ORDER
B. Prasad, Member (J)
1. This appeal is directed against the order of Collector of Central Excise, Shillong.
2. The appellant is engaged in the manufacture of plywood and other wood products. They have got their factory at Jeypore, Dibrugarh, Assam. Their case is that in the night between the 17th and 18th day of August, 1975 a devastating fire broke out in the said factory causing great loss and damage to raw materials, goods in process of manufacture, finished goods and machineries. This incident and the loss were duly intimated to the local Excise authorities, who instantly verified the stock, assessed the loss of the finished stock with reference to entries in G.R.I of closing balance of 17-8-1985. It amounted to Rs. 5,13,191.80P. The goods were insured with three Insurance Companies and a total amount of Rs. 5,13,191.80P was received from them by the appellants. The Supdt. Customs & Central Excise, Naharkatia, demanded a payment of Rs. 86,184.20P on the ground that the amount sanctioned by the Insurance Companies had also covered the Central Excise duty and other charges. The Assistant Collector, Central Excise confirmed this demand. An appeal was filed before the Appellate Collector of Customs & Central Excise which was dismissed on the ground that the Assistant Collector passed the Order-in-Original at the direction of the Collector. A Revision petition was filed before the Govt. of India and both the Order-in-original and the Order-in-Appeal were set aside and the Collector, Shillong was asked to decide the case de novo. Accordingly, the impugned order was passed whose concluding portion runs as follows :
“I have carefully gone through the case records and find that the licensee had received compensation which very easily covers the Central Excise duty involved. 1, therefore, order that the Central Excise duty demanded be paid.”
3. It has been submitted before us that in the present case, the goods were still lying in the factory premises in finished or semi-finished form. Our attention has been drawn to Rule 49 of the Central Excise Rules according to which the duty is chargeable only on the removal of the goods from the factory premises or from an approved place of storage. On this ground, it has been submitted that at the time when the goods were consumed by fire, they were still in the factory premises and, therefore, no duty was chargeable on them. Hence, properly speaking, the department could not have asked for the payment of any duty. In the present case, the learned SDR has not disputed that the goods were consigned to the fire in the factory premises. However, he would like to rely on the proviso to Rule 49(1) of Central Excise Rules.
4. It appears that the demand raised against the appellant was that since they have received an amount of more than Rs. 5 lakhs from the Insurance Company, which covered the Central Excise duty also, therefore, they should pay the same.
5. The appellants have contended that the amount paid by the Insurance Company did not include the Central Excise duty and other charges. In this connection, our attention was drawn to the certificates to be found at Annexures F-1, F-2 and F-3. The three certificates were issued by the three Insurance companies viz. Oriental Fire and Insurance Company Limited, National Insurance Company Ltd. and the United India Fire and General Insurance Company Ltd. In all these certificates it has been stated that the payments were being made excluding the Excise duty on the ground that the quantum of loss was assessed by an independent surveyor S/s. Escon and Avins and this assessment did not include Excise duty. The reports of the surveyors can be seen at Annexures F-4 and F-5. In their report also, they have clearly stated that they have not taken into consideration the Excise duty because the goods were burnt and/or damaged within the factory premises.
6. From all these, it would become clear that the payments made by the Insurance companies did not include any Excise duty as such. Moreover, as per Rule 49, the Excise duty had not as yet become chargeable on the goods which were lost in fire. Therefore, it was submitted that this appeal should be allowed.
7. We were taken through the Order-in-Original dated 13-9-1983 passed by the learned Collector. He has simply observed that since from the records he could find that the licensee had received compensation which very easily covers the Central Excise duty, he ordered that the duty demanded be paid. There is hardly any discussion on this point by the learned Collector.
8. From the facts and circumstances of this case, it would, however, appear that the payments made by the Insurance Companies did not include the Central Excise duty which evidently had not as yet become chargeable or payable.
9. For the reasons stated above, the appeal is allowed and the judgment of the learned Collectors is set aside, as already announced in the open Court.
S.K. Bhatnagar
10. While aggreeing with the learned Brother Shri Prasad, 1 would like to add a few observations.
11. I find that the submissions of the learned advocate are entirely correct and the department’s case has no legs to stand on.
12. The Order of the learned Collector is in fact wrong, both on facts and in law. Indeed, it appears that the learned Collector has perhaps not applied his mind fully to the facts of the case and the relevant law.
13. The crucial fact admitted by both the sides in this case is that the material in question was destroyed due to fire within the licensed premises and the appellant duly informed the Central Excise officers and the loss was duly evaluated. Under the circumstances, there was no question of demanding any duty. The position in law is very clearly stated in Rule 49 according to which duty is chargeable only on removal of the goods from factory premises or from an approved place of storage. Furthermore, as per the first proviso to Para (1) of Rule 49 in case the goods are lost or destroyed by natural causes or by unavoidable accidents during handling or storage in the store room or other approved premises the duty cannot be demanded. The manufacturer in fact, is required to pay the duty only if he fails to satisfy the proper officer that the goods have been so lost or destroyed by natural causes or by unavoidable accidents. In the instant case, the officers on intimation had verified the facts and it was not the case of the department that they were not satisfied. Therefore, no duty was demandable irrespective of what the insurance companies had done or not done. In any eventuality, even the survey reports and certificates of the insurance companies also indicate that element of excise duty had not been taken into account by them. Therefore, the Collector is obviously wrong in observing that the licensee had received compensation. But even if he had received the compensation, that by itself, could not be a ground for demand as a demand could be raised only in terms of proviso to Rule 9(1).
14. As we have seen above, in view of the admitted factual position, there was no cause for demand in the instant case. Therefore, I consider that the Collector’s order is misconceived and incorrect. It is set aside as such. The appeal is allowed.