2017 (9) TMI 1116 - AT - Central Excise

Reversal of CENVAT credit - capital goods destroyed in fire - Rule 3(5) of Cenvat Credit Rules - Held that - if capital goods or inputs have been removed as such, then the only option is that assessee is required to reversed the Cenvat credit availed on these goods. If capital goods are put in use, in that case, provision of Rule 3(5) of Cenvat Credit Rules, 2004 are not applicable - Admittedly, in the case in hand, capital goods were in use by the appellant and after use have been destroyed in fire. CENVAT credit not required to be reversed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against reversal of Cenvat Credit on capital goods destroyed in fire.

Analysis:
The appellant, a manufacturer of excisable goods, appealed against an order requiring them to reverse Cenvat Credit on capital goods destroyed in a fire incident. The appellant had informed the Central Excise department about the fire incident where the capital goods, purchased by them and used for manufacturing their final product, were destroyed. The show cause notice was issued for reversing the Cenvat credit availed on these capital goods. The matter was adjudicated, and the Cenvat credit was denied, leading to the appellant's appeal.

The appellant relied on a decision by the Hon'ble Gujarat High Court in the case of CCE Vs. Biopac India Corporation Ltd., stating that they were not obligated to reverse the Cenvat credit under Rule 3(5) of Cenvat Credit Rules, 2004. The appellant argued that the impugned order should be set aside based on this precedent. However, the learned AR contended that the facts of the Biopac India Corporation Ltd. case were different from the present case, emphasizing the level of use of the capital goods in question.

After hearing both parties and considering their submissions, the Tribunal analyzed Rule 3(5) of the Cenvat Credit Rules, which mandates the reversal of Cenvat credit when inputs or capital goods are removed as such. The Tribunal observed that if capital goods are put to use, the provisions of Rule 3(5) are not applicable. In this case, the capital goods were in use by the appellant before being destroyed in the fire. The Tribunal found that the decision of the Hon'ble Gujarat High Court was directly applicable to the present case. The Tribunal dismissed the argument of the learned AR regarding substantial use of capital goods, stating that such a definition is not provided in the Central Excise Act or Rules. Consequently, the Tribunal held that the Cenvat Credit was rightfully entitled to the appellant and not required to be reversed.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, providing for consequential relief, if any.