2016 (3) TMI 434 - AT - Central Excise

Recovery of Cenvat Credit - demands for Cenvat Credit on the said goods on the grounds that the same have not been used for the manufacture of dutiable final products - Held that - The appellants are not required to reverse the Cenvat Credit as alleged in the show-cause notice the credit on inputs which has written off obsolete in the financial accounts but were physically lying in their stock. As the appellants have succeeded on this issue, therefore, we are not dealing with other issues. See RPG. CABLES LTD. Versus COMMISSIONER OF C. EX., MUMBAI 2003 (2) TMI 117 - CEGAT, NEW DELHI - Decided in favour of assessee

Summary

Issues:
Recovery of Cenvat Credit on written-off goods

Analysis:
The case involved manufacturers of motor vehicles and parts who had written off certain inputs in their balance sheet as non-moving and obsolete during 2000-2003. The revenue sought to recover the Cenvat Credit availed on these goods, citing non-usage in the manufacture of dutiable final products. The Commissioner relied on circulars and previous tribunal decisions to confirm the demands.

The appellant's counsel argued that no duty was demandable as long as the obsolete goods were not cleared from the factory premises, referencing relevant high court decisions and the non-retrospective nature of an amendment to the Cenvat Credit Rules. The Departmental Representative supported the impugned order and circular.

The Tribunal analyzed the submissions and referred to previous decisions, notably distinguishing a case where written-off goods were physically available in the factory. They highlighted the requirement to reverse Cenvat credit upon removal of inputs written off as obsolete, as per Rule 5(b) of the Cenvat Credit Rules. Noting that this rule was inserted in 2007 and not applicable retroactively, the Tribunal ruled in favor of the appellants, following precedents where duty or credit reversal was not required for obsolete goods still in the factory.

The Tribunal's decision aligned with the interpretation of Rule 5(b) and relevant case law, emphasizing that the obligation to reverse credit arises upon removal of such inputs. The judgment relied on the distinction between physically present and absent goods in the factory, ultimately allowing the appeal based on the principles established in earlier cases.

Overall, the Tribunal's analysis centered on the applicability of Rule 5(b) to the case, the timing of its insertion, and the precedents indicating that duty or credit reversal is triggered only upon the removal of obsolete inputs. By considering the specific circumstances and legal provisions, the Tribunal provided a detailed rationale for allowing the appeal and upheld the appellants' position regarding the recovery of Cenvat Credit on written-off goods.