S.S. Kang, Member (J)

1. Heard both sides.

2. In this case, show cause notice was issued to the appellant for recovery of Modvat credit of Rs. 6,99,305/- on the ground that the inputs were not used in the manufacture of their final product.

3. The contention of the appellant is that the inputs in question were destroyed in a fire in the blow room of the factory and intimation was given to the Revenue regarding the fire. The contention of the appellant is also that the goods of value of Rs. 38 lakhs approximately were destroyed in the fire whereas they had only claimed the benefit from the Insurance Company only to the extent of Rs. 32 lakhs and the appellant had not claimed any compensation from the Insurance Company in respect of the duty paid on the inputs.

4. The contention of the Revenue is that the inputs were not used in the manufacture of the final product and the appellant had claimed the value of the goods from the Insurance Company.

5. Admittedly the facts of the case are that the goods were destroyed in the blow room due to the fire. The Tribunal in a similar case in CCE v. HEG Ltd. reported in 2001 (127) E.L.T. 121 held that in case of a fire in the blow room in a factory where yarn is manufactured, the credit in respect of the inputs is admissible as the inputs were destroyed after the manufacturing operations had already been commenced. In another case, the Tribunal in Asmaco Plastic Industries reported in 1998 (100) E.L.T. 129 held that where the inputs were destroyed after entering into the manufacturing process, Modvat credit in respect of such goods is admissible.

6. In respect of the claim of the appellants that they had not claimed the excise duty involved in this case from the Insurance Company, the appellant took the specific stand in the reply to the show cause notice that Revenue had not adduced any evidence to contradict this claim. In view of the above decisions of the Tribunal, the impugned order is set aside and the appeal is allowed.