2002 (11) TMI 185 - AT - Central Excise

Tribunal Upholds Duty Remission for Destroyed Goods, Reverses Penalty

The Tribunal upheld remission of duty on destroyed goods under Rule 49, emphasizing accidental causes. The appellant's penalty for not reversing Cenvat ... Demand - Remission of duty, Cenvat credit, non-reversal of Issues:1. Confirmation of Order-in-Original for recovery under Central Excise Rules.2. Applicability of Rule 49 for remission of duty on damaged finished goods.3. Interpretation of provisions regarding Cenvat credit availed on inputs.4. Consideration of relevant case laws in determining remission of duty eligibility.5. Compliance with Board's circular on remission of duty for destroyed goods.Issue 1:The Commissioner (Appeals) confirmed the Order-in-Original for recovery of an amount under Central Excise Rules and imposed a penalty. The appellant company, engaged in manufacturing Ceramic products, availed remission of duty on damaged finished goods but did not expunge the Cenvat credit on inputs used. The appellant's contention that they were not required to expunge the credit under Rule 49 of Central Excise Rules was rejected, leading to the penalty confirmation.Issue 2:The Tribunal considered the applicability of Rule 49 for remission of duty on destroyed goods. Citing a previous case, it upheld that remission is available when goods are destroyed due to accidental causes. The Tribunal noted that the goods destroyed by fire were eligible for remission under Rule 49, emphasizing that the manufacturer must pay duty only if the goods were not lost or destroyed by natural causes or unavoidable accidents during handling or storage.Issue 3:The dispute involved the interpretation of provisions regarding Cenvat credit availed on inputs used in manufacturing damaged finished goods. The appellant argued that they were not required to reverse the credit as the provision allowed for the benefit not to be reversed when goods were damaged due to specified processes. However, the Tribunal upheld the penalty and confirmed the need to reverse the credit in this case.Issue 4:In analyzing relevant case laws, the Tribunal considered decisions supporting remission of duty in cases of goods destroyed by fire accidents. Referring to various judgments, including those related to Modvat credit reversal in case of damaged inputs, the Tribunal concluded that the Commissioner (Appeals) correctly applied the law in granting remission of duty in the present case.Issue 5:The Tribunal also took into account the Board's circular clarifying eligibility for remission of duty on finished goods destroyed or damaged in accidents. The appellant, falling within the specified range of damage amounts and not claiming insurance, was deemed eligible for remission based on the Tribunal's ruling and the Board's circular. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.