2023 (7) TMI 153 - AT - Central Excise

Remission of duty - valuation on account of damage by fire (finished goods and semi-finished goods lost) - correctness of value of stocks considered for claim by the Insurance Surveyor - Rule 21 of Central Excise Rules, 2001 - HELD THAT - The Appellant s unit was undergoing severe labour unrest on 27.01.2012. A mob had gathered and violent incidents took place and huge damage was incurred for the assets of the Appellant. The mob had committed arson and also spread the fire within the factory premises which has resulted in total loss of more than Rs.300 Crores for the Appellant. The Appellant has filed the claim for more than Rs.300 Crores with the Insurance Company. The insurance valuer initially arrived at damage as only Rs.16.58 Crores. Being agitated by the same, the Appellants have approached the Arbitral Tribunal who have considered all these facts and then finally arrived at their damage for Rs.157 Crores and awarded this compensation to the Appellant. From a harmonious reading of the Rule would clarify that when the loss is caused by natural causes or unavoidable accident, the Assessee should be granted remission of duty. Coming to the factual matrix of this case, it is very clear that the arson indulged in by the mob of the workers was absolutely not an act which could have been avoided or controlled by the Management of the Appellant. The very fact that Appellant has lost assets worth about Rs.300 Crores (as per their estimate) for Rs.157 Crores (as estimated by the Arbitral Tribunal) shows that damage has been caused only on account of the situation which was completely unavoidable and was nowhere within the control of the Appellant - Though the Insurance Company has paid only a very paltry amount of Rs.16.5 Crores towards compensation, on Appeal before Arbitral Tribunal, which was headed by the eminent Ex-Supreme Court Judges, has come to a conclusion that the amount of damage caused to the extent was more than Rs.157 Crores. This is a fit case where the Appellant should have been granted the benefit of remission under Rule 21 of Central Excise Rules, 2002 and no Duty demand should have been confirmed - Appeal allowed.

Summary

Issues Involved:
1. Jurisdiction of CESTAT Hyderabad vs. CESTAT Chennai.
2. Remission of duty under Rule 21 of Central Excise Rules, 2002.

Jurisdiction Issue:
The Appellant's Advocate raised the issue of whether the Appeal should be heard in CESTAT Hyderabad or CESTAT Chennai due to a change in Cause Title. After detailed arguments and consideration of statutory provisions, it was clarified that jurisdiction for cases from Yanam lies with Hyderabad CESTAT, and for cases from Puducherry, it lies with CESTAT Chennai.

Remission of Duty Issue:
The Appellants, manufacturers of ceramic glazed tiles, faced significant damages during a violent incident at their factory. The Central Excise Authorities demanded duty payment for the goods lost in the violence. The Appellants claimed remission of duty under Rule 21 of Central Excise Rules, 2002, due to the unavoidable nature of the damage. The Arbitral Tribunal awarded compensation for the losses suffered, indicating the severity of the situation. Considering the facts and the insurance claim details, the Tribunal found that the Appellants should be granted remission under Rule 21, setting aside the duty demand and allowing the Appeal.

This judgment clarifies the jurisdiction of CESTAT Hyderabad and CESTAT Chennai for cases from specific regions and highlights the application of Rule 21 of Central Excise Rules, 2002 in granting remission of duty in cases of unavoidable losses due to external factors.