2016 (6) TMI 469 - AT - Central Excise

Requirement of reversal of Cenvat credit - finished goods which have been written-off - Rule 3(5B) of the Cenvat Credit Rules, 2004 Held that - there is no provision for reversal of cenvat credit on inputs/ components which have been used in the manufacture of final product. In fact, as per Section 3 of the Central Excise Act, 1944, the goods manufactured by an assessee are to be cleared on payment of duty, therefore, reversal of cenvat credit on finished goods does not arise; at the most, duty can be demanded. Requirement of reversal of Cenvat credit - traded goods - no credit has been taken Held that - as no cenvat credit has been taken by the appellant on traded goods, reversal of cenvat credit on those goods does not arise. Requirement of reversal of Cenvat credit - inputs/ components - provision has been made in the balance sheet but not actually written-off Held that - appellant has made a provision for written-off but inputs and components were not actually not written off by the appellant. Further, the appellant has used these inputs and components later on, in the manufacture of final goods, in that circumstances, as per provision of Rule 3 (5B) appellant is entitled to take cenvat credit on these inputs and components. Therefore, appellant is not required to reverse cenvat credit on inputs/ components for which they have made provision in the balance sheet. Invokation of extended period of limitation Issuance of subsequent SCN Held that - it is found that periodical show cause notices had been issued to the appellant as the first show cause notice for the period 2005-08 to 2008-09 was issued on 05.04.2010, therefore, both the show cause notices issued in question to the appellant by invoking extended period are barred of limitation. Therefore, the show cause notices are not sustainable in the eyes of law. Accordingly, the impugned proceedings are set aside as time barred. Applicability of Rule 14 of Cenvat Credit Rules, 2004 Held that - it is found that the appellant had taken cenvat credit correctly on inputs/ components at the time of procurement thereof and there is no allegation in the show cause notice that appellant has wrongly taken cenvat credit. Therefore, the provision of Rule 14 of Cenvat Credit Rules, 2004 are not applicable to the facts of the case. Decided in favour of appellant with consequential relief

Summary

Issues involved:
1. Reversal of cenvat credit on finished goods written off.
2. Reversal of cenvat credit on traded goods without credit taken.
3. Reversal of cenvat credit on inputs/components provisioned but not written off.
4. Validity of subsequent show cause notice under extended limitation.
5. Applicability of Rule 14 of Cenvat Credit Rules, 2004.

Analysis:

Issue 1: Reversal of cenvat credit on finished goods written off:
The appellant contested the denial of cenvat credit on inputs, components, and finished goods written off in the balance sheet. The Tribunal examined Rule 3(5B) of the Cenvat Credit Rules, 2004, which mandates payment if goods on which credit was taken are written off, but allows credit if subsequently used in manufacturing. The Tribunal held that no provision exists for reversing credit on inputs used in manufacturing finished goods, as goods are cleared on duty payment. Therefore, the appellant was not required to reverse cenvat credit on inputs/components used in written-off finished goods.

Issue 2: Reversal of cenvat credit on traded goods without credit taken:
As the appellant had not availed cenvat credit on traded goods, the Tribunal ruled that there was no requirement to reverse credit on such goods, thus favoring the appellant on this issue.

Issue 3: Reversal of cenvat credit on provisioned but not written off inputs/components:
Despite provisions made for writing off inputs/components in the balance sheet, the appellant had not actually written them off and had used them in manufacturing final goods. The Tribunal determined that as per Rule 3(5B), the appellant was entitled to retain cenvat credit on these inputs/components, thereby ruling in favor of the appellant on this issue.

Issue 4: Validity of subsequent show cause notice under extended limitation:
The Tribunal found that the show cause notices issued by invoking an extended period of limitation were time-barred since periodical notices had been previously issued. Consequently, the Tribunal held that the subsequent notices were not sustainable in law, ultimately ruling in favor of the appellant on this issue.

Issue 5: Applicability of Rule 14 of Cenvat Credit Rules, 2004:
Given that the appellant had correctly availed cenvat credit on inputs/components without any allegation of wrongful credit, the Tribunal concluded that Rule 14 of the Cenvat Credit Rules, 2004, was not applicable to the case, thereby favoring the appellant on this issue.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal with consequential relief, if any, based on the detailed analysis and findings on each issue raised by the appellant.