CESTAT grants remission of duty for goods destroyed by fire, sets aside penalty

The Appellate Tribunal CESTAT, New Delhi allowed the appeal, granting remission of duty to the appellant for goods destroyed by fire. The Commissioner's rejection of remission and imposition of a personal penalty under Section 11AC were set aside. The Tribunal found the fire to be an unforeseen incident caused by external factors, absolving the appellant of negligence. The appellant, a Public Sector Undertaking, was required to furnish a Bond to withdraw the insurance claim if remission was granted, which was accepted. The appeal was allowed with this condition, and the case was disposed of accordingly.

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Issues: Rejection of remission of duty for goods destroyed by fire, confirmation of Central Excise duty, imposition of personal penalty under Section 11AC.

In the present case, the Appellate Tribunal CESTAT, New Delhi addressed the issue of the rejection of remission of duty for goods destroyed by fire. The Commissioner of Central Excise had rejected the appellant's prayer for remission of duty and confirmed the Central Excise duty of Rs. 45.18 lakhs for the damaged goods. The Commissioner also imposed a personal penalty of the same amount under Section 11AC read with Rules 25 and 26 of the Central Excise Rules, 2002. The appellant's factory suffered heavy losses due to a fire, resulting in damage to excisable goods, specifically electric cables and drums. The appellant claimed remission of duty citing natural causes and unavoidable reasons for the loss. However, the Commissioner, based on the report of the Chief Fire Officer, attributed the fire to the factory's casual approach to storage and inadequate fire safety measures. The appellant contended that the fire was unexpected and uncontrollable, contradicting the Commissioner's findings on fire safety measures. After considering the arguments and the fire report, the Tribunal agreed with the appellant that the fire was an unforeseen incident, leading to an unavoidable accident. The sequence of events, including the cause of the fire spreading from outside the factory premises due to stray cigarette butts, indicated no negligence on the appellant's part. Consequently, the Tribunal set aside the impugned order, allowing the appeal and granting remission of duty to the appellant.

Furthermore, it was noted that the appellant, a Public Sector Undertaking, was required to furnish a Bond to withdraw the insurance claim if remission of duty was granted. The High Power Committee On Dispute had granted permission to pursue the appeal under this condition. The appellant's advocate confirmed that no claim would be made to the Insurance Company. As a result, the appeal was allowed with the specified condition, and the case was disposed of accordingly.

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