2012 (11) TMI 1037 - AT - Central Excise

Waiver of pre-deposit of Cenvat credit - Reversal of CENVAT Credit on the inputs which were used by assessee in the manufacture of final product, as at the stage of semi-finished product itself, the product got destroyed due to fire - Held that - provisions of Cenvat Credit Rules, 2004 talks about the reversal of Cenvat credit involved on the inputs which are utilised in the manufacture of finished goods which are destroyed in fire on which remission has been claimed. It is also seen that C.B.E. & C. s Supplementary Manual talks about reversal of Cenvat credit on the inputs which were destroyed without being put to use in the manufacturing process. The entire provisions are silent on the reversal of Cenvat credit on the inputs which were utilised in manufacturing process, but at the stage of semi-finished products were destroyed due to fire. At this juncture, I find that there is no dispute that the appellant had insured this semi-finished product for an amount. The said amount has been claimed from the insurance company and the insurance company has paid the amount to him - Prima facie case not in favour of assessee - Following decision of COMMISSIONER OF C. EX., BANGALORE Versus TATA ADVANCED MATERIALS LTD. 2011 (4) TMI 1124 - KARNATAKA HIGH COURT - Stay granted.

Summary

Issues:
Waiver of pre-deposit of Cenvat credit, interest, and penalty due to destruction of semi-finished goods in fire.

Analysis:
The appellant filed a Stay Petition seeking waiver of pre-deposit of Cenvat credit, interest, and penalty amounting to Rs. 3,41,348/-, confirmed by the adjudicating authority and upheld by the first appellate authority. The goods in question were destroyed in a fire at the semi-finished product stage. The appellant claimed to have followed all necessary procedures and informed the Department about the fire incident. The appellant also received an insurance claim for the destroyed goods, including the Cenvat credit. The appellant argued that the judgment of the Hon'ble High Court of Karnataka in a similar case supported their position.

The Department, represented by the Ld. D.R., contended that the demand was rightly confirmed as the destroyed goods were semi-finished and the appellant had claimed insurance for the same, including the Cenvat credit. However, upon careful consideration of the submissions and perusal of records, the Tribunal found that the Cenvat Credit Rules, 2004 and C.B.E. & C.'s Supplementary Manual did not explicitly address the scenario where inputs utilized in the manufacturing process, but at the semi-finished stage, were destroyed due to fire. Notably, the appellant had insured the semi-finished product and received the insurance claim amount.

The Tribunal referred to the judgment of the Hon'ble High Court of Karnataka in a similar case involving Tata Advanced Materials Ltd., which appeared to support the appellant's position, at least for the waiver of pre-deposit amounts. Consequently, the Tribunal allowed the application for waiver of pre-deposit of the amounts involved and stayed the recovery until the appeal's disposal.