Remission of duty after fire loss must be decided before Cenvat credit reversal is considered under the circular.

Remission of duty on finished goods destroyed in fire must be considered first on satisfaction of the permissible extent of remission; only thereafter can recovery or reversal of Cenvat credit attributable to inputs used in the destroyed goods be directed. The circular does not require prior reversal of Cenvat credit as a condition precedent to deciding remission, and that interpretation was held incorrect. The order was set aside and the matter remanded for fresh consideration, with the authority first to determine the quantum of duty remittable and then to examine any consequential Cenvat credit recovery.

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Issues: Whether reversal of Cenvat credit was a pre-condition for granting remission of duty on finished goods destroyed in fire under the Board's circular.

Analysis: The circular was construed to mean that remission of duty has to be considered first on satisfaction about the extent of permissible remission. Only after remission is granted can recovery or reversal of Cenvat credit attributable to inputs used in the destroyed goods be directed. The requirement of prior reversal before deciding remission was held to be an incorrect interpretation of the circular.

Conclusion: The impugned order was set aside and the matter was remanded for fresh decision by first determining the quantum of duty to be remitted and thereafter directing recovery of Cenvat credit, if warranted.

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