NECTAR LIFESCIENCES LTD. Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) THE appellant herein is engaged in the manufacture of excisable goods falling under Chapters 29 and 30 of the First Schedule to the Central Excise Tariff Act, 1985. They were availing the Cenvat credit facility in respect of inputs, capital goods and input services, which was being utilized by them in the manufacture of their final products. On 7 -5 -2007, a fire broke out in the bulk drug plant of the appellant which resulted in the destruction of the stock lying therein, to the tune of around Rs. 25 crores. The fact of fire incident was immediately brought to the notice of their jurisdictional Central Excise authorities by way of writing a letter to them on 8 -5 -2007. For better appreciation, we reproduce the contents of the said letter:

(2.) THEREAFTER various letters were written by their range office in the months of June, July and August, 2008 requiring the appellant to produce documentary evidence of duty involved in respect of inputs, inputs lying in process and final product destroyed in fire. In response to said letter, the appellant vide their letter dated 25 -8 -2008, intimated the Revenue that the entire material lost in fire was work in process material and as such, credit on the inputs which have been used in the manufacturing process and were lying at work in process stage is not required to be reversed. They also clarified that inasmuch as the goods had not reached the final stage, and as such cannot be held to be fully manufactured goods, no remission of duty is required to be availed. That explains as to why no application in terms of Rule 21 seeking remission of duty in respect of fully manufactured goods, stands filed by them.

(3.) THE appellants strongly contested the above proposal of the Revenue by submitting that the fire broke out at the bulk drug unit and the goods destroyed were work in progress. The inputs after availing the Cenvat credit are stored in the inputs store, which is away from the factory and are issued and taken to the work floor for the purpose of further manufacture. As the fire broke in respect of the unit manufacturing the final product, it cannot be said that the inputs were destroyed, before the same were issued. Inasmuch as the goods destroyed were work in progress, and neither the inputs as such nor the final product, the Revenue's proposal to seek reversal of credit is not justified. They contended that the Revenue has not verified the factual position before issuing the show cause notice and as is clear from the chart, the various goods were at the first or second stage of the manufacturing process and were generated by various stages of manufacture. They also submitted that the straightway demand of an amount at the rate of 16.32% of the value of claim filed with insurance company for the loss of intermediate goods is not proper inasmuch as admittedly the goods had not reached the final stage and the Cenvat credit reversal cannot be arrived at by applying the rate of duty applicable on the final product. For the above proposition, they relied upon various decisions of the Tribunal as detailed below: -