ISHU SUPER STEEL PVT. LTD. Vs. COMMISSIONER OF CENTRAL EXCISE
LAWS(CE)-2015-2-44
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on February 20,2015

Ishu Super Steel Pvt. Ltd. Appellant
VERSUS
COMMISSIONER OF CENTRAL EXCISE Respondents

JUDGEMENT

Ramesh Nair, J. - (1.)THE appeal is directed against Order -in -Appeal No. IPL/135/NSK/2008, dated 16 -7 -2008 passed by the Commissioner of Customs & Central Excise (Appeals), Nasik, wherein ld. Commissioner (Appeals) allowed the appeal of the Revenue, accordingly ordered the appellant to pay the entire duty of Rs. 10,73,856/ - along with interest Rs. 1,97,033/ -. The fact of the case is that the appellant vide their letter dated 25 -8 -2006 informed the Central Excise department that Input viz. Sponge Iron has caught fire on 2 -8 -2006 subsequently they lodged insurance claim with the New India Insurance Co. Ltd. for loss of 700 MT of Sponge Iron burnt which is valued of Rs. 88 lakhs. According to the appellant the assessable value of 700 MT Sponge Iron comes to Rs. 65,80,000/ -. On certificate of the Insurance Company Surveyor M/s. SIB Associates it was observed that burnt Sponge Iron quantity is 547.982 MT on which Cenvat credit comes to Rs. 6,43,615/ - which was reversed by appellant vide TR 6 Challan No. 20 dated 16 -3 -2007. The show cause notice was issued where in it was alleged that since the appellant themselves have declared quantity of Sponge Iron lost is 700 MT they are liable to pay Cenvat credit on such quantity and not on quantity ascertained by insurance surveyor. In the adjudication the adjudicating authority has ordered the recovery of Rs. 19,192/ - which was not challenged. The adjudicating authority has accepted that the actual loss is 547.982 MT and not declared one i.e. 700 MT. Aggrieved by the said order the Revenue filed an appeal before the Commissioner (Appeals), who held that when the appellant themselves have accepted that the loss is 700 MT there is no reason to take different view and accordingly the demand of 700 MT was confirmed by the ld. Commissioner (Appeals), hence the appellant is before me. None appeared on behalf of the appellant. It is noticed that this matter came up for the hearing earlier on 4 -7 -2014, 5 -8 -2014, 16 -9 -2014, 19 -11 -2014, 19 -12 -2014 however on all these dates none appeared, therefore I take up the appeal for disposal on the basis of documents available on record.
(2.)SHRI Rakesh Goyal, ld. Addl. Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. He submits that once the appellant themselves claimed that the total loss of Sponge Iron due to fire is 700 MT, it attained finality and therefore, appellant was required to reverse the Cenvat credit in respect of 700 MT. He submits that ld. Commissioner (Appeals) has rightly demanded the Cenvat credit attributed to the 700 MT and same should be upheld. I have carefully considered the submission made by ld. AR and perused the record. The adjudicating authority while disposing of the show cause notice adjudicated the matter on the following findings.
Findings: I have carefully gone through the case records and the submissions made by the said assessee, in this regard. The issue to decide before me is -

(a) whether the loss quantified by the Department is correct or otherwise;

(b) Whether the rate of damaged goods ascertained by the Department is correct or otherwise;

(c) Whether penalty under Rule 15(1) of Cenvat Credit Rules, 2004, is imposable on the said assessee or otherwise;

(d) Whether interest of the remaining amount is recoverable from the said assessee or otherwise;

(e) Whether interest of Rs. 52,036/ - on the amount of Rs. 6,43,615/ - paid on 16 -3 -2007, is recoverable from the said assessee or otherwise.

Now coming to the point (a) whether the loss quantified by the Department is correct or otherwise, I have notices that the Department has mainly relied on the statement of Shri S.K. Mishra, G.M. of the said assessee, recorded by the Range Superintendent, on 26 -3 -2007. I have notices that in the said statement it has been deposed by Shri S.K. Mishra, that out of total raw material 1315.924 MT, there was around 1000 MT of Sponge Iron was lying in different heaps. Out of this approximate 700 MT sponge iron, which was near to furnace burnt in the incident. However, the loss estimated by the SIB & Associates (Loss assessors) is 547.982 MT. I find no reason to deny the loss to the tune of 547.982 MT, as the said assessee has to record the actual loss in the proper records and the available balance qty. has to be shown in proper records, as they have to utilize the said balance qty. for the production, which ultimately will be removed on payment of Central Excise duty. Therefore, I hold that the qty. lost in fire is 547.982 MT.

As against the above findings, the Commissioner (Appeals) has differed the said order on the finding in the Order -in -Appeal which is reproduced below:

7. I have carefully gone through the facts of the case and the written order and submissions made by the respondents in the instant case. I find from the records, that the fire took place on the 1st of Aug. 2008, at the premises of the respondent. The respondent have informed about the incident of fire inside their factory to their insurance company at Mumbai on the 2nd Aug., 2008. The respondent have written to their insurers that their raw material viz. Sponge Iron quantifying to 700 MT has perished in fire, whose estimated value is Rs. 88/ - lakhs.

8. The respondent have also submitted the surveyors viz. SIB & Associates report which concludes through sketches and diagrams, that the total loss of raw material viz. Sponge Iron, due to fire is 547.982 Metric Tonnes.

9. The respondent have informed the Department about the incident of fire only after 25 days, which has been taken place at their premises, registered under the provisions of Central Excise under the jurisdiction of Nashik. The respondents have neither filed an FIR before the proper authorities nor have informed the fire brigade about the incident. This dispute would have never risen if the Department would have informed immediately for it would have easily quantified the raw material viz. Sponge Iron burnt, by verification from the statutory records to be maintained by the assessee when working under Cenvat Credit Rules.

10. The respondents have themselves claim 700 MT of Sponge Iron which has burnt to ash. The New India Assurance Company through their surveyors have estimated reimbursement to the effect of only 547.982 MTs. The working and formula of reimbursement by the insurers cannot be a yardstick for the Department to assess loss of raw material. When the respondents themselves claim the loss as 700 MT and when their balance of quantity in the statutory records justifies it, then for the purpose of the Department the loss due to fire is 700 MT on which proportionate Cenvat credit has to be reversed. It is a settled law that what is accepted need not be proved.

11 Further while claiming insurance from the New India Assurance Company the respondents have themselves claim the assessable value of the raw material viz. Sponge Iron at Rs. 9400/ - pmt. Further what is to be reversed is the actual Cenvat credit availed. The impugned OIO accounting it in average/mean assessable value to pay the appropriate Central Excise duty is not legally tenable. The respondent is thus liable to reverse the differential Cenvat credit amounting to Rs. 411049/ - in addition to the amount of Rs. 6,43,615/ - which is already debited by them.

12. The appeal by the Department to impose penalty upon the respondents under the provision of Rule 15(1) of the Cenvat Credit Rules, 2004 appears to be legally sustainable. The fire took place in the premises of the respondents as on 1st Aug. 2008. The respondents have paid the Central Excise duty including Education Cess amounting to Rs. 6,43,615/ - vide their TR -6 Challan No. 20, dated 16 -3 -2007. Paying the duty after a lapse of eight months tantamount to utilization of inadmissible Cenvat credit availed on the raw material viz. Sponge Iron, perished in fire. The above act of the respondent establishes mens rea and deserves to be penalized which I am inclined to do.

13. Under the above circumstances, the appellant is liable to pay the entire duty of Rs. 10,73,856/ - which I hereby confirm. I appropriate the amount of Rs. 6,43,615/ - paid by the respondent and I direct the respondents to pay the differential demand amounting to Rs. 4,11,049/ - along with accrued interest of Rs. 1,97,033/ - which is recoverable from the respondent from the date of accident till date of payment and also interest on the remaining amount which is to be calculated and recovered.

14. I impose penalty of Rs. 10,73,856/ - upon the respondents under the provisions, of Rule 15(1) of the Cenvat Credit Rules, 2004 as invoked in the show cause notice.

15. Accordingly the appeal filed by the Department succeeds and the order passed by the JCCE Nashik is set aside.

From the findings given by both the lower authorities, I am of the view that even though the appellant have declared that the quantity of loss is 700 MT but on the certificate by the Insurance surveyor it was found that the actual loss quantity is 547.982 MT. I do not find any reason that when the surveyor has correctly quantified the quantity of loss how can the same be brushed aside. It is also fact that it is not case of the Revenue that the remaining quantity of 152.018 MT (700 MT - 547.982 MT) has been disposed of otherwise. If it is accepted that the quantity of fire loss is 700 MT then there is no reason why the insurance surveyor reduced the quantity from 700 MT to 547.982 MT for the purpose of insurance. It shows that actual quantity of loss is 547.982 MT and remaining material is very much available in the factory of the appellant. It is observed that Central Excise department has not conducted any physical verification in order to justify that the actual loss is 700 MT and not 547.982 MT. On careful consideration of the findings given by both the lower authorities, I find that adjudicating authority has correctly held that the quantity of 547.982 MT is the actual lost quantity and I do not agree with findings of the ld. Commissioner (Appeals) that once the appellant declared 700 MT there is no reason to vary the said quantity.

3.1 In view of the above discussion, I am of the considered view that the order passed by the adjudicating authority is correct and I do not agree with the order passed by the ld. Commissioner (Appeals). I therefore, set aside the impugned order and allow the appeal of the appellant.

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