2018 (5) TMI 1656 - AT - Central Excise

Recovery of CENVAT credit - Remission of duty - inputs contained in finished goods, semifinished goods and returned defective goods which was destroyed in fire - Held that - This Tribunal in the case of UNIMERS INDIA LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, BELAPUR 2018 (1) TMI 357 - CESTAT MUMBAI whereby the order of the Commissioner directing the appellant to reverse the credit stand modified - the appellant was not required to reverse the Cenvat Credit. Also see JOY FOAM PVT. LTD case 2015 (7) TMI 386 - MADRAS HIGH COURT Demand of the Cenvat Credit does not sustain - appeal allowed - decided in favor of appellant.

Issues:
1. Confirmation of recovery of Cenvat Credit on destroyed goods
2. Remission of duty on condition of reversal of Cenvat Credit
3. Violation of natural justice in remission application
4. Imposition of conditions under Rule 21 of Central Excise Rules 2002
5. Reversal of credit while granting remission

Issue 1: Confirmation of recovery of Cenvat Credit on destroyed goods
The appeal was against the Order-in-Original confirming the recovery of Cenvat Credit on inputs in goods destroyed in fire. The Commissioner had allowed remission of duty on the condition of reversing Cenvat Credit on the destroyed goods. The Tribunal, in a previous order, modified the Commissioner's direction, stating that the appellant was not required to reverse the Cenvat Credit. The Tribunal cited a case where it was held that remission rules do not require reversal of credit on inputs used in goods destroyed by natural causes.

Issue 2: Remission of duty on condition of reversal of Cenvat Credit
The Commissioner had allowed remission of duty subject to reversing Cenvat Credit on inputs in goods destroyed in fire. The Tribunal, in a separate order, modified this condition based on the remission rules, stating that no reversal of credit was required on inputs used in goods destroyed by natural causes. The Tribunal relied on a previous case and the High Court's approval to support this decision.

Issue 3: Violation of natural justice in remission application
The appellant claimed a violation of natural justice as they were not given notice regarding the requirement to pay or reverse the credit amount during the remission application. The appellant also argued against the department's power to impose conditions under Rule 21 of the Central Excise Rules 2002. However, the Tribunal found that a show cause notice was issued, and the argument lacked substance. The Tribunal upheld the decision that no condition could be imposed while granting remission.

Issue 4: Imposition of conditions under Rule 21 of Central Excise Rules 2002
The appellant argued against the Commissioner's power to impose conditions under Rule 21 of the Central Excise Rules 2002. The Tribunal, based on a previous case and the High Court's approval, held that no conditions could be imposed while granting remission. It was decided that the reversal of credit could not be ordered as a condition for remission.

Issue 5: Reversal of credit while granting remission
The Tribunal examined the issue of reversal of credit while granting remission and concluded that remission rules do not mandate the reversal of credit on inputs used in goods destroyed by natural causes. Citing relevant rules and previous cases, the Tribunal allowed the appeal, setting aside the order for the demand of Cenvat Credit. The decision was based on the principle that no reversal of credit was required on inputs used in goods destroyed by natural causes.

In conclusion, the Tribunal's decision in this case clarified the rules regarding remission of duty and the reversal of Cenvat Credit on destroyed goods, emphasizing that no reversal of credit was necessary for inputs used in goods destroyed by natural causes.

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