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Issues: (i) whether Cenvat credit taken on inputs used in the manufacture of finished goods destroyed by fire was required to be reversed when remission of duty had been granted; (ii) whether the demand raised pursuant to the remission order was barred by limitation.
Issue (i): whether Cenvat credit taken on inputs used in the manufacture of finished goods destroyed by fire was required to be reversed when remission of duty had been granted.
Analysis: The larger bench view was applied to hold that the remission provisions in Rule 49 of the Central Excise Rules, 1944 and Rule 21 of the Central Excise Rules, 2002 do not impose any condition requiring reversal of credit on inputs used in goods lost or destroyed by fire. The contrary view relied upon by the lower authority was not accepted.
Conclusion: The requirement to reverse Cenvat credit was held to be unsustainable and was set aside in favour of the assessee.
Issue (ii): whether the demand raised pursuant to the remission order was barred by limitation.
Analysis: The demand was examined in the light of Section 11A(1) of the Central Excise Act, 1944 and the record did not show when the credit had been taken. In that context, the demand raised beyond the normal period of one year was held to be time-barred.
Conclusion: The limitation objection was accepted in favour of the assessee.
Final Conclusion: The order of the lower authority was set aside and the appeal succeeded with consequential relief.
Ratio Decidendi: Where remission of duty is granted for goods destroyed by fire, the applicable excise remission rules do not by themselves require reversal of Cenvat credit on inputs used in those goods, and a demand founded on such reversal must also satisfy the statutory limitation period.
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