Relief to Sun Pharmaceuticals: CESTAT allows Application of Remission of Duty as the Cenvat Credit involved in Destroyed Goods was Reversed [Read Order]

As a relief to Sun Pharmaceuticals, the Ahmedabad bench Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed application of remission of duty as the Cenvat Credit involved in destroyed goods was reversed.

The appellant M/s. Sun Pharmaceuticals Industries Ltd. are engaged in the manufacture of medical equipment, they have filed their application dated 26.08.2010 for the remission of duty on the finished goods destroyed in a fire accident that occurred in their factory on 07.06.2010 with the Assistant Commissioner, Central Excise & Customs, Division-II.

The said application was subsequently revised by them vide their application on the request of the Assistant Commissioner, Central Excise & Customs, Division-II vide their letter dated 27.09.2010 and 27.05.2011. As per the remission application of the appellant, they have claimed the remission of duty of Rs. 1,38,233/- involved in the PP medicine which was destroyed in the fire accident. The adjudicating authority rejected the remission application under Rule 21 of the Central Excise Rules, 2002 mainly relying on the guidelines as prescribed under the trade notice.

The adjudicating authority found that the appellant has not taken the proper precaution to avoid the fire accident. They have also not filed F.I.R. with the police within 24 hours. The adjudicating authority likewise pointed out various discrepancies on the part of the appellant and concluded that the appellant have not fulfilled the conditions laid down in the Commissionerates Trade Notice No.36/2005 dated 15.04.2005 in as much as they failed to inform the department in due time, they did not take necessary precautions to safeguard the goods, they did not insure the goods, that they failed to claim in any proper pro-forma, the claim was filed by them in proper pro-forma only on 01.07.2011 i.e. after almost one year after the fire accident on 07.06.2010.

The remission application was rejected against which the appellant filed an appeal before the Commissioner (Appeals) who upheld the order of the original authority.

Ms Nidhi Nawal, counsel appeared on behalf of the appellant submitted that the appellant have admittedly intimated to the range officer about the fire accident, the officers visited the factory and recorded the panchnama wherein, no lapse on the part of the appellant was pointed out.

She submitted that the appellant have informed the fire brigade to control the fire and also informed the insurance company. The insurance survey was conducted and the appellant was also granted the insurance claim. She submitted that the appellant by following the provision of remission reversed the cenvat credit of Rs.92,061/- involve in the goods destroyed in the fire accident. 

On the other hand, Shri Prakash Kumar Singh, Superintendent (AR) appearing on behalf of the revenue reiterated the finding of the impugned order. It was argued that there is no dispute that the appellant has not followed the guidelines for the remission of duty as laid down in the trade notice of Commissioner of Central Excise Ahmedabad therefore, for non-compliance with the guideline the remission of the appellant was rightly rejected and the consequential demand was correctly confirmed by the lower authorities.

without any evidence, the allegation of the lower authorities that the appellant has not taken precautions has no basis. find that the appellant has filed an insurance claim with the National Insurance Company Ltd. against the goods lost in the fire and the appellant has been granted the insurance claim in the survey report for the purpose of insurance, it is nowhere coming out that the fire has not occurred accidental but due to lack of precaution by the appellant or any mischief of the appellant therefore, the allegation made by the lower authorities for rejection of remission claim is based on assumption and presumption.

It was evident that the revenue stack is very minuscule as to the stack of insurance companies. Therefore, once the insurance company has granted the insurance claim for the principal amount of the goods destroyed which is much more than the duty implication in the goods destroyed. It can be conveniently inferred that the insurance company has scrutinized minutely each and every aspect of the accident of fire taking place and only thereafter the insurance claim was granted.

“It was also to be considered that the appellant as against the duty involvement of Rs. 1,38,233/- has reversed the Cenvat credit involved in the destroyed goods amounting to Rs. 92061/- therefore, we found that the appellant has made out a fit case for the remission of duty which could not have been rejected by the lower authorities accordingly, we set aside the impugned order and allow the appeal No. E/11131/2014. “, the two-member bench comprising Mr Ramesh Nair, Judicial Member and Mr C L Mahar, Technical Member.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates