Cenvat credit on fire-destroyed finished goods need not be reversed when remission of duty has already been granted.

Cenvat credit on inputs used in finished goods destroyed by fire need not be reversed where remission of duty has already been granted on the damaged goods. The applicable Board Circular for the relevant period supported retention of the credit, because it clarified that destruction or damage of finished goods in fire does not require reversal of input credit. The departmental circular relied on was from a later period and did not govern the dispute. The denial of Cenvat credit was therefore unsustainable, and the assessee was entitled to retain the credit.

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Issues: Whether Cenvat credit availed on inputs used in finished goods destroyed by fire can be denied when remission of duty has been granted on such goods, and whether the Board Circular applicable to the relevant period supports retention of the credit.

Analysis: The goods in question were destroyed in a fire accident and remission of duty had already been granted. The dispute was only whether the inputs credit relating to those destroyed finished goods had to be reversed. The applicable Board Circular clarified that where finished goods are destroyed or damaged in fire, the assessee remains entitled to the benefit of remission and the credit taken on inputs used in manufacture of such goods need not be reversed. The Circular relied upon by the department related to a subsequent period and was therefore not applicable to the dispute period.

Conclusion: The denial of Cenvat credit was held to be unsustainable. The assessee was entitled to retain the credit, and the appeal was decided in favour of the assessee.

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