Clearance of Damaged Goods on Payment of Duty and Claim of Insurance for the Same has not Violated any Central Excise Rules
26 th July 2005 spelt disaster for Mumbaikars. Unprecedented rains on that day caused immense loss of lives and property.
Noticing that the remission applications were pending, Superintendent had issued demand notice on the quantity of goods that were lost/destroyed by alleging that the goods were clandestinely removed by the assessee
The assessee suffered heavy damage to the finished goods caused by the floods in July 2005 and loss of Rs. 80 lakhs was estimated. They filed insurance claim with Insurance Company and recovered damages from them in respect of finished goods lying in stock with them which initially appeared to have been damaged. Later on, they found that after some re-conditioning the same could be made use of and accordingly after reconditioning they cleared the goods on payment of appropriate duty.
Subsequently, they were issued a show cause notice stating that they have suppressed the fact regarding the claim of insurance in respect of the finished goods and have accordingly evaded duty on the finished goods and demanded duty along with interest and a proposal to impose penalty.
The notice was adjudicated by the Asst. Commissioner who confirmed the duty along with interest and imposed penalty of an equivalent amount of Rs.6,75,126/-.
Since even the appellate authority was convinced of this decision, the assessee had to file an appeal to the Tribunal.
They submitted that once the goods were removed on payment of duty at the time of removal, the question of charging any interest does not arise and no penalty was imposable.
The Tribunal was in total agreement with the plea of the assessee and ordered thus –
• The applicant has removed the goods on payment of duty and if they have lodged claim with insurance company in respect of the same goods, they have not violated any Central Excise Rules as long as they have cleared the goods on payment of duty.
• Once the goods have been removed on payment of duty at the time of removal, the question of charging interest and imposition of penalty simply does not arise.
Finding that the applicant had made a prima facie case , pre-deposit of the entire amount of penalty was waived and a stay ordered from recovery till disposal of the appeal.