2007 (12) TMI 118 - AT - Central Excise

Demand raised on ground that assessee has not challenged the assessment of goods, which were lost due to fire accident - condition imposed by Comm(A) that remission will be allowed only after reversing credit input, is not tenable revenue plea that assessee has not challenge assessment order which was conditional, is not acceptable - held that there is no need to reverse the credit taken on inputs used in final products, destroyed in fire demand set aside revenue appeal rejected

Summary

Issues involved:
1. Demand of duty on finished goods lost in fire accident due to non-reversal of Modvat credit on inputs
2. Validity of remission of duty subject to reversal of Modvat credit on inputs

Analysis:

Issue 1: Demand of duty on finished goods lost in fire accident due to non-reversal of Modvat credit on inputs
The appeal was against the demand of duty on finished goods lost in a fire accident because the respondent did not reverse the Modvat credit on the inputs used in manufacturing those goods. The adjudicating authority confirmed the demand and imposed a penalty for non-compliance. However, the Commissioner (Appeals) set aside the impugned order, stating that the remission of duty was granted subject to the condition of reversing the Modvat credit, which the respondent fulfilled. The Commissioner held that the demand for duty was not valid as the remission was granted correctly, and the insistence on reversing the credit was not legally correct. The Commissioner relied on previous Tribunal decisions to support the argument that duty cannot be demanded on final products for which remission has been granted without reversing the credit on inputs.

Issue 2: Validity of remission of duty subject to reversal of Modvat credit on inputs
The learned Counsel for the respondent argued that the Commissioner (Appeals) correctly followed the Tribunal's decision in a similar case regarding the remission of duty subject to the reversal of Modvat credit on inputs. The ld. JDR, on the other hand, contended that the respondent had benefited from insurance claimed and that the issue of reversing input credit on final products destroyed in a fire was addressed in a Larger Bench decision of the Tribunal. The Tribunal's judgment in another case supported the respondent's position that the condition imposed in the order of remission was not legally tenable. The Tribunal held that the remission granted should not be equated with an assessment order and, therefore, the reasoning for demanding duty was not acceptable. The Tribunal found that the issue was settled in favor of the respondent based on previous judgments and rejected the appeal filed by the Revenue.

In conclusion, the Tribunal upheld the Commissioner (Appeals) decision, stating that the demand for duty on finished goods lost in a fire accident due to non-reversal of Modvat credit on inputs was not valid. The Tribunal relied on previous decisions to support its ruling and rejected the Revenue's appeal.