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Hindustan Insecticides Ltd. Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1988)(33)ELT575TriDel
AppellantHindustan Insecticides Ltd.
RespondentCollector of Central Excise
Excerpt:
.....the agency of a natural cause or an unavoidable accident that one cannot find in a mere common loss or destruction both of which can be caused by human contrariness and human wantonness or, at best, by human negligence. it is not the scheme of the law to grant amnesty for such loss or destruction, but only for loss or destruction brought about by the action of factors over which men have no foreknowledge or control. the proper officer must satisfy himself that the loss or destruction was effected by causes which are susceptible to no human control, before he agrees that the duty on the lost or destroyd goods need not be recovered under the rule (196). in this case, the officer would not have been so satisfied as the loss was not attributable to natural causes or unavoidable.....
Judgment:
1. Hindustan Insecticides Ltd., Eluru bought 4196 litres of benzene from Hindustan Steel, Bhilai and the spirit was sent in two railway tankers. Of the despatched quantity of benzene, Hindustan Insecticides received 20592 litres on 12.7.1979 (there was a transit loss of 186 litres), but the other wagon carrying 21138 litres did not arrive.

2. As the sale and purchase of the benzene was under Chapter X procedure and the clearance was given concessional duty under Notification No. 34/73-C.E., the Assistant Collector of Central Excise, Erna-kulam Division, Cochin, began proceedings to demand duty under rule 196 on the 21138 litres of benzene which did not reach destination. The duty demanded was Rs. 57,389.67. The Assistant Collector held that it had not been shown satisfactorily that the benzene had been lost or destroyed by natural causes or unavoidable accident during transport from the manufacturer of benzene to the factory of Hindustan Insecticides or during handling or storage in the premises of Hindustan Insecticides, he found no reason to treat the loss as intransit loss and accordingly demand duty. The appeal to the Appellate Collector was rejected by the latter's order in appeal No.1472/80, dated 11-6-1980. At the hearing on 3-11-1983, the learned counsel for the appellant disputed the interpretation put upon Rule 196 by the Assistant Collector and the Appellate Collector. He said the words "by natural causes", and "by unavoidable accident" qualified only the word "destroyed". They do not qualify or govern the word "lost". By this interpretation the learned counsel contended that however the goods were lost, even if no natural cause op unavoidable accident played a part or was instrumental, the loss must be condoned when it was established that the benzene never reached their factory. Hindustan Insecticides did not know the reason why the wagon did not arrive but whatever the reason, it was due to no fault of theirs and they should not be penalised. And when the Assistant Collector ordered recovery of the duty under rule 196, he was penalising them.

3. The learned counsel for the appellant read Notification No.34/73-C.E. to point out that under the proviso, the benzene should have been cleared under the intention to use it as a solvent in the formulation of pesticidal solution, etc. etc. to earn the exemption.

Nothing more was required - actual use was not a condition. Nobody has charged that the benzene was not cleared with such an intention. If the wagon went astray, they, at any rate, had met their obligation under the notification and so the exemption should still hold good and the demand was liable to be quashed.

4. The learned counsel for the department rejected the appellant's arguments. He said the word "lost" was qualified by the words "by natural causes" and "by unavoidable accident" just as much as the word "destroyed" was. The loss, he reasoned, must be the effect of natural causes or of unavoidable accident. Any other interpretation would invite serious danger to public revenue because the loss by human agency would still qualify for exemption, an untenable proposition for reasons which are obvious. He refuted the appellant's arguments that intention was all that was necessary to earn exemption under Notification No. 34/73-C.E. by pointing out that the clearance was under proviso (b) which had no intention, but, by its procedure, required actual use, as the benzene was required to follow Chapter X.And that was what Hindustan Insecticides did.

5. We agree with the learned counsel for the department. The loss must have been caused by natural causes or by unavoidable accident. This is the more consistent reading of the rule. It is not as if loss cannot be caused by natural causes or by accidents and that only destruction can.

The rule requires the proper officer's satisfation regarding the loss or the destruction. It is doubtful if mere loss needs So be the subject of such satisfaction. And let it be clearly observed that the satisfaction required is not about the loss or the destruction having taken place but about the agency that caused the loss or the destruction. There is an inexorability about the agency of a natural cause or an unavoidable accident that one cannot find in a mere common loss or destruction both of which can be caused by human contrariness and human wantonness or, at best, by human negligence. It is not the scheme of the law to grant amnesty for such loss or destruction, but only for loss or destruction brought about by the action of factors over which men have no foreknowledge or control. The proper officer must satisfy himself that the loss or destruction was effected by causes which are susceptible to no human control, before he agrees that the duty on the lost or destroyd goods need not be recovered under the rule (196). In this case, the officer would not have been so satisfied as the loss was not attributable to natural causes or unavoidable accident.

6. The intention under Notification No. 34/73-C.E. must be understood only as a legal device to allow clearance under concession because when it (concession) is being taken (at the time of clearance), actual use is obviously a physical impossibility. But mere intention can never be a basis for such a concession, notwithstanding the appellant's claim, because then no concession-goods need be really used as intended, once the intention is declared at the time of clearance, an absurd state of matters. We hold that actual use must follow intention if the concession is to be earned, unless the intention is frustrated by the intervention of events such as natural causes or unavoidable accidents.

7. We see no merits in Hindustan Insecticides's appeal and so we reject it.


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