Remission of duty for destroyed goods does not require reversal of CENVAT credit on inputs used in manufacture.

Remission of duty for goods destroyed by fire or another unavoidable accident does not amount to an exemption or clearance at nil rate under the excise rules. Where finished goods are lost, destroyed, or rendered unfit by natural cause or unavoidable accident, the inputs used in their manufacture are still treated as having been put to intended use, and no express statutory condition requires reversal of CENVAT credit merely because the finished goods were destroyed. The larger bench view accepting that reversal is not mandatory was followed, and the assessee is not liable to reverse input credit in such circumstances.

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Issues: Whether, on remission of duty for goods destroyed by fire or unavoidable accident, the assessee is required to reverse CENVAT credit taken on inputs used in the manufacture of such goods.

Analysis: Remission under Rule 49 of the Central Excise Rules, 1944 and Rule 21 of the Central Excise Rules, 2002 is granted where goods are lost, destroyed, or rendered unfit by natural cause or unavoidable accident. Such remission is not equivalent to exemption of goods or clearance at nil rate of duty. The inputs are treated as having been put to intended use in manufacture, and the relevant rules do not impose any condition requiring reversal of credit merely because the finished goods were destroyed. The larger bench view approving the principle that reversal is not mandatory was accepted.

Conclusion: The assessee is not liable to reverse CENVAT credit on the inputs when duty on the finished goods has been remitted due to destruction by fire or similar unavoidable accident, and the issue is answered in favour of the assessee.

Ratio Decidendi: Remission of duty for goods destroyed by natural cause or unavoidable accident does not amount to exemption, and in the absence of an express statutory condition, CENVAT credit on inputs used in such goods cannot be reversed.

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