2017 (7) TMI 326 - AT - Central Excise

CENVAT credit - Appellant s grievance is that before incorporation of sub-rule (3) to Rule 3 of CCR 2004, CENVAT credit availed on the written off goods shall not be liable to duty which is equivalent to CENVAT credit availed - Held that - in absence of a specific provision, the claim of availment of CENVAT credit thereon and not used in manufacture should not result in denial of CENVAT credit availed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Rule 3 of CENVAT Credit Rules 2004 regarding availing CENVAT credit on written off goods.
2. Applicability of sub-rules (5B) and (5C) of Rule 3 to a period prior to their insertion.
3. Conflict between a circular denying CENVAT credit on return of goods and the legal position established by a judgment of the Hon'ble High Court.

Analysis:
1. The appellant contended that CENVAT credit availed on written off goods should not be liable to duty before the incorporation of sub-rule (3) to Rule 3 of CENVAT Credit Rules 2004. The appellant relied on a judgment of the Hon'ble High Court of Bombay which supported this position. The Tribunal examined Rule 3(5) of the CENVAT Credit Rules, 2004, which required payment equal to the credit availed when goods on which CENVAT credit was taken were removed. The Tribunal noted that sub-rules (5B) and (5C) were inserted later, requiring payment if goods were written off fully before use or if duty was remitted. The Tribunal found that the appellant's case fell within precedents prior to the insertion of these sub-rules, leading to the dismissal of the appeal.

2. The Tribunal referred to a Division Bench judgment noting that where goods were shown as written off, the benefit was available. The Tribunal held that the appellant's case was covered by its previous judgments, and since the dispute was prior to the insertion of sub-rules (5B) and (5C), no substantial question of law was raised. The appeal was dismissed based on this reasoning.

3. The Revenue argued that a circular issued to deny CENVAT credit on return of goods should prevail. However, the Tribunal found the Revenue's reliance on the circular misplaced as it was issued after the transactions in question were completed. The circular stipulated the reversal of credit on written off inputs but did not apply to goods still capable of use. Following the judgment of the Hon'ble High Court of Bombay, the Tribunal allowed the appeal, considering the circular's issuance post the relevant period.

This comprehensive analysis of the judgment addresses the issues raised, the legal interpretations made, and the reasoning behind the Tribunal's decision, ensuring a detailed understanding of the case.