In The High Court Of Judicature For Rajasthan At Jodhpu4

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR -------------------------------------------------------(1) CENTR.EXCISE APPEAL No. 42 of 2006 UNION OF INDIA V/S M/S HINDUSTAN ZINC LIMITED & ANR. (2)

CENTR.EXCISE APPEAL No. 47 of 2006 UNION OF INDIA V/S M/S HINDUSTAN ZINC LIMITED.

Mr. V.K.MATHUR ) Mr. RISHABH SANCHETI) for the appellant. Mr. DINESH MEHTA, for the respondent Date of Order : 13.10.2008 HON'BLE SHRI N P GUPTA,J. HON'BLE SHRI KISHAN SWAROOP CHAUDHARI,J. ORDER REPORTABLE ----These two appeals arise in identical circumstances, in as much as, the Tribunal vide order dated 08.12.2004, allowed the appeals of assessee, and held the assessee entitled to remission of excise duty during the years 1997-98, 1998-99, 1999-2000, 2000-2001, which is under challenge in appeal No. 47/06. The Tribunal, then in the subsequent year 2001-02, vide judgment dated 24.5.2005, further granted remission to the assessee, following its previous judgment, dated 08.12.2004, which is under challenge in appeal No. 42/06. This is how the appeals have arisen. We take the facts from appeal No. 47/06. The necessary facts are that, the commissioner passed the order-in-original dated 08.11.2002, deciding the prayer of the assessee for remission of central excise duty. It was the case of the assessee, that lead and zinc concentrates were being manufactured in huge quantity, and were being stored in the open place, by the assessee. At the end of these financial year, the Unit Head Stock Verifier, carried physical stocktaking, which was even tallied with the recorded stock, and in that process, some difference was found between the

physically verified stock, and the stock as per the books. This according to the assessee was for the following reasons:“(a) De-bagging, breakage of lumps, shifting of concentrates to stockyard and sticking of concentrates in bags. (b) To reduce moisture content, concentrate is spread, turned up side down by terex (HEMM) from time to time causing loss of concentrate in the process. (c) Loss due to wind while drying, storage and loading on trucks. (d) Loss due to seepage of rainwater as the concentrate is stocked in open godown. (e) The physical stock of concentrate was ascertained by volumetric method and the moisture content by analysis of samples in laboratory. As the heaps of concentrate had very large volume, uneven shape and different density and moisture content in different layers, the method adopted was likely to have some variation. The quantity of stock ascertained by this method was not exact but approximate. The quantity of concentrate in stock generally remains in large quantity and no other method was feasible to physically verify such a large quantity.” The prayer for remission of central excise duty was made under Rule 21 of the Central Excise Rules, 2001. For ready reference, we may quote the provisions of Rule 21, which reads as under: “Where it is shown to the satisfaction of Commissioner that goods have been lost or destroyed by natural causes or by unavoidable accident or are claimed by the manufacture as unfit for consumption or for marketing, at any time before removal, he may remit the duty payable on such goods, subject to conditions as may be imposed by him by order in writing” The learned commissioner, held that the reasons for shortage of goods in respect of which, remission has been sought, are not natural causes, by which the losses have occurred. According to him, the shortage could be avoided or minimized by the assessee, as these were due to neither natural causes, nor unavoidable accident. Thus, the prayer for remission was declined. The assessee filed the appeal before the learned Tribunal. Likewise the commissioner also passed another order-in-original, being dated 09.6.2003, levying the excise duty, and also imposing penalty under Sec. 11AC. Both these orders have been challenged before the Tribunal, by filing two separate appeals, being appeals No. 457/02 and 240/02. The learned Tribunal found, that the concentrates were stored by them in open place, and then loss of zinc and lead concentrates during the year 1997-98 and 1998-1999 was 0.52% and 0.69% respectively, while that of lead concentrates during the year 1998-99 and 1999-2000 was 0.3% and 0.95% respectively, while the loss of zinc concentrates during the year 1999-2000 and 2000-2001 was 0.93 to 0.95%. The Tribunal, then found “therefore, keeping in view the total material storage and handling, we find that loss shown by the appellants can safely be said to be reasonable loss. This loss could be attributed to natural causes, as goods were stored in open place. Even some loss could take place while handling the same at the time of putting the concentrates in bulk packing for transportation. The plea of appellants, that loss of goods were due to natural causes, in our

view, deserves to be accepted, especially, when there is no tangible evidence on record to substantiate the allegations of the revenue, that there have been any clandestine removal of the concentrates without payment of duty....” It is contended by the learned counsel for the appellant, that the learned Tribunal has taken in account the accounting policy of the assessee, which comprehended the possible loss from 1 to 1.5%, as reasonable, while Rule 21 does not admit of any such accounting policy, and therefore, learned Tribunal should have considered the matter, only on the anvil of provisions of Rule 21. According to the learned counsel, under Rule 21, the remission can be claimed only where, the goods have been lost or destroyed, by natural causes, or by the unavoidable accident. (Other grounds being not relevant for the present controversy, we are not concentrating upon them). The whole thrust of the learned counsel was on the meaning of scope of the expression “natural causes” and “unavoidable accident” by referring to the dictionary meaning of the expression, and it was tried to be contended, that the causes given by the assessee, for the loss having taken place, individually or collectively, do not entitle the assessee to remission under Rule 21. Therefore, the order is liable to be set aside. On the other hand, learned counsel for the assessee supported the impugned judgment, by contending, that all said and done, practical view of things is required to be taken. The loss for consideration, of the goods, in the circumstances of the present case, is clearly attributable to the natural causes, and to unavoidable accident. Accordingly, the impugned order was supported. It is also submitted, that the assessee manufactures huge quantity of material, in absence of anything to show, any clandestine removal, a practical view was required to be taken, and has been taken, by the learned Tribunal which does not give rise to any substantial question of law. We have considered the rival submissions. The appeals were admitted by different orders, on different dates, by framing following substantial question of law: “Whether in the facts and circumstances, the tribunal was justified in allowing the clam of the respondent to remission of duty which had been written off by the management in its books of accounts for the period 1997-98 to 2000-01 in terms of prevalent rules governing remission of such duty ?” We have gone through the impugned order, and the dictionary meaning of the terms “natural causes” and “unavoidable accident”. In our view, since the matter is required to be considered in the cases, of the commercial establishments, where certain loses, even after manufacture, are unavoidable. Hyper technically speaking, the excise duty is attracted, where the goods are manufactured, but then, Rule 21 provides for remission of the excise duty, obviously, in cases, where the goods are lost or destroyed, after being manufactured, and thus, the provision obviously contemplates and comprehends such losses. In our view, the expressions, being “natural causes” and “unavoidable accident” are required to be given reasonable and liberal meaning, lest the provisions of Rule 21, so far they relate to admissibility of remission, on these two grounds, is rendered altogether otiose. If things were to be stretched in the manner, and to the extent, as the learned counsel for the appellant wanted us to, probably, no loss or destruction, would fall in either of these clauses,

obviously, because in either case, grounds may be projected, on the anvil of requirement of appropriate storage, or safety measures, and so on and so forth. Even in cases of “unavoidable accident” it can always be contended, that the accident could be avoided by taking recourse of one or more measures. Thus, a bit liberal rather more practical approach is required to be taken in the matter. Of course, we quiet agree with the learned counsel, that mere accounting practice of the assessee, could not be considered for granting remission, under Rule 21, rather, only requirement of Rule 21 is, that the concerned authority should be satisfied that goods have been lost or destroyed, by “natural causes” or by “unavoidable accident”. Then in very nature of things, contemplated by Rule 21, the aspect of satisfaction, about the destruction or loss of goods, by natural causes or unavoidable accident, is essentially a subjective satisfaction of the authority concerned, and that having been recorded by the learned Tribunal, it is a pure satisfaction of fact, altogether subjective. The findings recorded by the Tribunal have already been quoted above, which in our view leaves no manner of doubt that the learned Tribunal had independently recorded its satisfaction about the loss, or destruction having been sustained by the assessee under the circumstances as covered by Rule 21. Then, merely because the Tribunal also referred to, or relied upon the accounting policy, which as held above, is not relevant, would not in any manner vitiate the finding, recorded by the Tribunal. The finding remains the findings of fact. The result of the aforesaid discussion is, that we do not find any force in the appeals. The same are, therefore, dismissed. ( KISHAN SWAROOP CHAUDHARI ),J. /ns.

( N P GUPTA ),J.