2018 (3) TMI 482 - AT - Central Excise

Interest - penalty - It is the case of Revenue that there was illegal availment of CENVAT credit which was liable to be recovered u/r 14 of CCR 2004 and liable to be penalized u/r 15(2) of CCR 2004 - Held that - the reversal of CENVAT credit is mandatory whenever the value of inputs is written off or provisions made for such in the books of accounts - In the instant dispute, the reversal was made by the appellant and hence there is no call to invoke rule 14 of CCR 2004 - Consequently there is no scope for invoking rule 15 of CCR 2004 - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Setting aside of penalty and interest recovery
2. Confirmation of demand under rule 14 of CENVAT Credit Rules, 2004
3. Reversal of CENVAT credit by the appellant
4. Interpretation of rule 3(5B) of CENVAT Credit Rules, 2004

Analysis:
The judgment addresses the appeal filed by the Revenue against the setting aside of penalty, interest recovery, and the confirmation of a demand under rule 14 of CENVAT Credit Rules, 2004. The respondent-assessee, a manufacturer of motor vehicle parts, had taken CENVAT credit for various inputs and made provisions for writing off inventory for 2011 and 2012. The audit later pointed out that the corresponding reversal of CENVAT credit was not reflected in the account but was rectified between August 2013 and September 2014. The Revenue alleged illegal availment of CENVAT credit and sought recovery under rule 14 along with penalties under rule 15(2) of CENVAT Credit Rules, 2004.

The Commissioner of Central Excise (Appeals) had held that since the assessee had reversed the CENVAT credit, the show-cause notice issued was redundant. The Revenue argued that recovery of wrongly availed CENVAT credit should include interest and penalties. However, the Tribunal analyzed rule 3(5B) of CENVAT Credit Rules, 2004, and concluded that the reversal of CENVAT credit is mandatory when provisions are made for writing off inputs. The rule places the onus of reversal on the manufacturer, and since the appellant had reversed the credit, rule 14 was not applicable. Consequently, the Tribunal dismissed the appeal, stating that there was no justification for interference with the impugned order.

In summary, the judgment clarifies the mandatory nature of reversing CENVAT credit when provisions for writing off inputs are made, absolving the appellant from the penalties and interest recovery sought by the Revenue. The interpretation of rule 3(5B) played a crucial role in determining the outcome of the case, leading to the dismissal of the appeal.