2022 (10) TMI 803 - AT - Central Excise

Remission of duty - it is alleged that the appellant did not take adequate steps and precaution in storing their finished goods as it is established that thefire accident has taken place as result of negligence which can't be considered as natural cause or unavoidable accident in order to grant remission of duty of Excise - demand of interest and imposed penalty under rule 21 of Central Excise Rules 2002 - reversal of CENVAT Credit - HELD THAT - There is no dispute that a fire has taken place in the factory of the appellant due to short circuit and the finished goods was destroyed along with other material like packing materials and consumables. It is observed that immediately when the fire took place the management of the appellant company has intimated to the concerned local authorities i.e. Police, fire brigade, excise department, insurance company etc., and these agencies have started their respective procedure immediately. Thereafter, the jurisdictional superintendent has visited the appellant s factory and recorded the punchnama. In the said punchnama the details were recorded about incident of fire and about the goods destroyed in fire. However, in the said punchnama, there is no mention about the allegation that the appellant have not taken any precaution to avoid the fire incident - the short circuit is a usual cause of fire in majority of cases, therefore, the fire due to short circuit cannot be attributed to any malafide on the part of the appellant or it cannot be said that the appellant have not taken abundant precaution to avoid the fire incident. Even as per the forensic report also, it has been concluded that the fire has taken place due to short circuit. In this fact, the contention of the adjudicating authority that the appellant have not taken the proper precaution to avoid the fire incident is baseless and without any support. Therefore, on this ground rejection of remission claim is unsustainable. Reversal of CENVAT credit - HELD THAT - There is no dispute that the appellant is duty bound to reverse the cenvat credit on the inputs contained in finished goods which were destroyed in fire incident. However, on going through the Rule 3(5)(c) of Cenvat Credit Rules, it is absolutely clear that the reversal of the cenvat credit statutorily to be made only after the competent authority grant the remission of duty, therefore, the contention of the learned Commissioner that they have not reversed the credit before remission is without any basis. Thus, the appellant s case is clearly covered under the four corners of Rule 21 of Central Excise Rules, 2002 and the appellant is clearly eligible for remission of duty on the finished goods destroyed in fire incident - the order rejecting the remission of duty is set aside - appeal allowed.

Summary

Issues:
Remission of excise duty on finished goods destroyed in a fire accident, reversal of cenvat credit, validity of rejection of remission claim, confirmation of duty demand, imposition of penalty.

Remission of Excise Duty:
The appellant, engaged in manufacturing excisable goods, filed for remission of excise duty amounting to Rs. 22,71,034 on finished goods destroyed in a fire accident. The adjudicating authority rejected the remission claim, alleging negligence in storing finished goods and failure to reverse cenvat credit on raw materials. The appellant contended that the fire was a natural cause beyond their control, fulfilling Rule 21 of Central Excise Rules 2002. The Tribunal found that the fire was due to a short circuit, a common cause, and that the appellant had taken necessary precautions. The rejection of the remission claim was deemed unsustainable, and the appellant was held eligible for remission of duty on the destroyed finished goods.

Reversal of Cenvat Credit:
Regarding the reversal of cenvat credit, the Tribunal noted that as per Rule 3(5)(C) of the Cenvat Credit Rules, the reversal of credit is required only after the remission of duty on finished goods is granted. The contention that the appellant had not reversed the credit before remission was found to be without basis. The Tribunal upheld that the appellant was duty-bound to reverse the cenvat credit on inputs contained in the destroyed finished goods, but the timing of reversal was in accordance with statutory provisions.

Confirmation of Duty Demand:
In a separate proceeding, the adjudicating authority confirmed the duty demand for which the remission claim was made, along with interest and penalty under Rule 21 of Central Excise Rules 2002. However, since the Tribunal found the rejection of the remission claim to be unsustainable, the demand for duty on the lost goods was also deemed not sustainable. Both appeals were allowed with consequential relief, as the rejection of the remission claim was set aside, rendering the demand for duty on the lost goods invalid.

Conclusion:
The Tribunal ruled in favor of the appellant, allowing both appeals and providing consequential relief. The rejection of the remission claim was found to be unjustified, as the fire incident was deemed a natural cause beyond the appellant's control. The timing of reversing cenvat credit was in compliance with statutory provisions, and the demand for duty on the lost goods was invalidated due to the unsustainable rejection of the remission claim.