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2024 (10) TMI 215 - AT - Central ExciseSeeking relief from the demand/recovery of duty and interest - provision made under the head Inventory Procedure and Control for non-moving items as well as obsolete goods without paying an amount equivalent to the CENVAT credit taken in respect of the capital goods - contravention of Rule 3(5B) of the CENVAT Credit Rules 2004 - HELD THAT - As per Rule 3(5B) of the CENVAT Credit Rules 2004 as amended with effect from 01/03/2011 input or capital goods before being put to use on which CENVAT credit has been taken is written off fully or partially or where any provision to write off fully or partially has been made in the books of account then the manufacturer or service provider as the case may be shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods. Since the impugned period pertains to the period prior to 31/03/2012 there was no power to recover an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods provided for by law. This being so the order for recovery of CENVAT Credit along with interest during the impugned period was not correct and merits to be set aside. A Division Bench of this tribunal in Ericsson India Pvt Ltd. 2019 (3) TMI 776 - CESTAT NEW DELHI held that for reversal of cenvat credit on partial writing down of value of inputs the provision was introduced only first time by amendment of Rule 3(5B) of Cenvat Credit Rules with effect from 01.03.2011. Further there was no provision prior to 01 March 2013 for recovery of cenvat credit and interest thereon under Rule 3(5B) etc. which was made applicable with effect from 01.3.2013 only by virtue of Notification No. 3 of 2013-CE(NT) dated 01.03.2013. The notification provides that if the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rule (5) (5A) and (5B) it shall be recovered in the manner as provided in Rule 14 for recovery of CENVAT credit wrongly taken. The impugned order merits to be set aside and is so ordered. The appellant is eligible for consequential relief if any as per law - Appeal disposed off.
Issues:
1. Recovery of CENVAT Credit, interest, and penalty imposed on the appellant for non-moving items and obsolete goods. 2. Contesting the recovery of CENVAT Credit based on the categorization of goods and time-barred SCN. 3. Interpretation of Rule 3(5B) of the CENVAT Credit Rules 2004 and the machinery provision for recovery during the disputed period. Detailed Analysis: Issue 1: The appellant, a manufacturer of Sugar, procured capital goods and availed CENVAT Credit. The department noticed a provision for non-moving items and obsolete goods in the Balance Sheet without paying the equivalent CENVAT credit amount. The Original Authority ordered recovery of Rs 2,83,219/- along with interest and penalty. On appeal, recovery of CENVAT Credit and interest was confirmed, but the penalty was set aside. The appellant sought relief from the demand of duty and interest. Issue 2: The consultant for the appellant argued that the goods were not written off but categorized as non-moving items, hence credit denial was unjustified. He contended that the SCN issued in 2013 was time-barred as the issue was known to the department since 2008. The recovery under Rule 3(5B) was challenged as the power was granted by an amendment in 2013, which was not applicable to the disputed period. Issue 3: The tribunal analyzed the legal issues raised by the parties. It was observed that the impugned order was contested on grounds related to the time-barred SCN, categorization of goods, and absence of machinery provision for recovery during the disputed period. The tribunal referred to Rule 3(5B) of the CENVAT Credit Rules 2004, emphasizing that unless goods were fully or partially written off, the reversal of credit under the rule did not apply. The tribunal noted that the power to recover under Rule 3(5B) was granted through an amendment in 2013, not applicable to the period in question. In conclusion, the tribunal set aside the impugned order, stating that the demand and interest confirmed were not sustainable as the power to recover CENVAT credit under Rule 3(5B) was not in force during the disputed period. The decision was based on legal interpretations and precedents, granting relief to the appellant.
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