2009 (12) TMI 743 - AT - Central Excise

Reversal of CENVAT credit - goods destroyed by fire - demand on the ground that no application has been made for remission of duty u/r 21 of CER, 2002 and the amount has been collected from the insurance company - Held that - all the assessees are required to account for all the goods manufactured/produced and when some goods are destroyed because of fire accident or natural cause, in terms of provisions relating to accountal, assessee would be required to explain reasons for non-accountal. Therefore, demand for duty would be natural consequential action and when the appellant replies, the adjudicating authority would take into consideration the replies submitted by the assessee and come to a conclusion whether remission under Rule 21 is required or not - there was no requirement of application for remission in this case and the reply to the show cause notice is sufficient for claiming the remission if the appellant is otherwise liable for remission as per the legal provisions - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Duty demand on finished goods and reversal of Cenvat Credit on capital goods and inputs/raw materials.
2. Requirement of application for remission under Rule 21 of Central Excise Rules, 2002.
3. Claim for remission when amount collected from insurance company.
4. Appeal against the decision of the Commissioner (Appeals) regarding demand on capital goods.

Analysis:
1. The judgment dealt with a fire accident in the factory resulting in the destruction of capital goods, raw materials, and finished goods, leading to a duty demand and Cenvat Credit reversal. Both the party and the Revenue appealed. The party contested the duty demand on finished goods and inputs/raw materials, while the Revenue appealed the decision on capital goods.

2. The appellant argued that no separate application for remission was needed as the liability for duty arises only upon removal of goods, citing the Tribunal's decision in Shri Dudhganga-Vedganga SSKL & others v. CCEs. The advocate highlighted that the goods' destruction due to fire did not constitute removal, thus no remission application was required.

3. The Revenue, however, relied on the decision in Anand Control Systems (P) Ltd. v. CCE, Noida, stating that if the appellant claimed from the insurance company, remission was not permissible. The argument included that raw materials not in finished products did not warrant remission. The Commissioner's decision on capital goods was also contested.

4. The judge accepted the appellant's argument, emphasizing that duty liability arises upon removal, following the precedent in Shri Dudhganga-Vedganga SSKL & Others. The judge noted that the appellant's reply to the show cause notice was sufficient, and remission could be claimed if liable as per legal provisions. The judge also addressed the insurance claim issue, stating that reimbursement was not contingent on the insurance company's actions.

5. The judge highlighted that the decisions cited by both sides supported the appellant's position. The judgment concluded that all issues were covered by Tribunal precedents, leading to the allowance of the party's appeal and the rejection of the Revenue's appeal. The cross objection by the party was also disposed of in the judgment.