2012 (9) TMI 870 - AT - Central Excise

Remission of duty - Destruction of raw material/packing material during flood on 3-8-2004 - Whether the appellant is required to reverse the Cenvat credit availed on the inputs which were also destroyed in the said flood - Held that - reversal of credit in respect of the inputs which were lying in the appellants factory unutilised and got destroyed in the fire, it is seen that the said inputs were admittedly neither used in the manufacture of the final product, nor even issued for the manufacture. They were lying as such in the appellants premises. The Modvat credit on the inputs is available only when the inputs are used in or in relation to the manufacture of the final product. In the present case they cannot even be said to have been used in relation to the manufacture of the final product, or can be said to have been destroyed during the manufacture of the final product, inasmuch as the same were admittedly not even issued for the manufacture. Appellant is required to reverse the Cenvat credit in respect of inputs/packing material, which were lying as such in the factory and got destroyed in that condition without being issued for further work. As such by following the Tribunal s decision in the case of Biopac India Corpn. 2007 (11) TMI 213 - CESTAT AHMEDABAD as also in the case of Golden Polymex and Paras Foam Industries referred (2003 (4) TMI 191 - CEGAT, KOLKATA) - Decided against assessee.

Summary

Issues:
- Application for remission of duty on finished goods and inputs
- Interpretation of Rule 21 of Central Excise Rules, 2002
- Reversal of Cenvat credit on damaged inputs
- Applicability of Tribunal's previous decisions

Analysis:
1. The appellant, engaged in manufacturing medicines, sought remission of duty for damaged finished goods and inputs due to a flood. The Commissioner rejected the remission request, stating Rule 21 does not apply to inputs/raw material/packing material. The appeal challenged this decision.

2. The appellant argued that the issue was about the reversal of Cenvat credit, not remission of duty. They cited the absence of a provision for credit reversal before a specific amendment. Referring to a Bombay High Court decision, they claimed no reversal was required pre-amendment.

3. The Advocate relied on Tribunal cases where remission of duty on raw material was allowed. The Revenue countered, stating Rule 21 did not cover Cenvat credit on destroyed inputs. The Tribunal acknowledged the flood damage but focused on the credit reversal issue.

4. The Tribunal analyzed whether the destroyed inputs, not used in the final product, should reverse Cenvat credit. Referring to prior cases, it concluded that credit on unutilized, destroyed inputs must be reversed. Previous decisions cited by the appellant were deemed inapplicable.

5. The Tribunal determined that the appellant must reverse Cenvat credit on inputs/packing material destroyed without being used in manufacturing. Relying on precedents, the appeal was rejected, aligning with the decisions in Biopac India Corpn., Golden Polymex, and Paras Foam Industries.

6. In conclusion, the Tribunal upheld the Commissioner's decision, requiring the appellant to reverse Cenvat credit on inputs destroyed in the flood. The judgment was pronounced on 14-9-2012 by Ms. Archana Wadhwa, J.