2015 (11) TMI 240 - AT - Central Excise

Duty demand - Goods destroyed in fire - CENVAT Credit - Invocation of extended period of limitation - Held that - The main duty demand of ₹ 95,43,677/- is in respect of alleged loss in fire of certain finished products. According to the appellant, however, the goods lost were the inputs in process i.e. work-in-progress goods in the reaction tanks and were not finished goods, as after the completion of manufacturing process, they are taken out from the reaction tanks, tested for quality control and are packed and as such, the goods lying in reaction tanks have to be treated as work in progress and not finished goods and therefore, they were not entered in RG I register. Prima facie, we find merit in this plea of the appellant. Moreover, we also find that while the Superintendent had submitted his report on 3.3.2010 and clarifications were given by the appellant on 25.4.2011, but still show cause notice was issued beyond the normal period of limitation of one year. In the circumstances of the case, longer period of limitation under section 11A is not invokable in terms of Tribunal s decision in Nectar Lifesciences Ltd. (2013 (8) TMI 843 - CESTAT NEW DELHI). As regards the Cenvat credit demand of ₹ 4,41,949/-, the same is in respect of loss of Cenvat credit availed inputs namely the packing material and solvent, Though on merits, the appellant would not be eligible for Cenvat credit, the demand for this Cenvat credit is, prima facie, not sustainable as, an discussed above, the same is time barred. - Stay granted.

Summary

Issues Involved:
1. Time-barred show cause notice for demand of Cenvat credit and duty.
2. Classification of destroyed goods as finished products or work-in-progress.
3. Eligibility for Cenvat credit on destroyed inputs.
4. Waiver of pre-deposit for duty, Cenvat credit, interest, and penalty.

Analysis:

1. The case involved a show cause notice issued to the appellant for demand of Cenvat credit and duty due to a fire accident in their factory. The appellant argued that the notice was time-barred, citing a Tribunal judgment. The Tribunal found merit in the appellant's plea, noting that the notice was issued beyond the normal limitation period, and the longer period of limitation under section 11A was not applicable based on the facts and the Tribunal's decision in a similar case.

2. The main duty demand was related to the alleged loss of finished products in the fire. The appellant contended that the goods lost were actually work-in-progress in reaction tanks and not finished products. The Tribunal agreed with the appellant, finding that the goods in the reaction tanks should be treated as work-in-progress, as they had not completed the manufacturing process. Additionally, the Tribunal noted that the show cause notice was issued beyond the limitation period, further supporting the appellant's case.

3. Regarding the demand for Cenvat credit on destroyed inputs, the appellant was found ineligible for the credit on merits. However, the Tribunal observed that the demand for Cenvat credit was also time-barred, similar to the duty demand issue. Therefore, the Tribunal held that the Cenvat credit demand was not sustainable due to being time-barred.

4. In conclusion, the Tribunal found the entire demand to be time-barred, and the demand for duty was also deemed unsustainable on merits. Consequently, the Tribunal waived the requirement of pre-deposit for duty, Cenvat credit, interest, and penalty for the hearing of the appeal and stayed the recovery. The stay application was allowed based on the Tribunal's analysis and findings in the case.