2019 (4) TMI 1682 - AT - Central Excise

Remission of duty - destruction of finished and capital goods due to fire incidence - HELD THAT - Admittedly proper officer could not have got the particulars to assess the destruction as reporting was done about 2 years of the occurrence but going by the show-cause notice, one can very well infer that the duty demand has been made on the basis of damage assessed by the insurance authorities. This being so, it can be said that assessment had been made by the department concerning the exact damage on which duty demand has been raised but remission was refused for the reason that application for remission was put after an unreasonable delay. Unreasonable delay is, of course, a question of fact and the same varies from case to case. In the instant case, there was no strict adherence to the internal manual of the department noted in the Order-in-Original and Order-in-Appeal which prescribes that if the matter was not reported within 24 hours, no such remission is admissible. On the other hand, as found from the evidence and record, reporting was done within 24 hours to Fire Brigade and at the Police Station respectively but it was not done to the proper officer of the excise authority for determination of the extent of damage - such procedure lapse cannot take substantial justice away. Further, any prudent man can make out from the factual sequence of the case that appellant was unaware of such requirement of reporting and it did so after being pointed out by the Audit Officer. When damage due to fire had caused loss to the appellant, imposition of duty liability on the damage goods would further cause hardship to the appellant who has been struggling to get justice for over the last two years. CENVAT Credit - capital goods - plastic moulds and other machinery - HELD THAT - The Commissioner had observed that the goods on which appellant had availed MODVAT credit cannot have attained the character of inputs since appellant claimed that they had been destroyed in the fire for which there was no possibility of those goods being used (further) in relation to manufacture of final products and they were not fit for the intended use in the factory. If this is the observation of the Commissioner then in the normal circumstances, he would have treated those as unusable scrap having nil value and would not have ordered for reversal of credit availed on it. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Admissibility of remission application against finished and capital goods destroyed due to fire incidence
- Non-reversal of MODVAT credit availed on capital goods

Analysis:

*Admissibility of Remission Application:*
The case involved a dispute regarding the rejection of a remission application by the Commissioner concerning finished and capital goods destroyed in a fire incident. The appellant's appeal was based on the grounds that the application was rejected due to a delay in reporting the incident and the alleged inadmissibility of MODVAT credit on the damaged goods. The appellant argued that there was no time limit prescribed for filing a remission application and that the internal manual's requirement of reporting the incident within 24 hours was a procedural lapse. Citing relevant case laws, the appellant contended that the duty demand based on the damage assessed by insurance authorities should not lead to the refusal of remission due to an unreasonable delay in reporting. The Tribunal found that the appellant had reported the incident promptly to the Fire Brigade and Police but not to the excise authority, and the delay was due to lack of awareness rather than intentional negligence. Considering the hardship faced by the appellant and the assessment made by the department, the Tribunal allowed the appeal, setting aside the Commissioner's order.

*Non-Reversal of MODVAT Credit:*
Regarding the non-reversal of CENVAT credit on damaged capital goods like plastic moulds, the Commissioner's finding was questioned. The Commissioner had observed that the goods on which MODVAT credit was availed could not be considered as inputs since they were destroyed in the fire and unfit for use in manufacturing final products. The Tribunal noted that under normal circumstances, such goods would be treated as unusable scrap with nil value, and the reversal of credit was not warranted. Consequently, the Tribunal allowed the appeal with the consequential relief of accepting the remission claimed and set aside the Commissioner's order dated 26.11.2009.

In conclusion, the appellate tribunal ruled in favor of the appellant, allowing the appeal and providing relief in terms of the remission claimed and the reversal of MODVAT credit on capital goods destroyed in the fire incident.