2010 (7) TMI 431 - HC - Central Excise

Cenvat credit Inputs used in goods destroyed in fire insurance claim by assessee not covering duty on inputs in finished and semi-finished goods No demand could be made of cenvat credit claimed thereon Delay in filing of remission claim - the delay in filing the application cannot be a ground for rejection of remission application when there is no dispute regarding the loss occurring as a result of circumstances outlined in the relevant rules.

Summary

Issues:
1. Reversal of Cenvat credit on destroyed goods.
2. Interpretation of Modvat/Cenvat scheme.
3. Compensation received from insurance companies.
4. Remission of duty on destroyed goods.
5. Jurisdictional facts regarding insurance compensation.

Issue 1: Reversal of Cenvat credit on destroyed goods
The appellant-revenue contended that Cenvat credit availed on inputs and semi-finished goods destroyed in a fire should be reversed as they were not used in the manufacture of final products. The revenue issued a show cause notice to the respondent for not reversing the Cenvat credit, leading to a demand confirmed by the Assistant Collector, Central Excise. The Commissioner (Appeals) upheld the order, but the Tribunal partially ruled in favor of the respondent, allowing remission of duty on the final product only. The Tribunal held that Cenvat credit on inputs in finished/semi-finished goods destroyed in the fire cannot be demanded, citing the decision in Grasim Industries v. Commissioner of Central Excise, Indore. The Tribunal's decision was upheld, dismissing the appeal.

Issue 2: Interpretation of Modvat/Cenvat scheme
The appellant argued that the Tribunal erred in ignoring the Modvat/Cenvat scheme's intention that duty paid on inputs can be credited for payment on finished products to prevent cascading effects. The Tribunal, however, followed the decision in Grasim Industries v. Commissioner of Central Excise, Indore, stating that there was no need to reverse Cenvat credit on destroyed finished/semi-finished goods. The Tribunal's decision was upheld as it did not find any legal infirmity warranting interference.

Issue 3: Compensation received from insurance companies
The appellant contended that the respondent received compensation from the insurance company covering the duty element on destroyed goods. However, the Tribunal noted that the insurance claim did not cover the duty element on inputs in finished/semi-finished goods. The Tribunal's decision was upheld, stating that no evidence disproving the claim was presented, and the Tribunal did not commit any legal infirmity.

Issue 4: Remission of duty on destroyed goods
The respondent applied for remission of Cenvat duty on destroyed goods, which was initially rejected by the Commissioner but allowed by the Tribunal. The Tribunal held that the respondent was eligible for remission of duty on the final product, citing previous Tribunal decisions. The Tribunal's decision was upheld as it was based on factual findings and not challenged by the revenue.

Issue 5: Jurisdictional facts regarding insurance compensation
The appellant argued that the Tribunal ignored the fact that the respondent received compensation from the insurance company. However, the Tribunal found that the insurance claim did not cover the duty element on destroyed goods. The Tribunal's decision was upheld, stating that there was no legal basis for interference as the findings were based on evidence and not unreasonable.

Overall, the High Court upheld the Tribunal's decisions in both appeals, dismissing the appeals as they did not raise substantial questions of law.