2013 (7) TMI 184 - CGOVT - Central Excise

Remission of Excise Duty - reversal of credit on inputs using in finished goods destroyed in fire broke out in their factory - Insurance claim filed by the applicants appeared to be inclusive of the Central Excise Duty. - Held that Taking the ratio decided in case of Grasim Industries v. Commissioner, Indore 2006 (8) TMI 69 - CESTAT,NEW DELHI , reading of rules under which remission is granted in respect of goods which were lost or destroyed by natural cause or by natural accident, does not provide any condition regarding reversal of credit taken in respect of inputs used on such goods. Ratio laid down by Tribunal in case of Mafatlal Industries Ltd. 2003 (3) TMI 153 - CEGAT, MUMBAI , has been overruled by Larger Bench s judgment in the case of Grasim Industries - in case of CCE, Lucknow v. Varun Beverages in Excise Appeal No. 2801 of 2007, the Tribunal has held that as the Larger Bench of Tribunal in case of Grasim Industries overruled decision of Tribunal in the case of Mafatlal Industries Ltd., the Circular 800/33/2004-CX dated 1-10-2004 issued on the basis of ratio of Mafatlal Industries 2003 (3) TMI 153 - CEGAT, MUMBAI has become ineffective. Under such circumstances. Government is of opinion that lower authorities reliance upon Circular dated 1-10-2004 for reversal of Cenvat credit, is not legally sustainable. - Decided in favor of assessee. However, no remission on Cenvat credit availed on inputs/raw materials destroyed in fire - Decided against the assessee.

Summary

Issues:
1. Disallowance of remission of Central Excise Duty on raw materials/inputs lost in fire.
2. Reversal of Cenvat credit availed on inputs used in the manufacture of finished goods destroyed in fire.

Analysis:
1. The case involved a revision application filed against the Order-in-Appeal by M/s. Puskher Paint Industries regarding the disallowance of remission of Central Excise Duty on raw materials/inputs lost in a fire incident. The department contended that the inputs on which Cenvat credit was availed were not used in the manufacture of the final product, making the credit inadmissible under Rule 3 of the Cenvat Credit Rules, 2002. The Adjudicating authority disallowed the remission of duty on raw materials/inputs and confirmed the demand under Rule 12 of the Cenvat Credit Rules, 2002. The Commissioner (Appeals) rejected the appeal filed by the applicant, leading to the revision application before the Central Government.

2. The applicant contested the condition of reversing Cenvat credit availed on inputs used in the manufacture of finished goods destroyed in the fire. The applicant cited a decision by the Larger Bench of CESTAT in the case of Grasim Industries v. Commissioner, Indore, which held that Cenvat Credit availed on inputs used in finished goods destroyed in fire is not required to be reversed. The applicant argued that the Circular issued by the Board and relied upon by the lower authorities for reversing Cenvat credit was not legally sustainable due to the overruling of the Mafatlal Industries case by the Grasim Industries judgment. The applicant also highlighted that the provisions for reversing Cenvat credit on inputs used in the manufacture of finished products lost in fire were introduced only from 7-9-2007, and as the applicant's case was prior to this date, the provisions did not apply retroactively.

In conclusion, the Government upheld the rejection of remission of Cenvat credit availed on inputs/raw materials destroyed in fire but found the condition of reversing Cenvat credit goods while allowing remission of duty involved in finished goods destroyed in fire to be legally unsustainable. Therefore, the Order-in-Appeal was modified accordingly, and the revision application was disposed of in light of the above analysis.