Remission of duty on inputs lost in accidental fire upheld where goods had already been issued for manufacture.

Duty paid on inputs issued to the manufacturing floor and subsequently destroyed in an accidental fire could not be demanded back, because the Tribunal applied the principle that remission is available where such goods are lost after being put into the manufacturing process. The earlier precedent on insurance settlement was treated as distinguishable since, here, the duty component had not been settled by the insurer. On those facts, the assessee's claim for remission succeeded and the Revenue could not insist on reversal of Modvat credit or recovery of duty on the burnt inputs.

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Issues: Whether duty could be demanded or Modvat credit required to be reversed in respect of inputs issued to the manufacturing floor and lost in an accidental fire, and whether remission of duty was available.

Analysis: The inputs had already been issued for use in manufacture and were subsequently destroyed in a fire accident. The Tribunal applied the earlier ratio that where inputs are lost due to accidental fire after being issued to the manufacturing floor, the assessee is entitled to seek remission of duty on the goods for which duty had been paid. The cited precedent dealing with insurance settlement was held distinguishable because the duty component had not been settled by the insurer in the present matter.

Conclusion: The Revenue was not entitled to demand duty on the inputs lost in the accidental fire, and the assessee's claim succeeded.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Duty paid on inputs issued to the manufacturing floor cannot be demanded back where the inputs are lost in an accidental fire, and remission is available on those facts.

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