2022 (11) TMI 596 - AT - Central Excise

Remission of duty - incidence of fire and loss - case of negligence or not - Rule 21 of the Central Excise Rules, 2002 - HELD THAT - The incidence of fire and the loss of goods due to fire are undisputed. Under the facts and circumstances the fire was caused due to sparks, which have come out from the transformer due to stormy weather condition. On such fire incidence the appellant had no control nor such incidence were avoidable on the part of the appellant. The appellant was manufacturing since 1992 at the said premises and this was the first incidence of fire, which has occurred. Further, as per the report of the Fire Department, no case of negligence has been made out against the appellant. The loss has occurred including the loss of finished goods due to natural causes and/or by unavoidable fire accident and further the partially damaged goods were rendered unfit for human consumption being medicines, and were also unfit for marketing - the appellant is entitled to remission as provided under Rule 21 of the Central Excise Rules, 2002. Consequently the demand of duty of the matching amount is also set aside alongwith penalty. Appeal allowed.

Summary

Issues involved:
- Duty demand on goods lost in fire
- Imposition of penalty under Section 11AC
- Demand of interest under Section 11AA
- Rejection of remission claim
- Negligence leading to loss due to fire
- Appeal against the Adjudication Order
- Entitlement to remission under Rule 21 of the Central Excise Rules

Analysis:

The appellant, a manufacturer of Ayurvedic medicines, faced a fire incident resulting in the loss of finished goods due to sparks from a transformer. The appellant promptly informed the authorities and filed an insurance claim for the loss. The Revenue issued a show cause notice demanding duty on the lost goods, penalty, and interest. An ex-parte order confirmed the duty demand and penalty, which the appellant contested by filing a remission claim before the jurisdictional Commissioner. The remission claim was rejected, leading to an appeal against the rejection.

The Commissioner (Appeals) dismissed the appeal, citing negligence on the part of the appellant as the reason for the loss due to fire. The appellant then appealed to the Tribunal, arguing that the fire incident was beyond their control, caused by sparks from the transformer during stormy weather. They contended that they took necessary steps to mitigate the loss but could not prevent the damage to finished goods, rendering them unfit for consumption and marketing.

After considering the arguments, the Tribunal found that the fire and loss of goods were undisputed, caused by an unavoidable accident. The report from the Fire Department did not establish negligence on the appellant's part. The Tribunal concluded that the loss occurred due to natural causes and an unavoidable fire accident, making the appellant eligible for remission under Rule 21 of the Central Excise Rules. Consequently, the demand for duty and penalty were set aside.

In light of the above findings, the Tribunal overturned the impugned orders, allowing both appeals in favor of the appellant. The appellant was granted remission as per the Central Excise Rules, and the duty demand along with the penalty was revoked.

This comprehensive analysis highlights the legal journey of the appellant from the fire incident to the successful appeal before the Tribunal, emphasizing the key arguments, findings, and outcomes of the case.