1993 (4) TMI 171 - AT - Central Excise

Summary

Issues Involved:
1. Whether the shortage of cigarettes was due to theft or clandestine removal.
2. Whether theft can be considered an "unavoidable accident" under the Central Excise Rules, 1944.
3. Whether Rule 9(2) of the Central Excise Rules, 1944, can be invoked for the duty demand.

Detailed Analysis:

Issue 1: Shortage of Cigarettes - Theft or Clandestine Removal
The Deputy Collector adjudicated that the respondents were aware of the potential for worker theft yet did not take adequate measures to prevent it. The Deputy Collector concluded that the cigarettes were removed in contravention of Rule 9(1) and were not lost due to natural causes or unavoidable accidents. Conversely, the Collector (Appeals) found that the department could not prove clandestine removal and considered the probable cause to be theft, relying on the Tribunal's decision in Mahendra and Mahendra v. Collector. The appellate tribunal noted that the adjudicating authority also seemed convinced that theft had occurred rather than clandestine removal, as evidenced by the Deputy Collector's observations about worker pilferage over time.

Issue 2: Theft as an "Unavoidable Accident"
The appellate tribunal examined whether theft could be considered an "unavoidable accident" under Rule 49. The tribunal referred to multiple precedents, including decisions from the Delhi High Court and the Calcutta High Court, which interpreted "lost or destroyed" in a broad sense, encompassing theft. The tribunal noted that the majority view supports the inclusion of theft under "unavoidable accident," despite some contrary opinions. The tribunal also considered the security measures taken by the respondents, including regular checks by the security staff, and concluded that the theft was an unavoidable accident, as it occurred despite reasonable precautions.

Issue 3: Invocation of Rule 9(2)
The appellate tribunal analyzed Rule 9(1) and Rule 9(2) of the Central Excise Rules, 1944, which pertain to the time and manner of duty payment and raising a demand if goods are removed otherwise than as provided in sub-rule (1). Rule 49 stipulates that duty is chargeable only when goods are removed from the factory premises unless they are shown to have been lost or destroyed by natural causes or unavoidable accidents. The tribunal noted that the department's appeal did not provide substantial grounds to challenge the Collector (Appeals)' decision. The tribunal concluded that the plea of theft is valid for remission of duty under the circumstances described.

Conclusion:
The appellate tribunal upheld the order of the Collector (Appeals), finding no grounds for interference. The tribunal rejected the Revenue's appeal and disposed of the cross-objections filed by the respondents, which were in the nature of replies to the grounds of appeal without seeking counter relief. The final judgment concluded that the shortage of cigarettes was due to theft, considered an unavoidable accident, and thus Rule 9(2) could not be invoked for the duty demand.