Insurance compensation does not bar excise refund where fire destroys goods and no statute treats it as deemed credit use.

Refund of central excise duty on fire-destroyed finished goods could not be denied merely because the assessee received insurance compensation that included the amount of Cenvat credit. The governing rules required reversal of credit attributable to inputs contained in the finished products, but they did not create any express bar on recovering the loss from an insurer. In the absence of a specific statutory restriction, the insurance receipt could not be treated as deemed utilisation of credit, unjust enrichment, or payment of duty on other final products by legal fiction. The refund denial was therefore held unsustainable.

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Issues: Whether refund of central excise duty could be denied on the ground that the assessee had received insurance compensation including the amount of Cenvat credit in respect of goods destroyed by fire.

Analysis: The refund claim arose from destruction of finished goods in fire and the dispute turned on whether receipt of compensation from the insurance company could be treated as a deemed utilization of the Cenvat credit or as a bar to refund. The governing rules required reversal of the Cenvat credit attributable to inputs contained in the finished products, but contained no express prohibition against the assessee recovering the loss from insurance. In the absence of any specific statutory restriction, the compensation received from the insurer could not be treated as unjust enrichment or as payment of duty on other final products by a deeming fiction. The Tribunal also relied on earlier decisions supporting the same view.

Conclusion: The denial of refund was unsustainable and the appeal succeeded.

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