By TIOL News Service

MUMBAI, NOV 22, 2015. THESE are appeals filed by the CCE, Mumbai-V against the orders passed by the Commissioner (A).

The facts are that during the period from November, 2005 to March, 2006 the assessee defaced goods valued at Rs.10,99,408/- & lying within the factory premises as the same were damaged during the floods of 26/7/2005.

The scrap generated by such defacement was cleared on payment of duty.

The department was of view that since remission of duty was not granted on the damaged finished goods, therefore, SCNs were issued demanding Cenvat Credit of Rs. 1,79,423/- and 16,82,222/-.

The original authority confirmed the demand and imposed equivalent penalty and interest.

The Commissioner(A) observed that since the matter of remission of duty on the damaged goods is subjudice before the Tribunal,he refrained from passing any decision on the duty amount as same would be required to be decided in accordance with the decision on remission by the Tribunal. Nonetheless, he passed an order only in respect of penalty and he dropped the same on the ground that adjudicating authority has failed to provide any evidence that inputs were clandestinely removed.

Revenue is in appeal against this order, in particular, regarding dropping of penalty.

The AR submitted that the respondent had not informed the department regarding the loss due to the flood and they had suomoto cleared the damaged input as scrap and, therefore, penalty is rightly imposable.

The respondent assessee submitted that the floods of July 2005 in Mumbai is a well known fact and the loss of goods in the floods cannot be construed as clandestine removal and no malafide can be alleged and, therefore, penalty was rightly dropped by the Commr.(A). Furthermore, since the matter of remission claim is pending before the Tribunal, the order of the lower appellate authority is proper. The decision in Varun Coatings - 2014-TIOL-706-CESTAT-MUM is adverted to in support.

The Bench reproduced the findings of the Commissioner (A) and concluded thus -

"…, I find that it is not the case of clandestine removal nor any act on the part of the respondent to defraud the department with intention to evade payment of duty. The goods on which demand was confirmed has not been cleared clandestinely whereas same has been admittedly destroyed in the flood which was beyond the control of the respondent. It is kept in the mind that without any intention of the respondent they have already suffered huge loss because of natural disaster therefore it will be very unfair to ask for penalty on the respondent. In view of my above discussion, I am of the view that the orders of the Ld. Commissioner's (Appeals) are just and legal and I do not fine any infirmity therein. I therefore uphold the orders of the Commissioner (Appeals) and dismiss revenues appeals. CO filed by the respondent is also disposed of accordingly."

(See 2015-TIOL-2472-CESTAT-MUM)