Cenvat credit reversal for fire-destroyed goods fails where Revenue cannot prove actual credit availment.

Cenvat credit reversal was not required for capital goods and inputs destroyed in fire where the governing rules did not impose such a liability. The assessee had already reversed credit on raw material destroyed in the fire, and the Revenue failed to prove that credit had actually been availed on the disputed capital goods. Applying the principles in Auto Ignition and Grasim Industries, the tribunal held that the burden of proving availment of credit rested on the Revenue, and that no further reversal was sustainable for goods lost in an unavoidable accident. The demand and penalty therefore did not survive.

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Issues: Whether the appellant was liable to reverse further Cenvat credit in respect of capital goods and inputs destroyed in fire, and whether the Revenue had discharged the burden of proving availment of credit on the disputed capital goods.

Analysis: The appellant had already reversed Cenvat credit on the raw material destroyed in the fire. The claim that the capital goods were procured prior to the introduction of Modvat was not established by the documentary material relied upon by the appellant alone, but the Revenue also failed to produce evidence showing that credit had in fact been availed on those capital goods. The ruling in Auto Ignition placed the burden of proving availment of credit on the Revenue. The decision in Grasim Industries supported the proposition that no reversal is required where inputs are lost or destroyed by natural cause or unavoidable accident.

Conclusion: The demand for further reversal of credit was not sustainable and the issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded and the impugned demand and penalty did not survive.

Ratio Decidendi: In a demand for reversal of Cenvat credit, the Revenue must prove actual availment of credit on the disputed goods, and credit need not be reversed for inputs lost or destroyed by fire or other unavoidable accident where the governing rules do not impose such a requirement.

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