MODVAT credit on fire-damaged goods remained retainable; later circulars could not retrospectively undo granted remission.

MODVAT credit on inputs used in work-in-progress and finished goods destroyed in fire was treated as retainable where remission of duty had been granted under the then-applicable circular. A later circular could not be applied retrospectively to reopen the remission already allowed, and no statutory provision was identified authorising recovery of credit merely because insurance proceeds were received. The withdrawal of remission was also held to be beyond the Assistant Commissioner's competence and unsustainable without proper notice and authority, so the demand for reversal of credit and withdrawal of remission failed.

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Issues: Whether MODVAT credit taken on inputs used in work-in-progress and finished goods destroyed in fire could be reversed or recovered after remission of duty was granted and whether the Assistant Commissioner could withdraw the remission on the basis of a later circular.

Analysis: The credit on inputs used in work-in-progress and finished goods destroyed in fire was held to be retainable under the governing regime. The first appellate authority had relied on the then applicable circular permitting retention of credit even where duty was remitted, and the later circular could not be applied retrospectively to disturb the remission already granted. The record also did not disclose any statutory provision authorising recovery of the credit merely because insurance settlement was received. The withdrawal order was further found to be beyond the competence of the Assistant Commissioner and could not be sustained without proper notice and authority.

Conclusion: The demand for reversal of credit and the withdrawal of remission were not sustainable, and the appeals were dismissed in favour of the assessee.

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