2009 (7) TMI 596 - AT - Central Excise

Remission of duty- the assessee had claimed remission of duty of Rs.9,73,080/- on finished goods, semi-finished goods, inputs and packing materials on the ground that these goods were destroyed in fire on 19-1-2004. While this claim was pending with the Commissioner, the party pursued an insurance claim before the in the latter proceedings, there was a surveyor s report dated 29-1-2005 wherein the loss and damages had been assessed. Subsequently, on 25-4-2005, the department issued a show cause notice to the assessee demanding duty of Rs.9,73,080/- on the finished goods claimed to be destroyed in fire/removed clandestinely . This notice also demanded duty of Rs.3,16,889/- on the packing materials and other chemicals claimed to be destroyed in fire/removed clandestinely . Interest on the above amounts was also demanded under Section 11AB of the Central Excise Act. Penalty was proposed under Rule 25 of the Central Excise Rules, 2002/Rule 13 of the CENVAT Credit Rules, 2002. Held that- The challenge against the remission of duty of Rs.8,17,271/- on the finished goods is rejected and the condition attached to the remission of duty in para 32(i) of the order is set aside.The decision recorded in para 33 of the Commissioner s order is set aside and the question whether the assessee should be required to reverse any CENVAT credit on raw materials (inputs) and packing materials destroyed in fire and, if so, to what extent is remanded to the Commissioner for fresh adjudication in accordance with law and the principles of natural justice.Both the appeals are disposed of in the above terms.

Issues:
1. Remission of duty on goods destroyed in fire
2. Validity of demand of duty on destroyed inputs and packing materials
3. Interpretation of Tribunal's Larger Bench decision in Grasim Industries case
4. Calculation of duty and validity of conditions attached to remission

Issue 1: Remission of duty on goods destroyed in fire
The judgment addresses the remission of duty on goods destroyed in a fire incident. The Commissioner allowed remission of duty on finished goods destroyed in a fire, but the Revenue appealed against it. The Tribunal observed that the show cause notice did not conclusively prove that the goods were clandestinely removed, as it relied on a surveyor's report indicating destruction in fire. The Tribunal upheld the remission of duty on finished goods amounting to over Rs. 8.17 lakhs, as the Revenue failed to provide alternative calculations to dispute the Commissioner's quantification.

Issue 2: Validity of demand of duty on destroyed inputs and packing materials
The dispute also involved a demand of Rs. 3,16,889 on destroyed inputs and packing materials. The Tribunal found a need for a re-adjudication by the Commissioner as the records indicated a dispute on this demand. The Commissioner's observation that there was no dispute was deemed incorrect, and the issue was remanded for fresh adjudication.

Issue 3: Interpretation of Tribunal's Larger Bench decision
The judgment discussed the Tribunal's Larger Bench decision in the Grasim Industries case, which held that there was no provision for reversing credit on inputs when remission was allowed on finished goods destroyed due to accidents or natural causes. The Commissioner's reliance on a notification to alter this interpretation was deemed invalid as the notification had prospective effect and did not impact relief claimed based on the Larger Bench decision.

Issue 4: Calculation of duty and validity of conditions attached to remission
Regarding the conditions attached to the remission of duty, the Tribunal set aside a specific condition as it contradicted the Tribunal's Larger Bench decision. The judgment emphasized the need for adherence to legal principles and natural justice in re-adjudicating the demand of duty on destroyed inputs and packing materials.

In conclusion, the Tribunal rejected the challenge against the remission of duty on finished goods, set aside certain conditions, and remanded the decision on the demand of duty on destroyed inputs and packing materials for fresh adjudication. Both appeals were disposed of accordingly.

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