2013 (6) TMI 684 - CGOVT - Central Excise

Remission of duty - failure to reverse Cenvat credit taken on inputs - non production of documentary evidences regarding entry of damaged goods - Held that - On perusal of National Insurance Company letter dated 6-8-2007, Government observes that the quantity settled by the insurance company for insurance claim tallies with quantity mentioned in column (5) of the above said table. Hence, the observation of appellate authority regarding substantial difference in quantity on which remission was claimed and quantity as settled by insurance company is not sustainable. However, the factual verification in this regard is also required to be done by original authority on the basis of original documents. On verification, if the claim of applicant is found correct, the request for remission of duty is to be considered in accordance with law. - Matter remanded back - Decided in favour of assessee.

Issues Involved:
1. Non-reversal of Cenvat credit on inputs and interest.
2. Lack of documentary evidence regarding damaged goods in the daily stock register.
3. Interpretation of Rule 21 of Central Excise Rules, 2002.
4. Discrepancies in the quantity of goods claimed for remission and settled by the insurance company.

Issue-wise Detailed Analysis:

1. Non-reversal of Cenvat credit on inputs and interest:
The applicant's claim for remission of duty was initially rejected because they failed to reverse the Cenvat credit taken on inputs and did not produce documentary evidence regarding the entry of damaged goods. The applicant contended that they had reversed the input credit on raw materials used in the manufacture of goods lost, and provided documentary evidence, including GAR-7 Challans, to support their claim. The Government noted that if the Cenvat credit involved in inputs used in the manufacture of finished goods damaged in the flood has been reversed, the remission claim cannot be rejected. However, this claim needs to be verified by the original authority from the original records to determine its correctness.

2. Lack of documentary evidence regarding damaged goods in the daily stock register:
The Commissioner of Central Excise (Appeals) mentioned that the applicant had not produced evidence to show that the goods were actually entered in the RG-1 register at the time of the flood. The applicant argued that the quantity of finished goods was correctly entered in the Finished Goods Stock Register RG-1 as opening stock on the date of the flood and also the quantity salvaged after reprocessing. The differential quantity was claimed as lost and verified by the Surveyor of National Insurance. The Government observed that this claim needs factual verification by the original authority based on original documents.

3. Interpretation of Rule 21 of Central Excise Rules, 2002:
The applicant argued that the event on 26-7-2005 was an act of God, covered by Rule 21 of Central Excise Rules, 2002, which provides for remission of duty payable on goods lost or destroyed by natural causes or unavoidable accidents. The Commissioner of Central Excise (Appeals) stated that the goods salvaged were not fully destroyed and hence not covered by Rule 21. The applicant contended that Rule 21 also covers goods claimed by the manufacturer as unfit for consumption or marketing before removal. The Government noted that the remission claim should be considered if the applicant's claim regarding the reversal of Cenvat credit on inputs is verified and found correct.

4. Discrepancies in the quantity of goods claimed for remission and settled by the insurance company:
The appellate authority observed substantial differences in the quantity claimed for remission of duty and the actual quantity for which the claim was accepted and settled by the insurance company. The applicant provided a detailed table showing the quantities of finished goods lost, which tallied with the quantities settled by the insurance company. The Government observed that the quantity settled by the insurance company for the insurance claim tallied with the quantity mentioned in the applicant's table. However, factual verification by the original authority is required to confirm this.

Conclusion:
The Government set aside the impugned order and remanded the case back to the original authority to decide afresh after carrying out the necessary verification of the applicant's claims. A reasonable opportunity of hearing is to be afforded to the parties. The revision application was disposed of in these terms.

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