2012 (12) TMI 386 - AT - Central Excise

Tribunal grants excise duty remission for goods destroyed in fire incident

SHEELA FOAM PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, NOIDA

The Tribunal overturned the decisions of the Commissioner (Adjudication) and Commissioner (Appeals) and granted remission of excise duty to the appellant ... Remission of excise duty - fire incident - loss of finished as well as semi-finished goods lying in store – Held that:- There is nothing on record to suggest that there was any material available with the Commissioner (Adjudication) to come to the conclusion that the appellant was not following the safety norms - appellant has filed insurance claim without including the duty element - appellant has placed sufficient material on record to show that finished/semi-finished goods were destroyed in fire accident cause due to short circuit - appellant is granted remission of excise duty pertaining to the goods destroyed in fire Issues:- Remission of excise duty denied to the appellant by Commissioner (Adjudication).- Duty demand confirmed by Commissioner (Appeals) against the appellant.- Interpretation of Rule 21 of Central Excise Rules, 2002 in the context of goods destroyed in a fire incident.- Appeal against the order of Commissioner (Adjudication) and Commissioner (Appeals) by the appellant.Analysis:1. The judgment involves two connected appeals, one concerning the denial of remission of excise duty by the Commissioner (Adjudication) and the other related to the duty demand confirmed by the Commissioner (Appeals). The appellant's factory suffered a fire incident resulting in the loss of finished and semi-finished goods, leading to the assessment of the loss by the Central Excise department.2. The appellant had availed Cenvat credit on inputs used for manufacturing goods and applied for remission of excise duty. However, a show cause notice was issued by the Additional Commissioner raising a demand for excise duty on the destroyed goods. The proceedings ended with the confirmation of duty demand and dismissal of the appeal by the Commissioner (Appeals).3. The main contention revolved around the interpretation of Rule 21 of the Central Excise Rules, 2002, which allows remission of duty for goods lost due to unavoidable accidents. The appellant argued that the fire, caused by a short circuit, was an unavoidable accident, thus entitling them to remission. The Commissioner (Adjudication) and Commissioner (Appeals) based their decisions on incorrect interpretation of the rule and lack of insurance claim documentation.4. The Tribunal analyzed Rule 21 and emphasized that the satisfaction required from the Commissioner for remission is based on objective analysis, not arbitrary judgment. The Commissioner (Appeals) wrongly concluded that the fire was avoidable due to safety norms, without factual support. Additionally, the argument regarding lack of insurance claim documentation was dismissed as the appellant had indeed filed a claim excluding the duty element.5. Ultimately, the Tribunal found the orders of both the Commissioner (Adjudication) and Commissioner (Appeals) unsustainable in law. The appellant provided sufficient evidence of goods destruction due to a short circuit, qualifying as an unavoidable accident. Consequently, the Tribunal set aside the orders, granting remission of excise duty to the appellant for the goods destroyed in the fire incident.6. In conclusion, both appeals were accepted, overturning the decisions of the lower authorities. The appellant was granted remission of excise duty, and the orders denying remission and confirming duty demand were set aside, leading to the disposal of the appeals.