2023 (8) TMI 1266 - AT - Central Excise

100% EOU - Remission of duty - applicability of Rule 21 of CER on plant and machinery and raw materials which were lost and damaged in fire - HELD THAT - It is seen from the records that in case of the capital goods, the Appellant has procured them between 2002 to 2007 as per the Bill of Entry details given by them at Page 23 to 25 of the Appeal Paper Book. Since the Department has also made use of this detailed statement to arrive at the demand of Customs duty on such imported capital goods, it clarifies that the Department does not dispute that these capital goods were procured about 3 to 10 years prior to the fire accident. Therefore, admittedly these capital goods were being properly used in the factory premises for production of the finished goods which were exported by the EOU. As per the Notification No. 52/2003, if the Capital goods are not installed and used within a period of one year from the date of import, the same would amount to contravening the conditions set up under this Notification. As per the factual matrix discussed above, the capital goods have been used for more than three to ten years. Hence, the Department cannot claim that the conditions of Notification No. 52/2003 were not fulfilled. Further it is seen that in case of Laxai Avanti Live Sciences Pvt. Ltd. Vs. CC., C. Ex S.T. Hyderabad 2017 (3) TMI 451 - CESTAT HYDERABAD , the Tribunal has held As the goods is not lost or destroyed, the assessee made a request for relinquishment of the title to the goods with the intention of abandoning the same. By such abandonment and relinquishment, the title in the imported goods is divested and the title vests with the Department. The Tribunal on a proper consideration of the facts keeping in mind the legal principles involved has rightly set aside the order passed by the original authority as well as the Appellate Commissioner granting remission of duty to the assessee. It is in accordance with law. Thus, it has been held that if the raw materials/capital goods were destroyed due to accidents which are beyond the control of the assesse, remission is required to be granted. Accordingly, the impugned OIOs are not legally sustainable - appeal allowed.

Summary

Issues Involved:
1. Liability of Excise Duty on destroyed plant and machinery.
2. Liability of Customs Duty on imported goods destroyed in fire.
3. Liability of Excise Duty on indigenously procured raw materials destroyed in fire.
4. Applicability of Rule 21 of Central Excise Rules and Section 23 of the Customs Act for remission of duty.

Summary:

1. Liability of Excise Duty on destroyed plant and machinery:
The Adjudicating Authority held that Rule 21 of Central Excise Rules does not apply to plant and machinery lost in fire, and the EOU is liable to pay the duty forgone along with interest on the goods imported without payment of Excise Duty. The Tribunal, however, found that the capital goods were procured between 2002 to 2007 and were used for more than three to ten years before being destroyed in the fire. Therefore, the conditions of Notification No. 52/2003-Cus dated 31/03/2003 were fulfilled, and the duty confirmed on the imported capital goods was set aside.

2. Liability of Customs Duty on imported goods destroyed in fire:
The Department argued that since the imported goods were destroyed and could not be used in the future, the conditions of Notification No. 52/2003-Cus were not fulfilled. The Tribunal, referencing the case of Laxai Avanti Live Sciences Pvt. Ltd. Vs. CC., C. Ex & S.T. Hyderabad, held that when goods are destroyed by unavoidable accidents, the conditions of the notification are excused under the maxim 'Lex non cogit ad impossibilia'. Therefore, the rejection of remission of duty was unjustified.

3. Liability of Excise Duty on indigenously procured raw materials destroyed in fire:
The Tribunal cited the case of Sami Labs Ltd. Vs. Commissioner of Customs, Bangalore, where it was held that raw materials destroyed due to unavoidable accidents should be considered as used for the intended purpose. The Tribunal found that the raw materials lost in the fire were in various stages of production and the accident was beyond the control of the appellant. Therefore, the duty on indigenously procured raw materials should not be demanded, and the remission should be granted.

4. Applicability of Rule 21 of Central Excise Rules and Section 23 of the Customs Act for remission of duty:
The Tribunal emphasized that both Rule 21 of the Central Excise Rules and Section 23 of the Customs Act provide for remission of duty when goods are lost or destroyed due to natural causes or unavoidable accidents. The Tribunal concluded that the rejection of remission of duty was not legally sustainable and allowed the appeals with consequential reliefs as per law.