2013 (11) TMI 1420 - AT - Central Excise

Remission of duty under Rule 21 of the Central Excise Rules Reversal of Cenvat Credit - Held that - Relying upon GRASIM INDUSTRIES Versus COMMISSIONER OF CENTRAL EXCISE, INDORE 2006 (8) TMI 69 - CESTAT,NEW DELHI - Remission of duty under Rule 21 of the Central Excise Rules, in respect of the finished goods destroyed in any accident, reversal of input duty credit is not required, as the finished goods in respect of which remission of duty has been allowed are not exempted goods. Reversal of cenvat credit Goods destroyed by flood Held that - KHURANA WOOLEN MILLS (P) LTD. Versus COMMISSIONER OF C. EX., LUDHIANA 2010 (5) TMI 700 - PUNJAB & HARYANA HIGH COURT - specific provision providing for reversal of cenvat credit in such a situation was made only by inserting sub-rule 5 (C ) of Rule 3 of the Cenvat Credit Rules w.e.f. 7.9.2007 - There is nothing in this sub-rule 5 (C) of Rule 3, from which it can be concluded that it has retrospective effect - the order in so far as it imposes the condition of reversal of input duty credit is not sustainable and set aside Decided in favour of Assessee.

Summary

Issues:
Remission of duty in case of goods destroyed in flood, requirement of reversal of cenvat credit, applicability of Larger Bench decision, retrospective effect of Cenvat Credit Rules.

Analysis:
The judgment revolves around the issue of remission of duty for goods destroyed in a flood and the requirement of reversing cenvat credit. The appellant's factory faced a flood resulting in the destruction of finished goods with duty amounting to Rs.2,36,518. The appellant applied for remission of duty under Rule 21 of the Central Excise Rules, 2002. However, the Commissioner imposed a condition of reversing cenvat credit of Rs.34,324 related to the inputs used in the manufacture of the destroyed goods. The appellant challenged this condition, citing the Larger Bench decision in the case of Grasim Industries Ltd., which stated that for claiming remission of duty on finished goods destroyed in accidents, reversal of input duty credit was not required.

The appellant argued that during the period in question, there was no provision in the Cenvat Credit Rules, 2004 mandating the reversal of cenvat credit for goods destroyed in accidents. The appellant also referred to the Hon'ble Punjab & Haryana High Court's decision in a similar case, supporting the non-requirement of reversing input duty credit. On the other hand, the Respondent defended the Commissioner's order, mentioning a Board's Circular from 2004 that clarified the necessity of reversing input duty credit before claiming remission of duty. The Respondent contended that the insertion of sub-rule 5(C) in the Cenvat Credit Rules in 2007 was clarificatory.

After considering the arguments from both sides and reviewing the records, the judge noted that as per the law at the time of the incident and based on the Grasim Industries Ltd. decision, reversal of input duty credit was not mandatory for claiming remission of duty on goods destroyed in accidents. The judge highlighted that the specific provision requiring reversal of cenvat credit was introduced in the Cenvat Credit Rules only in 2007 and did not have retrospective effect. Consequently, the judge set aside the condition imposed by the Commissioner for reversing cenvat credit and allowed the appeal with consequential relief.