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2024 (5) TMI 1272 - AT - Central ExciseCENVAT Credit - inputs and capital goods which were claimed to have been destroyed in fire at the job workers premises - insurance claim restricted to the value of goods only - penalty u/s 11AC - HELD THAT - On perusal of the records, it is seen that the insurance claim was settled at Rs.3,01,00,921/- as against the claim of Rs.4,27,32,599/-. From the insurance claim by the appellant, it is seen that the amount of Rs.4,27,32,599/- is inclusive of cenvat credit and therefore, it can be inferred that the claim was restricted to the value of the goods only. From this insurance claim reproduced below, it is clearly seen only item no.1 to 4 deals with inputs which were destroyed in the fire. Item no.5 is for finished goods and Item No.6 is for replacement cost of equipment. Therefore, the inputs which have been destroyed before putting it to use the benefit of cenvat credit cannot be extended. As per the cenvat credit rules only those inputs which are used in the manufacture of final products are eligible for cenvat credit. With regard to capital goods also, one needs to verify whether they were put to use or destroyed before the same was used in the manufacture of the final products. If the capital goods were not used then the question of extending the benefit of cenvat credit does not arise. In the case of COMMISSIONER OF C. EX., BANGALORE VERSUS TATA ADVANCED MATERIALS LTD. 2011 (4) TMI 1124 - KARNATAKA HIGH COURT , this was a case where the capital goods were used in the manufacture of the final products for three long years and later, these capital goods were destroyed in the fire as seen from the observations of the Hon ble High Court of Karnataka. The facts cannot be compared with the instant case where the goods were not put to use at all, hence not applicable. In the case of M/S VFC INDUSTRIES PVT. LTD. VERSUS COMMISSIONER OF C. EX. S. TAX, VADODARA 2016 (9) TMI 1020 - CESTAT AHMEDABAD , the Tribunal has categorically held that inputs lying in stock which were not put to use and which were not used in the manufacture of final products the benefit of cenvat credit cannot be extended. There are no reason to interfere with the order of the Commissioner demanding reversal of cenvat credit on the inputs and the capital goods which were not used in the manufacture of the final products. However, for the limited purpose of verifying whether the capital goods were put to use in the manufacture of the final products, the matter is being remanded and accordingly, the penalty needs to be re-determined based on the final determination of the reversal of cenvat credit. Appeal allowed by way of remand.
Issues Involved:
1. Reversal of Cenvat Credit on Inputs and Capital Goods Destroyed in Fire. 2. Insurance Claim and Inclusion of Cenvat Credit. 3. Limitation Period for Issuance of Show-Cause Notice. 4. Imposition of Penalty u/s 11AC. Summary: 1. Reversal of Cenvat Credit on Inputs and Capital Goods Destroyed in Fire: The appellant, M/s. BPL Technovision Private Limited, availed Cenvat credit on inputs and capital goods sent to their job worker, M/s. BPL Engineering Limited, under Notification No. 214/86 dated 25.03.1986. A fire accident on 17.09.2006 destroyed these goods. The appellant informed the authorities but did not provide detailed information or claim remission of duty. The Commissioner held that since the goods were not received back within 180 days, the Cenvat credit had to be reversed. The Tribunal upheld this, stating that inputs and capital goods not used in manufacturing final products are not eligible for Cenvat credit. 2. Insurance Claim and Inclusion of Cenvat Credit: The appellant received an insurance settlement of Rs. 3,01,00,921/- against a claim of Rs. 4,27,32,599/-. The Commissioner noted that the insurance claim did not bifurcate the Cenvat credit element. The Tribunal observed that the insurance claim included the value of goods only, and since the inputs were destroyed before use, the benefit of Cenvat credit could not be extended. The Tribunal cited several cases to support this view, including CCE v. Indchem Electronics and VFC Industries Pvt Ltd v. CCE. 3. Limitation Period for Issuance of Show-Cause Notice: The show-cause notice dated 14.05.2010 was issued within the five-year period specified u/s 11A of the Central Excise Act, 1944. The Tribunal found that the appellant failed to provide details of the destroyed goods and did not claim remission of duty. The department became aware of the insurance settlement only after an audit in November 2008. Therefore, the notice was deemed timely. 4. Imposition of Penalty u/s 11AC: The Commissioner imposed an equivalent penalty u/s 11AC, citing the apex court's decision in Union of India v. Dharmendra Textile Processes. The Tribunal remanded the matter to verify whether the capital goods were used in manufacturing final products before being destroyed. The penalty would be re-determined based on this verification. Conclusion: The Tribunal upheld the reversal of Cenvat credit on inputs and capital goods not used in manufacturing final products. The case was remanded for verification of the use of capital goods and re-determination of the penalty. The appeal was allowed by way of remand.
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