2014 (12) TMI 821 - AT - Central Excise

Remission of duty - Fire accident - remission application of the appellant is denied only on the grounds that the accident was avoidable and that appellant has claimed the incidence of duty from the insurance Company - Held that - police authorities has filed the fire case as an accident after due investigation. Even Insurance Company has also settled the claim of the appellant and has not raised the objection that fire accident was avoidable or that there was any negligence on the part of the appellant. Negligence on the part of the appellant could be attributed if they were required to take certain actions/ precautions as per laws of the land but they failed to take such precaution/ action. Therefore, we do not agree with the view of the department from the facts and circumstances of the case that the fire accident was avoidable . So far as the second issue of payment of excise duty from the Insurance Company is concerned, it has been clearly spelt out by the Insurance Company that the excise duty element and VAT was not paid to the appellant. Learned AR during argument stressed that appellant has not reversed the Cenvat credit taken on the inputs, which were contained in the finished goods, as per Rule 3(5C) of the Cenvat Credit Rules, 2004. Appellant has fairly conceded reversal/ payment of cenvat credit under Rule 3(5C) if their prayer for remission of duty is allowed under Rule 21 of the Central Excise Rules, 2002. - Decided in favour of assessee.

Summary

Issues involved:
1. Remission of duty application filed by the appellant.
2. Rejection of remission application by the Adjudicating authority.
3. Payment of excise duty from the Insurance Company.
4. Reversal of Cenvat credit taken on inputs.
5. Principles of natural justice in issuing orders.

Issue 1: Remission of duty application filed by the appellant:
The appellant, engaged in manufacturing excisable final products, filed a remission application under Rule 21 of the Central Excise Rules, 2002, due to a fire accident in their factory. The police and Insurance Company treated the incident as an accident, without attributing negligence to the appellant. The appellant's consultant argued that the fire was unavoidable, and the appellant had taken necessary precautions. Case laws were cited to support the argument that a liberal view should be taken for remission in such cases.

Issue 2: Rejection of remission application by the Adjudicating authority:
The Adjudicating authority rejected the remission application, citing the fire accident as avoidable due to human error and the appellant's claim of duty incidence from the Insurance Company. The appellant contended that the remission request should be allowed before reversing Cenvat credit under Rule 3(5C) of the Cenvat Credit Rules, 2004.

Issue 3: Payment of excise duty from the Insurance Company:
The Insurance Company settled the appellant's claim but did not pay the excise duty element and VAT. The Adjudicating authority argued that the appellant did not reverse the Cenvat credit taken on inputs in the finished goods destroyed, as required by Rule 3(5C) of the Cenvat Credit Rules, 2004.

Issue 4: Reversal of Cenvat credit taken on inputs:
The appellant agreed to reverse/pay Cenvat credit under Rule 3(5C) if the remission of duty was allowed. The Adjudicating authority emphasized the non-reversal of Cenvat credit as a reason for rejecting the remission application.

Issue 5: Principles of natural justice in issuing orders:
The Tribunal analyzed the cause of the fire accident and concluded that negligence could only be attributed if the appellant failed to take required precautions as per the law. The Tribunal referred to case laws emphasizing a liberal interpretation of 'unavoidable accident' under Rule 21 for granting remission. The appeals were allowed, setting aside the orders-in-original, and remission of excise duty on goods destroyed in the fire was granted to the appellant.

This detailed analysis covers the key issues involved in the legal judgment, providing a comprehensive understanding of the arguments presented and the Tribunal's decision.