Whether appellant is entitled to remission on loss of finished goods and semi-finished goods?

PJ/Case Law /2016-17/3249

Case:- SUMIT CHEMICALS PVT. LTD. VERSUS COMMISSIONER OF C. EX., KANPUR

Citation- 2016 (337) E.L.T. 299 (Tri. - All.)

Brief Facts-The appellant suffered fire accident in the early morning on 17-1-2012 and the fire was reported to the Fire Department at 6 am/6.17 am and the fire department reached the place of occurrence at 6.23 am. As per report of the fire department, the reason for fire is short circuit and no foul play has been found. Further as is evident from the report of fire department some staff of the appellant got injured and severely burnt and were moved to hospital/nursing home. The appellant vide letter 17-1-2012 informed the Superintendent about fire incident and loss of finished goods, semi-finished products and raw materials as well as loss of plant & machinery. Pursuant to the receipt of the remission claim, show cause notice dated 15-1-2013 was issued wherein at para 4 of the SCN it is mentioned that it is apparent that incident of fire took place due to electric short circuit which could have been avoided if the appellant had taken proper monitoring of electric wires and fittings thereof. It appears to Revenue that there was negligence on the part of the appellant resulting in loss due to fire. It was further observed that the appellant have not followed the Electricity Safety Rules and further no documentary proof was submitted by the appellant showing total value of loss, inclusive of value of excisable goods destroyed in the said fire accident, having been claimed from any insurance company. Accordingly, SCN proposed to deny remission sought for Rs. 46,19,123/- of duty involved in the goods destroyed in fire comprising of raw material Rs. 26,31,955/-, finished goods Rs. 22,29,617/-, semi-finished product Rs. 3,72,325/-. The appellant dropped the claim of Rs. 26,31,955/- towards raw materials.

Appelants Contention-The appellant contested the SCN and the same was adjudicated by the impugned order rejecting the appellant’s claim in totality and appropriating the amount of Rs. 26,31,955/- already deposited by the appellant towards reversal of Cenvat credit on raw material lying in stock. The appellant has challenged the findings of the ld. Commissioner that there was negligence on their part either in running the factory or in taking measure for mitigating loss. The appellant has demonstrated that they were regularly obtaining safety certificate from fire department for running their plant and the last consent was taken on 17-6-2011 which is within one year of the date of loss. So far finding of the ld. Commissioner, the staff in the factory, it appears, were not given training on regular interval to face such emergent situation like fire. It is stated that there is no basis for such finding in view of the conclusive report of the fire department. So far finding as to lack of effort on the part of the appellant to mitigate loss or reduce loss, the ld. Consultant states that the same is without any basis which is apparent from the report of the fire department which states that report of fire starting was received by the fire department within 20 minutes of the incidence and further some persons/employees of the appellant suffered injury in dousing fire and as such said finding is fit to be set aside. Further, the ld. Consultant for the appellant relies on the ruling of this Tribunal in Sanskriti Packaging Pvt. Ltd. v. C.C.E. & S. Tax, Surat - 2015 (318) E.L.T. 451 (Tri.-Ahmd.) wherein it was held that remission claim was rejected by Revenue on the finding that fire accident was due to human error and was avoidable. In view of the report of the fire department that fire was accidental and insurance company has settled the claim, the finding was set aside and the claim was held allowable by this Tribunal. Further it is stated that the issue is settled by the Hon’ble Supreme Court in the case of C.C.E. v. Indchem Electronics -2003 (157) E.L.T. A206 (S.C.)wherein it has been held that assessee is also entitled to claim in respect of work in progress or semi-finished goods and the claim is only deniable on the raw materials lying and destroyed in stock. Accordingly, in view of the above fact that there is no dispute on the quantum of claim, the ld. Consultant prays for setting aside the finding for rejection and allowing the appeal.

Respondents Contention- Ld. AR for Revenue relies on the impugned order. He further relies on the ruling of the Larger Bench of this Tribunal in the case of C.C.E.v. Gangeshwar Ltd. - 2015 (322) E.L.T. 444 (All.) wherein the question before Allahabad High Court was whether onus on the assessee to place sufficient evidence and prove that goods were lost or destroyed by natural causes, was by unavoidable accident, the appellant/assessee seeking remission of duty and/or such onus cannot be shifted on the Department to prove otherwise. The Hon’ble High Court answered the question in favour of Revenue thus holding that onus lies on the assessee.

Reasoning Of Judgement-Having considered rival contentions, it is found that the ld. Commissioner have erred in rejecting the claim on extraneous considerations, in view of the consent to operate granted by the ‘Fire Department’. Further, the Fire Department (Competent Authority) have certified that there is no foul play, and fire is due to reasons beyond control. In this view of the matter, the impugned order is set aside so far remission have been denied on semi-finished goods or work in progress and the finished goods.
The appellant, it is held, is entitled to remission on loss of finished goods and semi-finished goods. The appellant will be entitled to consequential relief(s), if any, in accordance with law.

Decision:- Appeal allowed.

Comment:- The crux of the case is that the appellant suffered fire accident which caused huge loss of finished goods, semi-finished products and raw materials as well as loss of plant & machinery for which he claimed remission of duty. Thus,remission claim is not to be disallowed when Fire Department has certified ‘no foul play’ by appellant and also granted safety certificate regularly.

Prepared By-Ritika Mehta

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PJ/Case Law /2016-17/3249

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