Cenvat credit dispute over fire-damaged semi-finished goods led to waiver of pre-deposit and stay of recovery.

Pre-deposit of confirmed Cenvat credit demand, interest and penalty was waived, and recovery was stayed, where inputs had been used to manufacture semi-finished goods destroyed by fire. The Tribunal noted that the assessee had informed the department about the fire, had insured the goods, and had received insurance proceeds. It also observed that the Cenvat Credit Rules, 2004 and the departmental manual expressly addressed reversal for destroyed finished goods or destroyed inputs, but did not specifically cover destruction of semi-finished goods after use of inputs in manufacture. On that prima facie basis, and relying on the cited Karnataka High Court decision, interim relief was granted pending appeal.

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Issues: Whether pre-deposit of the confirmed Cenvat credit demand, interest and penalty should be waived and recovery stayed in a case where inputs were used in the manufacture of semi-finished goods that were destroyed by fire.

Analysis: The order notes that the materials on record showed the appellant had informed the department about the fire, had insured the semi-finished goods, and had received insurance proceeds. It further records that the Cenvat Credit Rules, 2004 and the departmental manual expressly dealt with reversal where finished goods are destroyed or where inputs are destroyed without use, but did not specifically cover destruction of semi-finished goods after inputs had been used in manufacture. On that basis, and relying at least prima facie on the Karnataka High Court decision cited, the Tribunal found the assessee's case fit for interim relief.

Conclusion: Waiver of pre-deposit was granted and recovery of the confirmed dues was stayed till disposal of the appeal.

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