JUDGMENT
Smt. Archana Wadhwa
1. Vide his impugned order, the Commissioner of Central Excise, Patna has confirmed the demand of duty of Rs. 8,08,909.00 (Rupees eight lakh eight thousand nine hundred and nine) in respect of the inputs which got destroyed by fire in the appellants’ factory when they were awaiting their utilisation. Another amount of Rs. 2,52,155.00 (Rupees two lakh fifty-two thousand one hundred and fifty five) has been Confirmed in respect of those inputs which were used by the appellants in the manufacture of the final products, but the final products were not cleared and got destroyed by fire.
2. Shri B.N. Chattopadhyay, learned Consultant for the appellants submits that the final products which were destroyed by fire, are the goods in respect of which the remission of duty is available under the provisions of Rule 49 of Central Excise Rules, 1944. As such, there was no justification for the Commissioner to direct for reversal of the MODVAT Credit in respect of the inputs contained in such final products. For the above proposition, he relies upon the Tribunal’s decision in the case of Kirloskar Electric Company Ltd. v. Commissioner of Central Excise, Bangalore, 2002 (48) RLT 689 (CEGAT-Ban.), wherein it was held that when the final product of the assessee gets destroyed and the duty-liability was remitted under the provisions of Rule 49, Rule 57C is not attracted and the credit of duty availed in respect of the inputs used in such final product, is not to be reversed. He also relied upon the Tribunal’s decision as reported in 2997 (19) RLT 308 (CEGAT) and 2002 (54) RLT 925 (CEGAT).
3. As regards the reversal of credit availed in respect of the inputs which was lying as such in the appellants’ factory he submits that the appellant became entitled to avail the modvat credit as soon as the inputs were received in the factory. Inasmuch as the same were intended to be utilised in the manufacture of the final product, the appellant took the modvat credit and also utilised the same inasmuch as there is no one to one correlation between the inputs and the final products. He submits that the Larger Bench of the Tribunal in the case of CCE, Rajkot v. Ashoke Iron & Steel Fabricators, 2002 (145) ELT 301 (Tri-Delhi-LB) has held that where the final product became exempted subsequent to the taking of the modvat credit, the credit is not required to be reversed even though the inputs were lying ‘as such’ in the factory and have not been used in the manufacture of the final product. Shri Chattopadhyay, Ld. consultant submits that following the ratio of the decision, credit availed by them in respect of the inputs destroyed in the fire is not required to be reversed.
4. Shri Chattopadhyay also submits that under the MODVAT provision, inputs can be removed as final product, as if the same has been manufactured by the assessee. If the same is allowed to be cleared as final product, the same gets the status of the final product and the provisions of Rule 49 would become applicable. As such, he submits that the destruction of the inputs would become at par with the destruction of the final product, as the provision for remission of duty would be available.
5. We have also heard Shri T.K. Kar, Ld. SDR appearing for the Revenue who submits that in respect of the inputs lying as such in the appellants’ factory, remission of duty would not be permissible inasmuch as there is no provision to that effect in the modvat rules. The inputs have not been used in the manufacture of the final product and as such it cannot be said that they got destroyed during the course of manufacture.
6. We have considered the submissions made from both the sides. As regards the direction to reverse the credit in respect of the inputs contained in the final product, which were destroyed by fire, we agree with the contention of the Ld. consultant that the issue is no more res integra and stands decided by the various Tribunal’s decisions relied upon by the appellant. Accordingly we set aside the said portion of the impugned order confirming demand of duty of Rs. 2,52,155.00.
7. As regards the reversal of credit in respect of the inputs which were lying in the appellants’ factory unutilised and got destroyed in the fire, it is seen that the said inputs were admittedly neither used in the manufacture of the final product, nor even issued for the manufacture. They were lying as such in the appellants’ premises. The modvat credit on the inputs is available only when the inputs are used in or in relation to the manufacture of the final product. In the present case they cannot even be said to have been used in relation to the manufacture of the final product, or can be said to have been destroyed during the manufacture of the final product, inasmuch as the same were admittedly not even issued for the manufacture. The appellants’ reliance upon the larger Bench decision in the case of Ashoke Iron is not appropriate inasmuch as the decision was given in the different set of facts and circumstances. The inputs were received by the appellants in that case, and were admittedly used in the manufacture of the final product, though no duty was paid on the final product. As such the facts and circumstances of that decision are distinguishable from the facts of the instant case inasmuch as in the present matter after receiving the inputs the same were destroyed by fire.
8. We also do not find any merits in the appellants’ contention that such inputs have to be treated at par with the final product, because the same can be cleared on payment of duty and by treating the same as final product, remission of duty should be granted on the same. Firstly the inputs received by the appellant are not manufactured by them and it is only under the deeming provisions of law that the same have to be cleared on payment of duty at the rate applicable by treating the same as final product. No remission of duty is provided in respect of the inputs deemed to have been cleared as final product.
9. In view of the foregoing the demand of duty of Rs. 2,52,155.00 is set aside and the” demand of duty to Rs. 8,08,909.00 is confirmed. Appeal is disposed of in above terms.
