2010 (11) TMI 919 - AT - Central Excise

Summary

Issues Involved: Appeal against order of Commissioner (Appeals) regarding denial of credit on goods received as replacement after a fire accident, imposition of penalty, and limitation of show cause notice.

Denial of Credit on Goods Received: The appellant, a manufacturer of various fabrics, faced a fire accident resulting in the destruction of goods. The insurance company provided fresh supply of goods destroyed/damaged in the fire. A show cause notice alleged that the appellant had been fully compensated by the insurance company and thus taking credit on such goods was against the Cenvat scheme. The original authority confirmed the demand and imposed a penalty under Cenvat Credit Rules. The Commissioner (Appeals) upheld this decision.

Arguments by Appellant: The appellant argued that due to a special insurance policy taken on a "reinstatement" basis, they received duty paid capital goods and rightfully took credit for the duty paid. The appellant contended that denial of credit was unjustified, and the imposition of penalty was not warranted. It was also argued that there was no suppression of relevant facts, and the show cause notice issued demanding duty for a specific year was time-barred.

Court's Analysis and Decision: The Court considered the terms of the insurance policy and the supply based on it between the appellant and the insurance company. It was noted that the appellant had taken credit on capital goods received with duty paying documents. The source of funding for the purchase of capital goods, whether by the appellant or the insurance company, was deemed irrelevant to the eligibility of credit on the goods received. Since the duty paid nature of the goods and their receipt by the appellant for use were undisputed, the denial of credit was deemed unjustified. Consequently, the order of the Commissioner (Appeals) was set aside, and the appeal was allowed with consequential relief as per law.