2006 (8) TMI 66 - HC - Central Excise

Cenvat/Modvat - Recovery of Cenvat credit on inputs destroyed in fire accident - Tribunal decided that assessee is entitled for relief - Assessee to file an affidavit before settlement of insurance claim

Summary

Issues involved:
1. Irregular availing of CENVAT credit on certain inputs after a fire accident.
2. Demand of duty and penalty by the Revenue under Central Excise Rules.
3. Interpretation of Rule 57-I of the Central Excise Rules, 1944.
4. Imposition of penalty under Section 11AA of Central Excise Act, 1944 and Rule 173Q of the Central Excise Rules.

Analysis:

1. The case involved a fire accident at a factory premises resulting in the destruction of several inputs for which CENVAT credit had been irregularly availed. The Revenue alleged that the respondent did not correctly adjust the differential amount and did not fully account for the disposed-off inputs. A show cause notice was issued demanding duty and penalty under Rule 173Q of the Central Excise Rules. The Assistant Commissioner confirmed the notice, leading to an appeal before the Commissioner and subsequently the Tribunal.

2. The Revenue raised questions regarding the levy of Central Excise duty on inputs for which CENVAT credit was availed but not fully accounted for as per the rules. Additionally, the justification for imposing penalties under Section 11AA of the Central Excise Act, 1944, and Rule 173Q was questioned due to alleged suppression of material facts by the assessee. The Tribunal's decision was challenged by the Revenue, citing a previous judgment by the Tribunal in a different case.

3. The Tribunal considered the facts where inputs, for which MODVAT Credit was availed, were lost in the fire accident, and a claim was made to the insurance authority without settlement. Referring to a previous judgment, the Tribunal held that duty credit recovered due to destruction could be returned to the assessee in such circumstances. The Tribunal distinguished another case where the claim was settled by an insurance company, leading to a different ruling. The High Court upheld the Tribunal's decision based on the fire accident and previous judgments, emphasizing the need for the assessee to remit benefits back to the Department if settled by the insurance company.

4. The High Court rejected the appeal without admission, stating that the order was factual, and declined to address the legal questions raised by the Revenue. No costs were awarded in the matter.