Kosi Plast Pvt. Ltd. v. Commissioner of Central Excise, Pune

]. - The appellant is in appeal against the impugned order wherein CENVAT credit on inputs which lost in fire “as such” has been denied by the lower authorities.

2. Brief facts of the case are that on 28-3-2010 a fire took place in the factory premises of the appellant wherein inputs, semi-finished goods, finished goods and capital goods were destroyed. The appellant claimed for remission of duty on the goods lost in fire. CENVAT credit on capital goods, finished goods and semi-finished goods is not an issue before me. The only issue before me is that whether the appellant Is entitled to take CENVAT credit availed by the appellant which were not put in use and destroyed “as such” or not.

3. Heard the parties.

4. The contention of the learned counsel for the appellant Is that there is no provision in law to reverse CENVAT credit on inputs lost in a fire. To support this contention, he relied upon the judgement In the case of Khurana Woolen Mills (P) Ltd. v. C.C.E - (P & H). He also submits that the all the inputs which lost in fire are not cenvatable, some inputs were not purchased by them against commercial Invoices on which they have not taken CENVAT credit. This aspect-has not been considered and CENVAT credit has been denied. The contention of the appellant is that when they have not taken CENVAT credit therefore, question of denial of CENVAT credit does not arise.

5. On the other hand the learned A.R. appearing for the Revenue submits that Rule 3(5B) of CENVAT Credit Rules, 2004 has been amended in 2009 and as per the said Rule the appellant is required to reverse the CENVAT credit on inputs which were destroyed in fire. Therefore, the decision in the case of Khurana, Woolen Mills (P) Ltd. (supra) relied on by the appellant is not applicable as the judgment has been pronounced prior to 2009.

6. Heard the parties and considered the submissions made by both the sides.

7. As per Rule 3(5B) of C.C.E which is reproduced here-in- under, 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 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”. Further, I find in the claim of the appellant that certain inputs were not purchased by them against Central Excise invoices and they are not claiming CENVAT credit on them. This aspect has to be examined by the adjudicating authority hence, the matter; needs examination at the end of the adjudicating authority. The adjudicating authority will examine the claim of the appellant with supporting evidence which will be produced by the appellant. The matter is remanded to the adjudicating authority to the extent only. The issue of levy of interest is kept open.

8. Appeal is disposed of in the above terms.

(Dictated in Court)