M/S Arhant Studes Ltd vs Cce, Ghaziabad
- CitationExcise Appeal No. 1673 of 2006
Ratio decidendi
The rule this decision rests on
Where goods are destroyed by fire and that destruction is admitted, the Commissioner cannot reject a remission claim merely because the assessee was careless in preventing the fire, where the loss is not shown to have benefited the assessee and the assessee acted promptly once the fire was noticed. Excise duty, although the liability arises at the time of manufacture, is payable at the time of clearance; goods that were destroyed and never cleared cannot attract a duty liability, so a demand confirmed on such destroyed finished goods cannot be sustained.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
[Arising out of the Order-in-Appeal No. 35/COMM./GZB/2005 dated 30/12/2005 passed by The Commissioner, Central Excise, Ghaziabad.]
For Approval and signature :
Honble Shri Ashok Jindal, Member (Judicial)
Honble Shri B. Ravichandran, Member (Technical)
1. Whether Press Reporters may be allowed to see :
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it would be released under Rule 27 of :
the CESTAT (Procedure) Rules, 1982 for
publication in any authoritative report or not?
3. Whether their Lordships wish to see the fair :
copy of the order?
4. Whether order is to be circulated to the :
Department Authorities?
M/s Arhant Studes Ltd. Appellant
Versus
CCE, Ghaziabad Respondent
Appearance
Shri Rajesh Chhibber, Advocate for the appellant.
Shri Ranjan Khanna, Authorized Representative (DR) for the Respondent.
CORAM: Honble Shri Ashok Jindal, Member (Judicial)
Honble Shri B. Ravichandran, Member (Technical)
Final Order No. 52752/2015 Dated : 20/08/2015
Per. B. Ravichandran :-
The appellants are engaged in the manufacture of P.U. Foam and Articles of P.U. Foam liable to Central Excise duty and are availing Cenvat credit facility. A fire broke out in the factory premises of the appellant on 28/03/1998. The same was informed to Range Officer of the Jurisdictional Assistant Commissioner on the same day. The fire was put out by the fire brigade who reported that the probable cause of fire accident was electrical short circuit. The appellant filed a claim for remission of the excise duty involved in the finished goods and inputs destroyed in the fire amounting to Rs. 64,65,355.48 and Rs. 1,05,761.27 respectively. Subsequently a demand notice was issued for Rs. 65,64,116.75 by the Assistant Commissioner. The demand notice was adjudicated by the Commissioner who rejected the remission claim and confirmed the demand of the above said amount. Aggrieved by the order, the appellant is before us.
2. In the appeal, the appellants pleaded that no show cause notice was issued to them giving the reason for proposed rejection of remission claim and the proceedings are in violation of principles of natural justice. The only ground on which the Original Authority rejected the remission application was that the appellant did not take proper care to prevent the fire. They relied on the provisions of Rule 21 of Central Excise Rules, 2002 and reiterated that once there was no dispute that the goods were completely burnt the Commissioner had no option but to remit the duty payable thereon. During the course of arguments, the learned Counsel for the appellant submitted that the provisions of Rule 21 are squarely applicable to their case that the goods have been lost by unavoidable accident. The fact that a sudden fire accident happened in their factory and the materials involved were highly inflammable are not in dispute. He relied on following case laws in his support :
(i) CCE & CUS, Ahmedabad II vs. Intas Pharmaceuticals Ltd. reported in 2013 (289) E.L.T. 256 (Guj.) ;
(ii) Bal Kishan Agrawal Glass Inds. Ltd. vs. CCE, Kanpur reported in 2010 (256) E.L.T. 775 (Tri. Del.);
(iii) Kisan Sahkari Chini Mills Ltd. vs. CCE, Meerut I reported in 2008 (222) E.L.T. 540 (Tri. Del.) ;
(iv) Aditya Industries vs. CCE, Ahmedabad reported in 2009 (247) E.L.T. 567 (Tri. Ahmd.) ;
(v) Selvarathnam Matches Pvt. Ltd. vs. CCE, Tirunelveli reported in 2009 (238) E.L.T. 610 (Tri. Chennai) ;
(vi) Triveni Engg. & Industries Ltd. vs. CCE, Meerut I reported in 2003 (161) E.L.T. 682 (Tri. Del.) ; and
(vii) Union of India vs. Hindustan Zinc Limited reported in 2009 (233) E.L.T. 61 (Raj.).
3. On the other hand the learned AR reiterated findings of the Original Authority.
4. Heard both the sides and examined the appeal records.
5. The basic facts of the case have been admitted by both the sides. The question to be decided is as to whether the remission prayed for can be rejected on the grounds mentioned by the Original Authority and the consequential confirmation of demand equal to that amount is sustainable. The Original Authority observed that the appellant kept the final product in open space and exhibited casual approach in dealing with the goods. Prescribed procedure for highly inflammable product has not been followed to avoid such fire accident. Sufficient fire fighting equipment were not put to service. Only fire brigade was informed who put out the fire later. The learned Commissioner rejected the remission claim on this ground and consequently confirmed the demand for excise duty on the product destroyed in fire. We find that the reason for rejection of remission and consequently confirmation of demand is not legally tenable. It is to be noticed that the appellants have lost substantial quantity of finished goods worth crores of rupees and the duty portion of the said loss is only a small part. It is nobody case that the fire accident benefited the appellant by way of remission of duty. It is also nobody case that as the owner of the goods, the appellant are not inclined to take expeditious action to avoid or reduce the damage of their property. Considering the nature of the product even the swift action immediately after noticing fire could not have prevented some damage to the final product. Further, we find the Original Authority has confirmed the demand of excise duty on the said destroyed final products. Though the excise liability arises at the time of manufacture the payment of duty is at the time of clearance. There could be no clearance of destroyed products. As the destruction has been an admitted fact there could be no duty liability on the goods which are not cleared. Considering the above factual and legal position, we are not able to agree with the reasoning given by the Original Authority and we find the order unsustainable. Accordingly, we set aside the impugned order and allow the appeal with consequential relief, if any.
(Operative part of the order pronounced in the open court.)
(Ashok Jindal)
Member (Judicial)
(B. Ravichandran)
Member (Technical)
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