Question

XYZ (EOU unit) had fire in factory in April’18 destroying stock of Raw/Packing Material, Engg. Stores, WIP, FG, P & M, Furniture.
1) Whether they have to reverse Cenvat, service tax, MVAT credits availed on above items?
2) They are also procuring imported capital goods & Raw material under “Procurement Certificate” & against “MEIS”, “SHIS”, “Advance Licence” so what will be the treatment of these benefits availed by them by way of duty forgone, if they are required to reverse the credit?

Answer

As per Section 17(5) of CGST Act ITC is not allowed on the material lost in fire. The same is reproduced below:
(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely

(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and

So the credit taken on all the material which is lost as it is or after taking shape of  WIP or finished goods is to be reversed.

So far as utilisation of MEIS, SHIS for payment of tax is concerned the same are used as mode of payment like cash is used to pay tax. It is as good as payment of tax through bank or cash. So there is no liability on this account.

Now coming to Advance license and Procurement Certificate

You have imported goods with a condition to use it for manufacturing of Export product.

Since the product are not exported, so the duty foregone is to be deposited with interest.

As there is no intentional evasion of tax there will be no penalty. (Reply dt. 26.06.2018)