2009 (1) TMI 232 - AT - Central Excise

Appeal dismissed for improper filing, respondent retains credit on destroyed goods. Recommendation to amend statute wording.

The Tribunal dismissed the appeal due to improper authorization for filing and upheld the respondent's right to retain credit on destroyed goods. The ... Goods Destroyed – fire accident – reversal of cenvat credit - Cenvat credit on the inputs and capital goods, had correctly availed based upon the documents and such credit was in accordance with the provisions of Cenvat Credit Rules, 2004. - It is also seen from the records that Cenvat credit availed by the Respondents on the finished goods which was returned by their purchasers was also in accordance with the Cenvat Credit Rules, 2002 read with CE Rules, 2004. - In short the credit which has been taken was legitimate and could not have been disputed by the Revenue. The entire dispute arose only after the fire accident in the factory in which inputs, intermediate products finished goods and capital goods got destroyed – Held that - Destruction of goods due to natural cause or by unavoidable accident during handling or storage cannot be equated with exemption to goods and the inputs can be considered to have been put to intended use for manufacture of final product.” Issues:1. Authorization to file an appeal signed by only one Commissioner.2. Merits of the case regarding the reversal of credit on destroyed goods due to a fire accident.Analysis:1. Authorization Issue:The appeal was filed by the revenue against the Order-in-Appeal No. 27/2007 (H-I) CE dated 19-7-2007. The respondent raised a preliminary objection regarding the authorization to file an appeal, stating it was signed by only one Commissioner. The respondent relied on a Tribunal decision in a similar case. The revenue argued that the authorization was correct as the review was done by two Commissioners, and the objection was not sustainable under Section 35B(2) of the CE Act, 1944. The Tribunal analyzed the authorization and found that it was indeed signed by only one Commissioner, contrary to the requirement of authorization by a Committee of Commissioners as per Section 35B(2).2. Merits of the Case:The dispute revolved around the reversal of credit on inputs, intermediate products, and capital goods destroyed in a fire accident at the respondent's factory premises. The respondent had correctly availed Cenvat credit on inputs, capital goods, and finished goods based on legitimate documents and rules. The revenue contended that since the destroyed goods were insured, and the respondent received insurance money, they should not benefit twice by retaining the duty credit. The Tribunal noted that the Larger Bench decision in the case of Grasim Industries addressed a similar situation, ruling that destruction of goods due to natural causes does not necessitate reversal of credit. The Tribunal found that the credit availed by the respondent was legitimate and in compliance with relevant rules. Therefore, the appeal was rejected on both grounds of improper authorization and on the merits of the case.In conclusion, the Tribunal dismissed the appeal due to the improper authorization for filing and upheld the respondent's right to retain the credit on destroyed goods as per the relevant legal provisions and precedents. The Tribunal recommended amending Section 35B(2) to rectify the drafting error in the wording of the statute.