2015 (10) TMI 1182 - AT - Central Excise

Reversal of CENVAT Credit - Whether the appellant is liable to reverse the credit so availed by him when the inputs were not actually used in the manufacture of the final product and were destroyed in the job-worker s factory - Held that - Tribunal in the case of Dishman Pharm. & Chemicals Ltd. Vs. CCE, Ahmedabad 2006 (5) TMI 356 - CESTAT, MUMBAI has dealt with an identical situation i.e. where the inputs sent to the job-worker s factory were destroyed in fire. The Tribunal relying upon some precedent decisions, as confirmed by Hon ble Supreme Court held that inasmuch as the inputs have been sent to the job-workers, they have to be considered as being issued for manufacture and entitled to the cenvat credit. As such the said decision fully covers the situation available in the present case. - an assessee is liable to reverse the cenvat credit of duty paid on the inputs, which have been used in the manufacture of the final product and which final product stands destroyed and remission of duty stands granted in respect of the said destroyed final product. However he submits that the said Rule is not applicable to the destruction of the inputs itself, which have not reached the stage of final goods. For the said proposition he relies upon the Tribunal s decision in the case of Themis Medicate Ltd. Vs. CCE&S.T, Daman 2014 (2) TMI 208 - CESTAT AHMEDABAD . - appellant is entitled to the cenvat credit of duty in respect of the inputs destroyed in fire at the job-worker s factory. Accordingly the impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
1. Denial of cenvat credit for destroyed inputs sent to job-worker.
2. Applicability of Rule 3(5C) of Cenvat Credit Rules to destroyed inputs.

Issue 1 - Denial of cenvat credit for destroyed inputs sent to job-worker:
The appellant, engaged in manufacturing bulk drugs, availed cenvat credit on inputs sent to job-worker for manufacturing intermediate products. In a fire accident, inputs sent during October to November 2009 were destroyed. The Revenue sought to deny the cenvat credit availed by the appellant, resulting in the confirmation of demand and interest by the adjudicating authority and Commissioner (Appeals). The issue was whether the appellant is liable to reverse the credit when inputs were not used in the final product. The Tribunal referred to a precedent case where inputs sent to job-worker and destroyed in fire were considered issued for manufacture, entitling cenvat credit. The Tribunal held that the appellant is entitled to cenvat credit for destroyed inputs sent to the job-worker.

Issue 2 - Applicability of Rule 3(5C) of Cenvat Credit Rules to destroyed inputs:
The appellant argued that Rule 3(5C) applies when final products are destroyed, not inputs. Citing the Tribunal's decision in Themis Medicate Ltd. case, it was noted that Rule 3(5C) is invoked when remission of duty is sought for destroyed final products, not inputs. The Tribunal clarified that Rule 3(5C) does not apply when inputs are destroyed before reaching the final goods stage. The Revenue did not present any contrary decision. As the destroyed inputs were not at the final stage and no remission of duty was involved, Rule 3(5C) was deemed inapplicable. Therefore, the appellant was entitled to cenvat credit for the destroyed inputs at the job-worker's factory.

In conclusion, the appellate tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellant. The judgment emphasized that the appellant was rightfully entitled to cenvat credit for the inputs destroyed in the fire at the job-worker's factory.