2017 (6) TMI 320 - AT - Central Excise

CENVAT credit - destruction of raw materials and semi-finished goods by fire - denial of credit on the ground that the appellant has applied for remission of duty - case of appellant is that in the case of destruction in fire in respect of inputs, no CENVAT Credit is required to be reversed - Held that - As per the remission provisions provided u/r 21 of the CER, 2002 the reversal of CENVAT Credit in respect of input is required to be made only when the remission of duty is sought for in respect of finished goods, which is liable for duty - In the present case, the input or semi-finished goods did not reach the stage of finished goods and the input/semi-finished goods destroyed. Therefore, the provision of reversal of CENVAT Credit, which is with reference to Rule 21 in respect of finished goods is not applicable. If the credit at the time of receipt of inputs was availed correctly and legally, recovery of the same in absence of any machinery provisions cannot be made. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Claim for remission of duty for destroyed raw materials and semi-finished goods, reversal of CENVAT Credit, penalty imposition, machinery provision for recovery of CENVAT Credit, admissibility of CENVAT Credit on destroyed inputs.

Detailed Analysis:

Claim for Remission of Duty:
The appellant's factory experienced a fire resulting in the destruction of raw materials and semi-finished goods. The appellant filed an application for remission of duty with the Commissioner of Central Excise. The department requested the appellant to reverse the CENVAT Credit related to the destroyed inputs, which the appellant did not comply with. Subsequently, a show-cause notice was issued proposing disallowance of CENVAT Credit, penalty under Section 11AC, and interest under Section 11AB.

Reversal of CENVAT Credit:
The appellant argued that as the destroyed inputs were at the stage of work-in-progress or contained in semi-finished goods, there was no finished goods destroyed in the fire. They contended that no CENVAT Credit reversal was required for inputs destroyed in such circumstances. They emphasized the lack of machinery provision for the recovery of CENVAT Credit in cases of destroyed inputs, citing relevant case laws and tribunal decisions.

Penalty Imposition and Recovery of CENVAT Credit:
The Revenue asserted that CENVAT Credit on destroyed inputs is not admissible as the inputs were not used in the manufacture of final products cleared on payment of duty. However, the appellant argued that the recovery of CENVAT Credit under Rule 14 of the Cenvat Credit Rules was not applicable as there was no wrong availment of credit at the time of input receipt.

Judicial Precedents and Legal Interpretation:
The Tribunal analyzed various judgments, including Suryalaxmi Cotton Mills, Apco Pharma Ltd., and Tractor & Farm Equipment Ltd., emphasizing that if the credit was correctly and legally availed at the time of input receipt, recovery in the absence of machinery provisions cannot be enforced.

Conclusion:
After considering the submissions and legal precedents, the Tribunal concluded that the CENVAT Credit correctly availed by the appellant cannot be recovered. Therefore, the impugned order was set aside, and the appeal was allowed, highlighting the importance of correct and legal availment of credit at the time of input receipt.

This detailed analysis showcases the complexities involved in the case, including the interpretation of rules, the absence of machinery provisions for recovery, and the significance of legal precedents in determining the admissibility of CENVAT Credit on destroyed inputs.