2017 (8) TMI 1270 - AT - Central Excise

Reversal of CENVAT credit - destruction of semi finished goods in fire - whether assessee is required to reverse the Cenvat credit attributed to input destroyed as such or contained in the semi finished goods? - Held that - there is no provision in law to recover the cenvat credit in respect input contained in semi finished goods destroyed in fire. The only rule which restrict availment of Cenvat credit is provided under Rule 6 of Cenvat Credit Rules. Accordingly to the said provisions when input is used in manufacture of exempted goods Cenvat credit is not available - In fact of the present case there is no dispute that input contained in semi finished goods was meant for use in the manufacture of dutiable goods and the same was used in the exempted goods, therefore provisions of Rule 6(1) is not applicable. As regard the specific provision for reversal of Cenvat credit on input contained in the goods which destroyed in the fire was brought w.e.f. 7-1-2007 under Rule 3(5)(c) of Cenvat Credit Rules whereas present case is pertaining to the period 9-6-2006 therefore this provision of Rule 3(5)(c) of Cenvat Credit rules is also not applicable - the Cenvat credit in respect of input either as such or in the form of semi finished goods lost in fire, cannot be denied - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Reversal of Cenvat credit in case of destruction of semi-finished goods in fire.

Detailed Analysis:
The issue in this case pertains to whether the assessee is required to reverse the Cenvat credit attributed to input destroyed in a fire, either as such or contained in the semi-finished goods. The appellant's consultant argued that the Commissioner (Appeals) upheld the demand of Cenvat Credit based on a judgment that has been overruled by a Larger Bench decision. He contended that the provision of Rule 6(i) of Cenvat Credit Rules, 2004, which restricts Cenvat credit when input is used in the manufacture of exempted goods, is not applicable in this case as the input was used for dutiable goods. Additionally, he highlighted that the specific provision for reversing Cenvat credit under Rule 3(5)(c) was not applicable to the appellant's case. The consultant cited various judgments to support his argument, emphasizing that denial of credit is not warranted in this scenario, especially considering the grave interpretation of the law involved.

On the other hand, the Assistant Commissioner representing the Revenue reiterated the findings of the impugned order, stating that the issue of loss due to fire does not fall within the jurisdiction of the Tribunal. He referenced a circular and previous judgments to support the position that modvat credit on destroyed input is recoverable, and the lower authorities were correct in confirming the demand.

After considering the submissions from both sides and examining the records, the Tribunal found that the appellant had validly availed Cenvat credit at the time of input receipt, and the input was used for manufacturing dutiable goods before being destroyed in the fire. The Tribunal emphasized that there is no provision in law to recover Cenvat credit for input contained in semi-finished goods destroyed in such circumstances. It was noted that Rule 6(1) of Cenvat Credit Rules, which restricts credit for exempted goods, did not apply as the input was intended for dutiable goods. The Tribunal also highlighted that the specific provision for reversing Cenvat credit introduced later was not applicable to the appellant's case. Referring to various judgments, including a Larger Bench decision and Supreme Court rulings, the Tribunal concluded that Cenvat credit for input lost in fire cannot be denied, consistent with past decisions of the Tribunal and High Courts. Consequently, the impugned order was set aside, and the appeal was allowed.

In conclusion, the Tribunal's decision was based on the interpretation of relevant provisions, precedents, and the specific circumstances of the case, ultimately upholding the appellant's entitlement to Cenvat credit for input lost in the fire.