2015 (6) TMI 656 - AT - Central Excise

Setting Aside Duty Demand on Insurance Claim: Importance of Legal Basis & Evidence in Central Excise Law

M/s Mahendra Sponge And Power Ltd Versus Commissioner of Central Excise And Service Tax, Raipur

The Tribunal set aside the duty demand on an insurance claim for damaged goods by the manufacturer of sponge iron, emphasizing the necessity of ... Duty demand - Insurance claim - Held that:- In their remand proceedings there were directions to Revenue also to tell the appellant under which provision revenue is seeking the demand of duty from the appellant on insurance claim on damaged goods. Neither both the authorities below nor the Ld. AR is able to tell under which provision duty is payable before the appellant on insurance claim received for damaged goods. In these circumstances, relying on the case laws cited by the Ld. Counsel for the appellant, Ratnatraya Heat Exchangers Ltd. Vs. CCE Mumbai[2011 (3) TMI 385 - CESTAT, MUMBAI], I hold that demand is not sustainable. - impugned order is set aside - Decided in favour of assessee. Issues:- Duty demand on insurance claim for damaged goodsAnalysis:The appellant, a manufacturer of sponge iron, faced duty demand on an insurance claim for damaged goods due to heavy rains in their factory. The revenue argued that the compensation received from the insurance company formed part of the goods' value, necessitating duty payment. The matter reached the Tribunal, which remanded it back to the Adjudicating Authority for further examination. The appellant contended that they did not clear the damaged stock and provided detailed accounts of production and clearance. Despite this, the duty demand was upheld by the adjudicating authority and the Commissioner (A), leading to the appeal.The appellant argued that there was no provision in Central Excise Law to levy duty on insurance claims, citing precedents to support their stance. On the contrary, the revenue relied on the impugned order's observations regarding the appellant's lack of tangible evidence to support their claims. The appellant failed to produce documentary evidence of losses or clearance of damaged goods, which weakened their case. The lack of evidence and failure to follow mandatory procedures under Central Excise Rules further weakened the appellant's position.During the hearing, it was noted that neither the authorities nor the revenue could specify the provision under which duty was being demanded on the insurance claim for damaged goods. Considering the absence of a legal basis for the duty demand and in line with the case laws cited by the appellant's counsel, the Tribunal concluded that the demand was not sustainable. Consequently, the impugned order was set aside, and the appeal was allowed with any necessary consequential relief.In conclusion, the Tribunal's decision highlighted the importance of providing tangible evidence, following procedural requirements, and establishing a legal basis for duty demands on insurance claims for damaged goods under Central Excise Law.