Input credit not reversible in case of remission of duty on destroyed goods

Brief of the case:

The Hon’ble Madras High Court in the case of M/s Joy Foam P. Ltd held that the input credit of inputs need not to be reversed even in case the payment of duty has been ordered to be remitted under Rule 49 of Central Excise Rules, 2002. It is why because neither such reversal is a pre-condition for remission nor the remission can be considered as exemption.

Facts of the case:

• A fire broke out it in the factory of assessee as a result of which the stock of manufactured goods, raw materials, work-in-progress and the returned goods were destroyed. The assessee reversed the credit availed on stock of raw materials, returned goods and inputs contained in semi-finished goods, which destroyed in the fire accident.
• Assessee applied for remission of the duty , which was accepted conditionally by Commissioner on the direction to pay/reverse Cenvat credit of inputs contained in stock of finished goods got destroyed by fire.
• Assessee aggrieved by the order of Commissioner approached to CESTAT which held that the credit in respect of inputs contained in destroyed finished goods need not to be reversed by relying on the decision of Larger Bench of CESTAT New Delhi in the case of Inalsa Ltd.
• Aggrieved by the said decision of the CESTAT , the department is before High Court.

Contention of the Revenue: