Non-intimation of fire incidence in factory to the department, whether duty can be remitted on goods destroyed and penalty imposed?

PJ/CASE LAW/2016-17/3223

Case-SAM EXPORTS Versus COMMISSIONER OF CENTRAL EXCISE, DELHI-II

Citation-2016 (337) E.L.T. 146 (Tri. - Del.)

Brief Facts-This appeal is directed against the impugned order dated 3-9-2013 passed by the Commissioner (Appeals), Central Excise, New Delhi, wherein the demand of Central Excise duty along with interest and penalties imposed in the adjudication order were upheld.
The brief facts of the case are that the appellant is engaged in the manufacture of branded and unbranded socks falling under Item 6115 99 00 of the Central Excise Tariff Act, 1985. The appellant also avails SSI exemption under Notification No. 8/2003-C.E. During scrutiny of the ER-I return filed by the appellant for the quarter ending June, 2012, it was detected by the Central Excise Officers that 37,799 pairs of branded socks and 63,891 pairs of unbranded socks were destroyed in the fire and the said stock of socks were deducted from the record of finished goods and no duty of Excise was paid by the appellant on such destroyed goods. For non-payment of Central Excise duty, the Central Excise department initiated proceedings against the appellant for confirmation of the Central Excise duty liability along with interest and for imposition of penalty. The SCN culminated in the adjudication order dated 5-3-2013, confirming the proposals made therein. In appeal, the ld. Commissioner (Appeals) has rejected the appeal filed by the appellant on the ground that the appellant suo motu claimed deduction of manufactured goods from their stocks without any intimation to the Department and also no intimation has been filed about the fire incidence so as to enable the Department to undertake necessary verification as stipulated under Rule 21 of the Central Excise Rules, 2002. Feeling aggrieved with the impugned order dated 3-9-2013, the appellant is in appeal before this Tribunal.

Appelants Contention-Sh. Abhishek Jaju, the ld. advocate appearing for the appellant submits that due to lack of knowledge, the appellant could not inform the Department about the fire incidence. However, when the appellant found out that the Department had to be informed regarding such incidence, the appellant promptly filed the required papers before the jurisdictional Central Excise authorities. To support his stand that fire took place in the factory of the appellant, the ld. advocate has submitted the fire report details issued by the Delhi Fire Service of the Government of National Capital Territory of Delhi before the concerned authorities. He also submits that occurrence of fire in the factory was brought to the knowledge of the jurisdictional Range Superintendent by the appellant vide its letter dated 2-11-2012, enclosing therewith all the requisite details.

Respondents Contention-On the other hand, Sh. G.R. Singh, the Ld. DR appearing for the Respondent reiterates the findings recorded in the impugned order.

Reasoning Of Judgement-The tribunal have heard the Ld. Counsel for both the sides and perused the records. It is an admitted fact that the fire took place in the factory of the appellant on 23rd and 24th June, 2012, which is evident from the certificate issued by the Delhi Fire Service and also the claim lodged by the appellant before the Insurance Surveyors. However, due to inadvertence, on occurrence of such incidence, immediate action was not taken by the appellant in intimating the Department regarding such incidence, and the jurisdictional Range Superintendent was belatedly intimated on 2-11-2012. The document enclosed to the said letter proves the fact regarding occurrence of the fire incidence in the factory of the appellant. Since the excisable goods have been destroyed in fire and the same have not been removed from the factory, they are of the view that payment of Central Excise duty cannot be fastened on such destroyed goods. The penalty imposed under Rule 25 of the Central Excise Rules, 2002 is also not justified in view of the fact that goods have not been removed from the factory. However, since the appellant had not informed the Central Excise Authorities regarding the fire incidence took place in the factory, there is violation of the statutory provisions, for which imposition of penalty under Rule 27 of the said Rules is justified.
In view of the foregoing, the impugned order so far as confirming the duty demand along with interest and imposition of penalty under Rule 25 of the Rules is concerned, the same is set aside. However, the penalty imposed under Rule 27 of the Rules is confirmed, which the appellant is liable to pay for contravention of the Central Excise Rules. The appeal is disposed of in above terms.

Decision-Appeal disposed of

Comment-The analogy of the case is that in accordance with Rule 21 of Central Excise Rules, 2002 incase of non-intimation about the fire incidence to the Department, the duty demanded in respect of goods destroyed in fire is not sustainable when such goods not removed from factory and Fire Service Department certified occurrence of such incidence then, even though Department informed belatedly after a period of 4-5 months of such accident.
And, with regard to imposition of penalty Since, goods destroyed in fire and not removed from factory, penalty under Rule 25 of Central Excise Rules, 2002, not imposable. But as the assessee has violated statutory provisions by not intimating Department about such fire incidence, penalty under Rule 27 of Central Excise Rules, 2002 is justifiable.

Prepared By-Neelam Jain

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PJ/CASE LAW/2016-17/3223

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