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Issues: Whether reversal of Cenvat credit on inputs/raw materials contained in finished or semi-finished goods destroyed by fire could be demanded as a condition for remission of duty under the Central Excise Rules.
Analysis: The reasoning followed the Larger Bench view that Rule 21 of the Central Excise Rules, 2002, like the corresponding remission provision under the earlier rules, does not prescribe reversal of credit on inputs used in goods lost or destroyed by fire or other unavoidable accident. Goods destroyed before removal are not treated as exempted goods for the purpose of denying credit, and the inputs are regarded as having been used for the intended manufacture of the final product. The decision relied on the earlier Larger Bench ruling approved by the High Court.
Conclusion: Reversal of Cenvat credit was not sustainable as a condition for remission, and the issue was decided in favour of the assessee.
Final Conclusion: The demand seeking reversal of credit linked to remission of duty on fire-destroyed goods could not be sustained under the remission framework applicable to excisable goods.
Ratio Decidendi: Where goods are lost or destroyed before removal and remission of duty is granted under the excise remission provisions, the rules do not authorise denial or reversal of credit on inputs used in those goods unless such a condition is expressly provided.
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