Insurance Claim on Remission of Duty cannot be Denied on Ground of Failure to Produce Documentary Evidence: CESTAT [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench, has recently, in an appeal filed before it, held that insurance claim on remission of duty cannot be denied on the ground of failure to produce documentary evidence.

The aforesaid observation was made by the Ahmedabad CESTAT, when an appeal was filed before it by the assessee, who was a manufacturer of glass bottles and vials, as against the order of the Commissioner of Central Excise, Surat, by which, the claim for remission of duty on the goods lost in fire accident which occurred on 22-01-1998, was rejected.

The brief facts of the case were that the appellant in its factory at Kosamba, had stored stock of finished goods in approved bonded store room as well as temporary go down. And, the entire stock was entered in RG-1 register.

On 02.01.1998, a fire broke out and immediately intimation was sent to the Superintendent of Central Excise on the same date and panchanama was drawn on 06.01.98. Subsequently, the Appellant also made application for remission of duty under Rule 49. Also, as per the letters dated. 04.01.1998 and 14.05.1998 of the Superintendent of Central Excise, the appellant had also debited under protest, the amount of cenvat credit of Rs. 5,97,062/- contained in inputs used in the manufacture of final products which were destroyed due to fire.

Thereafter, the Appellant was issued show cause notice dated 13.04.1998 demanding the duty of Rs. 24,21,535/- on finished goods lost in fire. And subsequently, the deputy Commissioner vide Order-In-Original dated 30.11.2000, passed the ex-parte order, thereby confirming the demand.

Being aggrieved by the said order, appellant filed an appeal before the Commissioner (Appeals), who passed the order-in-appeal stating that the order passed by the deputy commissioner is pre-mature and that the Commissioner who is the competent authority, is yet to take a decision on the remission of duty application filed by the appellant.

Subsequently, the appellant wrote various letters to the Commissioner for disposal of remission application. But, the Commissioner, vide impugned order –in-original, dated. 30.05.2012, rejected the duty remission application of the appellant, thus leaving the appellant aggrieved, to prefer the instant appellant before the Ahmedabad CESTAT.

With the Chartered Accountant, shri Mehul Jiwani, appearing on behalf of the appellant, having submitted that the deputy commissioner vide OIO dated, 30.11.2000, had noted that the fire accident took place due to the electric short circuit , which was beyond the control of the appellant, he thereby relying on a number of judicial precedents added to his submission that, the Tribunal as well as the High Court has consistently held that insurance claim of excise duty is having no bearing on claim or remission of duty.

On the other hand, Shri R.K. Agarwal, the Superintendent (AR), appearing for the department supported the impugned order.

Hearing the opposing contentions of both sides and thereby perusing the materials available on record, the CESTAT observed:

“We find that the crucial fact admitted by both the sides in this case is that the goods in question was destroyed due to fire within the licensed premises /factory premises and the appellant had duly informed the Central Excise officers and the loss was duly evaluated. Under the circumstances, there was no question of demanding any duty. The position in law is very clearly stated in Rule 49 according to which duty is chargeable only on removal of the goods from factory premises or from an approved place of storage. Furthermore, as per the first proviso to Para (1) of Rule 49 in case the goods are lost or destroyed by natural causes or by unavoidable accidents during handling or storage in the store room or other approved premises the duty cannot be demanded. The manufacturer in fact, is required to pay the duty only if he fails to satisfy the proper officer that the goods have been so lost or destroyed by natural causes or by unavoidable accidents. In the instant case, the officers on intimation had verified the facts and it was not the case of the department that they were not satisfied. Therefore, no duty was demandable irrespective of what the insurance companies had done or not done.”

“The Ld. Commissioner is obviously wrong in denying the remission of duty by observing that the Appellant have failed to produce details in respect of claim of excise duty from insurance company. In this regard we also agree with the arguments of Ld. Counsel that insurance claim having no bearing on claim for remission of duty. The judgments relied upon by the Ld. Counsel in this context squarely applicable”, the Coram of Mr. Ramesh Nair, the Member (Judicial) and Mr. Raju, the Member (Technical) added.

Thus, the Ahmedabad CESTAT finally held:

“As we have observed above, in view of the admitted factual position, there was no cause for demand of duty from appellant in the instant case. Therefore, we do not hesitate to hold that the Commissioner’s order is misconceived and incorrect in law as well as in fact. Accordingly, the impugned order is set aside. The appeal is allowed with consequential relief, as per law.”

To Read the full text of the Order CLICK HERE

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