Whether refund of duty under Rule 21 for finished goods destroyed in fire deniable on the ground that amount received from insurance company is inclusive of Cenvat?

PJ/Case Law/2013-14/1704

Case:-PRAGNA DYECHEM PVT. LTD. VERSUS COMMR. OF C.EX. & CUS. (APPEALS), SURAT-II

Citation:-2013(29) E.L.T. 117 (Tri.-Ahmd.)

Brief Facts:-The appellant filed this application for refund of Central Excise Duty of Rs. 1,89,582/- under Rule 21 of Central Excise Rules, 2002 in respect of finished goods destroyed in fire on 26-11-2007. The duty involved on the inputs utilized for the final products came to Rs. 1,01,085/-. The application for refund of Central Excise Duty has been rejected on the ground that the appellant had made a claim to insurance company on the goods destroyed and the claim included the Cenvat credit also. Since appellants received the Cenvat credit amount from the insurance company, in the impugned order a view has been taken that the appellant can be deemed to have utilized the amount of Rs. 1,01,085/- obtained from the insurance company for payment of duty on other final products and thus the situation is as if the Cenvat credit has not been reversed at all.

Appellant Contention:-The appellant submitted that that there is no provision in the Rules for the conclusion reached by the ld. Commissioner in the impugned order. He submits that according to Rule 3(5C) of Cenvat Credit Rules, the credit is required to be reversed if refund is granted. Nowhere in the Rules there is an indication or a requirement that the appellant should not get the Cenvat credit compensated from the insurance company. He relies upon the decision of the Tribunal in the case of M/s. Tata Advance Materials v. Commr. of C. Ex., Bangalore-I reported in 2009 (241) E.L.T. 92 (Tri.-Bang.) and M/s. Tulsi Intermediates Pvt. Ltd. v. Commr. of C. Ex. & Customs, Vadodara reported in 2010 (251) E.L.T. 225 (Tri.-Ahmd.) in support of his contention

Respondent Contention:-Ld. D.R. reiterates the observation of the Commissioner in the order.

Reasoning of Judgment:-We have considered the submission from both parties and perused the record, we find that the Cenvat Credit Rule requires the assessee to reverse the cenvat credit taken on the inputs contained in the finished products only and there is no specific provision to say that the amount should not have been claimed from the insurance company. In the absence of any specific provisions in the rules, the ld. Commissioner has erred in observing that the company can be deemed to have utilized the amount from insurance company for payment of duty of other final products. It is to be noted that even if the goods are destroyed, the appellants would have lost the entire value of the goods which would include raw materials, used labour and overheads for manufacture etc. Further the Cenvat credit is available to the appellants, once the raw materials are used. In such a situation, if such Cenvat credit is required to be reversed and if appellant receives compensation from the insurance company, it cannot be said to be unjust enrichment or cannot be said to amount to utilization of the amount for payment of duty of other final products. The loss of duty liability on the raw materials used has only been compensated by the insurance company on the basis of premium paid. In the absence of specific provisions in the statute, we cannot go into the question of intention or the deemed situation to deprive the benefit. Further the two decisions cited by the ld. Counsel are also applicable to the facts of the case. In view of the above discussion, the appeal is allowed and the impugned order is set aside.

Decision:-The appeal is allowed.

Comment: The essence of this case is that goods are destroyed in fire and appellant has received insurance claim for the cenvat element also contained in the destroyed goods, it cannot be said that the appellant is not entitled for refund of duty under Rule 21 in respect of finished goods.

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PJ/Case Law/2013-14/1704

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