2017 (6) TMI 706 - AT - Central Excise

Reversal of CENVAT credit - loss due to fire accident - Held that - The fire accident has been duly intimated. After completion of all formalities with the insurance survey, the quantum of credit is arrived at and the same is reversed. Penalty - Held that - there is no legal justification for imposing equal amount of penalty in case of loss of duty paid inputs, due to fire accident - penalty set aside. Interest liability - Held that - interest liability will arise in case the appellant have utilised any portion of credit availed and available in their books, attributable to the inputs lost in fire accident - this fact needs to be verified and for the purpose the matter is remanded. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Imposition of penalty and interest liability on the appellant.

Analysis:
The appeal in this case was against the order of the Commissioner of Central Excise, Indore, regarding the reversal of credit due to a fire accident at the appellant's factory. The appellant, engaged in manufacturing PVC pipes, availed credit of duty paid inputs and capital goods under the Cenvat Credit Rules, 2004. Following a major fire accident in March 2011, the appellant calculated the loss of duty paid inputs and credit availed, reversing an amount of ?2,02,22,908. The Commissioner's order required the appellant to reverse this credit attributable to the fire accident, dropping the demand for an additional reversal. Penalties and interest were also imposed. The appellant contested the penalty and interest liability, not disputing the reversal of credit due to the fire accident.

The appellant argued against the imposition of an equal penalty amount for the loss of raw material in the fire accident, stating that there was no legal basis for such a penalty. The Tribunal agreed, finding no justification for imposing an equal penalty under Rule 15(1) of the Cenvat Credit Rules, 2004, in cases of loss due to fire accidents. Consequently, the penalties were set aside. Regarding interest liability, the appellant acknowledged the liability if any portion of the credit was utilized for discharging duty. The Tribunal noted that the impugned order did not specify the amount of credit utilized for the final product's duty discharge. It was determined that interest liability would arise if any credit was utilized, and the jurisdictional officer was tasked with verifying this to ascertain any interest liability.

In conclusion, the Tribunal allowed the appeal with respect to the penalties imposed on the appellant, setting them aside. Any interest liability, if applicable, would be determined based on the verification of credit utilization for duty discharge, as per the observations made.