2023 (7) TMI 944 - AT - Central Excise

Recovery of CENVAT Credit - cenvated inputs in process which were lost in fire - material in process/work in progress destroyed in fire - recovery of excess cash refund under N/N. 56/2002-CE dated 14.11.2002 - levy of penalty u/r 15 of the Cenvat Credit Rules 2004 read with Rule 27 of the Central Excise Rules 2002. Reversal of cenvat credit on input lost in fire - HELD THAT - As such there is no dispute and the appellant himself has reversed the cenvat credit which is admitted by the department itself. Therefore there is no dispute with regard to this issue. CENVAT credit on material in process/work in progress destroyed in fire - whether in the facts and circumstances of this case Rule 3(5B) and 3(5C) are applicable or not? - HELD THAT - The original authority as well as the appellate authority both have invoked Rule 3(5B) and 3(5C) to confirm the demand. This issue has been considered by various benches of the Tribunal in this regard it is pertinent to refer the decision in the case of M/S. CIPY POLYURETHANES PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE KOLHAPUR 2021 (12) TMI 238 - CESTAT MUMBAI wherein the division bench of this Tribunal after considering various decisions of the Tribunal on this issue has held it is quite evident that Rule 3 (5B) is applicable only in the situation were the inputs or capital goods have become obsolete and written off. It is not applicable in the situations where the inputs and semi finished goods are destroyed in fire accident. Demand of excess refund of Rs. 4, 34, 573/- - HELD THAT - The show cause notice in this regard is totally vague and does not mention as to when by whom and vide which order-in-original refund has been granted and in which month. Further the appellant has categorically stated that no such refund was taken for the month of February 2008 as alleged by the department. Hence there is no question of excess refund which is to be paid to the department. This issue is also decided against the department. The impugned order is not sustainable in law - Appeal allowed.

Summary

Issues Involved:
1. Reversal of Cenvat credit on inputs lost in fire.
2. Reversal of Cenvat credit on Material in Process (MIP)/Work in Progress (WIP) destroyed in fire.
3. Demand of excess refund of Rs. 4,34,573/- under Notification No. 56/2002-CE.

Summary:

Issue 1: Reversal of Cenvat credit on inputs lost in fire

The appellant reversed the Cenvat credit on inputs lost in the fire, which was acknowledged by the department. Therefore, there is no dispute regarding this issue.

Issue 2: Reversal of Cenvat credit on Material in Process (MIP)/Work in Progress (WIP) destroyed in fire

The department confirmed the demand by invoking Rule 3(5B) and 3(5C) of the Cenvat Credit Rules, 2004. However, the Tribunal found that these rules are not applicable in this case. The Tribunal referred to various decisions, including M/s CIPY Polyurethanes Pvt. Ltd. vs. CCE, Kolhapur, which held that Rule 3(5B) applies only when inputs or capital goods are written off as obsolete, not when they are destroyed in a fire accident. Therefore, the demand for reversal of Cenvat credit on MIP/WIP is not sustainable and was set aside.

Issue 3: Demand of excess refund of Rs. 4,34,573/- under Notification No. 56/2002-CE

The show cause notice was found to be vague, lacking specifics on when, by whom, and under which order the refund was granted. The appellant stated that no refund was taken for February 2008, making the department's claim of excess refund baseless. Consequently, this issue was also decided against the department.

Conclusion:

The Tribunal found the impugned order unsustainable in law and set it aside, allowing the appeal with consequential relief as per law.