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2017 (9) TMI 604 - AT - Central ExciseCENVAT credit - loss of finished goods and semi-finished goods destroyed by fire - Held that - Following the principles of law in the case of Union of India Vs. Martin Lottery Agencies Ltd. 2009 (5) TMI 1 - SUPREME COURT OF INDIA , it can be concluded that the provision which imposes a burden is always considered declaratory and cannot be applied retrospectively. Therefore, the provision introduced in 2007 requiring reversal of CENVAT Credit at the time of granting of remission of duty being obligatory in nature, will apply prospectively. Appellant s prayer on levy of interest calls for remand for re-adjudication as the appellant says that they are not liable to the same on liability relating to the raw materials destroyed in flood - appeal allowed - decided partly in favor of appellant, part matter on remand.
Issues:
- CENVAT Credit on destroyed inputs - Liability to pay excise duty on destroyed goods - Applicability of provisions for disallowance of CENVAT Credit - Retrospective application of provisions - Levy of interest on raw materials destroyed in flood Analysis: 1. The judgment discusses the principle established by the Apex Court regarding the correlation between input and output in the case of Collector of Central Excise v. Daichi Karkaria Ltd. It highlights that there is no direct correlation between input and output, and the duty liability on final goods or output services is reduced by setting off the CENVAT Credit availed on inputs used in manufacturing goods or providing services. 2. The appellant argued that since excise duty liability did not arise due to the loss of finished and semi-finished goods destroyed before their removal from the factory in a flood situation, there was no requirement to reverse the CENVAT Credit. The appellant contended that it should retain the CENVAT Credit without reversal, as the proportionate input credit remained in the destroyed goods. 3. Another argument presented was regarding the specific provision introduced in 2007 for disallowance of CENVAT Credit on inputs in goods where duty is remitted. The appellant claimed that this provision, being declaratory in nature, should not be applied retrospectively to the case from July 2005. 4. The judgment referred to the case of Union of India v. Martin Lottery Agencies Ltd. where the Apex Court established that provisions imposing a burden are considered declaratory and cannot be applied retrospectively. Therefore, the provision requiring reversal of CENVAT Credit at the time of granting remission of duty, introduced in 2007, is to be applied prospectively. This decision pertains to the extent of reversal of CENVAT Credit related to inputs in finished and semi-finished goods. 5. Regarding the levy of interest on raw materials destroyed in a flood, the appellant requested a remand for re-adjudication, claiming they were not liable for interest on the raw materials lost. The judgment acknowledged the appellant's right to a fair opportunity of hearing before the adjudicating authority for a proper decision. 6. Consequently, the appeal was partly allowed based on the arguments presented, and the cross-objection filed by the respondent was disposed of accordingly. The judgment emphasized the need for a fair hearing and appropriate orders based on the evidence presented during the proceedings.
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