GANESHWAR LIMITED Vs. COMMISSIONER OF C. EX., ALLAHABAD

JUDGEMENT

(1.) THE appellants manufacture V.P. Sugar and Molasses falling under Chapter sub -heading Nos. 1701.31,1701.39 and 1703.10. A fire accident was caused in sugar godown No. 3 and 3A located in their factory premises on 8 -2 -97. The fire accident caused extensive damage to 19,577 qtls. of sugar stored therein. The damaged sugar was salvaged and reprocessed etc. However, the final loss was accounted for to 11,350.55 qtls. of V.P. Sugar involving the Central Excise duty of Rs. 9,64,796.75. The party was issued a show cause notice dated 24 -7 -97 in which it is alleged that as per report of the District Fire Officer, Padrauna the fire accident took place due to careless smoking of Biris/Cigarettes which caused extensive damage to 19,577 qtls. of V.P. Sugar. It is alleged that the party failed to avoid fire accident in the said godown which was quite avoidable and was caused due to carelessness. In this way they have clearly violated the provisions of Rules 49 and 223A of the Central Excise Rules, 1944 and they are liable to penal action under Rules 173Q and 223A of the Central Excise Rules, 1944. The appellants were, therefore, called upon to show cause why the Central Excise duty of Rs. 9,64,796.75 should not be demanded and recovered from them under Section 11A and why a penalty should not be imposed on them under Rule 173Q.

(2.) ON considering the reply of the party, the Commissioner of Central Excise, Allahabad, vide his order dated 10 -10 -2000 observed that the party obtained services from the Chief Fire Officer, Gorakhpur on 8 -2 -97. The said authority in his report dated 26 -2 -97 observed that the fire accident was caused due to careless smoking of Biris and Cigarettes. 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 rooms. Further in his written submission, he also admitted that to examine the cause of the fire accident, a committee consisting of the factory officers was formed and they were also of the same opinion as given by the fire officer. He also denied the cause of accident given in the paper "Rashtriya Sahara", dated 9 -2 -97 that the accident was due to electric short circuit or due to welding work. The party could not give any other reason for the fire accident. Therefore, it is held in the order of the Commissioner, Allahabad that the said fire accident was due to careless smoking of biris and cigarettes, which could have been avoided if proper care, safety and security had been provided by the party to safeguard such goods. Thus, it is observed that the fire accident could not be termed as due to "natural cause" or under "unavoidable circumstances". Therefore, the party had violated the provisions of Rule 49 read with Rule 223A and thus the Central Excise duty of Rs. 9,64,799.75 involved on the VP Sugar damaged due to the fire accident, is demandable from the party. Accordingly, he has confirmed the aforesaid amount on the appellants under Section 11A and also imposed a penalty of Rs. 9 lakhs on them under Rule 173Q read with Rule 223A of the Central Excise Rules, 1944.

(3.) I have carefully considered these submissions and find force in them. 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. In any case as rightly pleaded, admittedly the sugar in question after fire accident was unfit for human consumption or for marketing. In terms of proviso to Rule 49(1) it is provided, "The proper officer may not demand due duty on any goods claimed by the manufacturer as unfit for the marketing subject to such conditions as may be imposed by the Commissioner or order in writing." The Commissioner in his order has already observed that the fire accident caused extensive damage to 19,577 qtls of sugar stored therein. The damaged sugar was salvaged and reprocessed etc. and thus the final loss was accounted for to 11,350.55 qtls. of V.P. Sugar involved Central Excise duty to the tune of Rs. 9,64,796.75. These being the admitted facts on records and provisions of the rules for remission of duty in case of accident, and the goods claimed to be unfit for home consumption or for marketing, I am of the view that there is no warrant to demand any duty much less there is any ground to impose a penalty in the present case. The impugned order is therefore set aside and the appeal is allowed.