2017 (7) TMI 324 - AT - Central Excise

Write-off of inputs and finished goods - whether the appellant is required to pay Central Excise duty/reverse the Cenvat Credit, so availed on the goods (inputs and finished products) written off in the books? - Held that - The period involved in this case is from 2002-2003 to 2003 2004. The provisions for writing off the value of inputs / capital goods were inserted under Rule 3(5B) in the CCR, 2004 by N/N. 26 /2007 CE (NT) dated 11.5.2007. Since the period covered in this case is prior to insertion of sub rule (5B) in Rule 3 of Credit Rules, 2004, the embargo created therein is not applicable retrospectively for denying the cenvat credit to the appellant. With regard to packing material, inputs and finished goods, the learned advocate submits that embargo under Rule 3(5B) ibid will not have any application inasmuch as those goods are very much available and were not removed from the factory. However, this particular aspect was not dealt with by the lower authorities - Therefore the matter should go back to the original adjudicating authority for verification. Appeal allowed in part and part matter on remand.

Summary

Issues:
Whether the appellant is required to pay Central Excise duty or reverse the Cenvat Credit on goods written off in the books.

Analysis:
The Tribunal considered the issue of whether the appellant is obligated to pay Central Excise duty or reverse the Cenvat Credit on goods written off in the books. The period in question was from 2002-2003 to 2003-2004, predating the insertion of Rule 3(5B) in the Cenvat Credit Rules, 2004. The Tribunal referred to a previous case, GKN Driveline (India) Ltd. Vs. CCE Delhi IV, which held that the reversal of Cenvat Credit cannot be insisted upon in the absence of statutory provisions. The Tribunal highlighted that since there was no provision for reversal of Cenvat Credit during the relevant period, the demand confirmed in the impugned order based on writing off the value of inputs/capital goods could not be upheld.

The Tribunal further discussed the situation concerning finished goods and packing material. The appellant had made provisions in the books of accounts for writing off the value of these items. The Tribunal noted that the lower authorities did not address the availability of these goods in the factory during the relevant time. Therefore, the matter was directed to go back to the original adjudicating authority for verification of the fact regarding the availability of the goods in the factory. If the goods were not removed and were still present in the factory, the Tribunal held that the benefit of Cenvat Credit should be available to the appellant.

In conclusion, the Tribunal disposed of the appeal by emphasizing that the demand confirmed on the basis of writing off the value of inputs/capital goods could not be sustained due to the absence of specific provisions for reversal of Cenvat Credit during the relevant period. The Tribunal also highlighted the need for verification regarding the availability of finished goods and packing material in the factory for the appellant to potentially benefit from the Cenvat Credit on those items.