2004 (6) TMI 148 - AT - Central Excise

Remission of duty - Determination of admissibility of Modvat credit on inputs lost in a fire accident - recovery of credit under Rule 57-I and Rule 173Q - Penalty - eligibility of credit on inputs lost during work-in-process - Penalty - HELD THAT - The ld. Commissioner has relied upon the cantena of decisions that grant the eligibility if the inputs loss in during work in progress. It has to be held that loss containing final products the inputs or waste due to processing loss or natural causes or by an accident would be due accountal of the goods the term accounted for used in the Rule 57-I(2) would encompass a satisfactory recital of consumption which is not a diversion of the inputs for other commercial gains. No reason is found to deviate from the finding arrived at by ld. CCE (Appeals) on this account of accepting these loss of inputs as work in process or in final product to be accounted for . Following Supreme Court s decision in Collector v. Raghuvar (India) Ltd. 2000 (5) TMI 40 - SUPREME COURT (Modvat credit is not duty and reversals determined under Rule 57-I(2) cannot be equated with duty demands interest under 11AB as being read by ld. CCE (Appeals) moreover as Rule 57-I(5) has in built provision to recover interest as prescribed u/s 11AA. The orders on recovery of interest u/s 11AB cannot be upheld. The fire was a result of an accident beyond the control of the appellants is not in dispute and remission under Rule 49 of the Central Excise Rules 1944 is called for on reading proviso Rule 49(1) first proviso to Rule 49. The term any goods could extend to raw material capital goods unfinished goods and finding on that have to be have arrived. The Commissioner has to arrive at a finding on the scope of these proviso. The order is therefore set aside remitted to the Commissioner to rehear the appellant redetermine the application for remission. The penalty under Rule 173Q has been rightly set aside by the ld. CCE (Appeals) since Rule 57-I(4) provides that penalty could be arrived at only if the ingredients therein are satisfied. In the present case the appellants have been found to be not having any mala fides therefore the penalty set aside vide Order dt. 10-12-2002 against which no Appeal has been filed or grounds of mala fides taken in Appeal by Revenue. In any case i.e. loss of goods in fire that is found to be an accident is not called for. The appeals are therefore in view of our findings ordered to be disposed off

Summary

Issues involved: Determination of admissibility of Modvat credit on inputs lost in a fire accident, recovery of credit under Rule 57-I and Rule 173Q, imposition of penalty, eligibility of credit on inputs lost during work-in-process, application of Section 11AB for interest recovery, remission of duty under Rule 49, and penalty under Rule 173Q.

Admissibility of Modvat Credit on Inputs Lost in Fire:
- Appellants availed Modvat credit on inputs lost in a fire, which the lower authority found inadmissible.
- CCE (A) determined that credit on inputs actually used or issued for manufacture and lost due to fire was eligible.
- However, credit on inputs not used in the manufacture of final products and lost in fire was deemed ineligible for credit reversal.
- No mala fides were found, leading to the setting aside of the penalty under Rule 173Q.

Recovery of Credit and Imposition of Penalty:
- The lower authority confirmed a demand for recovery of credit under Rule 57-I and Rule 173Q, along with interest under Section 11AA and a penalty of Rs. 25 lakhs.
- CCE (A) found that Rule 57D could not assist the appellants and that Rule 57-I(1) & (2) would be applicable.
- The penalty under Rule 173Q was set aside due to the absence of mala fides.

Application of Section 11AB for Interest Recovery:
- The Revenue appealed against the non-demand of interest under Section 11AB by the original authority.
- CCE (A) held that Section 11AB was applicable, as the destruction of inputs by fire occurred in 1996, and the recovery of Cenvat credit was governed by Rule 12 of Cenvat Credit Rules 2001.

Remission of Duty under Rule 49 and Penalty under Rule 173Q:
- An appeal was filed by the assessee against the dismissal of the application for remission of duty under Rule 49, which was remanded for redetermination.
- The penalty under Rule 173Q was set aside by CCE (A) due to the absence of mala fides.

Final Disposition:
- The appeals were ordered to be disposed of as follows: E/490/03, E/1291/02, E/1051/03, and E/1052/03 were dismissed, while E/1946/00 was allowed for remand.