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The Commissioner of Central Excise Versus M/s. Joy Foam Pvt. Ltd., Customs, Excise and Service Tax Appellate Tribunal (CESTAT)

2015 (7) TMI 386 - MADRAS HIGH COURT

Reversal of CENVAT Credit - Remission of duty - whether on remission of duty, the assessee is liable to reverse the cenvat credit taken on inputs - held that:- once the goods are destroyed or lost due to natural cause, 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, th .....

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d as against the order of the Tribunal was admitted by this Court on the following substantial questions of law: "1. Whether the decision of the Tribunal is correct in law in rejecting the claim of reversal of CENVAT credit by the Department especially when Rule 21 of the Central Excise Rules, empowers the Commissioner/appellant herein to grant remission, subject to conditions as may be imposed by him? 2. Whether the 1st respondent is entitled to seek remission of duty without reversal of C .....

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w materials, work-in-progress and the returned goods were destroyed. The assessee reversed the credit availed on stock of raw materials, returned goods and inputs contained in semi-finished goods, which destroyed in the fire accident. Taking note of their application for remission of duty on the finished goods destroyed in the fire accident, the Commissioner allowed remission of duty to the tune of ₹ 9,85,744/-. In the same order, the assessee was directed to pay cenvat credit of ₹ 6 .....

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CCE, New Delhi reported in [1997] (90) ELT 417 (Tri.), wherein the Tribunal took a contrary view. In the decision reported in 2006 (199) ELT 437 (Grasim Industries Ltd. Vs. CCE, Indore), the single Member of the Tribunal referred the issue to the Larger Bench and the Larger Bench of the Tribunal approved the view taken in the case of Inalsa Ltd. V. CCE, New Delhi reported in [1997] (90) ELT 417 (Tri.) and overruled the decision in the case of Mafatlal Industries Ltd. V. CCE, Ahmedabad reported i .....

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ules 1944 read with Rule 21 of the Central Excise Rules 2002, which provides for remission of duty in respect of goods lost or destroyed by natural cause or unavoidable incidence and consequently become unfit for consumption or for marketing or production, does mot make it mandatory that there should be reversal of credit in respect of inputs used in the manufacture of such goods and ii) Modvat rules prohibits the credit of duty paid in respect of inputs, which are used in the manufacture of exe .....

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goods, whereas in the present case, the remission of duty is on account of goods being lost or destroyed by natural cause or accident and as such, the order of remission was granted, but it does not provide for any condition regarding reversal of credit taken in respect of inputs used in such goods. 7. In the decision reported in 2007 (208) E.L.T. 336 (Tri.-LB) (Grasim Industries Ltd. Vs. CCE, Indore), the Larger Bench of the Tribunal approved the view taken in the decision in the case of Inalsa .....

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erefore, the credit in respect of inputs used in the manufacture of such goods need not be reversed. In the case of Mafatlal Industries (supra), the Tribunal agreed with the earlier view in the case of Inalsa Ltd. (supra) that remission of duty on finished goods cannot be equated with exemption to goods. However, it is further held that in case remissions granted to finished goods destroyed in fire, a manufacturer is not entitled for credit of duty in respect of inputs used in the manufacture of .....

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7) ELT A206. 7. We find that reading of Rule 49 of Central Excise Rules, 1944 and Rule 21 of Central Excise Rules, 2002 which provides for remission of duty in respect of goods lost or destroyed by natural cause or by unavoidable accidents or in case goods become unfit for consumption or for marketing at any time before removal does not provide reversal of credit in respect of inputs used in the manufacture of such goods. The Modvat rules prohibits the credit of duty paid in respect of the input .....

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