2017 (3) TMI 1405 - AT - Central Excise

Recovery of CENVAT credit with interest and penalty - it is alleged that the appellant had reduced the value of closing stock of the raw materials to the extent of ₹ 1,63,28,010/- by amortizing in their Balance Sheet(2002-03) but had not reversed the CENVAT credit of ₹ 26,12,481/- @ 16% of the said value - Held that - There is no contrary evidence produced by the Revenue by which it could be concluded that the entire value of ₹ 1,63,28,010/- is attributable to inputs on which credit has been availed - certificates submitted by chartered accountants proof the bonafideness of assessee - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeals against order passed by Commissioner (Appeals) of Central Excise, Ahmedabad-II regarding reduction of value of closing stock of raw materials, reversal of CENVAT credit, and imposition of penalty.

Analysis:
The case involved three appeals filed against orders passed by the Commissioner (Appeals) of Central Excise, Ahmedabad-II. The appellants, engaged in manufacturing Copper Tubes/Brass Tubes, were alleged to have reduced the value of closing stock of raw materials without reversing the CENVAT credit. The issue arose from the amortization of an amount in the balance sheet for the year 2002-2003, leading to a demand for recovery of the credit with interest and penalty. The demands were confirmed on one appellant with interest and penalty, while personal penalty was imposed on the other two appellants under Rule 26 of Central Excise Rules, 2002. The appeals were filed challenging these orders.

The appellant's advocate contended that the reduced amount in the balance sheet related to expenditure incurred in a Research and Development Programme, including consumption of inputs/raw materials. The appellant had already reversed a portion of the credit before the show cause notice was issued. Despite producing a chartered accountant's certificate supporting their claim, the authorities did not consider it. The appellant argued that the certificate should have been accepted in the absence of contrary evidence.

The Revenue's authorized representative reiterated the findings of the Commissioner (Appeals) during the hearing. However, upon reviewing the records and arguments from both sides, the Tribunal found that the appellant had reduced the value of closing stock in the balance sheet and amortized the amount during the financial year 2002-2003. The Revenue claimed that the CENVAT credit on this amount was not reversed. The appellant explained that the reduced value included research and development charges over time, and they had already reversed a portion of the credit on raw materials used for R & D purposes. The Tribunal noted that there was no evidence to conclude that the entire reduced value was attributable to inputs for which credit was availed. Therefore, the Tribunal set aside the impugned order, allowing the appeals with consequential relief as per law.

In conclusion, the Tribunal overturned the orders passed by the lower authorities, emphasizing the importance of considering specific evidence, such as the chartered accountant's certificate, in cases involving the reduction of closing stock value and reversal of CENVAT credit.