Judgment:
1. The stay application arose out of the order of the Commissioner of Central Excise, Thane. In the impugned order, the Commissioner demanded Rs. 22,73,611/- and imposed an equal amount of penalty on the applicant. The issue involved relates to remission of duty on semi-finished goods destroyed in Hoods on 26.6.2002.
2. The applicant is a manufacturer of goods falling under Chapter 73 of the Central Excise Tariff Act, 1985. The demand arose out of the fact that the applicant took cenvat credit on the packing material and dyes and tools which were later destroyed in floods. It is the department's contention that since the cenvat credit on packing material and dyes and tools was already taken but the inputs were not used in the manufacture of final products but were lost in floods, cenvat credit taken should be reversed. The applicant contends that the formula adopted by the Commissioner in working out the cenvat credit contained in the semi-finished goods which were destroyed is arbitrary and that there is no one-to-one correlation between the inputs and semi-finished products under the Modvat Scheme. The applicant also relied on the decision in the case of Samtel Colour Ltd. v. CCE, Ghaziabad (2004 [171] ELT 101) wherein the Tribunal held that once the inputs are issued for the purpose of manufacture, they come in the nature of work in process and credit, therefore, is not deniable. The applicant also relied on the decisions in the case of CCE v. L.P. Appliances (2000 [119] ELT 627 and Asmaco Plastic Industries v. CCE (1998 [100] ELT 129.
The applicant also stated that he has not taken credit of duty paid under packing material and so the question of reversal does not arise.
Similarly, it is argued that no credit was taken on dyes and tools and, therefore, recovery of credit on that account is also not tenable and in any case penalty is not imposable in a situation of this type.
4. The Commissioner in the impugned order held that cenvat credit taken on the packing material and dyes and tools amounting to Rs. 22,73,611/- is reversible as the said goods were destroyed on account of floods and, therefore, were not used in or in relation to the manufacture of final excisable products in contravention of Rule 3 of the Central Excise Rules, 2002. The said cenvat credit attributable to inputs, dyes and tools and packing materials is recoverable. The various contentions such as whether the applicant has taken credit of duty paid on the packing materials, moulds etc. will have to be gone into at a later stage. In the impugned order, the Commissioner dropped the proceedings in respect of certain amounts but confirmed the reversal of cenvat credit taken on inputs which have not gone into production of final goods. At this stage it is not possible to go into the various details of the issues involved. After having carefully considered the submissions made by both sides, we direct the applicant to deposit Rs. 5 lakhs by 31.1.2005 towards the cenvat credit sought to be reversed, and report compliance on 3.2.2005. Upon such deposit, further deposit of credit not allowed and penalty imposed is waived during the course of this appeal. Failure to follow these directions will result in dismissal of the appeal without further notice.