2017 (6) TMI 264 - AT - Central Excise

CENVAT credit - write off of inputs - Held that - the inputs for which the provision write off was partially made was subsequently used in the manufacture as per the provisions of Rule 3(5B) which provides that in that situation the appellants are entitled to take back the credit in terms of the provisions to Rule 3(5B) - the amended provision of Rule 3(5B)was bought into from 01.03.2011 and the period of dispute involved in the present case is prior to 01.03.2011 in one case and therefore the appellants are not required to reverse the cenvat credit - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against rejection of appeal by Commissioner (Appeals) regarding demand of Cenvat Credit, penalty, and interest.

Analysis:
The appellants, engaged in Cement and Cement Clinker manufacturing, filed appeals against the rejection of their appeal by the Commissioner (Appeals) for demands related to Cenvat Credit. The dispute involved demands for the years 2010 and 2011, with specific amounts and penalties imposed. The issue revolved around the provision for obsolescence of stock in the appellants' Books of Accounts, leading to demands for cenvat credit availed on inputs for which provisions were made. The adjudicating authority ordered recovery of amounts and imposed penalties, which were challenged in the appeals.

The appellant's counsel argued that the impugned order contradicted statutory provisions and judicial precedents. They contended that the provisions made in the Books of Accounts were for partial write-offs of inputs, which were still in inventory and used in production. The counsel highlighted that the amended provisions were not applicable to the pre-2011 period in question. They cited relevant judicial decisions and circulars to support their arguments, emphasizing the lack of a recovery mechanism for such credits before 2013.

In response, the AR supported the impugned order, alleging that the appellants did not reverse cenvat credit on inputs written off in violation of Rule 3(5B). They claimed that the appellants failed to prove partial write-offs and suggested intent to evade duty payments. After hearing both parties and reviewing the records, the Judicial Member found that the appellants had partially written off inputs in accordance with company policy and later used them in manufacturing, entitling them to retain the credit under Rule 3(5B). The absence of a recovery mechanism before 2013 was noted, leading to the conclusion that the demands were not sustainable. Relying on precedents and legal provisions, the impugned order was set aside, allowing the appeals with consequential relief.

In conclusion, the judgment addressed the issues of demand for Cenvat Credit, penalties, and interest, emphasizing compliance with statutory provisions, judicial precedents, and the timing of relevant amendments. The decision favored the appellants based on the interpretation of rules and lack of a recovery mechanism during the disputed periods.