M/S. Sheela Foam (P) Ltd vs C.C.& C.E. & S.T., Noida

Excise Appeal No. E/59860/2013-E[SM] [Arising out of Order-In-Appeal No. 01/Commissioner/Remission/2013-2014 dated: 10.07.2013 passed by CCE Noida]

For approval and signature: Hon'ble Mr. S.K. Mohanty, Member (Judicial)

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 should 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 Departmental authorities?

M/s. Sheela Foam (P) Ltd. ...Appellant

Vs. C.C.& C.E. & S.T., Noida Respondent

Appearance:

Mr. Praveen Sharma, (Advocate) for the Respondent Mr. Pramod Kumar, DR for the Appellants

CORAM:

Hon'ble Mr. S.K. Mohanty, Member (Judicial)

Date of Hearing. 03.07.2015

Final Order No. 54254 /2015_ Per S K Mohanty:

Brief facts of the case are that the appellant is engaged in manufacture of P.U. Foam Mattresses, falling under Chapter Heading 39 of the Central Excise Tariff Act, 1985. On 27.08.2009, fire accident took place in the factory of the appellant, resulting in destruction of semi-finished goods (in process) and the finished goods available in the factory. The appellant informed the Department regarding such accident and the Range officer also visited the factory on the said date. Upon verification of such event, the Range Officer advised the appellant to reverse the cenvat credit attributable to the semi-finished goods and finished goods destroyed in fire. Immediately, the appellant reversed the cenvat credit of Rs. 41,01,620/-. Thereafter, the appellant filed the application in terms of Rule 21 of the Central Excise Rules, 2002 before the Jurisdictional Commissioner of Central Excise for remission of duty involved in the goods destroyed in fire. The Department issued the SCN dated 27.08.2010, seeking recovery of Central Excise duty along with interest involved on the finished goods/ semi-finished goods destroyed in fire. The SCN was adjudicated vide the impugned order dated 10.07.2013 against the appellant. Hence, this present appeal is before the Tribunal.

2. Shri Pravin Sharma, the Ld. Advocate appearing of the appellant submits that the fire took place owing to short circuit in the factory, which has been certified by the Fire Department of Government of Uttar Pradesh upon verification of the incident. He further submits that the appellant had wrongly reversed the cenvat credit, in as much as, no provisions exist in the Cenvat statute for reversal of credit on such eventuality. The ld. Advocate further submits that demand of duty on semi-finished goods is not in conformity with the statutory provisions, since the same are not capable of being sold in the market. The Ld. Advocate also submits that since no cenvat credit was required to be reversed, there is no question of payment of any interest for alleged delayed reversal of cenvat credit.

3. Per contra, Sh. Pramod Kumar, the Ld. Jt. CDR appearing for the Revenue submits that Rule 21 is not applicable in case of semi-finished goods. He further submits that the appellant had not produced any evidence before the original authority that the insurance company has settled the claim only with regard to finished goods and not for the semi-finished goods destroyed in fire.

4. I have heard the Ld. Counsel for both the sides and perused the records.

5. The Jurisdictional Commissioner has disallowed remission application on the ground that no reasonable steps were taken by the appellant to prevent fire. I find that in the impugned order at paragraph 7, it has been recorded that the fire accident has occurred in the factory due to a short circuit. In this context, the Honble Allahabad High Court in the case of CCE vs M. Kumar Udyog (P) Ltd. reported in 2014 (306) ELT 19 (All.) has held that accident of fire due to short circuit is an unavoidable accident, for which the assessee is entitled to remission of duty under Rule 21 ibid. In view of the said judgment, the impugned order denying the benefit of remission on this ground is not justified.

6. Further, there is no justification in confirming the demand on the semi-finished goods, for the reason that excise duty is a levy on the manufacture of the goods and unless goods are removed from the factory, no duty liability can be fastened against the assessee. In this case, since the semi-finished goods have not been removed from the factory, duty demand is not in conformity with the statutory provisions, as held by this Tribunal in the case of Urmi Chemicals vs CCE-Mumbai-II reported in 2014 (301) ELT 356 (Tri.  Mum). I find that cenvat credit attributable to the inputs used in or in relation to manufacture of the final product and the semi-finished goods available in the factory were wrongly reversed by the appellant based on the request made by the Range Officers. The Cenvat Statute nowhere provides that in case of fire accident, the cenvat credit attributable to the said goods has to be reversed. Further, sub-rule (5C) of Rule 3 of the Cenvat Rules calls for reversal of cenvat credit, in the eventuality, where the payment of duty is ordered to be remitted under Rule 21 of the Central Excise Rules, which is not the situation in the present case, in as much as, the remission application filed by the appellant has not been considered by the Jurisdictional Central Excise Authorities. In this context, I find support from the decision of this Tribunal in the case M. Kumar Udyog (P) Ltd. vs CCE-Kanpur reported in 2014 (302) ELT 385 (Tri. Del), wherein it has been held that semi-finished goods destroyed in fire having not attained marketable status, since remission of duty has not been granted, duty cannot be levied on those goods. Thus, in absence of any provisions contained in the statute for reversal of Cenvat credit, there is no question of payment of any interest as confirmed in the impugned order.

7. The submission of the appellant that the Insurance Company has only settled the claim with regard to the finished goods destroyed in fire and not on the semi-finished goods, I am of the view that the Ld. Jt. CDR has rightly pointed out that the report furnished by the appellant is not clear about the same. Considering the fact that the report submitted by the appellant is not clear, I am of the opinion that the matter should go back to the original authority for consideration of the actual amount settled by the Insurance Company upon verification of the documents submitted/ to be submitted by the appellant.

8. Therefore, the appeal is allowed by way of remand to the Original Authority for ascertaining the claim amount settled by the insurance company. The appeal is disposed of accordingly.

(Dictated and pronounced in open court)

(S. K. Mohanty) Member(Judicial) Neha

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