Cenvat credit on destroyed finished goods remains admissible when duty is remitted and no insurance-linked reversal applies.

Cenvat credit on inputs used to manufacture cigarettes later destroyed as unfit for human consumption was not required to be reversed when duty on the finished goods had been remitted. The Tribunal relied on the Board's earlier circular supporting credit admissibility after destruction with remission of duty and on its own earlier decision in the assessee's case. It also noted that the Revenue's later circular, which was linked to insurance-related reversal, did not apply because no insurance claim had been made. Credit was held admissible and consequential relief followed.

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Issues: Whether Cenvat credit taken on inputs used in the manufacture of cigarettes unfit for human consumption, which were destroyed with remission of duty, was required to be reversed.

Analysis: The dispute turned on whether remission of duty on the destroyed finished goods attracted reversal of the credit availed on inputs used in their manufacture. The Tribunal noted that the Board's earlier circular dealing with Modvat/Cenvat credit on goods destroyed after remission supported admissibility of credit, and that an earlier decision of the Tribunal in the same assessee's case had held that such credit remained admissible. It was also noticed that no insurance claim had been made, so the later circular relied on by Revenue, which was connected with insurance-related reversal, was not applicable to the facts.

Conclusion: Cenvat credit was held to be admissible and no reversal was required.

Final Conclusion: The appeals succeeded and the assessee was granted consequential relief.

Ratio Decidendi: Where finished goods are destroyed and duty is remitted, Cenvat credit on inputs used in their manufacture is not liable to reversal unless the governing circular or factual basis specifically warrants such reversal.

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