The Calcutta High Court recently in a case affirmed the Customs, Excise and Service Tax Appellate Tribunal’s ( CESTAT ) dismissal of lower authority’s rejection of CENVAT duty remission under rule 21 of the Central Excise Rules, 2002, noting that the evidence against the assessee to have given such a rejection was weak.
Sarvopari Impex Private Limited, the assessee, filed for remission of duty under Rule 21 of the Central Excise Rules, 2002, following a fire incident at their factory. The fire, reportedly caused by an electrical short circuit, destroyed a substantial amount of raw materials, plant, and machinery.
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The Central Excise Department issued a show-cause notice to the assessee proposing to reject their claim for remission of CENVAT duty and demanding the same under Section 11A of the Central Excise Act, 1944.
The department’s primary objection was that the assessee failed to establish the exact quantity of raw materials and machinery destroyed. Additionally, the department intended to levy interest and impose a penalty on the company.
The show-cause notice issued to the assessee was adjudicated without affording the assessee an opportunity to present their case, leading to the rejection of their remission application on March 28, 2012.
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Aggrieved, the assessee challenged this decision before the CESTAT. On August 17, 2015, the Tribunal set aside the adjudication order and remanded the case for de novo (fresh) adjudication.
The case was re-adjudicated, and on December 15, 2016, the adjudicating authority dropped the demand proposed in the show-cause notice, favoring the assessee.
Aggrieved, the Revenue/ appellant appealed against this before the CESTAT, who dismissed the appeal.
Aggrieved again, the appellant took matters to the Calcutta High Court to challenge the CESTAT’s dismissal of appeal.
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Before the Court, the appellant questioned whether the assessee was eligible for remission of duty under Rule 21 of the Central Excise Rules, 2002, despite the failure to provide evidence of the quantity of stock destroyed.
The appellant also submitted that the tribunal erred in dismissing the Revenue’s appeal, given the lack of documentation from the assessee, such as a survey report and procurement records.
After examining the facts of the matter, the division bench of Justice T S Sivagnanam and Justice Hiranmay Bhattacharya observed that the tribunal’s decision was based on factual assessments by the adjudicating authority, which had already been tested and confirmed.
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It was noted that the Fire Department had certified the occurrence of a fire, and while the exact cause was not determined, the possibility of an electrical short circuit was acknowledged.
The bench highlighted that the adjudicating authority noted that the respondent (the assessee) was not provided with the survey report, which could have substantiated the extent of damages. Despite this, the authority accepted the assessee’s claims regarding the quantity of stock based on the information available.
This action was vehemently contested by the appellant on the context that not enough evidence was available to the adjudicating authority to have held such a decision.
However, the Court observed that this point can’t be canvassed by the appellant department because whatever the details furnished by the assessee prior to issuance of the show cause notice, namely, quantity of finished goods and other details were never disputed by the department, and the show cause notice was drafted accordingly.
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Therefore, it was too late for the revenue to now agitate the said issue in the appeal because the show cause notice was drafted based on the same details upon which the adjudicating authority also crafted its decision.
In result, the Court dismissed the Revenue’s appeal, affirming the Tribunal’s decision to allow remission of duty to the assessee .The court concluded that no substantial questions of law arose in the appeal.
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