2019 (3) TMI 243 - AT - Central Excise

Remission of duty - molasses lost due to accident - Rule 49 of the Central Excise Rules - bursting of the tank and the consequent loss of molasses - Avoidable accident or not? - Held that - There is no dispute that rise in temperature can lead to a rise in storage tank pressure which in turn lead to an explosion of the tank. It is not the case of the Revenue that the Appellants are habitually negligent, due to which such losses or destruction of this nature had also occurred in past - As per the first proviso of Rule 49 the manufacturer shall on demand pay duty leviable on any goods which are not shown to the satisfaction of the proper officer to have been lost or destroyed by natural causes or by unavoidable accidents during handling or storage. The finding of the learned Commissioner that the Appellant had been negligent in safeguarding molasses is not reasonable as the Appellant s stake in the destroyed molasses was much higher than the stake of the Revenue. Nobody would deliberately indulge in such act or exercise which may result in huge loss and therefore while interpreting Rule 49 the authorities are required to be liberal. All the accidents occurred due to lack of protections of the personnel responsible for avoiding such accidents and nobody indulges in such accidents purposely. If the observation as made by the learned Commissioner is accepted then it would make the said rule redundant. It is not the case of the Revenue that there is any malafide on the part of the Appellant to make the accident occur resulting in loss of molasses - Although in the impugned order, the learned Commissioner has mentioned that there were negligence on the part of the Appellant but on what material this finding has been given is lacking in the order. The finding recorded by the learned Commissioner in the impugned order, while rejecting the Appeal filed by the Appellant, is not sustainable. The expression Natural causes or Unavoidable accidents used in Rule 49 of the erstwhile Central Excise Rules,1944 have to be interpreted in their ordinary and natural connotation in reasonable manner to sub-serve the object of legislature in introducing the remission of duty. An unavoidable accident is an event which lies beyond the control of the assesee and which has taken place despite the exercise of due and reasonable care and protection - In view of the facts as well as the communication by the sugar institute and also in view of the statements of civil engineer, It is found that the accident which has caused the loss of the molasses to the Appellant was unavoidable. Appeal allowed - decided in favor of appellant.

Summary

Issues involved: Remission of duty on molasses lost due to accident.

Analysis:
1. The appeal was filed by the appellant against the Order-in-Original confirming the demand of Central Excise duty due to the loss of molasses in an accident. The appellant, engaged in sugar and molasses manufacturing, experienced an explosion in one of their tanks, causing a significant loss of molasses. The technical team attributed the accident to the formation of carbon dioxide gas, leading to bursting of the tank. The appellant applied for remission of duty, but the revenue issued a show cause notice alleging negligence and demanded duty payment.

2. The Adjudicating Authority confirmed the duty demand, stating that the appellant failed to demonstrate that the loss was due to natural causes or unavoidable accident. In response, the appellant argued that the accident was unforeseeable and referred the matter to an institute for analysis. The appellant contended that certain accidents, like tank bursting due to carbon dioxide gas, are unavoidable despite precautions. They highlighted that standard tests cannot prevent such accidents and emphasized the civil engineer's statement regarding tank maintenance practices.

3. The main issue revolved around whether the appellant could have prevented the accident leading to molasses loss. The appellant argued that the rise in hydrostatic pressure due to carbon dioxide gas formation was beyond their control, making the accident unavoidable. The Chief Sugar Technologists supported this claim, noting similar incidents in the industry worldwide. The Tribunal emphasized that an unavoidable accident is one beyond the assessee's control, occurring despite reasonable care. The Tribunal found the accident in this case to be unavoidable, allowing the appeal and granting any consequential relief.

4. The Tribunal criticized the Adjudicating Authority's finding of negligence, stating that the accident was not deliberate and did not involve malice. The Tribunal stressed the need for a liberal interpretation of rules like Rule 49 to account for unforeseeable accidents. Ultimately, the Tribunal ruled in favor of the appellant, considering the expert opinions and technical analysis provided to support the claim of an unavoidable accident leading to molasses loss.

5. In conclusion, the Tribunal allowed the appeal, overturning the duty demand and acknowledging the accident as an unavoidable event beyond the appellant's control. The decision highlighted the importance of interpreting legal provisions in a reasonable manner to serve the legislative intent behind remission of duty in cases of genuine unavoidable accidents.