OSWAL SUGARS LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE appellants are manufacturers of sugar and molasses falling under Chapter 17 of the Central Excise Tariff Schedule. By telegram dated 2 -5 -99 followed by letter dated 3 -5 -99, they informed the Central Excise Range officer that their godown No. 2, where their stock of sugar was lying, had been gutted in fire. Further, by letter dated 4 -5 -99, they informed that they had deducted 45,097 bags of sugar (44,572 bags of white sugar plus 525 bags of Biss sugar) from RG I register on account of the goods having been damaged in the fire. However, 5,200 bags of marketable sugar, which were recovered during salvage operation, were restored to RG I, whereby the quantity deducted from RG I amounted to 45,097 - 5,200 = 39,897 bags of sugar.

(2.) THE Department by show cause notice dated 26 -10 -99 alleged that the appellants had removed 39,897 bags of sugar without payment of Central Excise duty in contravention of Rule 9(1) of the Central Excise Rules, 1944 read with Section 11A of the Central Excise Act, 1944. The show cause notice accordingly demanded Central Excise duty of Rs. 33,91,245/ - from the appellants under Rule 9(2) read with Section 11A and also proposed to impose penalty on them under Rule 173Q for the alleged contravention of law. The notice was contested by way of a detailed reply supported by numerous documents including the relevant correspondence on the subject between the appellants and the Central Excise Department. The jurisdictional Commissioner of Central Excise, in adjudication of the dispute, confirmed the above demand of duty against the appellants and imposed on them a penalty of Rs. 34 lakhs. Hence the present appeal.

(3.) HEARD both the sides. The learned Counsel for the appellants submitted that the occurrence of fire and the loss of goods or account thereof were admitted facts evident from the impugned order itself, and therefore, the duty demand on the basis of a finding of clandestine removal was not sustainable; that the appellants had intimated the occurrence of fire and the loss of goods to the Department and the finding to the contrary recorded by the Commissioner was factually wrong; that the Commissioner's finding that the appellants had not taken reasonable steps to avert the fire was also factually incorrect; that the enquiry report submitted by the Sub -Divisional Magistrate had not in any way indicted the appellants; that, on the other hand, the report virtually confirmed the occurrence of fire and the cause thereof; that the appellants could not be held responsible if any Departmental officer, who inspected the godown, did not submit any report; that the report of the SDM, which was prepared after a thorough and impartial investigation provided a firm basis for the appellants' claim for remission of duty on the goods destroyed in the fire; that the SDM's report was not properly and correctly appreciated by the Commissioner; that the Commissioner was unduly carried away by the unreliable report of the Insurance Company's surveyor, which was under challenge before the National Consumer Disputes Redressal Commission, New Delhi; that, apart from illegally confirming the demand of duty, the Commissioner had imposed on the appellants a penalty higher than the duty in quantum. The learned Counsel also relied on the following decisions : -