Clarificatory circular on destroyed goods required Cenvat credit reversal and upheld demand with interest

Cenvat credit on inputs used in goods destroyed after expiry of date had to be reversed where remission of duty was granted, because the Board circular was treated as clarificatory and to the appellant's case. The circular was not confined to future cases; it applied to pending or prior situations. On that basis, the demand and interest were upheld, and reversal of credit attributable to the destroyed goods was held mandatory.

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Issues: Whether Cenvat credit availed on inputs used in the manufacture of goods destroyed after expiry of date was required to be reversed in view of the Board's circular, and whether the circular operated only prospectively.

Analysis: The circular was treated as clarificatory in nature and therefore applicable to the appellant's case. Since the goods were destroyed and remission of duty had been granted, the credit taken on the inputs used in such goods was liable to be reversed. The demand and interest were held to be justified.

Conclusion: The issue was decided against the assessee and in favour of the Revenue; reversal of credit was held mandatory and the demand with interest was upheld.

Ratio Decidendi: A clarificatory circular may be applied to pending or prior situations, and where duty is remitted on destroyed goods, Cenvat credit attributable to those goods must be reversed.

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