Customs, Excise and Gold Tribunal - Mumbai
M/S. Shreeram Ssk Ltd. vs Commissioner Of Central Excise & ... on 12 February, 2001
Equivalent citations: 2001(133)ELT621(TRI-MUMBAI)
ORDER J.H. Joglekar, Member (T)
1. On hearing both sides, the main appeal itself was taken up for disposal after granting waiver of pre-deposit of duty amounting to Rs.9,86,510/-.
2. The appellants manufactured sugar. On 7.5.1991 some sugar stored in a bonded store room inside their factory was destroyed in fire. Part of the sugar was salvaged and was reprocessed after taking prior approval and permission of the departmental officers. On 26.11.1991 the assessees filed an application for remission of duty on sugar destroyed by fire in terms of rule 147 of the Central Excise Rules, 1944. In the meanwhile, the department issued three show cause notices. The first was dated 1.10.1991 requiring the assessees to pay duty of Rs.8,67,085/- on the ground that the assessees had surreptitiously removed a quantity of sugar at the same time giving the excuse that the sugar was washed away by the water sprayed for controlling the fire. Two more show cause notices were issued dated 19.5.1992 and 28.8.1992 demanding duty of Rs.54,570/- and Rs.64,855/- respectively. This demand pertained to the lost sugar during reprocessing. The jurisdictional Commissioner adjudicated all the three notices in the same order now impugned before us. He examined the documents relating to fire. He observed that the managing director had shown the probable cause as a bidi or a cigarette thrown by a worker during the course of packing the sugar bags. It was also stated before him that the assessees had put up warnings to their staff not to smoke on duty. The Commissioner observed that the assessees had not shown due diligence in enforcing their own orders and therefore the accident of fire could not be termed as "unavoidable". In holding so, he relied upon the Tribunal's judgment in the case of CCE vs. Dhampur Sugar Mills 1986 (24) ELT 28A. He disputed the ratio of the contrary judgments put forth by the counsel. On this ground he confirmed the duty in the first show cause notice. As regard the other two show cause notices he stated that the loss during reprocess could not be covered under the phrases "natural causes or unavoidable accident". He further held that there was no provision in the law to remit the duty. On these observations he confirmed the demands made in the other two show cause notices.
3. We have heard Shri G.L. Deshpande, advocate, for the appellants and Shri B.K. Choubey, JDR, for the Revenue.
4. The citation on which reliance was placed by the Commissioner draws force from the Tribunal judgment reproduced in 1984 ECR p.1 (Hindustan Insecticides Ltd.). In this judgment the wording in rule 49 was interpreted in an extremely rigid manner. In effect the Tribunal ruled out the coverage of this rule where the cause of accident was not susceptible to human act. This law has been departed from in almost all the later judgments. In fact in the judgment of the Tribunal in the case of Pravara SSK Ltd. vs. CCE 1998 (103) ELT 414 the facts were almost identical and that is there were no electrical connections and that the workers were "generally not in habit of smoking". The Tribunal in that situation ruled in favour of the assessee. This judgment relies upon similar judgments made in the past.
5. It is true that when the first show cause notice was issued, the assessee had not made an application for remission. In fact this show cause notice preempts such an application by alleging that the assessee surreptitiously removed the sugar and used the fire as an excuse. He also opined that the sugar washed away in water could have been recycled and manufactured by the assessee. He in fact doubted the very word of the assessee that the fire was put out with water by observing that in that situation the sugar solution would have covered the ground and on evaporation the sugar would have been visible. We do not wish to comment on these observations of the Commissioner but find that the fact of the fire accident has come out in the show cause notice itself. In that situation, instead of waiting for remission application, this show cause notice was issued on extraneous considerations. There is no jurisdiction for levelling the charge of conspiracy, malafide and of surreptitious removal. The Officers of the company continued to blame the loss by fire. The fact of fire was supported by independent agencies including Insurance Company and the surveyors. The Commissioner has based his confirmation of demand on entirely unsupported allegation of surreptitious removal. This order does not sustain and will have to be set aside.
6. As regards the other two demands confirmed, we find that the assessees had approached the Commissioner's staff for permission to reprocess the damaged sugar. Rules 86 & 87 of the Central Excise Rules, 1944 specifically relate to damaged sugar taken up for refining. When such sugar is remade, certain loss is inevitable. The loss of goods processed in the warehouse is capable of condonation in terms of rule 147 but for this rule to attract the commodity must fall under chapter VII of the Rules in terms of a notification to be issued under rule 139. It is likely that such loss is covered by executive instructions and therefore we do not find any force in the Commissioner's statement that there is no provision of law covering such loss. It is for the Commissioner to examine the provisions of law and in its absence the executive instructions to enable him to remit the payment of duty on the loss in refining of the sugar. For this, the proceedings will have to be remitted to the Commissioner and the assessees must assist him in determining the law.
7. In the result, the appeal is partly allowed. Confirmation of duty of Rs.8,67,085/- is set aside. The orders of confirmation of demands of Rs.54,570/- and Rs.64,855/- are remitted back to the Commissioner for reconsideration in view of our observations above.
(Dictated in Court)