2016 (2) TMI 1037 - AT - Central Excise

Refund claim - rejection on the ground that reversal of Cenvat credit was in the course of semi-finished goods lost in fire was in order - Held that - the inputs on which Cenvat credit was availed by the appellant were used in manufacture of final goods. Therefore, the Cenvat credit cannot be denied to the appellant, moreover, the work in progress lost in fire. Therefore, appellant is not entitled for claim of remission of duty but the appellant cannot be asked to reverse Cenvat credit. It is a fact on record that the appellant has not written off the value of semi-finished goods/work in progress. In that circumstance, Rule 3(5B) of the CCR, 2004 is not applicable in this case - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim rejection based on reversal of Cenvat credit for semi-finished goods lost in fire.

Detailed Analysis:

1. Facts of the Case:
- A fire accident occurred in the factory premises, resulting in damage to goods, machinery, and building.
- The appellant informed the authorities, filed a claim of remission of duty on finished goods and inputs, and reversed Cenvat credit on inputs used in work in progress.

2. Initial Refund Claim Rejection:
- The refund claim was initially rejected by the adjudicating authority due to incomplete submission of written off work in progress figures.
- The rejection was based on Rule 3(5B) of the Cenvat Credit Rules, 2004 and Circular No. 907/27/2009-CX.

3. Appeal and Arguments:
- The appellant challenged the rejection before the Commissioner (Appeals), citing that Rule 3(5C) of the Cenvat Credit Rules, 2004 was provisionally applied incorrectly.
- The appellant argued that they should be entitled to the Cenvat credit as the inputs were used in the manufacture of final goods.

4. Contentions and Decision:
- The appellant contended that they did not write off the value of semi-finished goods/work in progress, making Rule 3(5B) inapplicable.
- The Tribunal found that the appellant should not be required to reverse Cenvat credit as the semi-finished goods were lost in the fire.
- Provisional Rule 3(5C) was deemed inapplicable as the appellant did not file a claim of remission of duty under Rule 21 of the Central Excise Rules, 2002.

5. Judgment:
- The Tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellant.
- It was held that the appellant, having used the inputs in the manufacture of final goods, was entitled to the Cenvat credit, and the rejection of the refund claim was not sustainable in law.

This judgment highlights the importance of correctly applying the relevant rules and provisions in cases involving the reversal of Cenvat credit due to unforeseen circumstances like fire accidents impacting work in progress.