pay the duty - appeal allowed by way of remand.

Summary

Issues:
Appeal against rejection of application for remission of duty, imposition of penalty and interest on duty for destroyed goods.

Analysis:
The appellants appealed against the rejection of their application for remission of central excise duty and the imposition of penalty and interest on goods destroyed due to floods. The appellants initially applied for remission on 27.07.2005, but proper verification was hindered by floodwaters. Subsequently, they filed another application on 08.08.2005 with details of the damaged goods. Despite multiple verification attempts, it was challenging to assess the damage as the goods had been crushed and made unfit for use. The Commissioner rejected the remission application, leading to a demand notice for central excise duty. The appellants paid under protest, and the demand was confirmed by the adjudicating authorities. The penalty imposed was reduced by the first appellate authority. The appellants argued that due to the floods, it was impossible to assess the damage accurately, as the goods were destroyed to facilitate factory operations. They cited a Tribunal decision and mentioned that the insurance claim might have been settled but was not produced.

The appellant's counsel contended that the assessment of damage was based on stock records before and after the floods, as physical verification was not feasible due to the destruction of goods. The Revenue's representative highlighted the appellants' lack of cooperation during verification, as they failed to provide evidence of the damaged goods promptly. The Revenue promptly sent a team for verification after the application was filed, but the evidence had already been destroyed by then. The Tribunal noted that while the occurrence of the flood and the destruction of goods were undisputed, the quantum of goods destroyed was contentious. The Revenue relied on the appellant's estimate of the damaged goods to demand duty payment, indicating acceptance of the quantum for remission purposes. However, the actual quantity of goods destroyed remained disputed. The Tribunal emphasized the importance of the insurance report as an independent estimate of the goods lost, which would provide an accurate assessment. The appellants were directed to rely on the insurance company's estimate for remission purposes and pay duty for the balance. The appeal was allowed for remand to the original adjudicating authority to consider the insurance report and reassess the matter.

The judgment concluded by disposing of both appeals through remand, allowing for further examination based on the insurance report to determine the remission and duty payment for the destroyed goods.