CESTAT clarifies jurisdiction on loss of goods in storage under Central Excise Act

The Larger Bench of CESTAT considered the jurisdiction of the Tribunal to hear appeals on loss of goods in storage under Section 35B of the Central Excise Act. It was concluded that all types of losses, including those covered under Rule 49, fall under Section 35B. The Tribunal lacks jurisdiction to hear appeals on loss of goods in transit or storage when an order is passed by a Commissioner (Appeals). A similar decision by the Madras High Court upheld the Tribunal's lack of jurisdiction in such appeals. The matter was remitted back to the referring Bench for further action.

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Issues involved: Jurisdiction of the Tribunal to hear appeals arising from loss of goods in storage in a factory as per Section 35B of the Central Excise Act.

Summary:
The Larger Bench of CESTAT was constituted to consider the issue referred by a Bench of CESTAT regarding the jurisdiction of the Tribunal to hear appeals arising from loss of goods in storage. The issue revolved around the interpretation of the first proviso to sub-section (1) of Section 35 of the Central Excise Act. The referring Bench highlighted a previous case where it was held that loss due to unavoidable accident is covered by Rule 49 of the Central Excise Rules, while Section 35B of the Act covers simple loss due to any reason, indicating that the Tribunal can decide on issues arising from such loss.

Section 35B of the Central Excise Act specifies that no appeal shall lie to the Appellate Tribunal if the order relates to a case of loss of goods in transit or in storage, and the order is passed by a Commissioner (Appeals). The Tribunal concluded that all types of losses, including those covered under Rule 49, are encompassed by Section 35B, and if an order is passed by a Commissioner (Appeals) regarding claimed loss, the Tribunal lacks jurisdiction to hear an appeal on it.

In a similar case before the Madras High Court, it was held that the Tribunal lacked jurisdiction to deal with appeals arising from an order passed by the Commissioner (Appeals) concerning loss of goods. The Tribunal's decision in this regard was not faulted by the High Court. The Tribunal emphasized that loss occurring in storage, whether due to unavoidable accident or otherwise, falls under the purview of Section 35B, and there should be no distinction between types of losses as stated in the proviso. Therefore, the Tribunal concluded that it does not have jurisdiction to hear appeals related to loss of goods in transit or storage as per Section 35B.

The Larger Bench remitted the issue back to the referring Bench for appropriate orders in the matter before them.

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