TaxTMI 
TaxTMI 
2021 (12) TMI 238
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....T credit availed by the assessee on the inputs destroyed in the fire accident of the night of 02.04.2015, under Rule 14 of the CCR, 2004 read with Section 11A(10) of the CEA, 1944. iii) I confirm the demand of Rs. 28,93,666/- for reversal of CENVAT credit availed by the assessee on the inputs contained in the semi-finished goods destroyed in the fire accident of the night of 02.04.2015 as per provisions of Rule 14 of the CCR, 2004 read with Section 11A(10) of the CEA, 1944.. iv) I confirm demand of interest at appropriate rate on the above confirmed demands under the provisions of Section 11AA of Central Excise Act, 1944. v) I impose penalty of Rs. 1,00,000/- (Rupees One Lakh Only) on M/s Cipy Polyurethanes Pvt. Ltd., Shirwal under provisions of Section 11 AC(1)(a) of the Central Excise Act, 1944 read with Rule 25 of Central Excise Rules, 2002. No penalty is imposed under the provisions of Rule 15(1) of the CCR, 2004." 2.0 Facts of the case stated in brief as recorded in the impugned order are as follows: • Appellant is engaged in the manufacture of excisable goods viz. Paints & Varnishes of Tariff Item 32089019, Epoxy Resin/Polyurethane p....
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....s destroyed in the fire accident has not been remitted by the Commissioner a Show Cause Notice dated 03.05.2016 asking them to show cause as to why- i. duty amount of Rs. 28,06,385/- on the excisable goods destroyed in fire accident of . the night of 02- 04-2015 should not be recovered from them under the provisions of Section 11A (1) of the Central Excise Act, 1944; ii. CENVAT credit of Rs. 1,61,37,1917- (Rs. One Crore Sixty One lakhs Thirty Seven thousand One hundred Ninety One only) involved in inputs / raw materials lost / destroyed in fire accident of the night of 02- 04-2015 should not be recovered from them under the provisions Section 11A(1) of CEA, 1944 read with Rule 14 of the CCR, 2004. iii. Proposals for recovery of interest under Section 11AA of the Central Excise Act, 1944 read with Rule 14 of CCR, 2004 and for imposition of penalty under the provisions of Section 11AC (1)(a) of Central Excise Act, 1944 read with Rules 25 of the CER, 2002 and Rule 15(1) of CCR, 2004, were also made in the Show Cause Notice. • After following the principles of natural justice, Commissioner adjudicated the Show Cause Notice and also disposed of th....
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....ns on the issue and he would place his reliance on those decisions, as listed below: • Indchem Electronics [(2003) 151 ELT 393 (T)] • SMG International [2016 (534) ELT 1031 (T)] • Spectra Specialities [2008 (231) ELT 346 (T)] • Dalmia Dadri Cement Ltd. [JT 1988 (3) 1] • BPL Display Devices Ltd. [2004 (174) ELT 5 (SC)] • Asmaco Plastics Industries [1998 (100) ELT 129 (T)] • Grasim Industries [2007 (208) ELT 336 (T)] • Apart from confirming demand, Commissioner has also demanded interest and imposed penalty on them. In the circumstances of the case demand for interest and penalty imposed is not justifiable. • The appeal be allowed 3.2 Arguing for the revenue, learned Authorized Representative, reiterated the findings in the order and submitted that- • The order of Commissioner is fully in accordance with the decision of Tribunal in the case of Kosi Plast Pvt Ltd. [2016 (326) ELT (T)], wherein it has been held that in terms of Rule 3 (5B) of CENVAT Credit Rules, 2004, the CENVAT Credit taken on inputs destroyed in the fire needs to be reversed. â....
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....nd that in Annexure - 'D' and Annexure - 'F' of their application for remission of Central Excise duty under Rule 21 of CER, 2002, made vide their letter dated 28.03.2016, the assessee has indicated the value of each item of raw materials and packing materials. Further the assessee has mentioned the rate of Central Excise duty and the amount of Central Excise duty involved in each such item of raw materials and packing materials and sought remission thereof. Firstly I find that this description in the Annexure - 'D' and Annexure - 'F' itself is incorrect & misleading, if not mischievous. Since duty paid raw materials and packing materials had been received by the assessee, and CENVAT credit of the said duty amounts in respect of raw materials and packing materials had already been availed by the assessee. Thus there was no need for the assessee to make any calculations of 'Amount of Excise Duty involved in Annexure - 'D' and Annexure - 'F' after mentioning value and rate of duty in respect of each item of raw materials and packing materials. The assessee should have simply mentioned the actual CENVAT credit taken by them in respec....
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....fore being put to use, on which CENVAT Credit has been taken is written off fully or where any provision to write off fully has been made in the books of account, then the manufacturer shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods : Provided that if the said input or capital goods is subsequently used in the manufacture of final products, the manufacturer shall be entitled to take the credit of the amount equivalent to the CENVAT Credit paid earlier subject to the other provisions of these rules. Thus, it is clear that the intent of the legislature as per the provisions of CCR, 2004, is that CENVAT credit should be retained only in respect of those inputs which are actually used in or in relation to the manufacture of finished goods. In the present case the raw materials and packing materials had not been used in or in relation to the manufacture of finished goods by the assessee and therefore CENVAT credit taken on the said raw materials and packing materials is required to be reversed by the assessee. 23. Another contention of the assessee is that the majority of the goods were first rec....
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.... respect of the said input or capital goods : Provided that if the said input or capital goods is subsequently used in the manufacture of final products, the manufacturer shall be entitled to take the credit of the amount equivalent to the CENVAT Credit paid earlier subject to the other provisions of these rules." Therefore, I hold that the appellant is required to reverse CENVAT credit on inputs which have been lost in fire "as such". " 25. Now I shall discuss the request of the assessee for remission of duty on semi-finished goods. In this regard I find that the provisions of Rule 21 of the Central Excise Rules, 2002, are as under: Rule 21. Remission of duty. - Where it is shown to the satisfaction of the Commissioner that goods have been lost or destroyed by natural causes or by unavoidable accident or are claimed by the manufacturer as unfit for consumption or for marketing, at any time before removal, he may remit the duty payable on such goods, subject to such conditions as may be imposed by him by order in writing: Provided that where such duty does not exceed ten thousand rupees, the provisions of this rule shall have effect as i....
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....hat is, the duty which is 'payable'. Duty on the raw materials and packing materials is already paid. Further, the assessee is not the manufacturer for the same. Therefore there is no question of remission of duty on raw materials and packing materials under Rule 21 of CER, 2002.", is not supported by the wordings of Rule 21. Rule 21 do not limit its application only to the finished goods manufactured by the manufacturer, but would include within its ambit all those goods which "have been lost or destroyed by natural causes or by unavoidable accident or are claimed by the manufacturer as unfit for consumption or for marketing, at any time before removal." Clearly the word goods is wide enough to include all the goods, whether finished good, raw material, packing material, semi-finished goods or the capital goods within its ambit. 4.5 Further Commissioner observation in para 21, to effect "To look at it from another angle, remission of duty on duty paid raw materials and packing materials would amount to remission of duty paid by the manufacturers of such raw materials and packing materials, who are in fact suppliers of the assessee and not the assessee himself. Thus in e....
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....), it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken and utilised. (6) The amount paid under sub rule (5) and sub-rule (5A) shall be eligible as CENVAT credit as if it was a duty paid by the person who removed such goods under sub rule (5) and sub-rule (5A). In case the inputs are not used in the manufacture of the finished goods, by the manufacturer who has taken the CENVAT credit in respect of such inputs but removes them as such from his manufactory or premises, then Rule 3 (5) mandates that such manufacturer is required to pay/ debit an amount equivalent to the CENVAT Credit taken by him and after preparing an invoice as provided by the Rule 9 of the Central Excise Rules, 2002. Further Rule 3 (6), states that for the purpose of allowing, CENVAT credit to the person who procures these inputs from the manufacturer who has removed them in the manner as provided by Rule 3 (5), the amount paid/ debited by the manufacturer, shall be deemed to be the duty paid by the person who has so removed these inputs. Thus the amount paid/ debited under in terms of Rule 3 (5) is deemed to be the duty paid by the manufacturer remov....
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....rtificate dated 13-3-2010 that adequate fire fighting equipment and provisions of sufficient water was available with the appellant and sufficient efforts were made to put off the fire by the company. Accordingly, the fire department has certified that there is no foul play and that the fire has due to reasons beyond the control of the appellants. This establishes the fact that the fire was nothing but an unfortunate accident. The appellant has relied upon, the following case laws to support the argument that they were entitled to the grant of remission under Rule 21 of the Central Excise Rules as well as Section 23 of the Customs Act, 1962. i. Sumit Chemicals Pvt. Ltd. v. Commissioner of C. Ex., Kanpur - 2016 (337) E.L.T. 299 (Tri.-All.). ii. Commissioner of Cus., Bangalore v. Next Fashion Creators Pvt. Ltd. - 2012 (280) E.L.T. 374 (Kar.). In the case of M/s. Joy Foam Pvt. Ltd. [2015 (322) E.L.T. 209 (Mad.)], the Hon'ble High Court has held as follows : "8. We find that once the goods are destroyed or lost due to natural causes, remission of duty is granted on such goods. Since the inputs are considered to be put to intended use in the manufactu....
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....gned order is set aside and appeal allowed." 4.8 Commissioner has in the impugned order, invoked the provisions of Rule 3 (5B) to confirm the demand against the Appellant. He also relies on the decision of the tribunal in case of M/s Kosi Plast Pvt Ltd [2015 (326) ELT 328 (T-Mum)] to support his case. The operative part of the decision as reproduced in para 24 of the impugned order is as follows: "7. As per Rule 3(5B) of C.C.E which is reproduced here-inunder, the appellant is required to reverse the CENVAT credit on the inputs which have been written off in their books of accounts on account of fire or any other accidents. Rule 3(5B), If the value of any, (i) input, or (ii) Capital goods before being put to use, on which CENVAT Credit has been taken is written off fully or where any provision to write off fully has been made in the books of account, then the manufacturer shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods : Provided that if the said input or capital goods is subsequently used in the manufacture of final products, the manufacturer shall be entitled ....
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....e. 11. Further, I find that C.B.E. & C. Circular No. 907/27/2009- C.E., dated 7-12-2009 is contrary to the judicial pronouncement of this Tribunal wherein in the case of Nector Lifescience (supra), this Tribunal has examined the Rule as well as the C.B.E. & C. Circular and thereafter held as under : "13. We further note that the legal issue as regards reversal of credit is well settled. If the inputs, on which the credit stand availed were issued for further manufacture of the goods and goods are destroyed during the course of manufacture of the goods, no reversal of Cenvat credit is called for. For the above proposition, reference can be made to the Tribunal's decision in the case of Commissioner of Central Excise and Customs, Pune v. Spectra Speciality [2008 (231) E.L.T. 346 (Tri.-Mum.)] as upheld by the Hon'ble Supreme Court as reported in [2009 (240) E.L.T. A77]. To the same effect is another decision of the Tribunal in the case of Commissioner of Central Excise, Chennai v. Indchem Electronics [2003 (151) E.L.T. 393 (Tri.-Chennai)] wherein it stand held that where inputs were actually issued and thereafter destroyed in fire accident, there is no requirement of....
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....nputs store and as such, same cannot be considered to be inputs destroyed as such, so as to call for reversal of Cenvat credit. The bulk drugs are manufactured and marketed in the batches and the inputs are issued for production on the basis of issue slips corresponding to batches that are to be manufactured. Mostly the inputs are various chemicals which are consumed. The said goods were admittedly work-inprogress, in which case, no reversal of credit is justified. There is clearly no evidence on record to substantiate Revenue's allegations and findings that the destroyed goods were actually inputs, which were not issued for further manufacturing." 12. Therefore, I hold that respondents are not required to reverse the Cenvat credit. As such, I do not find any infirmity in the impugned order. Same is upheld. Appeal filed by the Revenue is dismissed." 4.9 In case of SMG International [2016 (344) ELT 1031 (TChand)] tribunal has held as follows: "7. In this case the appellant has filed the claim refund on duty paid by them on account of reversal of Cenvat credit availed on inputs which were used in work in progress/semi-finished goods. Admittedly, the inputs on whi....
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....aining to the of stock of all finished /semi-finished goods/ inputs 24.2015. However, as per details furnished vide assessee's letter dtd. 28.3.2016 the value of the excisable goods destroyed due to the fire accident was Rs. 14,63,34,243/- in which the total duty /CENVAT Cr involved was shown as Rs. 1,99,56,337/-. In a subsequent letter dtd. 28.4.2016, the assessee have intimated that value & CENVAT Cr. involvement in the inputs used in "semi-finished goods" destroyed on 2.4.2015 was Rs. 1,50,47,245/- & Rs. 18,80,905/- respectively. From all these information, it appeared that duty involvement in finished goods destroyed was Rs. 28,06,385/- and CENVAT Credit involvement in the inputs/ raw materials/ packing materials was Rs. 1,61,37,191/-= Total Rs. 1,89,43,576/-." 4.11 Further Hon'ble Supreme Court has in the case of BPL Display Devices Ltd [2004 (174) ELT 5 (SC)] has held as follows: "2. It is not in dispute that the appellant had imported parts of picture tubes for manufacture of colour picture tubes. Both the input and the manufactured items are covered by the Notifications. It is also not in dispute that a small percentage of the imported parts were damaged in ....