Decided on March 18,2015



H.K. Thakur, Member (T) - (1.)THIS appeal has been filed by the appellant with respect to OIO No. SUR -EXCUS -002 -COM -078 -13 -14 dated 31.01.2014, under which demands have been confirmed with respect to credit taken on capital goods and inputs contained in semi -finished goods/work in progress, destroyed in a fire accident. A demand of Rs. 8,41,009/ - is also made with respect to services availed by the appellant used in the installation/erection/fabrication of capital goods destroyed in fire.
(2.)SHRI Vinay Kansara (Advocate) appearing on behalf of the appellant argued that appellant has three plants S1, S2 and S3. That on 03.02.2012 a fire incident occurred in S1 plant of the appellant which is used for manufacturing of chemical known as MCCP. Learned Advocate argued that CENVAT credit on capital goods and inputs contained in semi -finished goods/work in progress can not be denied in view of the following case laws: -
(i) CCE & Customs vs. Biopac India Corporation Limited [ : 2010 (258) ELT 56 (Guj.)]

(ii) CCE Chennai -III vs. Indchem Electronics [ : 2003 (151) ELT 393 (Tri. Chennai)]

(iii) CCE, Bangalore vs. Tata Advanced Materials Limited [ : 2011 (271) ELT 62 (Kar.)]

2.1 That in view of the above settled law, credit of services used in installation and erection of machinery is also not demandable.

Shri J. Nair (Authorised Representative) appearing on behalf of the Revenue defended the order passed by the adjudicating authority. It was also pointed out by him that as per Para 25 (ii) of the adjudication order, a demand of Rs. 1,15,953/ - is with respect of destruction of inputs as such and is recoverable from the appellant. As a counter this argument, learned Advocate brought to the notice of the bench Panchnama dated 07.2.2012 according to which only semi -finished goods/work in progress have been destroyed. He also brought to the notice of the bench Annexure B of the show cause notice dated 28.01.2013 where Rs. 1,15,953/ - have been demanded only for raw material burnt/destroyed in fire which were under process of manufacture of MCPP crude.

(3.)HEARD both sides and perused the case records. It is observed from the facts of the case available on record that certain capital goods, which were used for considerable period and inputs contained in the semi -finished goods/work in progress were destroyed in a fire accident that happened on 03.02.2012. Hon'ble Gujarat High Court in the case of CCE & Customs vs. Biopac India Corporation Limited (supra) held as follows in Para 6 and 7: -
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.

7. Insofar as the demand in respect of the duty involved on finished goods and semi -finished goods destroyed in the fire, the Tribunal has found as a matter of fact that the adjudicating authority had not disputed the fact that the finished goods as well as semi -finished goods were fully destroyed in the fire inspite of the respondent having taken all precautions. The Tribunal placed reliance upon the decision of the Larger Bench of the Tribunal in the case of Grasim Industries v. C.C.E., Indore,, 2007 (208) E.L.T. 336 (Tri. - L.B.), wherein it had been held that the credit availed on inputs destroyed in fire was not required to be reversed and accordingly, set aside the demand on that count.

In view of the above settle legal proposition, demand of CENVAT credit taken with respect to capital goods in use and inputs contained in semi -finished goods/work in progress are required to be set -aside. Following the above ratio, no demand of credit taken services used in installation of capital goods destroyed in fire, can sustain.


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