Customs, Excise and Gold Tribunal - Tamil Nadu
Eid Parry (I) Ltd. vs Commissioner Of C. Ex. on 27 November, 2002
Equivalent citations: 2003(154)ELT175(TRI-CHENNAI)
ORDER S.L. Peeran, Member (J)
1. The stay and appeal lies in a short compass and hence after due hearing, and after granting the waiver of pre-deposit, the appeal itself is taken for disposal.
2. The Commissioner (Appeals) in the impugned order has confirmed the Order-in-Original passed by the ACCE, Ranipet Division, Chen-nai III Commissionerate ordering for recovery of an amount of Rs. 42,223/-under the provisions of Rule 57AH of Central Excise Rules, 1944 read with the provisions of Section 11A of Central Excise Act, 1944. He has also imposed a penalty of Rs. 4,000/- under Rule 173Q of Central Excise Rules, 1944.
3. The appellant-company is engaged in the manufacture of Ceramic products falling under Chapter Sub-Heading 6908.10 of Central Excise Tariff Act, 1985. On verification of records, it was found that the appellants had availed remission of duty on damaged finished goods from 1-6-2000 onwards but they did not expunge the Cenvat credit availed on the inputs used in the manufacture of such damaged finished goods. Appellant's contention that they are not required to expunge the same as the provision itself provides for the benefit to be not reversed when the goods are damaged due to the processes shown in the Rule 49 of Central Excise Rules under the duty remission scheme. However, their plea was not accepted and penalty was confirmed.
4. I have heard both sides in the matter and notice that this Bench in the case of CCE, Chennai v. Indchem Electronics, 2003 (151) E.L.T. 393 (Tribunal) = 2002 (53) RLT 314, dismissed the Revenue's appeal and upheld the grant of remission of duty by holding that in terms of Rule 49 of Central Excise Rules, remission of duty is available when the goods get destroyed in the store room or approved place due to accidental cause or by unavoidable accident during handling or storage. The findings recorded by this Bench in paras 5 and 6 are reproduced herein below :-
"5. We have carefully considered the rival submissions and gone through the case records. We observe that in this case, the fact of destroying the goods by fire accident is not disputed by the department. The contention of the department is that Rule 49 is not applicable in this case because the goods destroyed were not finished goods kept in a store room or in approved place. We find that the proviso to Rule 49 lays down that the manufacturer is required to pay duty on any goods which are not shown to the satisfaction of the proper officer to have been lost or destroyed by natural causes or by unavoidable accident during handling or storage. In the present case as already noted, there was no dispute that the goods were destroyed by fire. The survey report furnished by the Surveyor appointed by the Insurance Company which is reproduced in the order-in-appeal clearly stated that the goods in the form of assembled and semi-assembled circuit boards and electronics components viz. ICs, Diodes, Contactors relays, etc., totally valued at Rs. 1,46,79,988.96 have been destroyed by fire accident and the damaged PCBs and electronic components do not have any commercial value and are useless. Therefore, the plea of the Revenue that Rule 49 is not applicable cannot be countenanced. The Revenue has also contended that the reliance by the Commissioner (Appeals)' on the CEGAT's decision is not correct as those decisions are not relevant to the facts of the present case since fire accidents were not involved in those case. We have no hesitation to record that the Revenue has taken this plea without going into the case laws relied upon by the Commissioner (Appeals). They should have gone through the case laws before taking such a ground. We observe that the Commissioner (Appeals) has rightly applied the ratio of the following decisions in this case:
(a) CCE v. Foods, Fats and Fertilizers Ltd. reported in 1989 (41) E.L.T. 277 (T) wherein it was held that exemption under Notification No. 118/75-CE. is admissible when goods removed from place of production and intended for use in the manner specified even though lost due to destruction by fire.
(b) Larsen & Toubro Ltd. v. Assistant Collector of Central Excise reported in 1992 (61) E.L.T. 510 (Collr. App.) wherein it was held that Modvat credit cannot be reversed in respect of inputs actually issued and damaged in fire accident while in manufacturing process, whereas Modvat credit to be reversed only in respect of inputs not issued for manufacture but got damaged in fire, in terms of Rule 57A.
(c) Prem Pharmaceutical v. CCE, Indore reported in 1996 (88) E.L.T. 278 wherein it was held that in respect of credit taken on bottles broken during handling, the demand for duty on such bottles is not justified, in terms of Rule 57D. It was also held therein that credit is not to be denied in terms of Rule 57D subject to the bottles being destroyed as per procedure under Rule 57F of the CE Rules.
(d) In the case of CCE, Aurangabad v, Glindia Ltd. reported in 1996 (15) RLT 361 (CEGAT) - 1996 (87) E.L.T. 73 (T) wherein it was held that Modvat credit on broken glass bottles not to be denied in terms of Rule 57D.
6. As we have already observed, in this case, the fact regarding fire accident and goods having been destroyed as a result thereof is not disputed. The department has also not contested the claim of the assessee that the inputs were destroyed after the inputs were actually issued. Further, there was also no allegation that there was any diversion of the goods elsewhere. In view of our discussion above, we are of the considered opinion that the Commissioner (Appeals) has come to a correct conclusion after analysing the evidence on record, that there was no warrant to reverse the input credit taken in this case and we do not find any reason to interfere with the order passed by the lower appellate authority. Accordingly, the Revenue appeal is dismissed."
5. Further, I notice that the Board also by their circular No. 650/41/2002-CX, dated 7-8-2002 has also clarified that the assessee's in such case will be eligible for remission of duty on the finished goods destroyed or damaged in fire, accident, etc. The Counsel clarified that the amounts were in the range of Rs. 2,000/- to Rs. 5,000/- and were less than Rs. 5 lakhs and hence they have not claimed insurance. In terms of Board's circular they are eligible to remission of duty in view of Tribunal's judgment noted supra and the Board's circular, the appellants are entitled for remission of duty on the products which were destroyed due to breakage by accident/handling. They are entitled for the claim and are not required to reverse the Modvat credit as held by the lower authority. Therefore, respectfully following the Tribunal's ruling extracted supra and the Board's circular, the impugned order is set aside and appeal allowed.