Cenvat credit on destroyed pharmaceuticals need not be reversed; later Rule 3(5C) could not apply retrospectively.

Credit on inputs used in medicines that became unfit for human consumption and were destroyed was held not to require reversal where the goods were treated as waste pharmaceuticals and destroyed in the presence of officers, because that destruction produced the same legal effect as a formal remission order. Rule 3(5C) of the Cenvat Credit Rules, 2004, inserted only from 07-09-2007, could not be applied to deny relief for an earlier period in August 2007. The order denying refund relief was therefore set aside, and the assessee's appeals were allowed with consequential relief.

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Issues: Whether credit taken on inputs used in medicines that became unfit for human consumption and were destroyed was required to be reversed, and whether Rule 3(5C) of the Cenvat Credit Rules, 2004 could be applied to deny relief for the earlier period.

Analysis: The medicines, though classifiable under Heading 3006 92 00 and required to be destroyed, were treated as waste pharmaceuticals. The Tribunal relied on the Larger Bench ruling holding that no reversal of credit is required where final goods are destroyed and duty remission stands granted. The fact that the present goods did not require a formal remission order was held to be immaterial, because destruction in the presence of officers produced the same legal effect. The Tribunal further held that Rule 3(5C), introduced by Notification No. 33/2007-C.E. (N.T.) with effect from 07-09-2007, could not govern the earlier period in August 2007.

Conclusion: The reversal of credit was not warranted, and the denial of refund relief was unsustainable. The issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeals were allowed with consequential relief.

Ratio Decidendi: Credit on inputs used in goods lawfully destroyed pursuant to the applicable excise regime is not required to be reversed for a period anterior to the insertion of a contrary express rule, and a later-amended provision cannot be applied retrospectively in the absence of such indication.

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