Custom, Excise & Service Tax Tribunal
Diamond Cement vs C.C.E. Bhopal on 19 December, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI PRINCIPAL BENCH, COURT NO. I Appeal No. E/3749/2010-EX [DB] [Arising out of the common Order-In-Original No. 17/COMMR./CEX/ADJ/SGR/2010 Dated 24.08.2010 passed by Com. Of Customs, Central Excise, & Service Tax Bhopal.] Diamond Cement Appellant Vs. C.C.E. Bhopal Respondent
Appearance:
Sh. B.L. Nersemhan, Ld. Advocate for the appellant Sh. Yogesh Agarwal, Ld. AR for the respondent CORAM:
Honble Justice Mr. Dr. Satish Chandra, President Honble Mr. Ashok K. Arya, Member (Technical) Date of Hearing.02.11.2016 Date of decision.19.12.2016 Final Order No. 55899/2016 Per Ashok K. Arya:
1. M/s Diamond Cement are in appeal against the Commissioner, C. Excise Bhopals order dated 24/08/2010 whereunder demand of Cenvat Credit amounting to Rs. 68,71,639/- along with the interest is confirmed for recovery and equivalent penalty has also been imposed.
2. The brief facts are that the appellants have two units one in Karnataka and the other in Madhya Pradesh. The appellants purchased DG Sets in February, 97 and installed the same in their factory in the state of Karnataka and were using the same. Later on the same were shifted to their unit at Imlai in Madhya Pradesh, where the same were installed on 03.06.2002 and used. There was fire accident on 08.11.2003 at the DG house in Imlai unit and DG set was destroyed. The applicant received a total compensation of Rs. 4,45,91,991/- form Insurance Agency out of which a sum of Rs. 4,29,48,084/- related to destroyed capital goods on which credit had been availed.
A show cause notice (SCN) dated 09.01.2008 was issued proposing recovery of cenvat credit in respect of capital goods on the ground that the same were deemed to have been removed and the same tantamount to claiming cenvat credit irregularly and that the applicant suppressed relevant facts. The appellants contested the show cause notice and submitted that there was no irregularity in taking credit or utilizing the same and it was not a case of removal as such but the destruction of capital goods was in an unavoidable accident. Some parts were retrieved and sent for repair to M/s Singh Electricals, Jabalpur, and CENVAT credit was claimed in terms of Rule 4 (5) (a) of the Cenvat Credit Rules. Further, other items like cable and accessories which were totally damaged were cleared as scrap and such clearance of scrap was on payment of duty. The appellants also submitted that the insurance company settled only the value of the goods destroyed and not the duty amount involved.
3. The appellants have been represented by Ld. Advocate, Sh. B.L. Nersemhan and Revenue has been represented by Ld. AR, Sh. Yogesh Agarwal.
4. The ld. Advocate for the appellant based on appeal memorandum and written submissions inter alia submits as follows:
i. As regards the claim for reversal of Cenvat credit availed on the capital goods damaged/destroyed in fire, it is submitted that firstly, such capital goods were not removed as such by the appellant, therefore, no question of reversal of credit under Rule 3(4) of the Credit Rules would arise.
ii. Admissibility of credit under the Credit Rules is subject to the fulfillment of the condition that such goods must be received and used in the factory of the manufacturer of final products. However, no duration/ time-limit of the said usage is specified under the Credit Rules for satisfying the said condition. In the present matter, the capital goods in question were used in the Appellantss factory for a period of almost 18 months, before these were damaged/destroyed in fire. These capital goods were neither cleared as such nor removed on sale. There is no provision in the Credit Rules for reversal of credit in the event they are damaged/destroyed in fire.
iii. The question of reversal of credit on the capital goods destroyed in fire came up for consideration before the Honble Tribunal in the case of Biopac India Corporation Ltd. vs. CCE, Vapi, 2008 (224) ELT 548 (Tri. Ahmd.) and it was held that there is no justification for reversal of credit on the capital goods destroyed in the fire. The appellant also relies on the Tribunals decision in case of Tata Advance Materials V. CCE, Bangalore-I, 2009 (241) ELT 92 (Tri.-Bang.)
5. The ld. AR for the Revenue reiterates the findings given in the impugned order.
6. We heard both the parties and have carefully considered the facts of the case, along with the cited case laws.
It appears that the subject matter is squarely covered by the Tribunals decision in case of Biopac India Corporation Ltd.(supra), which was upheld by the Honble Gujarat High Court in case of CCE vs. Biopac India Corporation Ltd., 2010 (258) ELT 56(Guj.). Similarl view was taken by the Tribunals decision in case of Tata Advance Materials (supra), which was upheld by the Honble Karnataka High Court in the case of CCE vs. Tata Advanced Materials Ltd., 2011 (271) ELT 62(Kar.) Honble Gujarat High Court in case of CCE vs. Biopac India Corporation Ltd. (supra) observes as under:
6. From the facts noted hereinabove, it is apparent that the capital goods which came to be destroyed during the fire had been actually put to use by the respondent assessee for a period of 4 to 7 years. Thus, it is not as if the said capital goods had not been used in the manufacture of the finished goods. Hence, the respondent was entitled to avail of the cenvat credit in respect of the same. Having used the capital goods over a period of time, when the same came to be destroyed in the fire, it cannot be stated that the said goods had not been used in the manufacture of final products so as to call for reversal of the cenvat credit availed in respect of the same. In the circumstances, no infirmity can be found in the approach of the Tribunal in holding that there was no justification for reversal of modvat credit in respect of the capital goods which had been fully destroyed in the fire.
6.1 Honble Karnataka High Court in the case of Tata Advanced Materials Ltd.(supra) in para 6 of the decision observes as under:
6. Therefore, it is clear that there is no provision in the rules which provides for a reversal of the credit by the Excise Authorities except where it has been irregularly taken in which event it stands cancelled or if utilized has to be paid for. This is not the case of the revenue. In the instant case, when the assessee purchased the capital goods and when he has paid the excise duty on them, in law, he is entitled to get the credit on the duty paid while clearing the finished products from his factory. Accordingly, he utilized the cenvat credit and cleared the finished products. It is about three years after such payment, the capital goods were destroyed in fire. As the assessee had insured the said capital goods, he put forth a claim for payment of the loss sustained by him, which includes the payment of excise duty. The Insurance Company in terms of the policy has compensated the assessee. Merely because the Insurance Company paid the assessee the value of goods including the excise duty paid, that would not render the availment of the cenvat credit wrong or irregular. At the same time, it does not confer any sight on the Excise Department to demand reversal of credit or default to pay the said amount. The assessee has paid the premium and covered the risk of this capital goods and when the goods were destroyed in terms of the insurance policy, the Insurance Company has compensated the assessee. It is not a case of double payment as contended by the department. At any rate, the Excise Department has no say in the instant case as held by the Apex Court. In that view of the matter, the substantial questions of law framed in this appeal are answered in favour of the assessee and against the revenue. Accordingly, the appeal is dismissed.
7. As the subject matter is covered by the decision of Honble Gujarat High Court in the case of Biopac India Corporation Ltd (supra) and by Honble Karnataka High Court decision in the case of Tata Advanced Materials Ltd. (supra), the impugned order is set aside and the appeal is allowed with consequential relief to the appellant.
[Pronounced in open Court on 19.12.2016] (Justice (Dr.) Satish Chandra) President (Ashok K. Arya) Member (Technical) NK 5-Page E/3749/2010/-EX[DB]