2023 (4) TMI 656 - AT - Central Excise

Remission of duty on the goods lost in fire accident which occurred on 22-01-1998, rejected - denial on the ground that Appellant have failed to produce details in respect of claim of excise duty from insurance company - Rule 49 of Central Excise Rules, 1944 - HELD THAT - From the rule it is clear that where excisable goods have been destroyed or lost by natural causes or by unavoidable accidents and the proper officer is satisfied about the same, duty shall not be demanded. In this case it is not in dispute that the goods were destroyed due to fire accident and it is on record that the accident has taken place due to electric short circuit. In the present matter Ld. Commissioner for rejecting the remission of duty held that assessee could have saved the goods by storing in a approved store room. Hence the loss was indefinitely avoidable and goods could have been saved. The loss of the excisable goods in the instant case cannot be attributable to un-avoidable loss due to natural causes. Assessee kept the excisable goods in the temporary godown made up of Bamboo Poles and Tarpaulin. Thus it reveals that it was grave lapse on the part of the assessee for not taking precautions for keeping safe place. 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 excisable goods is not reasonable as the appellant s stake in the destroyed goods 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. For rejection of remission of duty Ld. Commissioner take the ground that Appellant stored the goods in store -room without obtaining the permission for storing of excisable goods. However the Rule 47 of Central Excise Rules 1944 provide that a manufacturer shall provide a store-room or other place of storage at his premises for depositing goods made on the same premise without payment of duty. Here, the word same premises means factory in which the goods are manufactured - there are force in argument of Ld. Counsel that as per the Notification No. 2/93 dtd. 13.02.1993 power to approve store room under rule 47(3) was delegated to Superintendent of Central Excise who was also licensing authority. In the present matter license was granted by the Superintendent as per procedure and he approved the ground plan. The same should be considered as sufficient approval for the purpose of storing the goods in the factory. The facts that the goods was stored in the temporary store room and panchnama drawn by the Superintendent of Central Excise is not disputed. In the panchnama proceeding nowhere it was mentioned that the goods was stored outside the factory premises. Therefore in our view on this ground remission of duty cannot be denied. In the matter of SHAKTI SPINNERS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, LUDHIANA 2004 (3) TMI 129 - CESTAT, NEW DELHI the tribunal by relying the judgment of SPORTKING INDIA LTD. VERSUS COMMISSIONER OF C. EX., CHANDIGARH-I 2002 (7) TMI 136 - CEGAT, NEW DELHI held that The perusal of the Rule 49 reveals that the goods should be either stored in the storage room or any other approved premises for the purpose of claiming remission of duty in the event of destruction of goods by fire or any other natural cause. The factory being the approved premises where the goods were lying at that time therefore, the appellants' claim for remission of duty could not be rejected. The crucial fact admitted by both the sides in this case is that the goods in question was destroyed due to fire within the licensed premises /factory premises and the appellant had duly informed the Central Excise officers and the loss was duly evaluated. Under the circumstances, there was no question of demanding any duty. The position in law is very clearly stated in Rule 49 according to which duty is chargeable only on removal of the goods from factory premises or from an approved place of storage - no duty was demandable irrespective of what the insurance companies had done or not done. Therefore, the Ld. Commissioner is obviously wrong in denying the remission of duty by observing that the Appellant have failed to produce details in respect of claim of excise duty from insurance company. In this regard, the arguments of Ld. Counsel also agreed upon, that insurance claim having no bearing on claim for remission of duty. The judgments relied upon by the Ld. Counsel in this context squarely applicable. There was no cause for demand of duty from appellant in the instant case - the Commissioner s order is misconceived and incorrect in law as well as in fact - Appeal allowed.

Summary

Issues Involved:
1. Remission of duty on goods lost in fire under Rule 49 of Central Excise Rules, 1944.
2. Compliance with Rule 44 and Rule 47 of Central Excise Rules, 1944.
3. Impact of insurance claims on remission of duty.

Summary:

1. Remission of Duty on Goods Lost in Fire:
The appellant, a manufacturer of glass bottles and vials, appealed against the rejection of their remission of duty claim by the Commissioner of Central Excise, Surat. The fire incident occurred on 02.01.1998, and the appellant promptly informed the Superintendent of Central Excise and filed for remission under Rule 49. The Deputy Commissioner initially confirmed the demand for duty, but the Commissioner (Appeals) stated that the decision was premature. The Commissioner later rejected the remission application, prompting the appellant's appeal to the tribunal.

The tribunal found that Rule 49 allows for remission of duty if goods are lost or destroyed by natural causes or unavoidable accidents, provided the proper officer is satisfied. The fire was deemed accidental due to an electric short circuit, and the appellant was not found negligent. The tribunal emphasized a liberal interpretation of "natural causes" and "unavoidable accidents," ruling that the fire accident met these criteria.

2. Compliance with Rule 44 and Rule 47:
The Commissioner had observed that the appellant contravened Rule 44 and Rule 47 by storing duty-paid and non-duty-paid goods together in a temporary godown. However, the tribunal found no such contravention and noted that the entire factory, including the temporary godown, was an approved premise. The tribunal cited previous judgments supporting that goods stored within factory premises qualify for remission under Rule 49.

3. Impact of Insurance Claims on Remission of Duty:
The Commissioner had also rejected the remission claim on the grounds that the appellant failed to provide details of the excise duty claimed from the insurance company. The tribunal noted that insurance claims have no bearing on the remission of duty, referencing several judgments that supported this view. The tribunal concluded that the Commissioner's order was incorrect in law and fact, and set it aside, allowing the appeal with consequential relief.

Conclusion:
The tribunal ruled in favor of the appellant, stating that the fire accident qualified as an unavoidable accident under Rule 49, and there was no contravention of Rule 44 and Rule 47. The tribunal also held that insurance claims do not affect the remission of duty, thus allowing the appeal with consequential relief. The judgment was pronounced on 11.04.2023.