Concessional duty rules exclude accidental fire loss of goods already issued for production in the manufacturer's premises.

Duty under Rule 6 of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 does not arise where duty-free raw materials and capital goods are destroyed by fire after being issued for production and while in work-in-progress stage. The explanation to Rule 6 treats goods as used for the intended purpose when loss or destruction occurs during transport, handling, or storage, and the same remission principle under Rule 21 of the Central Excise Rules and Section 23 of the Customs Act supports non-demand for unavoidable accidental loss. On these facts, goods already issued for production and destroyed in the manufacturer's premises were outside the mischief of Rule 6, so the duty demand on the indigenously procured goods was unsustainable.

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Issues: Whether duty was payable under Rule 6 of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 on duty-free raw materials and capital goods destroyed in a fire accident after they had been issued for production and were in work-in-progress stage.

Analysis: The relevant rules are meant to deny concessional treatment only when goods procured duty free are not used for the intended purpose. The explanation to Rule 6 deems goods to have been used for the intended purpose when loss or destruction occurs during transport to the manufacturer's premises or during handling or storage in the premises. The facts showed that the raw materials had already been issued for production, the capital goods had been installed and put to use, and the destruction occurred in the production premises in a fire accident. The loss was therefore not within the mischief of the explanation. The order also noted the parallel remission principle under Rule 21 of the Central Excise Rules and Section 23 of the Customs Act, 1962, which supported non-demand where goods are lost or destroyed by unavoidable accident.

Conclusion: Rule 6 did not apply to the goods destroyed in the fire accident, and the duty demand on the indigenously procured goods was unsustainable. The issue is decided in favour of the assessee.

Ratio Decidendi: Goods already issued for production and lost in an unavoidable accident in the manufacturer's premises are treated as having been used for the intended purpose and are not liable to duty under Rule 6 of the concessional-rate rules.

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