2023 (2) TMI 604 - AT - Central Excise

Denial of remission claim on goods lost (stolen) - Cigarettes - denial on the ground that this is a case of clandestine removal and not of burglary - demand of duty raised against the appellant company - imposition of penalty on the Director - HELD THAT - The allegation of clandestine removal against the appellant is not established. It is evident on the face of the record that the appellant have taken all steps as a person of ordinary prudence, to cooperate with the Department and have taken effective steps for getting the FIR registered and have pleaded before the Police Department repeatedly including the higher officers to investigate the matter. This is also corroborated by the fact that the appellant suo moto appeared before the Court of Judicial Magistrate in complaint case No.1 of 2010 of P.S. Kotwali, Bhopal and they also pleaded to give directions to the Police to investigate. Thus, no case of clandestine removal is made out. The appellant is liable to pay duty only for the proportionate goods finally lost and is not liable to duty on the 25 CFC cartons of cigarettes recovered by the Police. The appellant is liable for duty only on the balance quantity of cigarettes being 138 CFC cigarettes. Further, penalty imposed under Rule 25 read with Section 11 AC on the appellant company and on the Director under Rule 26 of Central Excise Rules are set aside. Appeal allowed.

Summary

Issues Involved:
1. Whether the claim of remission has been rightly denied.
2. Whether the demand of duty has been rightly raised against the appellant company.
3. Whether the imposition of penalty on the Director is justified.

Issue-wise Detailed Analysis:

1. Denial of Remission Claim:
The appellant company, engaged in the manufacture of cigarettes, faced denial of remission for goods stolen on 28-29 October 2010. The Principal Commissioner, CGST & Central Excise, Bhopal, rejected the remission claim based on the Larger Bench ruling in Gupta Metal Sheets vs. CCE, Gurgaon, which held that theft cannot be considered an unavoidable accident under Rule 49 of Central Excise Rules, 1944. The Commissioner noted the lack of documentary evidence, such as an FIR, to support the claim of theft. Despite the appellant's efforts to register an FIR and inform the authorities, the Commissioner concluded that the goods were clandestinely removed rather than stolen.

2. Demand of Duty:
The demand of duty and interest under section 11A and equal penalty under section 11AC was confirmed against the appellant company, alleging clandestine removal of goods. The Principal Commissioner issued an ex parte order, confirming the proposed demand and imposing penalties, as the factory was closed, and notices were sent to the non-functional address. The Tribunal, however, found that the appellant took all necessary steps to report and investigate the theft, including lodging a complaint with the police and cooperating with the Department. The Tribunal held that no case of clandestine removal was established, and the appellant is liable for duty only on the balance quantity of cigarettes, excluding the 25 CFC cartons recovered by the police.

3. Imposition of Penalty on the Director:
The Director of the appellant company faced a personal penalty under Rule 26(1) of CER, 2002. The Tribunal observed that the appellant and the Director took all prudent steps to report the theft and cooperate with the authorities. The Tribunal set aside the penalties imposed on both the appellant company and the Director, concluding that no clandestine removal was proven.

Conclusion:
The Tribunal allowed the appeals, holding that the appellant is liable to pay duty only for the proportionate goods finally lost and not for the 25 CFC cartons recovered by the police. The penalties imposed on the appellant company and the Director were set aside. The Tribunal emphasized the appellant's earnest efforts to report and investigate the theft, which were corroborated by the records and the appellant's proactive engagement with the authorities.