2008 (11) TMI 211 - AT - Central Excise

Cenvat Credit on slow moving inputs - inputs have not been scraped and discarded from the inventory - detailed chart showing the consumption of the inputs including the slow moving inputs had been submitted in support of their claim that the slow moving inputs, in respect of which Cenvat credit is sought to be denied, are being used - The inputs in respect of which the credit is sought to be denied are still being used and are very much in the stock Held that - Just because a provision was made in the books of accounts for 2003-04 for non-moving/slow moving/obsolete items of inputs, it cannot be concluded that those items have been actually scraped and discarded from the inventory credit is allowed

Summary

Issues:
1. Denial of Cenvat credit for slow-moving/non-moving inputs based on a provision made in the balance sheet.
2. Interpretation of Board's circular regarding denial of Cenvat credit.
3. Applicability of Tribunal judgments in similar cases.
4. Assessment of whether inputs have been discarded from inventory.

Analysis:

1. The case involved the denial of Cenvat credit amounting to Rs. 2,61,327/- for slow-moving/non-moving inputs by the Department based on a provision made in the balance sheet for non-moving/obsolete items of inputs in the books of accounts for the financial year 2003-04. The Dy. Commissioner confirmed the demand, imposed interest, and penalty under Cenvat credit Rules, 2002. The Commissioner (Appeals) upheld this decision, leading to the appeal before the Appellate Tribunal.

2. The Appellant argued that the inputs in question were not scrapped but were still available and being used in the factory. They presented evidence showing the consumption of inputs, including slow-moving ones, to support their claim. The Appellant cited Tribunal judgments emphasizing that as long as the inputs are physically available and not scrapped, the credit should not be denied. They contested the applicability of the Board's circular, stating that it pertains to cases where inputs have been both written off and scrapped, which was not the situation in this case.

3. The Departmental Representative contended that the inputs were obsolete and unfit for use, justifying the denial of Cenvat credit as per the Board's circular. They argued that without evidence that the inputs were not discarded, the Tribunal's judgment cited by the Appellant could not be applied, suggesting a remand to ascertain this aspect.

4. The Tribunal, after considering the submissions, noted that there was no finding that the inputs had been scrapped or discarded from inventory. The Appellant's detailed chart on input consumption indicated that the slow-moving inputs, for which credit was denied, were still in use and available in stock. The Tribunal applied the precedent set in the BHEL case, emphasizing that as long as the inputs are physically present and not discarded, credit should not be denied based on provisions in the balance sheet. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.