Cenvat credit on job-work inputs survives fire loss where the goods were issued for manufacture and remission was granted.

Cenvat credit on inputs sent for job work was not required to be reversed merely because the inputs and semi-finished goods were destroyed in a fire accident and remission of duty on the final goods was granted. The inputs had been removed for manufacture of intermediates under Rule 4(5)(a) of the Cenvat Credit Rules, 2002, so their later destruction did not change their character as inputs issued for use in manufacture. Remission under Rule 21 of the Central Excise Rules, 2002 did not, on these facts, justify denial of credit. The demand for reversal was therefore unsustainable.

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Issues: Whether Cenvat credit taken on inputs sent for job work could be denied when the inputs and semi-finished goods were destroyed in a fire accident and remission of duty on the final goods was granted.

Analysis: The inputs had been removed for job work under Rule 4(5)(a) of the Cenvat Credit Rules, 2002 and were meant for manufacture of intermediates. The destruction of inputs and semi-finished goods in fire did not alter the fact that the inputs had been issued for manufacture. The remission granted under Rule 21 of the Central Excise Rules, 2002 did not, on these facts, justify reversal of the credit. The conclusion was supported by the principle that credit cannot be denied where the inputs were actually used or issued for use in manufacture and their destruction later is not disputed.

Conclusion: The Cenvat credit was not liable to be reversed, and the demand confirming such credit was unsustainable.

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