fiogf49gjkf0d
Assessee availed CENVAT credit of duty paid on capital goods on clearing goods — Capital goods destroyed in fire — Insurance company compensated assessee for the loss including duty — Revenue directed assessee to reverse the credit in respect of lost goods and confirmed demand — Issue, whether payment by insurance company renders regular credit as irregular — Held, No provision in Rules which empower reversal except in the cases when credit is taken irregularly.
Facts:
The assessee availed CENVAT credit of excise duty paid on capital goods bought and used in manufacturing excisable goods. About five years later, they were destroyed in a fire accident. Based on purchase invoice of new capital goods, a claim was put before the insurance company for reimbursement in terms of the policy taken. The reimbursed amount also included excise duty paid on the newly bought capital goods. The Department on getting such information directed the assessee to reverse the credit taken earlier on the lost goods. The assessee challenged it. The Tribunal held that the assessee had legally availed CENVAT credit. There is no legal provision which empowers the authorities to reverse CENVAT credit otherwise than in case of wrongful availment. The claim of the Department that assessee attained double benefit was also found without basis. The substantial question of law before the Court therefore was whether the impugned order amounted to encouraging unjust enrichment and whether or not credit can be claimed on goods lost in fire and for which they received compensation.
Held:
There is no provision in the Rules providing for reversal of credit except when it is irregularly taken and that was not the Revenue’s case. Merely because the assessee was compensated by the insurance company would not render legally taken credit irregular and it does not confer right on the authorities to demand reversal of credit. The assessee paid premium and covered the risk. It is not the case of double payment and the Department has no say in the matter.
