Excise duty on goods destroyed before removal was not payable, and insurance compensation did not create liability.

Central excise duty was chargeable only on removal of goods from the factory or approved storage, so plywood and other stock destroyed by fire while still inside the licensed premises did not attract duty. The loss was reported to the excise authorities, the destroyed goods were assessed, and the insurance records showed that the compensation did not include excise duty. Receipt of insurance compensation could not create a duty liability where none had arisen under the rule. The excise demand was therefore not sustainable and was set aside in favour of the assessee.

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Issues: Whether central excise duty was payable on plywood and other goods destroyed by fire while they were still within the licensed factory premises, and whether the insurance compensation received could justify the duty demand.

Analysis: Rule 49 provided that excise duty became chargeable only on removal of goods from the factory premises or an approved place of storage. The facts showed that the goods were burnt inside the factory before removal, the loss was intimated to the excise authorities, and the destroyed stock was assessed at the time. The insurance certificates and survey reports also indicated that the amount paid by the insurers did not include excise duty. In these circumstances, the duty had not become payable, and receipt of insurance compensation could not create a duty liability where none otherwise existed.

Conclusion: The demand of excise duty was not sustainable and was set aside in favour of the assessee.

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