2015 (4) TMI 166 - HC - Central Excise

Remission of duty - Loss of goods in fire - Held that - For the loss of excisable goods duty is payable by assessee. This is the general rule. However, there is an exception. If the assessee is able to prove that it was unavoidable accident due to natural causes on which he had no control. Obviously, in order to avoid duty payable under Rule 49 of Rules, 1944, onus is on assessee to prove that accident occurred due to reasons beyond his control and he could not have avoided it. - Chief Fire Officer gave opinion that it may be due to mishandling of workforce of assessee i.e. due to careless smoking of biris and cigarettes. This opinion, as a matter of fact was not disputed by Sri D.K. Srivastava, Finance Controller appearing on behalf of assessee before Excise Commissioner - assessee failed to lead any evidence whatsoever before the authority concerned to show as to what steps it has taken to avoid accident, if any, caused by fire and that accident in question was for unavoidable reasons. - Revenue has committed manifest error in law and therefore reasons assigned by Tribunal in allowing assessee s appeal is clearly erroneous - Decided in favour of Revenue.

Summary

Issues involved:
1. Interpretation of Rule 49(1A) of Central Excise Rules, 1944 regarding the benefit of remission of duty for destroyed goods.
2. Allocation of burden of proof in cases of lost or destroyed goods due to natural causes or unavoidable accidents.

Detailed Analysis:
Issue 1: The interpretation of Rule 49(1A) of Central Excise Rules, 1944
The case involved a dispute where the assessee claimed the benefit under the proviso to Rule 49(1) of the Central Excise Rules, stating that the loss of excisable goods was due to an unavoidable accident. The Excise authorities, up to the Commissioner, ruled against the assessee based on the report of the Chief Fire Officer, suggesting the accident could have been caused by careless smoking of Biris and Cigarettes by the workers. However, the Tribunal took a different view, stating that the report was merely an opinion without any substantial evidence. The Tribunal observed that the department failed to prove what precautions the assessee had taken to prevent the fire accident, leading to the decision in favor of the assessee. The Court found that the Tribunal had erred in allowing the appeal based on insufficient reasoning and misdirection in law.

Issue 2: Allocation of burden of proof for lost or destroyed goods
The Rule 49 of the Central Excise Rules, 1944 specifies that duty is payable for excisable goods unless the manufacturer can prove that the loss was due to natural causes or unavoidable accidents. In this case, the burden of proof was on the assessee to demonstrate that the accident was beyond their control and could not have been prevented. The Chief Fire Officer's opinion suggested that the accident might have been caused by the workforce's mishandling, particularly careless smoking. The Finance Controller of the factory did not dispute this opinion. The Court noted that the assessee failed to provide any evidence of the steps taken to prevent the accident or to establish that it was unavoidable. The Tribunal's decision to shift the burden of proof onto the Revenue was deemed a legal error, and the appeal was decided in favor of the Excise Department.

In conclusion, the Court ruled in favor of the Excise Department, emphasizing the importance of proving that the loss was due to reasons beyond the assessee's control to avoid duty payment under Rule 49 of the Central Excise Rules, 1944. The judgment highlighted the significance of fulfilling the burden of proof in cases of lost or destroyed goods to determine liability for duty remission.