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2019 (6) TMI 191

..... cleared as they were destroyed during the Hudhud cyclone or whether it is sufficient that the appellant had reversed the CENVAT Credit taken on the inputs which have gone into the manufacture of such products? - HELD THAT:- Central Excise duty is a tax levied on the manufacture of goods. Section 3 of Central Excise Act is the charging section which states that there shall be levied and collected a duty of excise to be called CENVAT on all excisable goods which are produced and manufactured in India. Therefore, the levy of Central Excise Duty comes from the manufacture itself. Once the goods are manufactured, levy applies. When it is the duty become payable? - Rule 4 of Central Excise Rules, 2002 - HELD THAT:- While the duty becomes leviable, as soon as the goods are manufactured or produced, it becomes payable when they are removed from the place where they are produced or manufactured. When should be duty which is payable, to be paid? - Rule 8 of the Central Excise Rules 2002 - HELD THAT:- The levy of duty would be as soon as the goods are manufactured or produced. But the duty becomes payable only if the goods are removed from the factory and the duty so payable has to be paid on .....

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..... see s claim with the Insurance Company for the destroyed goods. The details of this claim are available in the table in para 3.5.3 of the Order-in-Original. He submits that, as can be seen, their claim before the Insurance Company covered not only the value of the goods but also overheads associated with the goods. He would submit that no CENVAT Credit was availed on the overheads components and CENVAT credit was only availed on the inputs. They have, therefore, reversed the CENVAT credit on the inputs used in the destroyed goods. The department has erroneously taken into account the overhead value also for calculation of the CENVAT Credit to be debited. Thus, the demand received was ₹ 12,03,530/- whereas the amount actually debitable was only ₹ 10,63,070/- which they have debited. Further, a penalty of ₹ 6,01,766/- was also imposed upon them with respect to this component of demand. He also shows the documents relating to the settlement of their insurance claim which show that although they claimed an amount of ₹ 97,37,301/-, the actual amount sanctioned by the Insurance Company was only ₹ 77,04,467/-. After debiting some amount towards under-insuranc .....

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..... his amount has been appropriated towards the demand raised. Therefore, there is no infirmity or incorrectness in the impugned order. He prayed that the appeals of the appellant may therefore be rejected. 6. I have considered the arguments on both sides and perused the records. The short question to be decided is whether the appellants were liable to pay duty on the goods which they had manufactured but had not cleared as they were destroyed during the Hudhud cyclone or whether it is sufficient that the appellant had reversed the CENVAT Credit taken on the inputs which have gone into the manufacture of such products. 7. Central Excise duty is a tax levied on the manufacture of goods. Section 3 of Central Excise Act is the charging section which states that there shall be levied and collected a duty of excise to be called CENVAT on all excisable goods which are produced and manufactured in India. Therefore, the levy of Central Excise Duty comes from the manufacture itself. Once the goods are manufactured, levy applies. 8. The next question is when it is the duty become payable. Rule 4 of Central Excise Rules, 2002 states every person who produces or manufactures any excisable goods o .....

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..... IP), semi finished goods and finished goods which have also been written off fully in the books of accounts. 2. The matter has been examined. Rule 3(5B) of the CENVAT Credit Rules, 2004, provides that if the value of any input on which cenvat credit has been taken is written off fully in the books of accounts, then the manufacturer is required to reverse the credit taken on the said input. As far as finished goods in concerned, it is stated that excise duty is chargeable on the activity of manufacture or production. Even though liability for payment of tax has been postponed to the time of removal of goods for the factory, but still the legal liability to pay the excise duty has been fastened on the goods, when it has been manufactured or produced. Therefore, normally all goods manufactured suffer excise duty at the time of removal, but if the manufactured goods are destroyed due to natural causes etc., Rule 21 of Central Excise Rules, 2002, provides for remission of duty. Further, Rule 3(5C) of CENVAT Credit Rules, 2004, also requires reversal of credit on the inputs when the duty is ordered to be remitted under the said Rule 21. Therefore, if the goods have been manufactured, in .....

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..... o does not indicate under which rule duty becomes payable when the goods are not removed. To that extent, there is a gap in the Central Excise Rules 2002 because the duty does not become payable on goods which are manufactured but are destroyed or lost before they removed from the factory. In the absence of any specific legal provision, duty cannot be demanded on the goods which are lost or destroyed in the factory. It does not matter whether the assessee has sought remission or not. The duty, though leviable, does not become payable in such cases and there is no date by which the said duty has to be paid. In view of the above, I find that the demand of CENVAT Credit on the lost/destroyed goods treating them as final products, is not sustainable. As far as CENVAT on the inputs contained in the final products is concerned, the same has already been reversed by the appellant and he is not contesting the same. As I found that the demand of duty is not sustainable, no penalty can also be imposed upon the appellant. 12. In view of the above, I allow the appeal and set aside the demand confirmed in para 15(j) of the Order-in-Original and upheld by the first appellate authority in the imp .....

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