Appeal allowed for Modvat credit on inputs destroyed in fire accident. Precedents cited.

The appeal was allowed in the case of M/s. Electrolux Kelvinator Ltd. regarding the availability of Modvat credit for duty paid on inputs used in manufacturing goods destroyed in a fire accident. The Appellate Tribunal held that the duty remission granted by the Commissioner did not equate to a general exemption from duty, citing precedents and a Board Circular. As the inputs were used in manufacturing the destroyed goods, the disallowance of Modvat credit was set aside, and the appeal was allowed.

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Issues involved: Whether Modvat credit of duty paid on inputs used in relation to manufacture of goods destroyed in fire is available.

Summary:
The appeal was filed by M/s. Electrolux Kelvinator Ltd. regarding the availability of Modvat credit for duty paid on inputs used in manufacturing goods destroyed in a fire accident. The Appellants manufactured refrigerators, and after a fire accident on 17-6-2000 destroyed refrigerators stored in a bonded room. They sought remission of duty on the burnt refrigerators, which was granted by the Commissioner. However, the Modvat credit in the destroyed refrigerators was disallowed on the basis that goods acquired exempted status after duty remission. The learned Advocate cited precedents such as Inalsa Ltd. v. CCE, New Delhi and highlighted that duty remission under Rule 49 does not equate to general exemption from duty. Similar views were upheld in cases like Kirloskar Electric Co. Ltd. v. CCE, Bangalore and MRF Ltd. v. CCE, Chennai. The Advocate also referenced a Board Circular clarifying the admissibility of Modvat credit in such cases.

The Appellate Tribunal noted that the issue had been settled in the case of Inalsa Ltd., which was further supported by a Circular issued by the Central Board of Excise and Customs. It was undisputed that the inputs were used in manufacturing the destroyed refrigerators, and duty remission was granted by the Commissioner. Following the Tribunal's decision and the Board's circular, the impugned Order disallowing Modvat credit was set aside, and the appeal was allowed.

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