Theft of excisable goods does not qualify for duty remission, but penalty fails without proof of intentional evasion.

Rule 49 of the Central Excise Rules, 1944 allowed remission only where excisable goods were lost or destroyed by natural causes or unavoidable accidents during handling or storage, and theft was treated as outside that scope. On that basis, remission was denied and duty on the stolen factory goods remained recoverable. The penalty, however, was unsustainable because the record did not show intentional removal of the goods without payment of duty, and the admitted theft negatived the element needed to justify penal action. The assessee was therefore liable for excise duty on the stolen goods but not for penalty.

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Issues: (i) whether excisable goods stolen from the factory premises were covered by remission under Rule 49 of the Central Excise Rules, 1944; (ii) whether the penalty imposed on the assessee could be sustained.

Issue (i): Whether excisable goods stolen from the factory premises were covered by remission under Rule 49 of the Central Excise Rules, 1944.

Analysis: Rule 49 permitted remission only where excisable goods were lost or destroyed by natural causes or by unavoidable accidents during handling or storage. The Tribunal followed the view that theft is not an unavoidable accident for this purpose and held that the earlier High Court decision treating theft as outside the scope of accident governed the controversy. Since the goods were admittedly stolen, the case for remission failed.

Conclusion: The duty demand was upheld against the assessee.

Issue (ii): Whether the penalty imposed on the assessee could be sustained.

Analysis: The record did not show intentional removal of the goods without duty payment by the assessee, and the fact of theft was not disputed. In those circumstances, although duty was recoverable, the element necessary to justify penalty was absent.

Conclusion: The penalty was set aside in favour of the assessee.

Final Conclusion: The appeal failed on the duty demand but succeeded on the penalty, leaving the assessee liable only for the excise duty on the stolen goods.

Ratio Decidendi: Theft of excisable goods from a factory does not amount to loss by unavoidable accident for remission of duty, though penalty cannot be sustained absent intentional evasion.

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