By TIOL News Service

DHARWAD, JAN 10, 2013: THIS is a Revenue appeal as the order of the CCE, Belgaum dated 16.12.2002 was reversed by the CESTAT vide its order dated 02.12.2005.

The facts are that the respondent availed CENVAT credit on imported capital goods. It is the case of the Revenue that the credit availed in respect of the goods damaged during transit is not in order since the respondents claimed the money from the Insurance Company. On the ground that the inputs were not at all used in the manufacture of final product a demand was raised to recover Rs.46,56,143/- for the period from January 1997 to November 2000. The case was adjudicated by confirming the demand and a penalty of Rs.8,43,509/- was also imposed u/s 11AC of the CEA, 1944 and a penalty of Rs.50,000/- u/r 173Q of CER, 1944.

The CESTAT had allowed the appeal on the ground that even though the goods are damaged such goods were still in the factory and it cannot be concluded that the damaged goods cannot be repaired and the possibility of using the inputs for manufacturing the final product cannot be ruled out. Holding that the claim made by the Revenue was premature, the Bench set aside the order and allowed the appeal.

This order is called in question by the Revenue in its appeal before the High Court.

The High Court observed -

“9. Admittedly, the claim is in regard to the period from January 1997 to November 2000. The Tribunal has disposed of the appeal on 05.12.2005. The contention of the respondent that the goods were damaged during transit and as a result of which the inputs could not be used for manufacturing the final products. If it is so, the Tribunal did not consider the vital aspect of the matter on account of the damaged causes to the inputs, it cannot be used for final product and when the respondent has claimed the insurance, we are at a loss to understand how the claim of the appellant can be considered as premature.

10. Be that as it may, when the demand is in respect of the period from January 1997 to November 2000, when the appeal is disposed of in the year 2005, at least the Tribunal was required to examine, whether the respondent has used inputs for the manufacture of final products and duty has been paid by the respondent to the appellant and without ascertaining this factual aspect, the Tribunal has erroneously passed an order.”

Holding so, the High Court directed the Tribunal to reconsider the matter afresh and allowed the Revenue appeal.

(See 2013-TIOL-21-HC-KAR-CX)