CX - Finished goods destroyed in fire - Remission of duty - expression 'unavoidable accident' requires to be given liberal meaning lest provisions are rendered altogether otiose - fire on account of short circuit has to be held as covered by expression - appellant is eligible: CESTAT
By TIOL News Service
MUMBAI, JUNE 12, 2015: THE appellants are engaged in the manufacturing of bulk drugs. A fire broke out in the factory of the appellants on 17.05.06. In the fire, raw material, finished goods, and some machinery were destroyed. On 22.05.2006 appellant intimated the jurisdictional Central Excise Officers, who verified the stock.
In the investigation conducted by the Police department and the fire department it was revealed that the fire broke out due to short circuit near reaction vessel.
At the instance of the department, the appellant debited Rs. 25,63,919/- on 18.08.2006, Under Protest, being the Cenvat Credit involved in the inputs contained in the finished goods as well as the raw material itself which got destroyed in the fire.
Later, on 14.05.2007 the Appellants filed remission application before the Commissioner of Central Excise seeking remission of duty on the finished goods amounting to Rs. 19,43,890/-.
The CCE, Thane-II rejected the claim on the ground that conditions of Rule 21 of CER, 2002 were not fulfilled inasmuch it was observed that the fire could have been avoided or in the event of fire, damage to the goods could have been minimized, had the assessee taken adequate steps to prevent the fire and had the assessee installed electrical equipment to prevent the electrical short circuits. The adjudicating authority also observed that though the employees of the Appellant's company made laudable efforts in saving the lives of the workers and in preventing any casualty, no significant efforts were made simultaneously to extinguish the fire or prevent the loss caused to the excisable goods on which remission is claimed.
As against these bombastic findings, the appellant is before the CESTAT and relies on the decision of Rajasthan High Court in the case of Hindustan Zinc Ltd. - 2008-TIOL-636-HC-RAJ-CX, where it was held that the expression "unavoidable accidents" requires to be given a reasonable and liberal meaning lest the provisions of Rule 21 are rendered altogether otiose, as it can always be contended, that the accident could be avoided, by taking recourse to one or more measures and that a bit liberal rather more practical approach is required to be taken in that matter. The appellant also relies on the decision in Lord Chloro Alkali Ltd. - 2014-TIOL-2420-CESTAT-DEL where it was observed that it is well settled that nobody intentionally invites such accidents and they happen on account of various natural causes. The decision in the case of M. Kumar Udyog Private Ltd. - 2014-TIOL-1491-CESTAT-DEL wherein involving almost identical facts, the Tribunal had held that when the fire admittedly broke out on account of short circuits it has to be held as covered by the expression "unavoidable accident" was also relied upon. In the matter of the praise heaped on the employees of the appellants company but nonetheless rejection of the remission claim, the appellant submitted that the same was not a sustainable ground as in the event of any such accident, the top priority would be given to save human life rather than saving/protecting the goods.
The AR submitted that the CCE, Thane-II was correct in rejecting the remission claim.
The Bench held that the case is squarely covered by the judgment of High Court of Rajasthan in the case of Hindustan Zinc Ltd. and the Tribunal's decision in the case of M. Kumar Udyog (P) Ltd. and, therefore, the appellant is eligible for claim of remission of duty.
The order was set aside and the appeal was allowed with consequential relief.
(See 2015-TIOL-1110-CESTAT-MUM)
