2017 (1) TMI 603 - AT - Central Excise

Recovery of credit along with penalty - demand on the ground that the value of the inputs has been written off - whether the Appellant is eligible to CENVAT Credit of ₹ 1,56,325/- on the inputs, the value of which was shown to have been written off in their books of account as other income? - Held that - I do not find any basis for denying the CENVAT Credit once the quantity of inputs received in the factory against those invoices and had been used in or in relation to the manufacture of final product cleared on payment of duty - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against OIA No.SRP/33/DMN/2013-14 for denial of CENVAT Credit on inputs written off as other income.
- Interpretation of Board's Circular dt.22.02.1995 regarding credit recovery.
- Compliance with CENVAT Credit Rules, 2004 for credit eligibility.
- Justification for writing off input value and utilization in manufacturing process.
- Analysis of ledger entries and invoices for credit availed and written off value.
- Applicability of CENVAT Credit on inputs used in manufacturing final products.

Analysis:
The appeal before the Appellate Tribunal CESTAT Ahmedabad pertained to the denial of CENVAT Credit on inputs amounting to ?1,56,325, which were shown as written off under the category of other income in the appellant's books of accounts. The issue revolved around the interpretation of the Board's Circular dt.22.02.1995, which led to a demand notice and penalty imposition. The appellant contended that the inputs' value was written off because they were not intended to be paid to the suppliers, asserting compliance with CENVAT Credit Rules, 2004.

The appellant argued that the inputs' value was written off as they had been used in the manufacture of finished goods, emphasizing that the non-payment to suppliers did not affect credit eligibility. The Tribunal examined the ledger entries and invoices provided by the appellant, revealing instances where the amount was written off in relation to specific bill numbers of inputs. Despite the Commissioner (Appeals) not finding any contrary evidence, the Tribunal disagreed with the denial of CENVAT Credit due to lack of proper justification.

The Tribunal referenced a previous decision to support its stance that once the inputs were received and used in manufacturing final products, the credit should not be denied. It was highlighted that the CENVAT Credit cannot be held inadmissible solely based on the written-off value without considering the actual utilization of inputs in the manufacturing process. Consequently, the impugned order was set aside, and the appeal was allowed, providing consequential relief as per the law.