Cenvat credit on inputs lost in fire need not be reversed where duty remission under the rules was not sought.

Cenvat credit validly taken on inputs issued for manufacture did not have to be reversed merely because the resulting work-in-progress was destroyed in an accidental fire. The credit rules did not require reversal simply because semi-finished goods were lost before completion, and the later insertion of Rule 3(5C) of the Cenvat Credit Rules, 2004 did not apply absent remission of duty under Rule 21 of the Central Excise Rules, 2002. On those facts, the assessee was not required to reverse the credit.

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Issues: Whether Cenvat credit taken on inputs contained in work-in-progress destroyed in a fire accident is liable to be reversed.

Analysis: The destruction of the work-in-progress in fire was undisputed, and the inputs on which credit had been taken had already been issued for manufacture. The applicable credit rules did not require reversal merely because the semi-finished goods were destroyed before completion. The later insertion of Rule 3(5C) of the Cenvat Credit Rules, 2004 was also inapplicable, as reversal under that provision arises only where duty is remitted under Rule 21 of the Central Excise Rules, 2002, which was not the case here.

Conclusion: The assessee was not required to reverse the Cenvat credit.

Ratio Decidendi: Where inputs on which Cenvat credit has been validly taken are issued for manufacture and are thereafter destroyed in an accidental fire, without any claim or order of remission of duty under the remission provisions, the credit is not liable to be reversed merely because the resulting work-in-progress was lost.

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