2018 (5) TMI 1708 - AT - Central Excise

Reversal of Cenvat Credit - credit attributable to the inputs contained in the goods - semi finished goods and intermediate goods destroyed during fire accident - Remission of duty - Held that - Revenue authorities were in fact seeking details of the stage at which the goods which were destroyed in fire accident. Appellant had not responded to the said communications from the authorities to show that goods which were destroyed were semi finished goods, intermediate goods, adding to the confusion they applied for remission of duty on such goods which were destroyed by the fire accident. When an application for remission of duty is made, it is an acceptance of the fact that goods which were destroyed had reached a stage which can be considered as finished goods - having accepted the fact that the goods which were destroyed in fire are liable to duty, hence remission of duty was sought, the impugned order confirming the demands raised of reversal of Cenvat Credit on the inputs seems to be correct. We uphold the impugned order that confirms demand along with interest. Penalty - Held that - Penalty imposed by the adjudicating authority is unwarranted as the issue was in knowledge of light of the authorities, and also the issue involved interpretation - saddling appellant with penalty is uncalled for more so, when they have utilised the inputs for manufacturing process but due unfortunate incident of fire there was destruction of the semi finished goods. Appeal allowed in part.

Summary

Issues:
1. Demand for reversal of Cenvat Credit on goods destroyed in a fire accident.
2. Interpretation of remission of Central Excise Duty on destroyed goods.
3. Imposition of penalty by the adjudicating authority.

Analysis:
Issue 1: The appeal involved a dispute over the demand for reversal of Cenvat Credit on goods destroyed in a fire accident. The appellant had sought remission of duty on semi-finished and intermediate goods destroyed in the fire, leading to a Show Cause Notice for the demand of Cenvat Credit on inputs used in the production of the destroyed goods. The appellant contested the notice on merits and limitation, but the adjudicating authority confirmed the demand along with interest and penalties.

Issue 2: The main contention was whether the appellant should be liable to reverse the Cenvat Credit on inputs used in the goods destroyed in the fire. The Tribunal considered the fact that the appellant had applied for remission of duty on the destroyed goods, indicating an acceptance that the goods had reached a stage where duty was applicable. The Commissioner's office had granted remission of Central Excise Duty on the destroyed goods, leading to the conclusion that the demand for reversal of Cenvat Credit was justified under the law.

Issue 3: The Tribunal analyzed the imposition of penalties by the adjudicating authority. It was noted that the penalty was unwarranted as the issue was a matter of interpretation. The Tribunal found that penal provisions were not applicable in this case, especially considering that the appellant had used the inputs for the manufacturing process, and the destruction of goods was due to an unfortunate fire incident. Therefore, the penalty imposed by the adjudicating authority was set aside.

In conclusion, the Tribunal upheld the demand for reversal of Cenvat Credit and interest but set aside the penalty imposed by the adjudicating authority. The appeal was disposed of with the decision to uphold the demand and interest while canceling the penalty.