Cenvat credit on job-work goods destroyed in fire need not be reversed when the goods cannot be returned.

Cenvat credit on inputs sent for job work was held not to require reversal where the intermediate goods were destroyed in a fire at the job worker's premises and could not be returned within the prescribed period. The Tribunal reasoned that credit validly taken on inputs cannot be denied merely because the goods manufactured from them ceased to exist, and the assessee could not be compelled to return goods destroyed in fire. The pending remission application did not change this result on the facts found. The demand for reversal of credit, interest, and penalty was therefore not sustainable.

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Issues: Whether Cenvat credit attributable to inputs sent for job work was required to be reversed when the intermediate goods were destroyed in a fire accident and could not be returned within the prescribed period.

Analysis: The goods were admittedly sent for job work and were destroyed in fire at the job worker's premises. The Tribunal relied on prior decisions holding that where inputs had been issued and the goods manufactured therefrom were destroyed in fire, reversal of credit was not warranted. It held that the assessee could not be compelled to restore goods that had ceased to exist, and that the credit validly taken on inputs could not be denied merely because the finished or intermediate goods were not returned. The pending remission application did not alter this conclusion on the facts found.

Conclusion: The demand for reversal of Cenvat credit, interest, and penalty was not sustainable; the appeal was allowed in favour of the assessee.

Ratio Decidendi: Where inputs or goods manufactured from them are destroyed in fire after being issued for job work, Cenvat credit is not required to be reversed merely because the goods are not returned within the prescribed period.

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