Case Law Details
Comfort Polymers Pvt. Ltd. Vs CCE- Jammu (CESTAT Chandigarh)
In the case of Comfort Polymers Pvt. Ltd. Vs. CCE- Jammu, the CESTAT Chandigarh ruled in favor of the taxpayer. The dispute revolved around the applicability of Rule 3(5B) and 3(5C) of the Cenvat Credit Rules, 2004, regarding the reversal of CENVAT credit on destroyed goods during the manufacturing process.
Analysis: The taxpayer faced two issues: one concerning the credit availed on inputs used for further manufacturing, and the other regarding material in process/work in progress destroyed in a fire accident. The authorities relied on Rule 3(5B) and 3(5C) to confirm the demand, seeking the reversal of CENVAT credit.
However, the Tribunal referred to various precedents and judgments to clarify the applicability of these rules. Notably, the case of M/s CIPY Polyurethanes Pvt. Ltd. vs. CCE, Kohlapur, held that if inputs are issued for further manufacturing, and goods are destroyed during the manufacturing process, no reversal of CENVAT credit is required. Similarly, the case of SMG International confirmed that Rule 3(5B) is applicable only when inputs or capital goods become obsolete and are written off.
Based on these precedents, the CESTAT Chandigarh ruled in favor of Comfort Polymers, stating that Rule 3(5B) and 3(5C) were not applicable in this case. The demand for reversal of CENVAT credit on destroyed goods was deemed unsustainable and set aside.
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