2009 (6) TMI 539 - AT - Central Excise

Demand and Penalty- A fire took place in the assessee s factory on 25th July, 2005 and finished goods were damaged. A show cause notice dated 14th June, 2006 was issued proposing demand of duty of Rs. 1,29,303/-. Original authority confirmed the demand of duty and imposed penalty of Rs. 15,000/- along with interest. The Commissioner (Appeals) set aside the demand of duty and penalty but, the assessee was directed to pay back input credit taken by them on steel tubes destroyed in the fire. Revenue filed this appeal against setting aside the duty and penalty. Assessee filed appeal against direction of reversal of input credit. Held that- It is seen that the Commissioner is empowered to remit the duty payable on such goods. The assessee has not filed any application under Rule 21 of the Rules. The Commissioner (Appeals) cannot exercise power under Rule 21 of the Rules. Hence, the order of the Commissioner (Appeals) is not sustainable. The order of the original authority is to be restored. In view of the above discussion, order of the Commissioner (Appeals) is set aside and the order of the original authority is restored. However, considering the facts and circumstances of the case, penalty of Rs. 15,000/- imposed upon the assessee is set aside. Appeal filed by the assessee is rejected.

Issues:
1. Duty demand and penalty imposition after goods damaged in a fire.
2. Interpretation of Rule 21 of Central Excise Rules, 2002 regarding remission of duty.
3. Commissioner's authority to remit duty in case of goods destroyed by natural causes.
4. Applicability of Rule 21 in the absence of an application for remission.
5. Setting aside of penalty imposed on the assessee.

Analysis:
1. The judgment pertains to a case where a fire in the assessee's factory caused damage to finished goods, leading to a duty demand of Rs. 1,29,303/- and a penalty of Rs. 15,000/- imposed by the original authority. The Commissioner (Appeals) set aside the duty demand and penalty but directed the assessee to repay input credit taken on destroyed goods, prompting appeals from both the Revenue and the assessee.

2. The learned D.R. argued that Rule 21 of the Central Excise Rules, 2002 allows for remission of duty in cases of goods lost or destroyed by natural causes. He contended that the Commissioner has the power to remit duty but highlighted the absence of any application for remission by the assessee. This lack of application, according to the D.R., renders the Commissioner (Appeals) unable to set aside the duty demand and penalty.

3. The Member (J) agreed with the D.R.'s submission, citing Rule 21(2) which empowers the Commissioner to remit duty on goods lost or destroyed by unavoidable circumstances. Since the goods were destroyed in a fire, the Commissioner had the authority to remit the duty payable, but as the assessee did not file an application under Rule 21, the Commissioner (Appeals) could not exercise this power. Consequently, the original authority's order was deemed appropriate for restoration.

4. The judgment concluded by setting aside the Commissioner (Appeals) order, restoring the original authority's decision, and rejecting the appeal filed by the assessee. However, in consideration of the case's circumstances, the penalty of Rs. 15,000/- imposed on the assessee was also set aside. The judgment was dictated and pronounced in open court, providing a clear resolution to the issues raised in the appeal.

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