TaxTMI 
TaxTMI 
2026 (6) TMI 1006
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....ron Works Ltd, is a wholly-owned subsidiary of the Industrial Development Corporation of Odisha Ltd. (IDCOL), a Government of Odisha undertaking, holding Central Excise Registration No. AAACI9143DXM001, and is engaged in the manufacture of Pig Iron, C.I./D.I. Spun Pipe and Iron Castings falling under Chapter Sub-Headings 7201.1000, 7303.0030 and 7325.100 respectively of the First Schedule to the Central Excise Tariff Act, 1985, at its plant at Matkambeda, Barbil, District Keonjhar, Odisha. 2.1. Pig Iron is, by its very nature, a brittle product. In the course of casting of hot metal in the pig casting machine, and during the consequent in process mechanical handling, storage and intra-plant transportation, Pig Iron Chips, Dust and Dross are inevitably generated on an ongoing basis, a part whereof is inevitably irrecoverable. As per the settled practice of the pig iron industry, the physical stock of Pig Iron is generally ascertained on eye-estimation basis for the purpose of accounting, whereas sale is effected on actual weight basis. A difference between the book stock (RG-1) and the actual physical stock of Pig Iron is, therefore, inherent and inevitable in any pig iron manufa....
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....I/Tech/Rem/No.01/COMMISSIONER/2013 dated 31.10.2013 (the 'Impugned Order'), inter alia, on the grounds that: (i) Rule 223A of the erstwhile Central Excise Rules, 1944 is no longer in vogue and the operative provision is Rule 21 of the Central Excise Rules, 2002; (ii) the loss of 5490.601 MT is not attributable to any natural cause such as flood, fire, cyclone or earthquake, and there is no evidence to correlate the said loss with any natural cause or accident; and (iii) the Appellant ought to have undertaken timely stock-taking and reconciliation. 2.5. The Impugned Order was passed in reliance upon the reports of the jurisdictional Range Superintendent, Barbil and the Assistant Commissioner, Rourkela-II Division, without affording the Appellant any opportunity of personal hearing and without furnishing copies of the said reports to the Appellant. Being aggrieved by the Impugned Order, the Appellant begs to prefer the present appeal. 3. The submissions made by the appellant in support of their case are summarized below: That the shortage represents an inevitable and irrecoverable handling/process loss inherent to the manufacture of Pig Iron,....
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....n would ever fall within either clause. 3.3. The aforesaid view was affirmed, and the principle carried forward, by the Hon'ble High Court of Rajasthan in Union of India v. Hindustan Zinc Ltd. - 2017 (48) S.T.R. 422 (Raj.), wherein, in a case of short receipt of inputs of the order of about 0.05% accounted for by the assessee by writing off the shortage in its books on the strength of dryage of moisture content and slight differences in weighment, the Hon'ble High Court declined to disturb the grant of credit, holding that it would be "too impracticable and unrealistic to ignore... the ground realities and the natural causes" attendant upon such handling, and that, absent any evidence of diversion of duty-paid inputs with intent to evade duty, credit could not be denied. The Hon'ble High Court applied the principle laid down in Union of India v. Hindustan Zinc Ltd. - 2009 (233) E.L.T. 61 (Raj.) (supra), and reiterated that the expressions "natural causes" and "unavoidable accident" in Rule 21 must be given a reasonable and liberal meaning and that a more practical approach is called for in such matters. The said principle applies with greater force to the present case, w....
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....rmissibly narrow construction of Rule 21, which is not confined to such catastrophic events alone but extends to all losses occasioned by natural causes or by unavoidable accident before removal - including inevitable, irrecoverable handling and process losses inherent to the manufacturing process, such as the irrecoverable loss of Pig Iron Chips, Dust and Dross occasioned by oxidation and admixture with the ground. Such inevitable and unavoidable losses are squarely within the remissory ambit of Rule 21 is borne out by the judgments cited above wherein remission was allowed in respect of losses arising from a recurrent natural phenomenon and from handling, respectively, neither of which constituted a catastrophic event of the kind contemplated by the Ld. Commissioner. 3.8. In view of the foregoing, the Appellant submits that the loss of 5490.601 MT of Pig Iron, being an inevitable and irrecoverable handling/process loss generated in the very course of manufacture and occurring well before removal, falls squarely within the remissory ambit of Rule 21 of the Central Excise Rules, 2002. The Ld. Commissioner, having nowhere disputed the inevitability or the irrecoverable character ....
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....ule 223A of the erstwhile Central Excise Rules, 1944, whereas the Appellant never invoked Rule 223A and the Remission Application was expressly made under Rule 21 of the Central Excise Rules, 2002. The erstwhile Central Excise Rules, 1944 had long ceased to exist during the relevant period, having been replaced first by the Central Excise (No. 2) Rules, 2001 and thereafter by the Central Excise Rules, 2002. The Impugned Order is liable to be set aside on this ground alone. The circumstance that the Board's product-specific condonation norms were originally issued with reference to Rule 223A of the erstwhile Rules does not, in any manner, detract from their continued applicability under the present remission regime; indeed, in Steel Authority of India Ltd. (supra) and Rashtriya Ispat Nigam Ltd. (supra), the guidance contained in C.B.E.C. Circular No. 52/79-CX was applied notwithstanding the migration of the statutory rules. 3.12. Thus, the Appellant submits that the impugned Order denying remission to the Appellant is liable to be set aside on this ground also:. That the Impugned Order, having been passed in gross violation of the principles of natural justice without af....
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....sioner has rejected the remission application of the appellant. 6.2. In this regard, we refer the Supplement to the Manual of Departmental Instructions on Excisable Manufactured Products (Iron and Steel - Chapter 72), issued by the Central Board of Excise and Customs vide GIMF(DR) F.No.223/31/73-CX.6 dated 26.10.1979 (Circular No. 52/79-CX), which prescribes the permissible extent of condonable losses observed during annual stock-taking in the following terms: "As regards the percentage of losses that can be allowed in relation to the various iron and steel items... following percentage of condonable losses observed during annual stock taking is fixed:- (i) Steel ingots including steel melting scrap covered by the erstwhile T.I.26 and Iron or steel products covered by the erstwhile T.I.26AA - 1%; (ii) Pig iron - 2%; (iii) Iron and any crude form - 0.25%." 6.3. In the present case, we find that the total production of Pig Iron during the period 2001-02 to 2011-12 was 9,96,907.535 MT. As against this quantity of Pig Iron produced, the accumulated irrecoverable loss was 5490.601 MT, which works out to a mere 0.55% and it is less than one-third....