HONOURABLE SRI JUSTICE GODA RAGHURAM AND HONOURABLE SRI JUSTICE ASHUTOSH MOHUNTA WRIT PETITION No. 30837 OF 2010 . DATED 1ST August, 2011 BETWEEN M/s. Hindustan Petroleum Corporation Limited, Vijayawada Terminal, Kattubadipalem, Kondapally, Krishna District. …Petitioner And Joint Secretary to the Government of India, Ministry of Finance, 14, HUDCO Vishala Buildings, New Delhi and ors ….Respondents. HONOURABLE SRI JUSTICE GODA RAGHURAM AND HONOURABLE SRI JUSTICE ASHUTOSH MOHUNTA WRIT PETITION No. 30837 OF 2010 . ORDER: ( Ashutosh Mohunta,J) The petitioner, M/s.Hindustan Petroleum Corporation Limited, Vijayawada Terminal, Kattubadipalem, Kondapally, Krishna District, assails the order dated 11.05.2010 passed by the Joint Secretary to the Government of India, Ministry of Finance, New Delhi, the first respondent, rejecting the revision application dated 23.04.2008 filed by it. It is the case of the petitioner that it has a bonded warehouse at Vijayawada having been registered under Rule 20 of the Central Excise Rule, 2002 ( ‘the Rules 2002’ for brevity) for duty free receipt, storage of petroleum products such as Motor spirit (MS), High Speed Diesel (HSD), Superior Kerosene oil (SKO), Naphtha, Hexane etc., falling under Chapter-27 of the Central Excise Tariff Act, 1985 which were covered by the Notification No.47/2001-CE(NT) dated 26.06.2001 for the purpose of duty free warehousing under bond. While so, it is the case of the petitioner that under letter dated 13.07.2004 it had intimated to the Assistant Commissioner of Central Excise, Vijayawada Division, Vijayawada, the second respondent, that due to torrential rains on 13.07.2004 in Vijayawada water got accumulated on the floating roof beyond the draining capacity, owing to which, certain quantity of SKO stored in Tank No.002B entered the roof through emergency roof drain and got drained through the roof drain pipe and the same was found in open storm water drain outside the terminal, adjacent to their Company Owned Company Operated (COCO) outlet. It is stated that the said leakage was also informed to the Superintendent of Central Excise, Range-I, the District Collector, Krishna District and the Commissioner of Police, Vijayawada. Further, the petitioner under its letter dated 16.08.2004 stated that as per Tank gauge of the said tank, a quantity of 875.851 KL of SKO was lost due to the aforesaid leakage and therefore requested condonation/waiver of the central excise duty. However, the second respondent under his letter dated 08.10.2004 directed the petitioner to pay the Central Excise duty of Rs.24,18,750/- on the quantity of 875.851 KL of SKO. The petitioner did not pay the same and requested him to grant remission of duty on the entire loss. The petitioner also marked a copy thereof to the Superintendent of Central Excise, Range-1, Vijayawada. The second respondent rejected the request of the petitioner and informed the petitioner vide his letter dated 14.02.2005 to submit its application for remission of duty, etc., to the Commissioner of Central Excise & Customs, Guntur, the fourth respondent, through proper channel, i.e. Superintendent of Central Excise Range-1, with all relevant supporting documents and evidence. As matters stood thus, the petitioner was issued show cause notice dated 01.07.2005 proposing to demand Central Excise duty of Rs.24,18,750/- along with interest under Sections 11A(1) and 11 AB of the Central Excise Act, 1944 (for short ‘the Act 1944’) respectively and penalty under Rule 25 of the Rules 2002. Therein, it was stated that the petitioner had contravened the provisions of rule 20 of the Rules 2002 and the conditions of the notification No.47/2001 dated 26.06.2011 as it had failed in its responsibility as a warehouse keeper in protecting the aforesaid quantity of SKO in the warehouse safely and further it had not provided proper explanation for the said loss of the goods and thereby failed in accounting for the goods stored and in establishing that the said goods were lost or destroyed by natural cause or by unavoidable accident with necessary evidence for being eligible to claim remission of duty thereon under Rule 21 of the Rules 2002. To the said show cause notice, the petitioner had filed its reply dated 20.09.2005 narrating the incidents leading to the loss of SKO and stated that penalty under Section 11AC of the Central Excise Act,1944 ( ‘the Act’ for short) cannot be levied in as much as there is no contumacious dishonesty or wilful disobedience of law. After affording an opportunity of personal hearing to it, the Additional Commissioner of Central Excise under his order-in-original dated 29.12.2006 confirmed the demand of Rs.24,18.750/- along with interest as made by the second respondent and further imposed a penalty of Rs.10,000/- in terms of Rule 25 of the Rules 2002. The said demand was confirmed primarily on the ground that remission of central excise duty for the goods lost has not been granted by the proper authority (Commissioner of Central Excise, Guntur, the fourth respondent). Aggrieved thereby, the petitioner preferred an appeal before the Commissioner (Appeals), Guntur, the third respondent. Upon a consideration of the entire material and arguments advanced before him on either side, the third respondent by order-in-appeal dated 24.01.2008 dismissed the appeal filed by the petitioner upholding the order of the original authority dated 29.12.2006. Challenging the said order of the appellate authority, the petitioner instituted a revision application dated 23.04.2008 before the first respondent. By his order dated 11.05.2010 the first respondent rejected the revision application of the petitioner inter alia observing that the same is devoid of merit. Assailing the said order of the first respondent, the present writ petition is filed. The second respondent filed a counter affidavit on behalf of all the respondents mentioning that the fourth respondent-Commissioner of Central Excise is the competent authority to grant remission of the central excide duty in terms of Rule 21 of the Rules 2002 and in absence of such remission of central excise duty being granted by the competent authority to the petitioner, the original adjudicating authority could not allow the condonation/ waiver of excise duty. He stated that the petitioner did not choose to avail the aforesaid option of remission by submitting the necessary application along with supporting evidence to the fourth respondent-Commissioner of Central Excise through proper channel and as the remission of payment of central excise duty on the impugned goods from the fourth respondent was not obtained, the petitioner is liable to pay the excise duty as per the provisions of the Act 1944 and accordingly demand was made which was later upheld by the original, appellate and revisional authorities. He further stated that though the petitioner had submitted a letter on 08.01.2005 to the fourth respondent communicating the reasons for the loss of SKO from Tank No.002B and requested for remission of payment of central excise duty on the entire quantum of lost goods, but it did not produce any corroborative and supporting documentary evidence therefor showing correct quantity/account of the loss of goods and as such, the said letter was returned to the petitioner duly advising it to submit an application for remission of duty to the fourth respondent with all relevant supporting documents and evidence through proper channel in as much as the fourth respondent is the proper authority for remission of payment of central excise duty amounting to more than Rs.5.00 lakhs under Rule 21 of the Rules, 2002. The petitioner filed a reply affidavit denying the counter averments that it had not applied for remission of duty. It is stated that the petitioner had, in fact, applied to the fourth respondent as well as the Superintendent of Central Excise for remission of duty. It is stated that in as much as the application for remission filed by the petitioner is pending consideration before the fourth respondent, the first respondent should not have confirmed the demand and would have remanded the matter to the original authority to consider the remission application. It is stated that once the application for remission submitted to the Commissioner is pending consideration, it is not open for the respondent authorities to direct the petitioner to re-submit the same. Heard the learned counsel appearing for both the parties. Perused the case file thoroughly. The learned Counsel for the petitioner, while reiterating the contentions raised in the affidavit filed in support of the writ petition, submitted that Rule 21 of the Rules 2002 provides for remission of payment of central excise duty in case the goods are lost or destroyed by natural causes or by unavoidable accident or claimed by the manufacturer as unfit for consumption or for marketing at any time before removal. In support of the said contention, he placed reliance on the decision of the High Court of Rajasthan in the case of Union of India Vs. Hindustan Zinc Limited {2009 (233) ELT 61 (Raj)}. He also pointed out that though the petitioner under letter dated 23.11.2004 requested the second respondent for grant of remission of duty on account of loss of SKO due to torrential rainfalls, but being advised by the department to apply the same to the fourth respondent, the petitioner had submitted a letter on 8.1.2005 to the fourth respondent for grant of remission of duty on the loss of SKO. He argued that the said application was returned merely on the ground that the same is required to be filed through the proper channel, i.e. Superintendent of Central Excise, Range-1, Vijayawada. Placing reliance on the decision in R.B.N.S.Sugar Mills Ltd., Vs. Commissioner of Central Excise, Merrut {2004 (166) ELT 327}, the learned Counsel for the petitioner submitted that a show cause notice for demand of duty is to be issued only after disposal of remission application. In support of his argument that the office of the second respondent with whom the petitioner filed the application for remission of duty should have forwarded the same to the Superintendent of Central Excise, he placed reliance on the decision in CCE Vs. Gujarat Tea Processors and Packers Ltd {2010 (17) STR 489 }. On the other hand, the learned Counsel appearing for the respondents, while supporting the impugned order whereby the revision application of the petitioner was rejected, submitted that when the assessee had not applied for remission of duty before the appropriate authority (the fourth respondent) for the loss of goods due to natural calamities and in the absence of remission of duty which was otherwise payable in respect of the SKO stored in the factory premises, the original authority had no power to waive the demand of duty. He also contended that though the letter of the petitioner for remission of duty dated 08.01.2005 was returned advising it to submit the same to the fourth respondent through the proper channel, i.e., Superintendent of Excise, Range-1, Vijayawada with all corroborative and supporting evidence and documents, but the petitioner, for the reasons best known to it, did not submit any such required evidence and documents such as investigation reports from the authorized investigators, estimation of loss from the standard estimation agencies to facilitate the respondents to get satisfied to arrive at a conclusion that the incident occurred due to natural calamity. He also pointed out that in as much as the petitioner has not exhausted the alternative and efficacious statutory remedy available with the fourth respondent for remission of duty on the impugned goods, the Writ Petition filed under Article 226 of the Constitution is not maintainable. He further submitted that the revisional authority can only examine the issues that arise for determination against the orders passed by the quasi-judicial authorities and the liability of duty on the impugned goods cannot be dropped without any order of remission of payment of central excise duty on them. Admittedly, the original authority, after duly affording an opportunity of personal hearing to both sides and perusing the entire material on record, held that unless the remission of payment of central excise duty is granted by the proper authority, the original authority cannot have any power to waive/condone the excise duty which is otherwise liable to be payable by the petitioner. It is apt to extract the relevant portion of the order of the original authority, which reads as under: “ …………………. …………….. ………………….. The contention of M/s. Hindustan Petroleum Corporation Limited cannot be accepted unless the proper authority (Commissioner of Central Excise) has granted remission of duty under Rule 21 of Central Excised Rules, 2002 on these goods. In the facts of this case no such remission has been granted by the Commissioner so far. It is not even the claim of M/s. Hindustan Petroleum Corporation Limited that such remission has been granted. It is only contended by them that the leakage has happened due to natural causes and they have applied for remission of duty. It is admitted by the them that such application for remission was returned by the Commissioner with a direction that they should apply with proper documents in terms of Rule 21 of Central Excise Rules, 2002. After the incomplete application has been returned, M/s. Hindustan Petroleum Corporation Limited have neither applied for such remission nor any remission was granted by the proper authority so far. Since there is no evidence that remission has been granted for these goods, M/s Hindustan Petroleum Corporation Limited being the registered person for maintenance of the warehoused goods are liable for payment of duty in terms of Rule 20 of Central Excise Rules 2002 and the notification issued under the said Rule. Accordingly, the demand is liable for confirmation. In support of their claim M/s. Hindustan Petroleum Corporation Limited have relied upon two orders in originals passed by the Commissioner of Central Excise, Visakhapatnam vide order C.No.V/30/34/2002- Tech, date 20.08.2004 and order in Original No.18/2005 dated 31/8/2005 passed by the Commissioner of Central Excise, Mumbai-II. I have gone through these two orders and find that M/s Hindustan Petroleum Corporation Limited’s reliance on these two orders in Originals is highly misplaced. In the order passed by the Commissioner of Central Excise, Visakhapatnam, the issue was with reference to allowing of the remission of duty. Under Rule 21 of Central Excise Rules, 2002 for the material destroyed during fire accident. In the said order the Commissioner after examining the claim of M/s Hindustan petroleum Corporation Limited has allowed remission of duty on the quantity destroyed under Rule 21 of Central Excise Rules 2002. In the facts of this case no such remission has been granted by proper authority………..” The said order of the original authority was affirmed by the appellate as well as the revisional authorities. Further, it is palpable from the record that the petitioner had submitted a letter on 08.01.2005 to the fourth respondent communicating the reasons for the loss of 850 KL of SKO from tank No.002B and accordingly requested him for remission of payment of central excise duty on the entire quantum of lost goods. But the petitioner failed to produce any corroborative and supporting evidence and documents showing the correct quantity of the lost goods while an application was made in this regard. Therefore, the said letter was returned to the petitioner advising it to re-submit the same to the fourth respondent with all relevant supporting and corroborating evidence and documents through proper channel as the fourth respondent is the proper authority for remission of payment of central excise duty amounting to more than Rs.5.00 lakhs under the Rule 21 of the Rules 2002. However, it is not understandable as to what prevented the petitioner from re-submitting the application for remission of duty on the lost goods to the fourth respondent through the proper channel when it was the case of the petitioner that the loss was occurred due to natural calamity. Instead, he agitated before the original, appellate and revisional authorities that the application submitted by it on 08.01.2005 for remission is pending consideration before the fourth respondent which was indeed returned to the petitioner vide letter dated 14.02.2005 advising it to re-submit the same to the fourth respondent through proper channel duly enclosing therewith the necessary supporting and corroborating evidence and documents. In the light of the above, the submission of the petitioner that the application dated 16.8.2004 submitted for remission of payment of central excise before the Superintendent of Central Excise is still pending consideration, cannot therefore be countenanced in as much as the said authority is not competent authority to waive such duty and it is only an authority to transmit and forward the application of the petitioner, if any filed by it, to the appropriate authority, namely, the fourth respondent. In the absence of remission of duty from the competent authority-fourth respondent, the original authority has no power to waive the demand of duty which is otherwise payable in respect of the alleged lost SKO. The entire gamut of the case is that the petitioner has not re-submitted the application for remission of duty to the fourth respondent with all relevant supporting and corroborating documents and evidence through proper channel, as advised by the respondent authorities. Hence, it cannot, under any circumstances, be said that the petitioner is denied of the benefit in terms of Rule 21 of the Rules 2002. In view of the foregoing discussion, the precedential law relied on by the petitioner in support of his contentions need not be gone into as the alleged loss by the petitioner was not proved by any corroborative and supporting documents and evidence. Further, the petitioner has not even resubmitted the application following the due procedure as indicated in the letter dated 14.02.2005 of the respondent authorities. In the absence of the grant of remission of payment of central excise duty by the competent authority, it is not open to the original authority who has no power to drop the demand of duty payable by the petitioner. The other contentions of the petitioner that the penalty cannot be imposed; demand of interest under Section 11 AC of the Act 1944 is not sustainable; that appropriation of duty along with interest from the amount due from the petitioner is illegal; that quantification of duty payable by the petitioner is incorrect and other contentions supra are devoid of merit. Having due regard to the facts and circumstances narrated hereinbefore, we do not find any error in the impugned order warranting interference by this Court. As a result, we do not find any merit in the writ petition, which is liable to be dismissed. The Writ Petition is accordingly dismissed. However, it is left open for the petitioner to file an appropriate application as stated supra, under Rule 21 of the Rules 2002 for remission of payment of central excise duty on the alleged loss of SKO if so advised. There shall be no order as to costs. --------------------------------- --- JUSTICE GODA RAGHURAM ---------------------------------------------- JUSTICE ASHUTOSH MOHUNTA Dated 1st August, 2011. Msnr.