Commissioner of C. Ex. and Customs vs Biopac India Corporation Ltd.

H.N. Devani, J.—Appellant-revenue in this appeal u/s 35G of the Central Excise Act, 1944 (the Act), has challenged the order dated 28-11-2007 [2008 (224) E.L.T. 548 (Tri. - Ahmd.)] made by the Customs, Excise & Service Tax Tribunal (the Tribunal), proposing the following four questions:

[1] Whether, in the facts and circumstances of this case, the Tribunal is justified in setting aside the demand of duty on finished goods and semi-finished goods which were destroyed in fire by holding that the provisions of the Modvat Rules seek reversal of credit only in a situation where the capital goods are either removed as such or sold?

[2] Whether, in the facts and circumstances of this case, the Tribunal is justified in setting aside the demand of duty on finished as well as semi-finished goods destroyed in fire by holding that the adjudicating authority has not disputed the fact that the goods were fully destroyed in fire inspite of the respondent having taken all the precaution whereas the remission application filed by the respondent has been rejected by the Commissioner under Rule 1 of Central Excise Rules, 2002 by virtue of which the Commissioner has been empowered with the discretionary power to grant the remission of duty?

[3] Whether, in the facts and circumstances of this case, the Tribunal is justified in law in holding that no reversal of modvat credit in respect of the capital goods destroyed in fire was required?

[4] Whether, in the facts and circumstances of this case, the Tribunal is justified in law in holding that no reversal of Cenvat Credit on the inputs used in the manufacture of finished and semi-finished goods destroyed in fire?

The respondent-assessee is engaged in the manufacture of plastic raw materials and petrochemicals classifiable under Chapter 39 of the Central Excise Tariff Act. A fire took place in the factory of the assessee on 14-12-2004 and the goods lying at various stages, that is, raw materials, finished goods, semi-finished goods and machinery were totally damaged. The central excise authorities were given intimation in respect of the same pursuant to which, they visited the factory and drew a panchnama taking stock of finished goods, semifinished goods, inputs and capital goods/machinery fully destroyed in the said fire. Vide order dated 9-1-2007 made by Commissioner of Central Excise & Customs, Vapi, the respondent was directed to pay modvat credit of Rs. 1,16,59,093/- availed by it in respect of the machinery/capital goods destroyed in the fire. Central excise duty amounting to Rs. 9,30,300/- also came to be confirmed in respect of the semi-finished goods and finished goods destroyed in the fire. The respondent was also directed to reverse the cenvat credit of Rs. 95,503/-availed on the inputs used in semi-finished and finished goods destroyed in the fire and cenvat credit of Rs. 60,558/- in respect of the inputs destroyed as such in the fire. Interest came to be levied u/s 11B of the Act and penalty of Rs. 25 lakhs also came to be levied under Rule 25 of the Cenvat Credit Rules, 2004.

The assessee carried the matter in appeal before the Tribunal and has partly succeeded.

Mr. Varun Patel, learned standing counsel for the appellant-revenue has vehemently assailed the impugned order, submitting that insofar as the capital goods which were destroyed during the course of fire are concerned, it cannot be said that the same were used in the manufacture of finished goods so as to entitle the respondent assessee to avail of the benefit of cenvat credit thereon. Learned advocate further submitted that in respect of the inputs used in the manufacture of semi-finished goods which had been lost in the fire, it cannot be said that the same had been used in the manufacture of final products. Hence, the cenvat credit in relation to the semi-finished goods destroyed in fire was inadmissible and as such, was required to be reversed. It was submitted that once the cenvat credit on goods destroyed in the fire had been reversed, the same was required to be reversed with interest. The respondent having not paid interest on such reversal, the adjudicating authority had rightly rejected the claim of the respondent.

As can be seen from the impugned order of the Tribunal, the Tribunal has noted that insofar as the capital goods are concerned, the same were procured by the respondent during the period 1997 to 2001 and had been used in the factory of the respondent. That the same were destroyed in December 2004, that is, after putting the same to use for a period of almost 4 to 7 years. That the adjudicating authority himself had observed that the said capital goods were totally burnt/destroyed in the fire accident. The Tribunal found that when the credit in respect of the capital goods had been availed, the same was in accordance with law. The capital goods had been put to use for a number of years before the same were ultimately destroyed in the fire. That the provisions of Modvat Rules provide for reversal of credit only in a situation where the capital goods are either removed as such or sold. In the instant case, neither the capital goods had been cleared "as such" nor removed on sale. The Tribunal, accordingly, did not find any justification for reversal of modvat credit availed by the respondent on the capital goods, which after being put to use were fully destroyed in the fire accident.

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.

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.

Thus, the Tribunal has merely followed an earlier decision of the Larger Bench of the Tribunal and based its conclusions upon findings of fact recorded by it upon appreciation of the evidence on record. On behalf of the revenue, nothing has been pointed out to show that the Tribunal has taken into consideration any irrelevant material or that any relevant material has been ignored. In the circumstances, it cannot be stated that the Tribunal has committed any legal error so as to call for intervention.

In matters involving similar controversy this Court has already held in cases of Commissioner of Central Excise & Customs v. CDN Garments (Tax Appeal No. 1144 of 2009) decided on 7-7-2010 and Commissioner of Central Excise Customs & Service Tax v. Pololight Industries Limited (Tax Appeal No. 1363 of 2009) decided on 7-7-2010, that no substantial question of law arises.

For the foregoing reasons, it cannot be stated that the impugned order of the Tribunal suffers from any legal infirmity so as to warrant interference. No question of law, much less any substantial question of law, can be stated to arise out of the impugned order of the Tribunal. The Appeal is, accordingly, dismissed.