2011 (6) TMI 662 - HC - Central Excise

Cenvat credit - assessee had a practice of identifying stores which were no more useful or which were unfit for consumption in its Taloja plant. According to the Revenue, Cenvat credit covered by the list of cancelled bins for the years 2003-2004, 2004-2005 and 2005-2006 which was reversed by the assessee had to be demanded and appropriated, spares and components which had been lost or destroyed in the floods of July 2005. The Revenue took the estimated loss, reduced therefrom the salvage value and computed the Cenvat credit availed of on the estimated value of the loss in the case of Indian Petrochemicals Corporation Limited, (2007 - TMI - 48202 - HIGH COURT OF JUDICATURE AT BOMBAY - Central Excise) , Tribunal in a long line of judgments had taken the view that where the goods have been shown as written off goods, the benefit is available, case relates to a period prior to the amendment of Rule 3 by the insertion of sub-rules (5B) and (5C), Appeal dismissed

Summary

Issues:
Interpretation of Rule 3(5) of the CENVAT Credit Rules, 2004
Applicability of sub-rules (5B) and (5C) in Rule 3
Effect of prior judgments on the current case

Interpretation of Rule 3(5) of the CENVAT Credit Rules, 2004:
The case involved a notice to show cause issued to the assessee regarding the reversal of Cenvat credit for identified stores and lost items due to floods. Rule 3(5) of the CENVAT Credit Rules, 2004 states that if inputs or capital goods on which Cenvat credit has been taken are removed, the credit availed must be paid back. The Tribunal addressed both aspects of the notice to show cause, emphasizing the requirement for payment equal to the credit availed upon removal of inputs or capital goods.

Applicability of sub-rules (5B) and (5C) in Rule 3:
Sub-rule (5B) and (5C) were inserted into Rule 3 through amendments. Sub-rule (5B) mandates payment if the value of goods on which Cenvat credit was taken is fully written off. Sub-rule (5C) requires reversal of Cenvat credit if duty on goods is remitted under Rule 21 due to loss or destruction. The Tribunal noted that the case predated the insertion of these sub-rules and relied on past judgments where the benefit was granted for written off goods. The Tribunal found that the case fell within the purview of its previous judgments, and since no challenge was made to the validity of those judgments, the Appeal was dismissed.

Effect of prior judgments on the current case:
Referring to past decisions, the Tribunal highlighted that the case period was before the introduction of sub-rules (5B) and (5C) in Rule 3. Citing Commissioner of Central Excise v. Indian Petrochemicals Corporation Limited, the Tribunal noted that the benefit for written off goods had been recognized in previous judgments. The Tribunal concluded that the Appeal did not raise any substantial question of law due to the absence of challenges to its previous decisions. Consequently, the Appeal was dismissed, and no costs were awarded.

This comprehensive analysis of the judgment addresses the interpretation of relevant rules, the impact of amendments, and the reliance on past judgments to determine the outcome of the case.