2024 (10) TMI 909 - AT - Customs

Recovery of differential duty with penalty - suppression of fact of the fire accident which had occurred in their factory premises on 10.6.2011 with an intention to evade payment of customs duty - HELD THAT - The charge by revenue that the appellant claimed insurance for the goods destroyed by fire shows that the fire accident and loss of goods has been correctly made by the appellant and it was not a case of a false claim. The department should have examined the survey report and the insurance Co s final settlement order before coming to a conclusion. The survey report No. MSPL/F/UH/6217/SE/2011 dt 14/11/2011 is quite detailed and has not been shown to be false. There is no allegation that the goods on which duty was demanded had been diverted for other purposes. Hence this charge does not hold good. No proof has been submitted by revenue that the appellant had received insurance money towards the tax amounts involved. The appellant has stated that their claim for CVD and ED was disallowed and the claim for the damage for material alone was accepted - Merely stating that the appellant claimed insurance including the taxes paid on goods with an intention to get double benefit, will not suffice. Revenue should have proved their case with documentary proof, which could easily have been collected. However, with the survey report stating to the contrary, this charge of revenue is rejected. A Coordinate Bench of this Tribunal in NATIONAL ORGANIC CHEMICAL INDUS. LTD. VERSUS CC., (IMPORT), MUMBAI 1999 (5) TMI 388 - CEGAT, MUMBAI held that the benefit of the Notification concerned, could not be denied in respect of goods which were intended for use for manufacture of the final product but could not be so used due to shortage or leakage. The demand cannot sustain, and the question of imposing fine and penalty does not arise. The impugned orders are set aside - Appeal allowed.

Summary

Issues:
- Failure to intimate department about loss of goods due to fire
- Allegation of claiming insurance for goods destroyed by fire with intention to evade duty
- Allegation of not using impugned goods in the manufacture of kraft paper

Analysis:

The appeal was filed against an order demanding differential duty and penalty for the import of waste paper under a concessional rate of duty. The appellant's unit experienced a fire accident leading to the destruction of imported waste paper. The appellant notified the department immediately after the fire accident, fulfilling the requirement under Rule 21 of Central Excise Rules and Section 23 of Customs Act, 1962. The appellant argued that the imported waste paper was intended for use in the manufacture of kraft paper, meeting the conditions of the end-use based exemption Notification. The appellant cited relevant Supreme Court cases and a Tribunal decision to support their argument that duty cannot be demanded when goods intended for use are destroyed due to unavoidable accidents like fire.

The Tribunal found that the appellant had indeed informed the department about the loss of goods due to fire through email and written correspondence. The department's allegation that the appellant claimed insurance for the destroyed goods with an intention to evade duty was unfounded, as there was no proof that the appellant received insurance money towards the tax amounts involved. The Tribunal emphasized that mere assumptions and allegations do not constitute proof, and the department failed to provide documentary evidence to support their claim.

Regarding the allegation that the impugned goods were not used in the manufacture of kraft paper, the Tribunal referred to legal precedents to establish that goods intended for use but destroyed by unavoidable accidents like fire are eligible for remission of duty. The Tribunal highlighted that destruction by fire is considered an unavoidable accident, and the impugned goods being destroyed did not violate the conditions of the undertaking given. Therefore, the demand for duty was deemed unsustainable, and the appeal was allowed with consequential relief as per law.

In conclusion, the Tribunal set aside the impugned orders, ruling that the demand for duty cannot be sustained, and there was no basis for imposing fines or penalties. The judgment was pronounced in open court on 15.10.2024.