2002 (2) TMI 150 - AT - Central Excise

Summary

Issues:
1. Liability of Central Excise duty and penalty due to a fire accident causing damage to sugar stored in a factory godown.
2. Determination of the cause of the fire accident and the responsibility of the party in preventing it.
3. Admissibility of duty demand on damaged sugar claimed to be unfit for human consumption.

Issue 1: Liability of Central Excise duty and penalty:
The appellants manufactured V.P. Sugar and Molasses, with a fire accident on 8-2-97 causing damage to stored sugar. The District Fire Officer attributed the accident to careless smoking, leading to a demand notice for Central Excise duty and penalty under relevant rules. The Commissioner confirmed the duty demand and imposed a penalty, holding the party liable for violating rules. The appellants appealed against this order.

Issue 2: Determination of the cause and responsibility:
The Chief Fire Officer's report supported the claim of careless smoking causing the fire accident, which the party did not refute. The Commissioner found the party negligent in providing safety measures, attributing the accident to avoidable causes. The Commissioner upheld the duty demand and penalty based on the party's failure to prevent the accident due to carelessness, rejecting claims of other potential causes like electric short circuit or welding work.

Issue 3: Admissibility of duty demand on damaged sugar:
The appellants argued that the damaged sugar was unfit for human consumption post-accident, hence no duty should be demanded. The Commissioner acknowledged the extensive damage to stored sugar but still demanded duty on salvageable quantity. The Commissioner's order did not consider the provision allowing remission of duty on goods claimed unfit for marketing. The appellate tribunal, however, noted the unfit status of the damaged sugar and the lack of duty demand grounds, setting aside the duty demand and penalty imposed.

In conclusion, the appellate tribunal allowed the appeal, overturning the duty demand and penalty imposed by the Commissioner, emphasizing the unfit status of the damaged sugar and the lack of grounds for duty demand or penalty under the circumstances of the fire accident.