2014 (7) TMI 832 - HC - Central Excise

Interpretation of 'Unavoidable Accident' for Excise Duty Remission Upheld

The High Court upheld the Tribunal's decision regarding the interpretation of 'unavoidable accident' for excise duty remission, affirming that a fire ... Goods lost due to fire - reversal of cenvat credit - effect of insertion sub-rule (5C) into rule 3 of the cenvat credit - Remission of duty under Rule 21 - Held that:- The present case relates to a period prior to the introduction of rule 3(5C) and is, therefore, not covered by the modified provision. Prior to the introduction of rule 3(5C), there was no such restriction to the effect that the Cenvat credit which is taken on inputs used in the manufacture or production of goods in respect of which duty is remitted under rule 21 would have to be reversed. - The law at the relevant point of time was governed by the decision of the larger bench of the Tribunal in Grasim Industries [2006 (8) TMI 69 - CESTAT,NEW DELHI] - Decided in favor of assessee. Issues:1. Interpretation of 'unavoidable accident' for remission of excise duty.2. Requirement to reverse credit for raw materials consumed in final products.Analysis:1. The case involved the interpretation of the term 'unavoidable accident' for the purpose of remission of excise duty under Rule 21 of the Central Excise Rules, 2002. The appellant, a footwear manufacturer, sought remission of duty after a fire destroyed raw materials, semi-finished, and finished goods in its factory. The Revenue contested the remission, arguing that the fire caused by a short circuit did not qualify as an unavoidable accident. The Adjudicating Officer rejected the remission application, citing non-reversal of credit on inputs and the non-marketable status of semi-finished goods. However, the Tribunal, following a Rajasthan High Court decision, determined that the fire due to a short circuit constituted an unavoidable accident, allowing the remission application.2. The second issue revolved around the requirement to reverse credit for raw materials consumed in the final products for claiming remission of duty. The Tribunal held that the appellant was entitled to remission even without reversing the credit, citing a larger bench decision. It highlighted the importance of beneficial circulars and the binding nature of judicial decisions on adjudicating authorities. The Tribunal clarified that remission on semi-finished goods was not necessary if they had not attained a marketable status, emphasizing the statutory provisions and practical implications.In conclusion, the High Court dismissed the Revenue's appeal, affirming the Tribunal's decision. The Court upheld the Tribunal's interpretation of 'unavoidable accident' and the allowance of remission without reversing credit, in line with the law prevailing at the time. The judgment emphasized the significance of legal precedents, statutory provisions, and the evolving nature of regulations in determining excise duty remission eligibility.