2006 (1) TMI 25 - AT - Central Excise

Central Excise Goods destroyed due to fire (1) Demand of duty (2) Citing of wrong statute (3) Show cause notice

Summary

Issues involved:
1. Interpretation of Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacturing of Exported Goods) Rules, 2001.
2. Liability to pay duty on goods destroyed in a fire accident under Notification No. 1/95-C.E.
3. Proper drafting of show cause notice invoking relevant legal provisions.

Analysis:
1. The case involved a dispute regarding the liability to pay duty on goods destroyed in a fire accident under Notification No. 1/95-C.E. and the interpretation of Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacturing of Exported Goods) Rules, 2001. The Revenue contended that Rule 6 of the mentioned Rules bars duty concession for goods lost or destroyed by natural causes. The Tribunal analyzed the provisions of Rule 6 and found that while the Respondents were liable to pay the duty, it should be recovered in accordance with Rule 6. However, the Tribunal noted that the show cause notice did not properly invoke Section 11A of the Central Excise Act or Rule 6 of the Rules, making it defective. As a result, the Tribunal rejected the Revenue's appeal due to the deficiencies in the drafting of the notice.

2. The Tribunal specifically addressed the issue of liability to pay duty on goods destroyed in a fire accident under Notification No. 1/95-C.E. The Tribunal noted that while there was no problem with dropping the demand of Customs duty, there was a dispute regarding the duty foregone on indigenously procured goods. The Tribunal highlighted that Rule 6 of the Central Excise Rules applies to cases where goods are not used for the intended purpose, and the duty should be recovered accordingly. The Tribunal emphasized the need for proper invocation of legal provisions in the show cause notice to establish liability accurately.

3. The Tribunal extensively analyzed the drafting of the show cause notice and its compliance with relevant legal provisions. It pointed out that the notice did not reference Section 11A of the Central Excise Act or Rule 6 of the Central Excise Rules, which were crucial for determining the liability to pay duty on the destroyed goods. The Tribunal emphasized the importance of clarity and precision in drafting such notices to ensure that the legal basis for demanding duty is adequately established. Due to the deficiencies in the show cause notice, the Tribunal concluded that the Revenue's appeal could not be upheld.

In conclusion, the judgment focused on the proper application of legal provisions, specifically Rule 6 of the Central Excise Rules, in determining the liability to pay duty on goods destroyed in a fire accident. The Tribunal highlighted the significance of accurately invoking relevant legal provisions in show cause notices to establish liability and emphasized the need for clarity and precision in such legal documents.