Custom, Excise & Service Tax Tribunal
M/S. M Kumar Udyog (P) Ltd vs Commissioner Of Central Excise on 25 November, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. III
Excise Appeal No. 3461 of 2006-SM
[Arising out of Order-In-Original No. 1/Commr/Tech/Rem/2006 dated 29.07.2006 passed by Commissioner of Central Excise Kanpur]
For approval and signature:
Honble Ms. Archana Wadhwa, Member (Judicial)
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes
3
Whether Their Lordships wish to see the fair copy of the Order?
Seen
4
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s. M Kumar Udyog (P) Ltd. Appellants
Vs.
Commissioner of Central Excise Respondent
Kanpur Appearance:
Shri Kumar Akasrshan, Advocate for the Appellants Shri B.B. Sharma, DR for the Respondent CORAM:
Hon'ble Ms. Archana Wadhwa, Member (Judicial) Date of Hearing /Decision: 25.11.2013 ORDER NO . FO/ 58359 /2013-SM(Br) Per Ms. Archana Wadhwa:
As per facts on record the appellant is engaged in the manufacture of footwear falling under Chapter 64 of the Central Excise Tariff Act, 1985 and were availing the benefit of Cenvat credit of duty paid on the inputs.
2. A fire broke out in the appellants factory on 2.6.2004 and the raw materials stored in the factory and as also semi finished goods as well as finished goods got destroyed. The fact of fire was intimated to the Revenue vide their letter dated 3.6.04. The Appellants jurisdictional Central Excise Range Officer visited the appellants factory on 4.6.04 and conducted survey of the premises as also the goods destroyed / damaged in the fire. The statement of the appellants Director Shri Neeraj Gupta was also recorded on 4.6.04.
3. In view of the above, the appellants filed the remission application dated 30.5.05 in terms of Rule 21 of Central Excise Rules, 2002 seeking remission of duty of 8,85,278.40 in respect of goods in process and of Rs.5,12,659.26 in respect of finished goods destroyed in fire. On receipt of above application, a report was sought from their jurisdictional Assistant Commissioner. Vide their letter dated 1.8.05, the office of Assistant Commissioner recommended the rejection of remission application on the ground that as prescribed under Chapter 18 of the CBEC Excise Manual of supplementary instructions read with CBEC Circular No.800/33/2004-CX dated 1.10.04, the assessee has not reversed the credit involved on goods which were contained in burnt / destroyed finished goods and as also on the ground that Rule 21 of Central Excise Rules provide remission of duty on the finished goods only and such remission of duty claimed by the assessee on the semi finished goods is not covered in the said Rule.
4. Further, the Assistant Commissioner of Central Excise having jurisdiction over the appellants factory also filed a detailed report on 7.2.06, as under:-
(1) The party has informed the fire accident within 24 hours of its occurrence. (2) They have not claimed the Excise Duty element involved in the destroyed goods, in their insurance claim. (3) The quantity of destroyed goods was not physically verified but the same was verifiable on the basis of records maintained by the party. (4) The document enclosed with the remission application of the party appears to be correct. (5) The fire accident occurred due to short circuit.
5. The fire report dated 18.6.04 filed by Chief Fire officer, Kanpur was also taken note of and it was found that fire occurred on account of short circuiting which happened on account of over heating of cables.
6. Subsequently, the appellants were issued a show cause notice dated 25.4.06 proposing to reject the remission application seeking remission of total duty of Rs.13,97,937.66. The said show cause notice stand culminated into impugned order passed by the Commissioner rejecting the appellants remission application.
7. After hearing both sides duly represented by Shri Kumar Akarshan, learned Advocate appearing for the appellants and Shri B. B. Sharma, learned AR appearing for the Revenue, I find that the adjudicating authority has observed that breaking of fire on account of short circuit cannot held to be a natural cause or unavoidable accident. The appellant failed to give details of the fire fighting equipment in their factory and to show that they had adequate safety measures to prevent fire accidents due to short circuit. Commissioner observed that on previous occasions also such fire broke in the factory of their job worker in the year 2002 on account of short circuiting. He also rejected the remission application on the ground that appellants have not reversed the Cenvat credit involved in the raw materials contained in the final product, so damaged. He rejected the remission of duty of Rs.8,85,278.40 on the semi finished goods by observing that the said goods had not attained the marketable status and as such, remission of the same is not called for.
8. As regards the first issue, I find that admittedly the fire broke in the appellants factory on account of short circuiting, which is attributable to electric malfunctioning. The appellants have rightly contended that no sane industrialist will cause huge loss of money invested in plant and machinery in the factory by fire accident, due to negligence. The fire caused by short circuiting cannot be avoided by taking precautionary measures. The Honble Rajasthan High Court in the case of Union of India vs. Hindustan Zinc Ltd. [2009 (233) ELT 61 (Raj)] has examined expression natural cause and unavoidable accident appearing in Rule 21 of the Central Excise rule and has held that same has to be given reasonable and liberal meaning requiring practical approach in such cases. The said decision of the Honble Rajasthan High Court was taken note of by the Tribunal in the case of Lord Chloro Alkali Ltd. [ 2013 (293) ELT 68 (Tri-Del)]. It was held that fire having occurred on account of excess heat emanating from the storage of the goods has to be held as unintended. The Court observed that - it is well settled that nobody intentionally invites such accidents to happen and they happen on account of various natural causes and have to be held as unavoidable accident.
Similarly, the observations of the Commissioner that two years back also, the fire broke in the factory of the appellants job worker has no relevance to the present case. Admittedly, the factory of the job workers is a different factory and we do not know the reasons for fire in that case. The fire accident may arrive without giving any warning and it cannot be said that once the fire broke in the factory of the job worker of the appellant, the same cannot again cause appearance in the appellants factory after a period of two years. I find no relevance to the said observation of the Commissioner in the present case.
Accordingly, I hold that the fire having been caused on account of electric short circuiting, has to be held as covered by expression unavoidable accident.
9. As regards, the second reason adopted by the Commissioner for denial of remission that the appellants have not reversed credit availed in respect of raw materials used in the said final product, I find that the issue stand covered by the Larger Bench decision of the Tribunal in the case of Grasim Industries vs. CCE, Indore [2007 (208) ELT 336 (Tri-LB)] . Instead of following the said decision, the Commissioner has preferred to follow the Boards circular dated 1.10.04 by observing that the said circular would prevail over the final order of the Tribunal. For the above observations, he has referred to Honble Supreme Court decision in the case of Ratan Melting & Wire and Cables Industries [ 2005 (02)LCX0032] which held that the departmental circulars are binding on the Departmental officers. I am afraid that such views of the adjudicating authority are against all the judicial principles, and is based on mis-reading of the Honble Supreme Court decision. The said decision is to the effect that beneficial circular of the Board cannot be ignored by the adjudicating authority and a contrary view against the assessee cannot be taken. When the Larger Bench decision of the Tribunal has decided the issue, the law gets declared on the disputed issue and is required to be followed by all the adjudicating authorities, unless the same is reversed by the higher appellate forum. As such, the Commissioner was bound to follow the Larger Bench decision in the case of Grasim Industries. The said ground for rejection of the remission application cannot be upheld.
9. As regards the remission of duty on the semi finished goods, I find that if the Commissioner is of the view that such goods have not attained marketable status and as such, there are no requirement for remission of duty, the Revenue cannot call for any duty on the said semi-finished goods. Either they are non-dutiable in which case no duty can be demanded or the same or have to be granted remission from payment of duty, having been admittedly damaged in fire accident.
10. Accordingly, the impugned orders are set aside and the appeal is disposed of in the above manner.
( operative part of the order pronounced in the open Court )
( Archana Wadhwa ) Member(Judicial)
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