Commissioner of Central Excise vs Gangeshwar Ltd.

Heard Sri Siddharth Shukla, learned counsel for applicant-department and Sri Piyush Agarwal, learned counsel appearing for respondent-firm. The following two questions of law have been referred for consideration:-

(i) Whether under the facts and circumstances of the case, the impugned order of the Tribunal dated 20-2-2002 suffers from manifest error of facts and law in allowing to the opposite party the benefit of the provisions of Rule 49(1A) for damage of 19577 qtls. of V.P. Sugar, and that too without recording any finding to the effect that the sugar in question was shown to the satisfaction of the proper officer to have been destroyed by unavoidable accident?

(ii) Whether the onus to place sufficient evidence and prove that the goods lost or destroyed by natural causes or by unavoidable accident rest on the appellants seeking remission of duty and such onus cannot be shifted on the proper officer/department to prove otherwise?

Assessee claimed benefit under proviso to Rule 49(1) of Central Excise Rules, 1944 (hereinafter referred to as ''Rules, 1944'') in respect to loss of certain excisable goods, stating that it was on account of unavoidable accident and therefore, he is not liable to penalty. Excise authorities up to Commissioner decided the matter against him, relying on the report of Chief Fire Officer that accident could be due to careless smoking of Biris and Cigarettes used by workmen of assessee industrial undertaking. However, Tribunal has taken otherwise view while allowing assessee''s appeal observing that report of Chief Fire Officer was only an opinion based on no evidence whatsoever and department could not prove as to what precaution or steps were taken by assessee to avoid fire accident in the factory. The relevant extract of the findings of Tribunal is as under:

"As rightly contended, the averment of the Chief Fire Officer that the fire accident could be due to careless smoking of biris and cigarettes is only a matter of opinion and this is not based on either on account of any evidence or as a result of an enquiry conducted by him in the matter. The Commissioner in his order has observed that the party has not taken reasonable steps to ensure fire preventive measures but has not recorded any finding as to what reasonable steps could have been taken against the fire accident which is caused by the careless smoking of biris and cigarettes by any individual or workers in a sugar factory."

Tribunal in our view has wholly misdirected itself and erred in law in recording aforesaid reasons for allowing appeal of assessee and setting aside penalty.

Proviso to Rule 49 of Rules 1944, reads as under:-

"RULE 49. Duty Chargeable only on removal of the goods from the factory premises or from an approved place of storage.-(1) Payment of duty shall not be required in respect of excisable goods made in a factory until they are about to be issued out of the place or premises specified under Rule 9 or are about to be removed from a store-room or other place of storage approved by the [Commissioner] under Rule 47:

Provided that the manufacturer shall on demand pay the duty leviable on any goods which are not accounted for in the manner specifically provided in these rules, or which are not shown to the satisfaction of the proper officer to have been lost or destroyed by natural causes or by unavoidable accident during handling or storage in such store-room or other approved premises:

Provided further that the proper officer may not demand duty due on any goods claimed by the manufacturer as unfit for consumption or for marketing subject to such conditions as may be imposed by the [Commissioner] by order in writing.

(2) Notwithstanding anything contained in sub-rule (1), excisable goods made in a factory to which provisions of Chapter VII of these rules have been extended by the Central Government by notification in the Official Gazette, may be removed from the factory in which they are made to any warehouse [registered] under Rule 140 for the storage of such goods and situated outside the [registered] premises of the factory and subject to such exemptions, limitations and conditions as may, from time to time, be specified in this behalf by the Central Government.

[(3) Notwithstanding anything contained in sub-rule (1), the Central Government may, under circumstances of exceptional nature, allow, by notification in the Official Gazette, any excisable goods to be removed from the factory in which they are produced [without payment of, or only part payment of, duty] leviable thereon subject to such conditions and limitations (including payment of interest on the balance amount of duty) as may, from time to time, be specified by the Central Government. The manufacturer of such excisable goods shall execute a bond in the proper Form with [such surety or security] as the [Commissioner] may approve.]

[(4) Omitted by M.F. (D.R.) Notification No. 23/94 - C.E. (N.T.), dated 20-5-1994.

Explanation.-For the purpose of this rule, excisable goods made in a factory and consumed or utilised-

(i) as such or after subjection to any process or processes; or

(ii) for the manufacture of any other commodity, whether in a continuous process or otherwise, in such factory or place or premises specified under Rule 9 or store-room or other place of storage approved by the [Commissioner] under Rule 47, shall be deemed to have been issued out of, or removed from such factory, place, premises, store-room or other place of storage, as the case may be, immediately before such consumption or utilisation."

(emphasis added)

Therefore, for the loss of excisable goods duty is payable by assessee. This is the general rule. However, there is an exception. If the assessee is able to prove that it was unavoidable accident due to natural causes on which he had no control. Obviously, in order to avoid duty payable under Rule 49 of Rules, 1944, onus is on assessee to prove that accident occurred due to reasons beyond his control and he could not have avoided it.

In the present case, Chief Fire Officer gave opinion that it may be due to mishandling of workforce of assessee i.e. due to careless smoking of biris and cigarettes. This opinion, as a matter of fact was not disputed by Sri D.K. Srivastava, Finance Controller appearing on behalf of assessee before Excise Commissioner and in his written submission he clearly stated as under:

"It is observed that Shri D.K. Srivastava, Finance Controller of the factory in his written submission also did not deny the report of the Chief Fire Officer and admitted that it may be the carelessness of any labourer working inside the store room."

Sri Piyush Agarwal, learned counsel appearing on behalf of assessee could not dispute that assessee failed to lead any evidence whatsoever before the authority concerned to show as to what steps it has taken to avoid accident, if any, caused by fire and that accident in question was for unavoidable reasons.

Tribunal in placing onus upon Revenue has committed manifest error in law and therefore reasons assigned by Tribunal in allowing assessee''s appeal is clearly erroneous.

Questions referred to above are accordingly answered in favour of Excise Department i.e. the Revenue and against assessee. Reference is accordingly answered as above.