2016 (11) TMI 823 - AT - Central Excise

Reversal of CENVAT credit - inputs in process, which was destroyed in fire - Held that - the party had inadvertently reversed the cenvat credit in respect of inputs used in work in process alongwith the credit in respect of raw material in store at the time of fire accident. Later on, they realized their mistake that credit on inputs contained in the work in process was incorrect and applied for refund. The first contention of the revenue that the refund cannot be entertained under Section 11B is not correct as the Larger Bench of Hon ble Tribunal in case of BDH Industries Ltd, vs, CCE 2008 (7) TMI 78 - CESTAT MUMBAI has held that all types of refund will be governed by Section 11B of the Act. The second issue whether the appellant was required to reverse the cenvat credit on inputs in process which was destroyed in fire is also no longer res-integra and it has been held in the case Cc vs. Fenner India Ltd. 2014 (11) TMI 704 - MADRAS HIGH COURT that the credit on inputs in process need not be reversed Appeal allowed.

Summary

Issues:
Refund claim rejection under Section 11B of Central Excise Act, 1944 for reversed cenvat credit on inputs destroyed in fire.

Analysis:
The appeal was filed against the Order-in-Appeal dated 27.04.2012 by the Commissioner of Central Excise (Appeals), Delhi-III. The appellants, engaged in pesticide manufacturing, faced a fire accident leading to the destruction of raw materials and inputs in process. They reversed cenvat credit but later realized an error in reversing the credit for inputs in work in process. The refund claim was rejected on the grounds of not falling under Section 11B and lack of evidence of reusing burnt goods in manufacturing. The appellant argued citing legal precedents like Cc vs. Fenner India Ltd. and others, emphasizing that the credit on inputs in process need not be reversed post-destruction. The appellant also referred to the case of BDH Industries Ltd. vs. CCE, stating that all refund claims must be filed under Section 11B. The Revenue contended that the refund did not align with Explanation A to sub-section 5 of Section 11B and lacked evidence of reusing burnt goods, along with incomplete documentation regarding insurance claims.

The Tribunal noted that the party mistakenly reversed cenvat credit for inputs in work in process and raw materials after the fire accident. It was established that the refund claim could be entertained under Section 11B as per the precedent set by BDH Industries Ltd. vs. CCE. The Tribunal referenced legal decisions such as CCE vs. Fenner India Ltd. and others to support the argument that credit on inputs in process need not be reversed post-destruction. The Tribunal upheld the settled position on these issues and set aside the Commissioner's order, allowing the appeal. The judgment was pronounced on 7.10.2016 by the Tribunal at CESTAT CHANDIGARH.