Tribunal reverses Cenvat Credit requirement for destroyed goods, citing natural justice and CBEC guidelines.

The Tribunal allowed the appeal against the Commissioner's Order-in-Original, modifying the requirement to reverse the Cenvat Credit on destroyed goods. The Tribunal held that in cases of goods destroyed by natural causes or unavoidable accidents, no reversal of credit was necessary, citing violation of natural justice and deviation from CBEC instructions. The High Court supported this view, leading to the Tribunal setting aside the demand for Cenvat Credit, ruling in favor of the appellant. The decision was pronounced on 24.05.2018.

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Issues:
Appeal against Order-in-Original confirming recovery of Cenvat Credit on destroyed goods and remission of duty subject to reversal of Cenvat Credit.

Analysis:
The appeal was directed against the Order-in-Original confirming the recovery of Cenvat Credit on inputs contained in goods destroyed in fire and the remission of duty subject to reversal of Cenvat Credit. The Commissioner had allowed the remission of duty on the condition of reversing the Cenvat Credit on the destroyed goods. In a previous proceeding, the Commissioner's order was challenged before the Tribunal, specifically regarding the condition of reversing the credit. The Tribunal allowed the appeal against the Commissioner's order, modifying the requirement to reverse the Cenvat Credit. The Tribunal's decision highlighted that the Commissioner's directive to reverse the credit was not upheld, relieving the appellant from this obligation.

The Tribunal's decision was based on the grounds of violation of natural justice and deviation from CBEC instructions. The appellant argued that they were not given proper notice during the remission application process and that the demand show cause notice was not issued as required. Additionally, the appellant contended that imposing conditions under Rule 21 of the Central Excise Rules was not permissible. The Tribunal examined the issue of reversal of credit during the grant of remission and referred to the decision in the case of Grasim Industries, emphasizing that rules on remission did not mandate the reversal of credit on inputs used in destroyed goods. The Tribunal approved the view that in cases of goods destroyed by natural causes or unavoidable accidents, the inputs could be considered to have been put to intended use for manufacturing the final product, thus no reversal of credit was necessary.

The Tribunal's decision was further supported by a High Court ruling, affirming the stance that in cases of goods destroyed by natural causes or unavoidable accidents, the reversal of credit was not required. Consequently, the Tribunal set aside the order for the demand of Cenvat Credit, allowing the appeal in favor of the appellant. The judgment was pronounced on 24.05.2018 by the Tribunal.

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