2024 (12) TMI 1538 - AT - Central Excise

Reversal of Cenvat credit on provisions made for slow-moving/non-moving inventory of stores and spares - Rule 3(5B) of the Cenvat Credit Rules 2004 - HELD THAT - The issue came up before this Tribunal in the appellant s own case 2024 (10) TMI 1336 - CESTAT NEW DELHI wherein it was held that it is clear that provisions of rule 3 (5B) CCR are applicable only when the value of asset and or inventory is written off fully or partially or wherein any specific provision to write-off fully or partially has been made in the books of accounts. On going through the decision in the appellant s own case it is found that the facts are not in dispute that the appellant has made provisions in books of accounts for partial writing down the value in respect of the slow moving and non-moving of inventories and spares whereas the provision of Rule 3(5B) of Cenvat Credit Rules are applicable when the provision in the books of accounts the stock/inventories have been written off which is not the case in hand. Therefore relying on the appellant s own case it is held that the provision of Rule 3(5B) of Cenvat Credit Rules 2004 are not applicable to the facts of the present case therefore no demand is sustainable against the appellant. As no demand is sustainable against the appellant no penalty is also imposable against the appellant. Conclusion - The provisions made for slow-moving/non-moving inventory did not amount to a write-off under Rule 3(5B) of the Credit Rules and thus no demand for the reversal of Cenvat credit was justified. The impugned order is set aside - appeal allowed.

Summary

The case involves an appeal against an order confirming a demand for the reversal of Cenvat credit on provisions made for slow-moving/non-moving inventory of stores and spares. The appellant, engaged in manufacturing alloy steel products, made provisions in its books of account for writing down the value of such inventory based on Accounting Standard-2. The issue centered around whether the appellant was required to reverse the Cenvat credit under Rule 3(5B) of the Credit Rules, despite the inventory being usable and physically available for manufacturing purposes.The appellant argued that the provisions made were not equivalent to writing off the inventory and that the credit was not reversible under the rules. The Tribunal considered the appellant's case in a similar matter where it was held that Rule 3(5B) did not apply when the value of assets/inventory was written down but not fully written off. The Tribunal emphasized that the rule is invoked only when there is a complete or partial write-off of the asset or inventory value, which was not the case here. The Tribunal also referenced precedents to support its interpretation that provisions for slow-moving inventory are different from actual write-offs and that the rule should not be applied in such cases.Based on the findings in the appellant's own case and the interpretation of Rule 3(5B), the Tribunal concluded that the rule was not applicable to the appellant's situation. Therefore, the demand for the reversal of Cenvat credit was deemed unsustainable, leading to the setting aside of the impugned order and allowing the appeal.In summary, the Tribunal held that the provisions made for slow-moving/non-moving inventory did not amount to a write-off under Rule 3(5B) of the Credit Rules, and thus, no demand for the reversal of Cenvat credit was justified. The appeal was allowed, and no penalty was imposed on the appellant.