Remission and continuing obligation principles governed excise duty on flood-destroyed finished goods; limitation did not bar the demand.

Goods destroyed in floods could not be written off against excise duty liability without first obtaining remission from the jurisdictional Commissioner; in the absence of such remission, the original authority had no basis to drop the demand on finished goods stored in the factory and found unaccounted for. The article also notes that the obligation to account for goods in approved storage was treated as continuing, so no limitation period was held to apply under Rule 223A of the Central Excise Rules, 1944, and Section 11A limitation was said not to govern that situation. The demand was therefore sustained, while the assessee remained free to seek remission before the jurisdictional Commissioner.

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Issues: (i) whether the demand on finished goods destroyed in floods could be dropped without an application for remission to the jurisdictional Commissioner; (ii) whether the demand was barred by limitation under the excise law.

Issue (i): whether the demand on finished goods destroyed in floods could be dropped without an application for remission to the jurisdictional Commissioner

Analysis: The finished goods were alleged to have been destroyed by rain and flood, but no remission application had been made to the jurisdictional Commissioner. In the absence of an order granting remission, the original authority had no power to drop the duty demand on goods manufactured, stored in the factory premises, and found unaccounted for. The lower appellate authority was therefore correct in restoring the demand.

Conclusion: The demand could not be dropped without remission, and the finding was against the assessee.

Issue (ii): whether the demand was barred by limitation under the excise law

Analysis: The obligation to account for goods in an approved place of storage was treated as a continuing obligation. It was held that no period of limitation is prescribed under Rule 223A of the Central Excise Rules, 1944, and that the limitation under Section 11A of the Central Excise Act, 1944 does not apply to the situation covered by Rule 223A. The demand raised on that footing was therefore not time-barred.

Conclusion: The limitation plea failed, and the finding was against the assessee.

Final Conclusion: The order restoring the duty demand on the finished goods was sustained, while the assessee was left free to seek remission before the jurisdictional Commissioner.

Ratio Decidendi: Where remission of duty has not been obtained for goods destroyed while in storage, the duty demand cannot be dropped by the original authority, and the obligation to account for such goods is a continuing one to which the limitation in Section 11A does not apply when Rule 223A governs the situation.

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