TMI Blog2021 (12) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... es, 2004. Rejection of request for remission of duty - HELD THAT:- Rule 21 do not limit its application only to the finished goods manufactured by the manufacturer, but would include within its ambit all those goods which have been lost or destroyed by natural causes or by unavoidable accident or are claimed by the manufacturer as unfit for consumption or for marketing, at any time before removal. Clearly the word goods is wide enough to include all the goods, whether finished good, raw material, packing material, semi-finished goods or the capital goods within its ambit. It is settle principle of interpretation, that interpretation should be made without adding or deleting the words used in the Rules. What is to be remitted is the duty required to be paid by the manufacturer on the goods he intends to remove from his premises. When the amount required to be paid in terms of Rule 3 (5) has been deemed to be the duty paid by the manufacturer removing the inputs as such, then claim made by such manufacturer in terms of Rule 21 for remission of these amounts cannot be brushed aside if the Commissioner is satisfied that these goods have been lost or destroyed by natural cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fire accident of the night of 02.04.2015 as per provisions of Rule 14 of the CCR, 2004 read with Section 11A(10) of the CEA, 1944.. iv) I confirm demand of interest at appropriate rate on the above confirmed demands under the provisions of Section 11AA of Central Excise Act, 1944. v) I impose penalty of ₹ 1,00,000/- (Rupees One Lakh Only) on M/s Cipy Polyurethanes Pvt. Ltd., Shirwal under provisions of Section 11 AC(1)(a) of the Central Excise Act, 1944 read with Rule 25 of Central Excise Rules, 2002. No penalty is imposed under the provisions of Rule 15(1) of the CCR, 2004. 2.0 Facts of the case stated in brief as recorded in the impugned order are as follows: Appellant is engaged in the manufacture of excisable goods viz. Paints Varnishes of Tariff Item 32089019, Epoxy Resin/Polyurethane paint of Tariff Item 39073010, Thinner of Tariff Item 38140010, Glazier Puttee of Tariff Item 32141000 of the Central Excise Tariff Act, 1985. They are also availing CENVAT credit on the inputs / input services / capital goods used in or in relation to manufacture of these Final Products. A fire accident occurred at their manufacturing unit in the night of 02-04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,37,1917- (Rs. One Crore Sixty One lakhs Thirty Seven thousand One hundred Ninety One only) involved in inputs / raw materials lost / destroyed in fire accident of the night of 02- 04-2015 should not be recovered from them under the provisions Section 11A(1) of CEA, 1944 read with Rule 14 of the CCR, 2004. iii. Proposals for recovery of interest under Section 11AA of the Central Excise Act, 1944 read with Rule 14 of CCR, 2004 and for imposition of penalty under the provisions of Section 11AC (1)(a) of Central Excise Act, 1944 read with Rules 25 of the CER, 2002 and Rule 15(1) of CCR, 2004, were also made in the Show Cause Notice. After following the principles of natural justice, Commissioner adjudicated the Show Cause Notice and also disposed of the application for remission filed under rule 21 of Central Excise Rule, 2002. 3.0 We have heard Shri Bharat Raichandani, Advocate for the Appellant and Shri S.H. Hattangadi, Assistant Commissioner, Authorized Representative for the revenue. 3.1 Arguing for the appellant learned counsel submits- Referring to para 19 of the order in original, that Commissioner has categorical held that the fire in the factory premis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manded interest and imposed penalty on them. In the circumstances of the case demand for interest and penalty imposed is not justifiable. The appeal be allowed 3.2 Arguing for the revenue, learned Authorized Representative, reiterated the findings in the order and submitted that- The order of Commissioner is fully in accordance with the decision of Tribunal in the case of Kosi Plast Pvt Ltd. [2016 (326) ELT (T)], wherein it has been held that in terms of Rule 3 (5B) of CENVAT Credit Rules, 2004, the CENVAT Credit taken on inputs destroyed in the fire needs to be reversed. In case of India Containers Ltd [2017 (355) ELT 326 (Bom)] and ITC Ltd [2014 (36) STR 481 (Del)] it has been held by the Hon ble High Court of Bombay and Delhi respectively, that non-mention of a particular sub-rule in the show cause notice will not cause any prejudice to the noticee for making his defence submissions if the show cause notice is otherwise precise and not vague. Thus confirmation of demand made against the appellants by invoking the provisions of Rule 3 (5B), which was not in the show cause notice would not have caused any prejudice to the appellants while making their defence subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... schievous. Since duty paid raw materials and packing materials had been received by the assessee, and CENVAT credit of the said duty amounts in respect of raw materials and packing materials had already been availed by the assessee. Thus there was no need for the assessee to make any calculations of 'Amount of Excise Duty involved in Annexure - 'D' and Annexure - 'F' after mentioning value and rate of duty in respect of each item of raw materials and packing materials. The assessee should have simply mentioned the actual CENVAT credit taken by them in respect of each item of raw materials and packing materials even if they were of the view that they can claim retention of such CENVAT credit despite destruction of those items of raw materials and packing materials in fire. In other words, the assessee have already enjoyed the benefit of CENVAT credit on such items of raw materials and packing materials and by referring to Rule 21 of CER, 2002, they are trying to seek its retention in the name of remission of duty, which is clearly outside the scope of Rule 21 of the CER, 2002. Thus I conclude that the request of the assessee in respect of the CENVAT credit taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the provisions of CCR, 2004, is that CENVAT credit should be retained only in respect of those inputs which are actually used in or in relation to the manufacture of finished goods. In the present case the raw materials and packing materials had not been used in or in relation to the manufacture of finished goods by the assessee and therefore CENVAT credit taken on the said raw materials and packing materials is required to be reversed by the assessee. 23. Another contention of the assessee is that the majority of the goods were first received in their Unit at Palshi and there the goods were subjected to some processing and therefore what were received in assessee's Shirwal Unit were actually intermediate goods on which duty had been paid by their Palshi Unit under Rule 8 of the Valuation Rules read with Section 4(1)(b) of the CEA, 1944. However, I find that this contention of the assessee is devoid of merits as the assessee have admitted in their reply to the Show Cause Notice that the process at both their Units - Palshi Shirwal amounted to manufacture. Thus, what the assessee had received in their Shirwal Unit were inputs only and it is not disputed that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: Rule 21. Remission of duty. - Where it is shown to the satisfaction of the Commissioner that goods have been lost or destroyed by natural causes or by unavoidable accident or are claimed by the manufacturer as unfit for consumption or for marketing, at any time before removal, he may remit the duty payable on such goods, subject to such conditions as may be imposed by him by order in writing: Provided that where such duty does not exceed ten thousand rupees, the provisions of this rule shall have effect as if for the expression Commissioner , the expression Superintendent of Central Excise has been substituted: Provided further that where such duty exceeds ten thousand rupees but does not exceed one lakh rupees, the provisions of this rule shall have effect as if for the expression Commissioner , the expression Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, has been substituted: Provided also that where such duty exceeds one lakh rupees but does not exceed five lakh rupees, the provisions of this rule shall have effect as if for the expression Commissioner , the expression Joint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oval. Clearly the word goods is wide enough to include all the goods, whether finished good, raw material, packing material, semi-finished goods or the capital goods within its ambit. 4.5 Further Commissioner observation in para 21, to effect To look at it from another angle, remission of duty on duty paid raw materials and packing materials would amount to remission of duty paid by the manufacturers of such raw materials and packing materials, who are in fact suppliers of the assessee and not the assessee himself. Thus in effect, the assessee is seeking remission of duty paid by other manufacturer, which is clearly beyond the scope of Rule 21 of the CER, 2002. do not find support from provision of rule. 4.6 We reproduce the Rule 3 (5), (5B), (5C) and Rule 3 (6) of the CENVAT Credit Rules, 2004 for analyzing them. Rule 3 CENVAT Credit (5) When inputs or capital goods on which CENVAT credit has been taken are removed as such from the factory, or premises of the provider of output service the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as provided by the Rule 9 of the Central Excise Rules, 2002. Further Rule 3 (6), states that for the purpose of allowing, CENVAT credit to the person who procures these inputs from the manufacturer who has removed them in the manner as provided by Rule 3 (5), the amount paid/ debited by the manufacturer, shall be deemed to be the duty paid by the person who has so removed these inputs. Thus the amount paid/ debited under in terms of Rule 3 (5) is deemed to be the duty paid by the manufacturer removing these goods. If Observation of the Commissioner, to effect that these inputs, raw material are duty paid as they have in the first instance suffered duty at the hand of the manufacturer who has cleared these inputs do not find support from these rules. As these rules are worded a deeming fiction has been created, and the manufacturer removing such inputs as such in term of Rule 3 (5) is required to pay/ debit an amount equivalent to the CENVAT Credit taken and this removal of inputs is deemed to be the removal of these goods on payment of duty in the manner as provided by the Rule 9 of the Central Excise Rules, 2002. When the removal of these inputs as such is deemed to be the remova ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of C. Ex., Kanpur - 2016 (337) E.L.T. 299 (Tri.-All.). ii. Commissioner of Cus., Bangalore v. Next Fashion Creators Pvt. Ltd. - 2012 (280) E.L.T. 374 (Kar.). In the case of M/s. Joy Foam Pvt. Ltd. [2015 (322) E.L.T. 209 (Mad.)], the Hon ble High Court has held as follows : 8. We find that once the goods are destroyed or lost due to natural causes, remission of duty is granted on such goods. Since the inputs are considered to be put to intended use in the manufacture of finished products, it is deemed to have been consumed in the process of manufacture and since the goods are lost or destroyed due to unavoidable accident, the claim of reversal of credit cannot be countenanced, more so, when the said provision does not provide for reversal of credit, as has been observed by the Tribunal, which we approve. In the case of M/s. Next Fashion Creators (supra) of Hon ble High Court of Karnataka has held as follows : 4. The facts are not in dispute, the assessee is a 100% export oriented unit. It has imported goods without paying duty. If they have performed their export obligations, they were not liable to pay the duty. Before that obligation could be perfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al goods before being put to use, on which CENVAT Credit has been taken is written off fully or where any provision to write off fully has been made in the books of account, then the manufacturer shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods : Provided that if the said input or capital goods is subsequently used in the manufacture of final products, the manufacturer shall be entitled to take the credit of the amount equivalent to the CENVAT Credit paid earlier subject to the other provisions of these rules. Therefore, I hold that the appellant is required to reverse CENVAT credit on inputs which have been lost in fire as such . Further, I find in the claim of the appellant that certain inputs were not purchased by them against Central Excise invoices and they are not claiming CENVAT credit on them. This aspect has to be examined by the adjudicating authority hence, the matter; needs examination at the end of the adjudicating authority. The adjudicating authority will examine the claim of the appellant with supporting evidence which will be produced by the appellant. The matter is remanded to the adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pune v. Spectra Speciality [2008 (231) E.L.T. 346 (Tri.-Mum.)] as upheld by the Hon ble Supreme Court as reported in [2009 (240) E.L.T. A77]. To the same effect is another decision of the Tribunal in the case of Commissioner of Central Excise, Chennai v. Indchem Electronics [2003 (151) E.L.T. 393 (Tri.-Chennai)] wherein it stand held that where inputs were actually issued and thereafter destroyed in fire accident, there is no requirement of reversal of Cenvat credit. The said decision also stands upheld by the Hon ble Supreme Court, when the appeal filed by the Revenue was dismissed, as reported in 2003 (157) E.L.T. A206 (S.C.)]. The list is unending and we do not feel any need to refer to all such decisions as the issue is almost settled. 14. As such, in the light of the said decision as detailed above, the factual position, as disputed by the Revenue, is required to be ascertained. Whereas the Revenue is contending that it was actually the inputs which were destroyed, the appellants stand is that it was the work-in-progress, which was destroyed in the fire. We note that the appellant, right from their first letter onwards, in all their communications addressed to the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not find any infirmity in the impugned order. Same is upheld. Appeal filed by the Revenue is dismissed. 4.9 In case of SMG International [2016 (344) ELT 1031 (TChand)] tribunal has held as follows: 7. In this case the appellant has filed the claim refund on duty paid by them on account of reversal of Cenvat credit availed on inputs which were used in work in progress/semi-finished goods. Admittedly, the inputs on which Cenvat credit was availed by the appellant were used in manufacture of final goods. Therefore, the Cenvat credit cannot be denied to the appellant, moreover, the work in progress lost in fire. Therefore, appellant is not entitled for claim of remission of duty but the appellant cannot be asked to reverse Cenvat credit. It is a fact on record that the appellant has not written off the value of semi-finished goods/work in progress. In that circumstance, Rule 3(5B) of the CCR, 2004 is not applicable in this case. Further, I have gone through to the provisional Rule 3(5C) of the Cenvat Credit Rules, 2004 which are not applicable to the facts of this case as appellant has not filed any claim of remission of duty under Rule 21 of the Central Excise Rules, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king materials was ₹ 1,61,37,191/-= Total ₹ 1,89,43,576/-. 4.11 Further Hon ble Supreme Court has in the case of BPL Display Devices Ltd [2004 (174) ELT 5 (SC)] has held as follows: 2. It is not in dispute that the appellant had imported parts of picture tubes for manufacture of colour picture tubes. Both the input and the manufactured items are covered by the Notifications. It is also not in dispute that a small percentage of the imported parts were damaged in Transit and could not be used to manufacture picture tubes during the year 2000-2001. The appellant claimed the benefit of the aforesaid Notifications in respect of the entire lot of the parts imported relying, inter alia, upon the earlier decision of the Tribunal in National Organic Chemical Indus. Ltd. v. Collector of Customs (Import), Mumbai, 2000 (126) E.L.T. 1072 which had held that the benefit of the Notifications could not be denied in respect of goods which were intended for use for manufacture of the final product but could not be so used due shortage or leakage. The Notifications relied upon in the decision in National Organic Chemical Indus. Ltd. (supra) are substantially similar to the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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