2006 (2) TMI 28 - AT - Central Excise

Central Excise Cenvat credit Remission of duty granted in respect of the goods destroyed due to fire however the Cenvat credit denied on the inputs used in the manufacture of smashed goods

Summary

Issues:
1. Waiver of pre-deposit of duty amount confirmed in the impugned order.
2. Granting remission of duty on destroyed goods but denying CENVAT Credit.
3. Applicability of Board's Circular No. 650/41/2002-CX.
4. Discrepancy between the Commissioner's reliance on subsequent Circular and the relevant period.
5. Correctness and legality of the order in light of cited judgments and Circular.

Analysis:
1. The appellants sought waiver of pre-deposit of duty amount confirmed in the impugned order. The Commissioner had granted remission of duty on the goods "Table fans, Pedestal fans and accessories" destroyed in a fire accident but directed to recover the CENVAT Credit availed on inputs. The appellants argued that their case was supported by relevant judgments such as Electrolux Kelvinator Ltd. v. CCE, Jaipur-I, CCE, Chennai-III v Indchem Electronics, and EID Parry (I) Ltd. v. CCE, Chennai. They contended that the Commissioner erred by relying on a subsequent Circular instead of the one applicable to the relevant period.

2. The issue of granting remission of duty on destroyed goods while denying CENVAT Credit was addressed. The Tribunal noted that the Board's Circular, which clarified that credit taken on inputs used in the manufacture of damaged finished goods need not be reversed, was applicable to the period in question. The Tribunal found an error in the Commissioner's order as he granted remission of duty but denied CENVAT Credit, contrary to the judgments and Circular. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.

3. The applicability of Board's Circular No. 650/41/2002-CX was crucial in this case. The Tribunal observed that the Circular clarified the eligibility for remission of duty on destroyed goods and the non-reversal of credit on inputs used in manufacturing such goods. The Tribunal emphasized that the Circular applicable to the relevant period should have been considered, highlighting the error in the Commissioner's decision to rely on a subsequent Circular.

4. The discrepancy between the Commissioner's reliance on a subsequent Circular and the relevant period was a significant point of contention. The Tribunal, after considering the cited judgments and Circular, found that the Commissioner's decision to follow the subsequent Circular was incorrect. The Tribunal emphasized the importance of applying the Circular relevant to the period in question to ensure the legality and correctness of the order.

5. In conclusion, the Tribunal found that the impugned order was not correct in light of the cited judgments and the applicable Board's Circular. The Tribunal set aside the order, allowing the appeal with consequential relief. Additionally, in another related case with a similar issue of remission of duty and denial of CENVAT Credit, the Tribunal followed the same rationale based on the cited judgments and Circular, allowing the stay application and the appeal.