2010 (8) TMI 521 - AT - Central Excise

Modvat credit - Written off inputs - Commissioner is not disputing the applicability of judicial pronouncements laying down that there is no obligation on the part of an assessee to pay the cenvat credit in respect of written off inputs - Commissioner has held against the assessee on the basis of the two circulars issued by the Board, which according to the learned adjudicator are binding on him, in preference to the judicial pronouncements made by the Tribunal. The judgment of the Hon ble Supreme Court in the case of Ranadey Micronutrients 1996 -TMI - 44319 - SUPREME COURT OF INDIA and Green Chemicals, clarified that whereas the circular issued by the Board are in favour of the assessee, the benefit of the same is required to be extended to the assessee in spite of the declaration of law to the contrary - It cannot be said that where the appellate orders are in favour of the assesses, the same have to be ignored in preference to Board s circular and the Commissioner is duty bound to follow the Board s circular - Accordingly the impugned order is set aside and appeal allowed in favour of assessee.

Summary

Issues involved:
Whether written off inputs in the books of account would attract duty or reversal of modvat credit availed in respect of the same.

Analysis:

Issue 1: Reversal of modvat credit for written off inputs
The appellants, engaged in manufacturing items under Chapter 85 of the Central Excise Tariff Act, were availing modvat credit for inputs used. The balance sheet scrutiny revealed that the closing stock values were adjusted for raw material obsolescence, indicating outdated technology unsuitable for use. The question arose whether such written off inputs would require duty payment or reversal of modvat credit. The Commissioner, citing circulars from CBEC, held that the credit must be reversed. However, the appellants argued based on CESTAT decisions that written off inputs do not necessitate credit reversal as long as they remain in the factory. The Commissioner's decision was challenged, emphasizing that judicial pronouncements favoring the assessee should prevail over circulars. The Tribunal agreed, setting aside the Commissioner's order and allowing the appeal in favor of the appellant.

Conclusion:
The Tribunal ruled that the circulars from CBEC mandating reversal of credit for written off inputs should not supersede judicial pronouncements supporting the assessee. As the Tribunal decisions favored the appellant, the circulars were deemed not binding, and the appeal was allowed, granting relief to the appellant.