2007 (6) TMI 49 - AT - Central Excise

Cenvat/Modvat - Appellant demand for refund claim on the ground that they made wrong reversal of cenvat credit - Held that appellant demand was correct and allowed

Summary

Issues:
1. Refund claim denial based on reversal of Cenvat credit.
2. Interpretation of conditions for remission of duty on finished goods.
3. Applicability of Board's Circular on reversal of credit.
4. Comparison with Tribunal's decision in Grasim Industries case.
5. Challenge to the condition in the order of remission.

Analysis:
1. The case involved a manufacturer seeking permission to destroy unusable finished products and claiming remission of duty. The appellant's refund claim was denied by the original authority due to the reversal of Cenvat credit as a condition for remission under Rule 49 of Central Excise Rules, 1944.

2. The Commissioner (Appeals) initially upheld the remission of duty on the finished goods, despite the destruction not being supervised by Central Excise officers. The appellant filed a refund claim within one year of reversing the Cenvat credit, as required. However, the denial was based on the condition of reversing the credit as part of the remission process.

3. The appellant argued that as per Board's Circular No. 650/41/2002, there was no requirement to reverse the Cenvat credit in such cases. They also cited the Tribunal's decision in Grasim Industries case, emphasizing that the credit for inputs in the final product destroyed need not be disallowed.

4. The Tribunal, in the Grasim Industries case, held that remission of duty on finished goods should not be equated with exemption to goods. It was clarified that the credit for inputs in destroyed final products, for which remission was granted, should not be reversed.

5. The Commissioner (Appeals) held that since the condition in the remission order was not challenged through an appeal, the refund was deemed impermissible. However, the Tribunal disagreed, stating that the condition in the remission order was not legally valid and should not prevent the refund claim. The appeal was allowed, providing consequential relief to the appellant.