Custom, Excise & Service Tax Tribunal
M/S Libra International Ltd vs C.C.E., Chandigarh I on 25 March, 2013
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R.K.Puram, New Delhi COURT-III Date of hearing/decision: 25.3.2013 Central Excise Appeal No. 3176 of 2010 Arising out of the order in appeal No.83/CE/Chd-I/2010 dated 14.6.2010 passed by the Commissioner (Appeals), Central Excise, Chandigarh II. For Approval and Signature: Honble Mr. Rakesh Kumar, Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982? 2 Whether it should be released under Rule 26 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3 Whether their Lordships wish to see the fair copy of the Order? 4 Whether Order is to be circulated to the Departmental authorities? M/s Libra International Ltd. .. Appellant Vs. C.C.E., Chandigarh I . Respondent
Appearance:
Shri Gagan Kohli, Advocate for the appellant Shri R.K. Mathur, A.R. for the Revenue/respondent Coram: Honble Mr. Rakesh Kumar, Member (Technical) Final Order No.55890/2013 Per Rakesh Kumar:
The appellant are manufacturer of PU foam chargeable to central excise duty. On 19.7.2005, a fire accident took place in the factory in which stock of finished goods involving central excise duty of Rs.23,64,289/- was destroyed. The appellant submitted an application for remission of duty under Rule 21 of Central Excise Rules, 2002 on 31.6.2005. However, the Department insisted that before claiming remission of duty, they must reverse the cenvat credit amounting to Rs.18,21,174/- involved on the inputs used in the manufacture of finished goods which had been destroyed. Ultimately, the appellant paid an amount of Rs.18,21,174/- plus interest of Rs.2,35,373/-. On this basis, remission of duty of Rs.23,64,289/- claimed by the appellant was allowed by the Commissioner. Subsequently, the appellant on realising that in terms of the Cenvat Credit Rules as the same existed during the period of dispute, they were not required to reverse the credit, they filed an application for refund of the credit along with interest which had been paid by the appellant. Thus refund application was rejected by the Deputy Commissioner vide order dated 1.5.2009.On appeal to the Commissioner (Appeals), the order of the Deputy Commissioner was upheld vide order in appeal dated 14.6.2011. Since the appellant had also claimed insurance in respect of the finished goods lost in fire and since from the insurance company they received compensation for the finished goods lost in fire which also included the element of duty, they are not challenging the Commissioner (Appeals) order upholding the rejection of refund of cenvat credit. The only challenge in this appeal in respect of the order upholding the rejection of refund claim of the interest amounting to Rs.2,35,373/- on the cenvat credit which according to the appellant had been wrongly reversed.
2. Heard both sides.
3. Shri Gagan Kohli, Advocate, the ld. Counsel for the appellant, pleaded that fire accident had taken place on 19.7.2005 in which finished goods involving central excise duty of Rs,23,64,289/- had been lost, that at that time, there was no provision in the Cenvat Credit Rules, 2004 providing that for claiming remission of duty on the finished goods lost in fire/ accident, the cenvat credit in respect of the inputs used in the manufacture of those goods would be required to be reversed, that such provision was made by inserting Rule 3(5C) in the Cenvat Credit Rules, 2004 w.e.f. 7.9.2007 by Notification No.33/2007-CE(NT) dated 7.9.2007, that for the period prior to 7.9.2007 the provision of Rule 3(5C) cannot be applied and for this period, the Larger Bench of the Tribunal in the case of Grasim Industries vs. C.C.E., Indore reported in 2007 (208) ELT 336 (Tri-LB) would be applicable , wherein it has been held that when remission of duty is claimed in respect of finished goods lost in accident/fire, the cenvat credit in respect of the input used in the manufacture of those finished goods lost/accident is not required to be reversed; that in view of Hon.ble Karanataka High Court judgment in the case of C.C.E., Bangalore vs. Tata Advanced Materials Ltd. reported in 2011 (271) ELT 62 (Kar.) when cenvat credit availed capital goods were lost in fire, and the Assessee received payment from insurance company which included the central excise duty, the Assessee would not be required to reverse the cenvat credit in respect of the capital goods lost in fire, that in view of this, when the cenvat credit itself was not required to be reversed for remission of duty, there is no question of payment of interest on the cenvat credit, and that in view of this, the impugned order upholding rejection of refund claim for interest is not sustainable.
4. Shri R.K. Mathur, ld. Departmental Representative for the respondent supported the impugned order reiterating the finding of the Commissioner (Appeals).
5. I have considered the submissions made from both sides and perused the record. The fire accident had taken placed on 19.7.2005. It is only with effect from 7.9.2007 that by inserting Rule 3(5C), provision was made in Cenvat Credit Rules providing that when any goods manufactured are lost in fire/accident and remission of duty on the goods lost is claimed under Rule 21 of the Central Excise Rules, 2002, the cenvat credit availed on the inputs used in or in relation to the manufacture of such goods shall be reversed. For the period prior to 7.9.2007 this issue was governed by the judgment of the Larger Bench of this Tribunal in the case of Grasim Industries vs. C.C.E., (supra) holding that where any finished goods lost /destroyed in fire or accident, and remission of duty under Rule 21 of Central Excise Rules is claimed in respect of said goods, cenvat credit in respect of inputs is not required to be reversed. Same view has been taken by a Larger Bench of Honble Gujarat High Court in the case of C.C.E., Ahmedabad II vs. Intas Pharamaceuticals Ltd. reported in 2013 (289) ELT 256 (Guj.). Besides this, the fact that the Appellant had received compensation for finished goods lost in fire, from insurance company which included the element of duty on finished goods lost, would also not come in the way of availing cenvat credit in view of judgment of Honble Karnataka High Court in the case of Tata Advanced Materials Ltd. (supra), When in respect of finished goods lost in fire in this case, the input cenvat credit was not required to be reversed, for claiming remission of duty, there was no question of payment of interest on such cenvat credit. Since the appellant have paid an amount equal to the amount of cenvat credit along with interest, and since they are claiming refund of interest, they are entitled for the same. The impugned order upholding the denial of refund is , therefore, not sustainable. The impugned order with regard to denial of refund of interest is, therefore, set aside. The appeal is allowed with consequential relief to the appellant.
(Rakesh Kumar) Member (Technical) scd/ 1