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2017 (9) TMI 1246 - AT - Central ExciseWrite off of value of inputs - Rule 3 (5B) of the Cenvat Credit Rules, 2004 - case of Revenue is that appellant had written off the value of inputs at the time of annual stock taking, but did not reverse the amount of CENVAT credit for the period 31.12.2004 and for the year 2005-06 on the said inputs - Held that - Rule 3 (5B) was inserted in the statute by N/N. 26/2007-CE(NT) dated 11.05.2007 - The present case relates to the period 2005-06, prior to the insertion of Rule 3 (5B) in the statute. The Hon ble Gujarat High Court in the case of Commissioner of Central Excise Vs. Ingersoll Rand (India) Ltd. 2013 (2) TMI 32 - GUJARAT HIGH COURT observed that there was no authority of the reversal of MODVAT Credit in cases which are covered prior to introduction of Rule 3 (5B) of Cenvat Credit Rules, 2004. Appeal dismissed - decided against Revenue.
Issues:
Violation of Rule 3 (5B) of Cenvat Credit Rules, 2004 - Demand of duty, Education Cess, interest, and penalty - Appeal against Adjudication order - Interpretation of Rule 3 (5B) - Adjustment of inputs on short and excess - Case law references - Appeal by Revenue dismissed. Analysis: Violation of Rule 3 (5B) of Cenvat Credit Rules, 2004: The case involved the respondents being accused of violating Rule 3 (5B) of the Cenvat Credit Rules, 2004 by not reversing the CENVAT credit for inputs written off during annual stock taking. The Adjudicating Authority confirmed a demand of duty, Education Cess, and imposed a penalty equal to the duty amount. However, the Commissioner (Appeals) set aside this order, leading to the Revenue filing an appeal. Interpretation of Rule 3 (5B): The Adjudicating Authority based its decision on the assumption that the quantity of inputs written off was against the proviso to Rule 3 (5B). However, it was noted that Rule 3 (5B) was inserted in the statute post the relevant period of 2005-06, indicating that the present case was not covered by this rule during that time. Adjustment of Inputs on Short and Excess: The respondents argued that the adjustments made were due to short and excess inputs, falling within permissible limits. They highlighted that the shortages were within the normal tolerance limits and were a result of various factors like handling issues and inaccurate estimations. Citing case law references, including the Gujarat High Court and Punjab & Haryana High Court decisions, the respondents emphasized that there was no authority for the reversal of MODVAT credit in cases predating the introduction of Rule 3 (5B). Case Law References: The judgment referred to the Gujarat High Court decision, emphasizing that the reversal of credit without specific authority would be unauthorized. Additionally, the Punjab & Haryana High Court decision highlighted that shortages within tolerable limits, not resulting from unauthorized utilization, do not warrant a demand under the rules. Appeal Dismissed: Based on the discussions and case law analysis, the order of the Commissioner (Appeals) was upheld, and the appeal filed by the Revenue was dismissed. The judgment concluded that there was no justification to interfere with the decision of the Commissioner (Appeals) in this matter.
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