Mr. M.V. Ravindran and Mr. H.K. Thakur, JJ.
For the Appellant : Shri P.P. Jadeja, Consultant
For the Respondent : Shri K. Sivakumar, A.R.
JUDGEMENT
Per : Mr. H.K. Thakur;
These miscellaneous application, stay application and appeals have been filed by appellant M/s. Sanskrit Packaging Pvt. Limited, Surat with respect to order-in-original Nos. OIO-SUR-EXCUS-001-COM-101-13-14 dated 31.01.2014 and OIO-V/TECH-02/2013-14 dated 28.03.2014 passed by Adjudicating authority confirming demand of ₹ 47,75,036 and ₹ 5,54,120/-, along with interest and equivalent penalties have also been imposed. Under the second OIO dated 28.3.2014 Adjudicating authority rejected the remission of duty application filed by the appellant with respect to the same fire accident for which duties were earlier confirmed.
2. Brief facts of the case are that appellant is engaged in the manufacture of Polyester coated film, Metallised Polyester films etc. and are also availing the benefit of Cenvat Credit Rules, 2004 for the inputs used in the manufacture of above excisable final products. There was a fire accident in the factory premises of the appellant on 31.3.2012. Appellant’s Manager Shri Rishi Ashok Sheth was present in the factory and appellant tried to control the fire and also promptly informed Fire and Emergency Services, Police authorities, Central Excise Authorities, Insurance Company etc. at Surat. Police authorities carried out the inspection of the premises on 31.3.2012 and a Panchnama was drawn. After the investigation, it was concluded by police that no criminal angle was found to have been committed and the fire incident file was closed as an accident. The site was also visited by the Central Excise authorities on 02.4.2012 and the damage recorded. Appellant filed a remission application dated 11.3.2013 claiming remission under Rule 21 of the Central Excise Rules, 2002. A show cause notice dated 28.3.2013 was issued demanding duty and for imposing penalties. Both the demands raised and the remission claims were decided by two separate orders-in-original already mentioned above against which the present proceedings are being taken up. As the issue involved in both the appeals is the same, therefore, after allowing the stay application and miscellaneous application filed by the appellant, appeals themselves are taken up for disposal.
3. Shri P.P. Jadeja (Consultant) appearing on behalf of the appellant argued that there is no dispute on the fire accident and destruction of goods in the factory premises of the appellant on 31.3.2012. That there is no allegation by the department anywhere that goods were clandestinely removed and were not destroyed. That first confirming the demand under order dated 31.1.2014 is bad in law without disposing appellants Remission application dated 11.3.2013. For this purpose he relies upon the case law of R.B.N.S. Sugar Mills Limited vs. CCE [2004 (166) ELT 327 (Tri. Del.)] and Arraycom India Limited [2006 (205) ELT 1023 (C.O.I.)]. That even OIO dated 28.3.2014 is also bad in law as the same has been issued without a show cause notice and by not following the principles of natural justice. That remission application of the appellant is denied only on the grounds that the accident was avoidable and that appellant has claimed the incidence of duty from the insurance Company. It was strongly argued by the learned Consultant that once police authorities and the insurance Company has accepted the fire incident as an accident and settled appellants claim, it can not be said that the accident was avoidable. It was his case that if this view is taken that each and every case of destruction can be held to be avoidable by taking certain precautions which are not anticipated. That the fire accident was unexpected and appellant took all the necessary precautions to avoid fire accident. That steps were also taken by the appellant to control the fire accident. That the fire was unavoidable one and not due to any negligence on the part of the appellant. That as the fire accident has led to a financial loss and was not due to any negligence on the part of the appellant, therefore, a liberal view is required to be taken while allowing the remission. He relied upon the following case laws in support of his arguments:-
(a) UOI vs. Hindustan Zinc Limited - [209 (233) ELT 61 (Raj)]
(b) Commissioner vs. Pololight Industries Limited - [2014 (299) ELT A 91 (Guj.)]
(c) CCE vs. M. Kumar Udhyogh (P) Limited - [2014 (306) ELT 19 (All.)]
3.1 With respect to the findings of the Adjudicating authority that appellant has claimed the incidence of duty confirmed from the insurance Company, it was argued on behalf of the appellant that in the insurance claim the element of duty on finished goods was included but Insurance Company M/s. Future General India while setting appellants claim vide letter dated 14.10.2014 has only given them ₹ 3,04,37,941/- by deducting amounts of ₹ 62,40,649/- on account of Central Excise duty and VAT. Learned consultant was fair enough to argue that appellant would reverse/ pay Cenvat credit under Rule 3(5C) of the Cenvat Credit Rules, 2004 if their remission of duty is allowed.
4. Shri K. Sivakumar, Additional Commissioner (AR) appearing on behalf of the Revenue defended the orders passed by the Adjudicating authority. It was his case that the final claim of the appellant, as settled by the Insurance Company, was not made available to the adjudicating authority. It was argued by the learned AR that fire accident was due to human error and could have been avoided by taking necessary precautions. That appellant’s remission application was correctly rejected as the Cenvat credit taken on inputs and contained in the finished goods destroyed was not reversed by the appellant under Cenvat Credit Rules, 2004. As a counter to this argument learned Consultant of the appellant considered that reversal of Cenvat credit will arise only when their remission request is allowed.
5. Heard both sides and perused the case records. As a result of a fire accident in appellants factory on 31.3.2012 certain finished goods / semi-finished goods were destroyed. The remission application of the appellant is rejected on the grounds that fire accident was due to human error and was avoidable and also due to the reason that duty remission sought for has been claimed from the Insurance Company.
5.1 in this regard it will be relevant to examine the cause of accident. The facts about incidence of fire are available in Para 17.2 (5) and (6) of the show cause notice dated 28.3.2013 and are reproduced below:-
5. Description of accident : On 31.3.2012 at about 12.30PM, the above referred coating process was in progress on Coating Machine No.1. During the said process, due to some reason the plastic film broke at the upper portion of the dryer and fell into the tray containing hot liquid solvent which then inflamed. As soon as the same was noticed by the workers/ labourers, they immediately informed the factory manager, Shri Rishi Ashok Seth, who immediately rushed to the accident spot along with a Fire Extinguisher in his hands and tried to extinguish the fire which took place in the solvent tray. But due to the pressure of the Fire Extinguished which was sprayed on the solvent tray, the inflamed solvent spilled from the tray in the surrounding area which also caught fire and subsequently took a huge form. On seeing the said situation, Shri Rishi Seth informed all the workers/ Labourers to immediately vacate the said factory. Thereafter, he informed the Sachin GIDC fire station about the said incidence and asked for help. Fire tankers from Sachin GIDC arrived the affected site at about 0100PM and initiated the onsite process of fire extinguishing. On seeing the huge form of fire, they said Fire Fighting team informed the other Fire Stations for suitable help. Thereafter, at about 0130 PM Fire Fighter from Pandesara, Majura and Nanpura arrived at the affected site and thereafter much efforts, the fire came under control at about 0700PM.
6. Due to above fire accident, the machineries and materials lying at the Ground Floor of Plot No. 2124/B in name of Sanskriti Packaging Pvt. Limited got heavily damaged. The machineries and materials of M/s. R.K. Textiles and M/s. Krishna Prints (engaged in the Embroidery Work and located on the First Floor the said building premises) also got heavily damaged. During the said fire accident, no workers/ labourers of the said factories got injured. This dangerous incident was intimated in our office in Form No. 21A dated 02.4.2012. Prior to this, the said incident was also telephonically informed to them.
5.2 Based on the above factual matrix, police authorities has filed the fire case as an ‘accident’ after due investigation. Even Insurance Company has also settled the claim of the appellant and has not raised the objection that fire accident was avoidable or that there was any negligence on the part of the appellant. Negligence on the part of the appellant could be attributed if they were required to take certain actions/ precautions as per laws of the land but they failed to take such precaution/ action. Therefore, we do not agree with the view of the department from the facts and circumstances of the case that the fire accident was ‘avoidable’. Our views are fortified by the view taken by Rajasthan High Court in the case of UOI vs. Hindustan Zinc Limited [2009 (233) ELT 61 (Raj.)]. Para 12 and 13 of this case law are relevant and are reproduced below:-
12. In our view, the expressions, being ‘natural uses’ and ‘unavoidable accident’ are required to be given, reasonable and liberal meaning, lest the provisions of Rule 21, so far they relate to admissibility of remission, on these two grounds, is rendered altogether otiose. If things were to be stretched in the manner, and to the extent, as the learned counsel for the appellant wanted us to, probably, no loss or destruction, would fall in either of these clauses, obviously, because in either case, grounds may be projected, on the anvil of requirement of appropriate storage, or safety measures, and so on and so forth. Even in cases of unavoidable accident it can always be contended, that the accident could be avoided by taking recourse of one or more measures. Thus, a bit liberal rather more practical approach is required to be taken in the matter. Of course, we quiet agree with the learned counsel, that mere accounting practice of the assessee, could not be considered for granting remission, under Rule 21, rather, only requirement of Rule 21 is, that the concerned authority should be satisfied that goods have been lost or destroyed, by ‘natural causes’ or by ‘unavoidable accident’.
13. Then in very nature of things, contemplated by Rule 21, the aspect of satisfaction, about the destruction or loss of goods, by natural causes or unavoidable accident, is essentially a subjective satisfaction of the authority concerned, and that having been recorded by the learned Tribunal, it is a pure satisfaction of fact, altogether subjective. The findings recorded by the Tribunal have already been quoted above, which in our view leaves no manner of doubt that the learned Tribunal had independently recorded its satisfaction about the loss, or destruction having been sustained by the assessee under the circumstances as covered by Rule 21. Then, merely because the Tribunal also referred to, or relied upon the accounting policy, which as held above, is not relevant, would not in any manner vitiate the finding, recorded by the Tribunal. The finding remains the findings of fact.
5.3 Similar views were expressed by Allahabad High Court in the case of CCE vs. M. Kumar Udhyog (P) Limited [2014 (306) ELT 19 (All.)] in Para -7 of this order reproduced below:-
7. Under Rule 21, a remission of duty is contemplated where it is shown to the satisfaction of the Commissioner that goods have been lost or destroyed by (i) natural causes; or (ii) unavoidable accident; or are claimed by the manufacturer as being unfit for consumption or for marketing. The remission is to be granted subject to such conditions as may be imposed. The expressions ‘natural causes’ or ‘unavoidable accident’ have to be interpreted in their ordinary and natural connotation. An unavoidable accident is an event which lies beyond the control of the assessee and which has taken place despite the exercise of due and reasonable care and protection. Both the expressions have to be construed in a reasonable manner to sub-serve the object of the legislature in introducing the provision for remission of duty in Rule 21.
6. So far as the second issue of payment of excise duty from the Insurance Company is concerned, it has been clearly spelt out by the Insurance Company that the excise duty element and VAT was not paid to the appellant. Learned AR during argument stressed that appellant has not reversed the Cenvat credit taken on the inputs, which were contained in the finished goods, as per Rule 3(5C) of the Cenvat Credit Rules, 2004. Appellant has fairly conceded reversal/ payment of cenvat credit under Rule 3(5C) if their prayer for remission of duty is allowed under Rule 21 of the Central Excise Rules, 2002.
7. In view of the above observations and settled proposition of law, we allow the appeals filed by the appellants by setting aside the orders-in-original dated 30.1.2014 and 28.3.2014 passed by the adjudicating authority and allow the remission of duty of excise on goods destroyed in fire to the appellant under Rule 21 of the Central Excise Rules, 2002 with direction to the Adjudicating authority to quantify the amount of cenvat credit taken on inputs used in the manufacture of the finished goods for which remission is allowed. After quantification of such credit required to be reversed by the appellant, adjudicating authority will communicate the same to the appellant who shall pay that short paid amount without raising the issue of time-bar as agreed during the course of the hearing.
8. Appeals filed by the appellant are allowed to the extent indicated hereinabove.
(Operative part of the order pronounced in the Court)
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