2017 (2) TMI 940 - AT - Central Excise

Revocation of permitted remission of duty - revocation on the ground of failing to comply with subsequent direction to reverse MODVAT credit taken on inputs - Held that - The relevant provision for availment of credit was Central Excise Rules, 1944 and it did not incorporate a provision for recovery of credit upon settlement of claim by insurer. Neither a subsequent circular nor a decision delivered much after the sanction of remission permits such recovery. The Assistant Commissioner concerned has erred in resorting to an instruction of the Central Board of Excise & Customs that was issued after the remission was ordered in the present dispute. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Appeal against order-in-appeal regarding reversal of MODVAT credit on destroyed inputs issued for 'works-in-progress'.
2. Appeal by the assessee against payment requirement of duty on finished goods destroyed in the fire.
3. Interpretation of rule 57F of Central Excise Rules, 1944 regarding usage of goods in 'work-in-progress'.
4. Validity of circulars issued by the Central Board of Excise & Customs in relation to retention of credit and remission of duty.
5. Time-barred nature of the demand for remission.
6. Claim of Cenvat credit on destroyed inputs used in the manufacture of final product.
7. Recovery of credit on destroyed goods subject to settlement with insurer.
8. Competence of the Assistant Commissioner to revoke remission without proper procedure.

Detailed Analysis:

1. The appeal was filed by Revenue against the order-in-appeal of the Commissioner of Central Excise (Appeals) regarding the reversal of MODVAT credit on inputs issued for 'works-in-progress' that were destroyed in a fire. The first appellate authority did not accept the Revenue's contention that rule 57F required goods to be used in the manufacture of the final product, holding that 'work-in-progress' is deemed to be finished goods. The appellate authority also noted discrepancies in the circulars issued by the Central Board of Excise & Customs, favoring the retention of credit even where duty is remitted. The appeal of the assessee was allowed based on the incident occurring in 1999, insurance compensation received in 2001, and remission granted in 2003 under specific rules.

2. The issue of payment requirement of duty on finished goods destroyed in the fire was also raised in the appeal. The appellate tribunal, after considering relevant case laws, concluded that the manufacturer was entitled to claim Cenvat credit on inputs destroyed in a fire accident. However, in case of settlement with the insurance company, the manufacturer was required to remit the benefit back to the Department within a specified period. The judgment emphasized the manufacturer's entitlement to claim credit on destroyed inputs used in the final product.

3. The judgment highlighted the competence of the Assistant Commissioner to revoke remission without following proper procedures. It was noted that the Assistant Commissioner erred in relying on a circular issued after the remission was ordered, and there was no provision for recovery of credit upon settlement by the insurer. The tribunal found no merit in the Revenue's submissions and dismissed the appeals, emphasizing the lack of cause to sustain the withdrawal order of the Assistant Commissioner without proper notice and option to refute.

This detailed analysis covers the various issues involved in the legal judgment, providing a comprehensive overview of the tribunal's decision and reasoning in each aspect of the case.