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2013 (8) TMI 843 - AT - Central ExciseReversal of Cenvat Credit in case inputs are destroyed in an accident - Appellant is engaged in the manufacture of excisable goods falling under Chapter 29 and 30 of the first schedule to the Central Excise Tariff Act, 1985 - On 7.5.07, a fire broke out in the bulk drug plant of the appellant which resulted in the destruction of the stock lying therein, to the tune of around Rs.25 crores. The fact of fire incident was immediately brought to the notice of their jurisdictional Central Excise authorities by way of writing a letter to them on 8.5.07 - On scrutiny of the fire insurance claim filed by the appellant with M/so. United India Insurance Company, it was found that the total stock of loss was shown as Rs.25,11,70,548/- - The audit entertained a view that all the goods destroyed in the fire as such and not were inputs issued for the work in progress, the appellants are required to reverse the credit Held that - Relying upon the decisions in the various cases s.a. Commissioner of Central Excise and Customs, Pune vs. Spectra Speciality 2008 (5) TMI 209 - CESTAT MUMBAI as upheld by the Hon ble Supreme Court ; Commissioner of Central Excise Chennai vs. Indchem Electronics 2002(9)TMI 195 CEGAT, CHENNAI, it has been held that where inputs were actually issued and thereafter destroyed in fire accident, there is no requirement of reversal of Cenvat credit. The factual position, as disputed by the Revenue, is required to be ascertained - The Revenue is contending that it was actually the inputs which were destroyed, the appellants stand is that it was the work-in-progress, which was destroyed in the fire - Appellant, right from their first letter onwards, in all their communications addressed to the Revenue, have repeatedly submitted that the fire broke out in the bulk drug unit of the appellant, which unit is located in the manufacturing section. Inasmuch as the bulk drug manufacturing section of the plant is away from the stores, where the inputs were stored, the said fact itself establishes that the inputs had been issued for manufacturing and were work in progress - Manufacturing unit, where drugs are being manufactured is separate from the stores, formulation unit, solvent storage etc. There is a dividing road between the bulk drug manufacturing section and the store meant for storing inputs which is around 20 feet wide road. If that be so, it has to be concluded that goods which are destroyed in the fire in the bulk drug manufacturing section were the goods which have already left the inputs store and as such, same cannot be considered to be inputs destroyed as such, so as to call for reversal of Cenvat credit Appeal allowed Decided in favor of Assessee. Limitation Held that - Demand having been raised after a period of around two years from the date of incidence of fire and consequent destruction of goods is hopelessly barred by limitation. Revenue is not disputing that the fact of fire was intimated to them on the next date. The Revenue s stand that inspite of repeated reminders, the appellant did not provide the detailed list of the destroyed goods and as such, invocation of extended period is justified cannot be appreciated. The jurisdictional Central Excise authorities are expected to visit the factory of the assessee within a period of 24 hours in case of any report of fire incident and are required to assess the losses. Though we note that the appellant had been responding to all the communications of the Revenue, but presuming that they were not, the Revenue was within their right and power to issue summons to the appellants to call for such details or to visit their factory to find the exact losses Show-cause barred by limitation Decided in favor of Assessee.
Issues Involved:
1. Reversal of Cenvat credit for goods destroyed in fire. 2. Applicability of Rule 3(5B) and 3(5C) of Central Excise Credit Rules. 3. Limitation period for issuing show cause notice. Issue-Wise Detailed Analysis: 1. Reversal of Cenvat Credit for Goods Destroyed in Fire: The appellant, engaged in manufacturing excisable goods, experienced a fire on 7.5.07, resulting in the destruction of stock worth approximately Rs. 25 crores. The appellant informed the Central Excise authorities the next day. The Revenue initiated proceedings to demand Rs. 4,13,92,906/- for non-reversal of Cenvat credit, arguing that all destroyed goods were inputs. The appellant contended that the destroyed goods were work-in-progress, not inputs or final products, and thus no reversal of credit was required. The Tribunal found that the goods destroyed were indeed at various intermediate stages of manufacturing, supporting the appellant's claim that they were work-in-progress. The Tribunal referenced multiple decisions, including *CCE vs. Indechem Electronics* and *Asian Paints vs. CCE*, establishing that no reversal of Cenvat credit is required for work-in-progress goods destroyed during manufacturing. 2. Applicability of Rule 3(5B) and 3(5C) of Central Excise Credit Rules: The Commissioner relied on Rule 3(5B) and 3(5C) to confirm the demand. However, these rules were introduced after the fire incident (on 11.5.07 and 7.9.07, respectively). The Tribunal, citing the Hon'ble Gujarat High Court in *Commissioner of Central Excise, Ahmedabad vs. Intas Pharmaceuticals Ltd.* and the Hon'ble Bombay High Court in *CCE, Navi Mumbai vs. Hindalco Industries Ltd.*, held that these provisions could not be applied retrospectively. The Tribunal concluded that invoking these rules was improper since they were not in existence at the time of the fire. 3. Limitation Period for Issuing Show Cause Notice: The demand was raised after more than two years from the fire incident. The appellant had informed the Revenue about the fire immediately. The Tribunal noted that the Revenue's claim of non-cooperation from the appellant was unsubstantiated, as the appellant had responded to all communications. The Tribunal emphasized that the jurisdictional authorities should have visited the factory promptly to assess the losses. The Tribunal found the invocation of the extended period unjustified, rendering the demand time-barred. Conclusion: The Tribunal allowed the appeal on both merits and the point of limitation, setting aside the impugned order. The appellant was not required to reverse the Cenvat credit for the destroyed work-in-progress goods, and the demand was deemed time-barred due to the delayed issuance of the show cause notice.
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