2010 (5) TMI 700 - HC - Central Excise

Whether in the absence of one-to-one co-relation Appellant is liable to pay Modvat/Cenvat involved on raw material destroyed in fire? Whether the Tribunal has failed to pass a Speaking Order? Held that - In the present case, it is on record that the Assessee has not received amount of Cenvat Credit involved on inputs, as compensation from the Insurance Company. It means, Assessee has borne loss of goods incident. It is undisputed fact that the Appellant has paid duty on inputs at the time of purchase of goods. The Assessee took credit and utilized the same for the payment of duty on finished goods. There is no one-to-one co-relation between the inputs and finished goods. In the absence of one-to-one co-relation, it is unjustified to ask the Assessee to reverse the credit which has already been utilized for the payment of finished goods. Thus the Assessee is not liable to pay duty equivalent to amount of Cenvat Credit availed on inputs and therefore question No. 1 is answered in favour of the appellant-assessee. As far as the second question of law is concerned, a perusal of the order passed by the Tribunal shows that it is a speaking order. Hence, this question is also decided against the Revenue

Summary

Issues:
1. Liability to pay Modvat/Cenvat on raw material destroyed in fire.
2. Failure of the Tribunal to pass a Speaking Order.

Analysis:
1. The case involved the Appellant, engaged in manufacturing Acrylic/Polyester Yarn, facing a demand of duty amounting to Cenvat Credit on raw material destroyed in a fire incident. The Adjudicating Authority confirmed the demand, but the Commissioner (Appeals) allowed remission only on finished goods and material in process, denying the benefit for inputs destroyed in fire. The Tribunal dismissed the appeal based on a previous decision. The Appellant argued that there is no rule requiring reversal of credit for destroyed inputs, citing relevant judgments and rules. The Court held that the Appellant is not liable to pay duty equivalent to the Cenvat Credit on destroyed inputs, as there was no one-to-one correlation between inputs and finished goods, following previous court decisions.

2. The second issue raised was regarding the Tribunal's failure to pass a Speaking Order. The Court found that the Tribunal's order was indeed a speaking order, thereby deciding this question against the Revenue.

In conclusion, the Court allowed the appeal, quashed the Tribunal's order, and answered both questions of law in favor of the Appellant. The judgment emphasized the indefeasible nature of credit for excise duty paid on raw material, the lack of correlation between inputs and finished goods, and the non-reversal of credit for destroyed inputs. The decision was based on legal principles, relevant rules, and precedents from the Supreme Court and various High Courts.