2016 (12) TMI 1178 - AT - Central Excise

Remission of duty - loss of goods by fire - denial on the ground that appellant has taken credit with respect to inputs used in the manufacture of finished goods destroyed in fire - Held that - It is now a settled legal proposition that inputs which get used in the manufacture of finished goods to be treated as properly utilized under the credit rules made under the Central Excise Rules, 1944. Therefore, inputs used in the manufacture of finished goods, which are subsequently destroyed, is not required to be reversed. Denial also on the ground that appellant has been compensated by the insurance company against the goods destroyed in fire and that the monetary compensation does not include Central Excise duty on the finished goods destroyed in fire, has not been substantiated - Held that - It is observed from a letter dated 14.01.2004, written by the insurance company to the appellant, that the claim of ₹ 34,05,867/-(Rupees Thirty Four Lakhs Five Thousand Eight Hundred and Sixty Seven only) paid to the appellant was excluding Excise duty. However, this letter dated 14.01.2004 and the insurance application for seeking insurance claim filed by the appellant have not been brought on record - remanded back to the Adjudicating authority for deciding the case in remand proceedings on the issue of insurance claim filed by the appellant and whether Central Excise duty element is excluded from the claim paid to the appellant. Appeal allowed by way of remand.

Issues involved: Rejection of remission application for duty due to fire accident - Credit availed for inputs used in finished goods destroyed in fire - Compensation by insurance company for destroyed goods possibly including excise duty.

Analysis:
1. Rejection of Remission Application: The appellant filed an appeal against the rejection of their remission application for duty amounting to ?7,17,818 due to a fire accident in their factory premises. The Adjudicating authority rejected the remission application on two grounds presented by the appellant. Firstly, the authority claimed that the credit availed for inputs used in the manufacture of finished goods destroyed in the fire needed to be reversed. However, the appellant argued that the credit was correctly availed under the Central Excise Rules, 1944, as the inputs were properly utilized in the manufacturing process. The Tribunal acknowledged the legal principle that inputs used in the manufacture of finished goods, even if subsequently destroyed, do not need to be reversed under the credit rules.

2. Compensation by Insurance Company: The second ground for rejection was that the appellant had been compensated by an insurance company for the goods destroyed in the fire, which might include excise duty. The appellant presented a letter from the insurance company stating that the compensation paid did not include excise duty. However, the Adjudicating authority had not considered this letter in their Order-in-Original. The Tribunal observed that the insurance claim papers and the letter from the insurance company needed to be brought on record to establish whether the excise duty element was excluded from the compensation paid to the appellant. Therefore, the Tribunal set aside the original order and remanded the matter back to the Adjudicating authority for further proceedings on this issue.

3. Decision and Remand: After hearing both sides and examining the case records, the Tribunal allowed the appeal by way of remand. The Adjudicating authority was directed to reconsider the case in light of the insurance claim filed by the appellant and determine whether the excise duty element was excluded from the compensation paid. The appellant was granted the opportunity for a personal hearing to present their case and was instructed to produce relevant insurance claim papers to establish that excise duty on the finished goods destroyed in the fire had not been compensated by the insurance company. The decision was made in the interest of justice to ensure a fair consideration of the remission application.

← Previous Next →