Remission of duty on fire-destroyed goods does not equal exemption, so input credit reversal cannot be demanded.

Remission of duty on final products destroyed in fire is not equivalent to an exemption, so the goods do not become exempted goods merely because duty has been remitted. Where the competent authority has already granted remission, reversal of Modvat/Cenvat credit on inputs used in those destroyed goods cannot be insisted upon as a condition for denying remission or demanding duty. On that principle, the demand raised solely for non-reversal of input credit was held unsustainable, and the assessee's position was upheld.

---

---

Issues: Whether duty could be demanded on final products destroyed in fire on the ground that the assessee had not reversed Modvat/Cenvat credit taken on inputs, notwithstanding grant of remission of duty.

Analysis: The remission of duty on the destroyed final products was granted by the competent authority. The demand was sustained only because the credit taken on inputs was not reversed. The governing principle applied was that remission of duty on goods destroyed in fire is not to be treated as exemption from duty, and therefore the final products do not acquire the character of exempted goods merely because duty has been remitted. On that basis, reversal of input credit was not required where remission had already been allowed on the final products.

Conclusion: The demand of duty for non-reversal of Modvat/Cenvat credit was not sustainable, and the finding in favour of the assessee was upheld.

Ratio Decidendi: Where duty on final products destroyed in fire has been remitted, such remission is not equivalent to exemption, and no reversal of Modvat/Cenvat credit on inputs used in those goods can be insisted upon as a condition for denying remission or demanding duty.

---