2018 (5) TMI 285 - AT - Central Excise

Demand of duty on semi-finished goods destroyed by fire - CENVAT credit on capital goods destroyed - case of appellant is that semi finished goods or work in progress goods, since not attained the RG-1 stage and ready for dispatch, therefore, duty cannot be demanded; also credit availed on capital goods on destruction in the incident of fire cannot be demanded - Held that - the issue covered by the decision in the case of URMI CHEMICALS Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III 2014 (6) TMI 785 - CESTAT MUMBAI , where it was held that issue of reversal of credit arises only when the final product destroyed in fire and not in case of semi finished goods - demands raised against the appellant for destruction of semi-finished goods and capital goods cannot be sustained. Penalty - Held that - major portion of the liability has been discharged within one month and the present demand notice is issued for normal period of limitation - penalty not imposable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against order-in-original for recovery of duty on destroyed goods, liability on semi-finished goods and capital goods destroyed in fire, applicability of penalty under Rule 15 of the Cenvat Credit Rules.

Analysis:
The appeal was filed against an order-in-original for recovering duty on goods destroyed in a fire incident. The appellant did not dispute duty liability on inputs and finished goods but contested duty demand on semi-finished goods and capital goods destroyed in the fire. The appellant argued that duty on semi-finished goods should not be demanded as they had not reached the RG-1 stage. Referring to the Urmi Chemicals case, the appellant contended that no duty can be demanded on semi-finished goods. Regarding capital goods destroyed in the fire, the appellant argued that credit availed on such goods cannot be demanded as they were used for a considerable period. Citing the Biopac India Corporation Ltd. case, the appellant stated that duty on destroyed capital goods cannot be demanded. The appellant also mentioned that remnants of destroyed capital goods were cleared as scrap with duty paid. Additionally, the appellant argued against the imposition of penalty under Rule 15 of the Cenvat Credit Rules due to the timely payment of duty on inputs and finished goods after the fire incident.

The Revenue supported the findings of the Commissioner (Appeals) during the proceedings. After hearing both sides and examining the records, the Tribunal found that the inputs, finished goods, semi-finished goods, and capital goods were destroyed in the fire incident. The appellant did not dispute the duty liability on inputs and finished goods but contested the liability on semi-finished and capital goods. Relying on the judgments in the Urmi Chemicals and Biopac India Corporation Ltd. cases, the Tribunal concluded that duty demands on semi-finished goods and capital goods destroyed in the fire could not be sustained. The Tribunal noted that the liability to discharge duty arose due to the fire incident, and a major portion of the liability was paid within the specified time. Therefore, the Tribunal decided that no penalty should be imposed on the appellant. The appeal was disposed of accordingly.