2018 (7) TMI 417 - AT - Central Excise

Reversal of CENVAT Credit - inputs and capital goods destroyed by fire - case of appellant is that since the capital goods had been purchased prior to the implementation of the Modvat scheme, i.e. prior to 01.03.1994, no credit of duty was availed at the time of procurement of such capital goods - Held that - The appellant has relied upon the Block Addition register and Chartered Accountant s certificate which was issued based on the Block Addition register to convince the Bench that the capital goods in question were procured prior to 01.03.1994 - the contention of the appellant cannot be accepted based on this evidence alone, and that the appellant has failed to produce any further evidence in this regard. The Hon ble Supreme Court in the case of Auto Ignition Ltd. 2008 (4) TMI 43 - SUPREME COURT has held that the onus of proof of availment of credit by the assessee is on the Revenue - With regard to the ratio of this judgment, the Revenue has failed to produce any evidence to show that the appellant had availed credit pertaining to the disputed capital goods. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against Order-in-Appeal - Recovery of Cenvat credit - Destruction of raw material in fire - Short-reversal of credit - Availment of credit on capital goods - Compliance with pre-deposit order - Adjudication by Commissioner (Appeals) - Tribunal's remand - Appellant's liability for reversal of credit.

Analysis:

1. Destruction of Raw Material and Cenvat Credit Reversal:
The appellant, engaged in manufacturing tyres, tubes, and flaps, faced a fire incident causing damage to plant, machinery, and raw material. The appellant informed the authorities and reversed Cenvat credit of ?33,86,947/- related to the destroyed raw material. The audit raised questions about an insurance claim of ?8,68,84,916/- received by the appellant. The department issued a show cause notice proposing recovery of credit under Rule 14 of Cenvat Credit Rules, which was confirmed by the adjudicating authority. The Commissioner (Appeals) upheld the decision, leading to the current appeal.

2. Availment of Credit on Capital Goods:
The appellant argued that no credit was availed on capital goods procured before the Modvat scheme's implementation. The department alleged a short-reversal of credit amounting to ?36,65,722/-. The appellant contended that the department miscalculated by not considering the reversal of cess amounting to ?66,411/-. Legal precedents were cited to support the appellant's position.

3. Tribunal's Findings and Precedents:
The Tribunal examined the evidence presented by the appellant, including the Block Addition register and a Chartered Accountant's certificate. While the appellant failed to provide further evidence regarding the procurement date of capital goods, the Tribunal noted the Revenue's failure to prove the appellant's availment of credit on disputed capital goods. Citing legal precedents like the Auto Ignition Ltd. case, the Tribunal emphasized the Revenue's onus to prove credit availment. Additionally, the Tribunal referred to the Grasim Industries case, highlighting that Rule 21 of the Central Excise Rules does not mandate credit reversal for inputs lost due to natural causes or unavoidable accidents.

4. Conclusion and Tribunal's Decision:
Based on the analysis, the Tribunal allowed the appeal filed by the appellant, overturning the Commissioner (Appeals)' decision. The judgment was pronounced on 25.05.2018, emphasizing the appellant's successful challenge against the recovery of credit and the short-reversal amount. The Tribunal's decision was influenced by the lack of conclusive evidence from the Revenue regarding the appellant's credit availment, in line with legal principles established in relevant cases.