2015 (3) TMI 956 - AT - Central Excise

Denial of CENVAT Credit - Input lost in fire - Held that - Department has mainly relied on the statement of Shri S.K. Mishra, G.M. of the said assessee, recorded by the Range Superintendent, on 26.03.07. I have notices that in the said statement it has been deposed by Shri. S.K. Mishra, that out of total raw material 1315.934 MT, there was around 1000 MT of Sponge Iron was lying in different heaps. Out of this approximate 700 MT sponge iron, which was near to furnace burnt in the incident. However, the loss estimated by the SIB & Associates (Loss assessors) is 547.982 MT. I find no reason to deny the loss to the tune of 547.982 MT, as the said assessee has to record the actual loss in the proper records and the available balance qty. has to be shown in proper records, as they have to utilize the said balance qty. for the production, which ultimately will be removed on payment of C.EX. DUTY. Therefore, I hold that the qty. lost in fire is 547.982 MT. - order passed by the adjudicating authority is correct and I do not agree with the order passed by the Ld. Commissioner (Appeals). - Decided in favour of assessee.

Issues:
1. Discrepancy in the quantity of Sponge Iron lost due to fire - 700 MT declared by the appellant vs. 547.982 MT ascertained by insurance surveyor.
2. Liability to reverse Cenvat credit on the quantity of Sponge Iron lost.
3. Imposition of penalty under Rule 15(1) of CENVAT Credit Rules, 2004.
4. Recovery of interest on the remaining amount.
5. Recovery of interest on the amount paid on a specific date.

Analysis:
1. Discrepancy in Quantity Lost:
The Department relied on a statement by the General Manager of the appellant, indicating that around 700 MT of Sponge Iron was burnt in the fire incident. However, the surveyor's report estimated the loss at 547.982 MT. The adjudicating authority upheld the quantity of 547.982 MT as the actual loss, emphasizing the need for accurate record-keeping and utilization of remaining material for production. The Commissioner (Appeals) disagreed, citing the appellant's claim of 700 MT and the insurance surveyor's assessment. The Tribunal concurred with the adjudicating authority, emphasizing the lack of physical verification by the Central Excise department to support the 700 MT claim.

2. Liability for Cenvat Credit Reversal:
The appellant was required to reverse the Cenvat credit on the quantity of Sponge Iron lost. The Commissioner (Appeals) upheld the demand for Cenvat credit attributed to the 700 MT loss, emphasizing the appellant's own claim and statutory record justification. The Tribunal, however, found the surveyor's quantification of 547.982 MT to be accurate, rejecting the Commissioner's reasoning and setting aside the order in favor of the appellant.

3. Imposition of Penalty:
The Commissioner (Appeals) imposed a penalty under Rule 15(1) of the CENVAT Credit Rules, 2004, due to the delayed payment of Central Excise duty after the fire incident. The penalty was justified based on the utilization of inadmissible Cenvat Credit on the lost material. The Tribunal did not find this penalty legally sustainable and set aside the order, ruling in favor of the appellant.

4. Recovery of Interest:
The order confirmed the liability of the appellant to pay the entire duty amount, along with accrued interest and additional demands. The Tribunal's decision to set aside the Commissioner's order also impacted the recovery of interest, aligning with the findings on the quantity discrepancy and Cenvat credit reversal.

In conclusion, the Tribunal's judgment addressed the discrepancies in the quantity of Sponge Iron lost, the obligation to reverse Cenvat credit, the imposition of penalties, and the recovery of interest, ultimately ruling in favor of the appellant based on the accurate quantification of the loss by the insurance surveyor.

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