2018 (6) TMI 179 - AT - Central Excise

Remission of duty - loss of material due to flood in the factory - remission application was rejected on the ground that documents such as survey report, insurance claim papers etc. were not submitted by the assessee - penalty u/s 11AC of CEA - Held that - Once the insurance claim was filed and the same was processed, all the proceeding of insurance claim itself is sufficient to establish that the goods were destroyed in flood. Therefore, no further document is required - However, as per the finding of the Commissioner, insurance related documents were not submitted by the assessee. In these circumstances, the remission matter needs to be reconsidered. Penalty u/s 11AC - Held that - This is admitted case of loss of goods in flood. In this fact, the ingredient to invoke the penalty under Section 11AC does not exist, as it is beyond the control of the assessee that the goods were lost in flood - penalty not invocable. Appeal allowed by way of remand.

Summary

Issues:
1. Appeal against the demand of duty confirmed on the loss of material due to flood in the factory.
2. Appeal against rejection of remission claim ordered by the Commissioner (Appeals).
3. Revenue's appeal seeking to uphold the penalty imposed under Section 11AC of the Central Excise Act, 1944.

Analysis:

Issue 1: Appeal against the demand of duty confirmed on the loss of material due to flood in the factory:
The case involved the destruction of finished goods, goods in process, and raw material due to a flood in the factory. The assessee claimed insurance for the loss, which was allowed. The demand of duty was confirmed, and the Commissioner (Appeals) upheld it. The appeal was filed against this decision. The counsel for the assessee argued that the goods were indeed destroyed in the flood, supported by the insurance claim and books of account. The Tribunal observed that the insurance claim itself should suffice to establish the loss due to the flood. However, the remission application was rejected as necessary documents like insurance claim papers were not submitted. The Tribunal directed the assessee to produce all records related to the insurance claim for reconsideration of the remission application and the consequent demand.

Issue 2: Appeal against rejection of remission claim:
The rejection of the remission claim was based on the failure to submit essential documents alongside the application. The counsel for the assessee contended that the insurance claim should have been adequate evidence for granting remission. The Tribunal agreed that the insurance claim should have been sufficient and directed the Commissioner to reevaluate the remission application with all relevant documents provided by the assessee.

Issue 3: Revenue's appeal on penalty under Section 11AC:
The Revenue sought to uphold the penalty imposed under Section 11AC. The Superintendent (AR) argued that once the demand was confirmed, the penalty was inevitable. However, the Tribunal noted that the loss of goods in the flood was not due to clandestine removal, making the imposition of penalty under Section 11AC inappropriate. The Tribunal upheld the Commissioner (Appeals)'s decision to drop the penalty, emphasizing that penalty imposition was not justified in the circumstances of the case.

In conclusion, the Revenue's appeal was dismissed, while the assessee's appeals were allowed for remand to the adjudicating authority for reconsideration based on the submission of necessary documents related to the insurance claim.