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TMI Blog2014 (11) TMI 704X X X X Extracts X X X X X X X X Extracts X X X X ..... it was availed were destroyed when the work was in progress. Once this fact is not disputed, then the assessee cannot be called upon to reverse the credit. goods destroyed in fire after being used for many years cannot be said as not used in the manufacture of final and finished product and the assessee need not reverse the credit availed on inputs used in finished or semi-finished goods. Further clause (5C) to Rule 3 of the Cenvat Credit Rules, 2004 would be invoked “where on any goods manufactured or produced by an assessee, the payment of duty is ordered to be remitted under Rule 21 of the Central Excise Rules, 2002, the Cenvat credit taken on the inputs used in the manufacture of production of said goods shall be reversed”. question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Cenvat credit on the raw materials, which were to be used for production of Oil Seals. A show cause notice dated 28-12-2006 was issued calling upon the asseessee to explain as to why the Cenvat credit availed on raw materials, which was destroyed in fire should not be demanded in terms of Rule 14 of the Cenvat Credit Rules, 2004 r/w Section 11A of the Central Excise Act, 1944 and why penalty and interest should not be levied. The assessee by referring to Rule 2(k)(i) of the Central Excise Rules, 2002 stated that the inputs should be received within the factory of production and no co-relation or nexus is required to be established for availing the credit and input credit is allowed whether it is contained in the final product and it shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80 (Tri. - Chen.)]. As regards the order of the Tribunal in the case of Indchem Electronics (cited supra), the First Appellate Authority held that the Special Leave Petition filed by the Department as against the said order was dismissed by a non-speaking order and therefore that would not be binding. On the above ground, the appeal came to be rejected. However, the First Appellate Authority set aside the penalty imposed by the Adjudicating Authority. 4. Aggrieved by the said order, the assessee preferred further appeal to the Customs, Excise and Service Tax Appellate Tribunal (the Tribunal). The Tribunal after considering the case of the assessee and taking note of the fact that there is no dispute with regard to the destruction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the said case, the inputs in question were not actually used in the manufacture of final products as the same were destroyed in fire accident and as Rule 57A of the Central Excise Rules, Modvat credit is allowable only when the inputs are used in or in relation to the manufacture of final product. Therefore, it was held that the case of the assessee would fall within the provision of [Rule] 57D(1) of the Central Excise Rules. Aggrieved by such order, the Revenue preferred appeal before the Tribunal. The Tribunal after considering the rival submission dismissed the appeal filed by the Revenue holding that the fact regarding fire accident and goods having been destroyed as a result thereof is not disputed and the Department has not conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner. Therefore, the finding of the Commissioner to that extent is absolutely perverse. 9. Coming to the facts of this case, it is not in dispute that the inputs on which the Cenvat credit was availed were destroyed when the work was in progress. Once this fact is not disputed, then the assessee cannot be called upon to reverse the credit. 10. Learned counsel for the Revenue, by relying upon clause (5C) to Rule 3 of the Cenvat Credit Rules, 2004 submitted that the assessee is bound to reverse the credit taken on the inputs. Firstly, it is to be noted that the said clause (5C) was inserted to Rule 3 of the Cenvat Credit Rules, 2004 w.e.f. 7-9-2007. In fact, the High Court of Gujarat in the case of Commissioner of Central Excise and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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