2017 (9) TMI 1374 - AT - Central Excise

CENVAT credit - inputs used in the work in progress destroyed in fire in their premises - Rule 5B of the Cenvat Credit Rules - Held that - Rule 5B deals with inputs and capital goods. It does not specifically deal with work in progress. Therefore no demand in terms of Rule 5B can be raised in respect of work in progress - the only conclusion that can be reached that the inputs on which the credit was taken have been used in the process of manufacture and therefore, condition for availing input credit has been made with - reliance placed in the case of The Commissioner of Central Excise Versus M/s. Joy Foam Pvt. Ltd., Customs, Excise and Service Tax Appellate Tribunal (CESTAT) 2015 (7) TMI 386 - MADRAS HIGH COURT - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of reversal of cenvat credit on inputs used in work in progress destroyed in fire.

Analysis:
The appellants challenged the demand raised in terms of Rule 5B of the Cenvat Credit Rules regarding the reversal of cenvat credit on inputs used in work in progress lost due to fire. The appellant's counsel argued that the cenvat credit on such inputs cannot be demanded when work in progress is lost, citing the decision of the Hon'ble High Court of Madras and a Tribunal decision. The counsel also relied on a circular clarifying the treatment of finished goods and work in progress in terms of excise duty liability and credit reversal. The Assistant Commissioner (AR) relied on the impugned order.

The presiding member, after considering the submissions, observed that Rule 5B specifically deals with inputs and capital goods, not work in progress. Referring to the decision of the Hon'ble High Court of Madras, it was noted that when goods are lost or destroyed due to natural causes, remission of duty is granted, and the claim of reversal of credit cannot be accepted. The Tribunal's decision in a similar case was also cited, emphasizing that if inputs were used in the manufacture of final goods and work in progress was lost, the appellant cannot be asked to reverse cenvat credit. As the appellant had not written off the value of work in progress, Rule 3(5B) of the Cenvat Credit Rules was deemed inapplicable, leading to the conclusion that the impugned order was not legally sustainable.

In line with the decisions cited, the appeal was allowed, setting aside the impugned order and granting consequential relief to the appellant. The judgment was pronounced in court on 19/9/17.