SWEET INDUSTRIES Vs. CCE

JUDGEMENT

(1.) IN this appeal the appellants are challenging the demand for interest confirmed by the Commissioner (Appeals) as detailed below:

(2.) HEARD both the sides. Shri P.M. Dave, ld. Advocate on behalf of the appellants fairly admits interest liability on the finished goods which were destroyed in fire accident which took place on 26/1/2004, in view of the fact that the remission application filed by the appellants according to his information has not been considered favourably by the Commissioner. As regards interest on the Cenvat credit of Rs. 1,25,844/ - reversed by them on the inputs contained in semi -finished goods destroyed in fire, he submits that in view of the decision of the LB of the Tribunal in Grasim Industries v. CCE, Indore 2007 (208) ELT 336 (Tri. LB) and the decision of the Tribunal in Inalsa Ltd. v. CCE, New Delhi , they need not even reverse the credit taken on the inputs contained in semi -finished goods destroyed in fire since the requirement of the Cenvat Credit Rules that the inputs should have been used in the manufacture has been fulfilled as per the decisions cited above. Therefore the question of demand of interest does not arise. As regards interest on the amount of Cenvat credit of Rs. 19,06,198/ - reversed by them on the inputs lying as such, he submits that Section 11AB is not at all applicable in this case. Section 11AB is applicable only where there is a short levy or non -levy of duty of excise or where an assessee failed to pay the duty required to be paid by him before 5th of the next month. In their case what is required is reversal of Cenvat credit and therefore Section 11AB does not cover such instances. He also pointed out that Sub -rule 5 of Rule 3 of Cenvat Credit Rules is relevant in this case since it can be said that inputs are removed as such from the factory when they get destroyed. In such a case also Cenvat Credit Rules require that the assessee shall pay an amount equal to the credit availed in respect of such inputs or capital goods and no time limit is prescribed. He further submits that even if it is assumed that duty should be debited next month, in such cases also, their case is not covered by the rule in view of the fact that the rules specifically provide that such inputs or capital goods shall be removed under the cover of an invoice referred to in Rule 9 and it is not anybody's case that the goods destroyed in a fire accident have to be covered by an invoice. As regards the last and 4th item which is the amount of Cenvat credit of Rs. 6,38,393/ - which was availed by them in April, 2004 by which time the capital goods had already been destroyed, he submits that there is no interest liability at ail in view of the following viz. the credit taken was never utilized till the date of reversal and in view of the decision of the Tribunal in Sagar Twisters v. CCE , credit taken but not utilized till reversal is not liable to interest; in view of Sub -rule 2(a) of Rule 4 of Cenvat Credit Rules, they were entitled to take the cenvat credit in respect of capital goods for the whole amount of duty paid in the same financial year since the capital goods were destroyed in fire and became scrap in January i.e. in the same financial year. As per Sub -rule 5(A) of Rule 3, if the capital goods are cleared as waste and scrap the manufacturer is required to pay an amount equal to the duty eligible on transaction value and in this case the scrap was cleared on payment of duty applicable under transaction value thereby fulfilling the requirement of Cenvat Credit Rules. Summing up, he submits that there is nothing liable to be paid by them and they have fulfilled all the obligations required as per law.

(3.) AFTER considering the submissions of both the sides, I find considerable force in the arguments advanced by the ld. Advocate on behalf of the appellants. In view of the Larger Bench decision in the case of M/s. Grasim Industries cited above, there is no liability of interest on Rs. 1,25,844/ - Cenvat credit reversed by them since the inputs have been issued for manufacture and were contained in semi -finished goods and there is no dispute on this aspect. As regards interest on cenvat credit of Rs. 19,06,198/ - on the inputs lying as such and destroyed in fire accident, in view of the fact that Section 11AB applied to only in cases of non -levy or short levy of excise duty or non -payment of duty by the due date as required under law, Section 11AB is clearly not applicable. I also find that interest is not demandable under any of the provisions available and relevant to the facts of the case. Therefore the demand of interest on this amount also cannot be upheld. Coming to the cenvat credit of Rs. 6,38,393/ - taken on capital goods, in view of the fact that the credit was not at all utilized as mentioned in the appeal memo submitted by the appellants, and in view of the decisions of the Tribunal cited above that interest is not payable if the credit has not been utilized, the demand for interest on this amount also has to be set aside. I am not going into the merits of other contentions since the benefit of non -levy of interest on this ground alone is sufficient.