2017 (11) TMI 748 - AT - Central Excise

Recovery of the amount paid by the insurance company as excise duty to the appellant - the appellant has received certain amount on account of excise duty on the capital goods lost in fire on 03.05.2008 and the duty has been demanded by invoking provisions of Section 11D (1A) of Central Excise Act, 1944 - Held that - Admittedly, as per Section 3 of the Central Excise Act, 1944, duty is to be paid by the assessee on manufactured goods. The capital goods in question were never manufactured by the appellant. Therefore, in the hands of appellant the capital goods in question is not an excisable goods. As the goods in question are not excisable goods, therefore, provisions of Section 11D (1 A) are not applicable to the facts of this present case - demand not sustainable. The insurance company has given the claim as per the agreement between the appellant for replacement of capital goods lost in fire, which includes excise duty element. If appellant is purchasing capital goods they were required to pay excise duty thereon. Therefore, there is no double benefit as availed by the appellant. In that circumstance, the impugned order has no merits. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against demand under Section 11D (1) of the Central Excise Act, 1944 based on insurance claim for excise duty paid on capital goods destroyed in fire.

Analysis:
The appellants procured capital goods against EPCG licenses, some domestically and some through licenses, and obtained a refund of terminal excise duty. After a fire destroyed the goods, they claimed insurance, which included excise duty. The Revenue claimed the insurance amount as payable under Section 11D (1A) of the Act, alleging double benefit. The Adjudicating authority upheld the demand, citing the refund of duty and insurance claim. The appellant contended that as they did not manufacture or sell the goods, Section 11D (1A) does not apply. They argued that the duty refund was based on export obligations, and the insurance claim was for replacement, not double benefit. Citing legal precedents, they challenged the Revenue's stance.

The dispute centered on whether the appellant collected duty on excisable goods from the insurance claim. The Tribunal noted that duty is paid on manufactured goods, and as the appellant did not manufacture the capital goods, they were not excisable goods in their hands. Therefore, Section 11D (1A) did not apply. The Tribunal found that the appellant had paid duty, obtained refunds, and fulfilled export obligations. The insurance claim covered replacement costs, including excise duty, without resulting in double benefit. Consequently, the demand under Section 11D (1A) was deemed unsustainable, and the impugned order was set aside.

In conclusion, the Tribunal allowed the appeal, providing consequential relief. The decision clarified that the appellant did not avail double benefits and that the insurance claim for excise duty on non-excisable goods did not contravene the Act.