[Order]. - This appeal is filed against the Order-in-Appeal No. P-III/SLC/070/2007, dated 31-8-2007.
2. Considered the submissions made by both sides and perused the records.
3. It is the submission of the ld. JDR that the Commissioner (Appeals) has not considered the issue in totality. It is his submission that while setting aside the order-in-original which confirmed the demand of the reversal of the Cenvat credit which was in respect of dint he inputs and capital goods, which got destroyed in the fire in the factory premises of the appellant. The Commissioner (Appeals) has not given any findings as regards the reasons why she has allowed the appeal of the respondents in respect of the capital goods. He points out the findings in paragraph 6 in the order-in-appeal which reads as under :
“6. The issue before me is whether Cenvat credit availed on inputs which have gone into intermediate goods which were destroyed in the fire is required to be reversed. The appellant have clarified that the intermediate goods are work in process material and that the inputs had already been issued to the production shop. The fact that the goods in question were intermediate goods emerging in the course of production has been accepted both in the show cause notice and the O-I-O. The decision in the case of CCE, Chennai-III v. Indchem Electronics - (Tribunal - Chennai) which has been affirmed by the Supreme Court is clearly applicable in this case. Once such input has been issued for the process of manufacture, they satisfy the requirement of use in the manufacture of finished goods and the fact that the inputs have gone into the intermediate goods also does not make a difference to the credit being availed in terms of Rule 3 & 4 of the Cenvat Credit Rules 2004. This has been affirmed in number of decisions by the CESTAT also. In view of the above case law and in the absence of any allegation of diversion of goods, demand for reversal of Cenvat credit contained in, the intermediate goods is not sustainable. The appellant has also produced certificate from the Insurance Co. that they have not covered the Cenvat portion.”
It is his submission that the issue may be referred back to the Commissioner (Appeals) to reconsider the issue on the question of the Cenvat credit taken on the capital goods, destroyed due to fire.
4. Ld. counsel for the respondent, on the other hand, submits that the issue involved in this case is squarely covered by the decision of the Larger Bench in the case of Grasim Industries - (Tri. - LB) = 2007-TIOL-135-CESTAT-DEL-LB. It is her submission that when the appeal was filed before the Commissioner (Appeals), they have disputed the entire reversal of the credit as ordered by the adjudicating authority.
5. On perusal of the records it is seen that the adjudicating authority while confirming the demand on the respondents, has given the following findings as regards the Cenvat credit on the capital goods.
“With regard to the reversal of Cenvat Credit on the value of capital goods amounting to Rs. 8,91, 713/-, I apply the same analogy as in case of intermediate goods because such capital goods of said value were not used in the manufacture of final product. Therefore, I hold that the Cenvat credit amounting to Rs. 76,961/- is liable to be reversed by and recoverable from the noticee under Rule 14 of CERs, 2004 read With Section 11A of the Act.”
It can be seen from the above reproduced findings of the adjudicating authority that the adjudicating authority has applied the reasoning for reversal of Cenvat credit on the inputs of the intermediate goods, in confirming the demand of Cenvat credit on capital goods destroyed in fire. On perusal of the impugned order it is seen that while Commissioner (Appeals) allowed the entire appeal of the respondent by specifically gone into the details of the case as to the denial of the credit on the inputs which were going in the intermediate goods. Since both the issues are interlinked, Commissioner (Appeals) allowed the entire appeal. It is also seen from the appeal memoranda that the Revenue has not contested the fact that there was loss of capital goods and intermediate products in the factory premises of the respondent due to fire. It is also not disputed the fire and consequent destroying the inputs used in the intermediate products and the capital goods were accidental. I find that the issue is squarely covered in favour of the respondents by the decision of the Larger Bench in the case of Grasim Industries (supra). Respectfully following the decision of the Larger Bench in the case of Grasim Industries (supra) the appeal filed by the Revenue is rejected. The cross-objections filed by the respondents is also disposed off accordingly.
(Pronounced and dictated in Court)