2024 (10) TMI 1249 - AT - Central Excise

Reversal/Recovery of CENVAT Credit - inputs written off - Rule 3(5B) of the Cenvat Credit Rules, 2004 - HELD THAT - The issue is no more res integra and considered by this Tribunal in the case of M/S. HEWLETT PACKARD INDIA SALES PVT. LTD. VERSUS THE COMMISSIONER OF SERVICE TAX, LTU, BENGALURU 2024 (8) TMI 718 - CESTAT BANGALORE . This Tribunal after referring to the judgments in the case of M/S. ERICSSON INDIA PVT. LTD. VERSUS CCE, JAIPUR 2019 (3) TMI 776 - CESTAT NEW DELHI and M/S. GKN DRIVELINE (INDIA) LTD. VERSUS CCE, DELHI-III 2023 (9) TMI 1131 - CESTAT CHANDIGARH , held ' erroneous availment of cenvat credit under Rule 3(5) of the Cenvat Credit Rules, 2004 could be recoverable only after insertion of the recovery provision to the said Rule by insertion of an Explanation through amending Notification No.3/2013-CE(NT) dated 01.03.2013 as amended only w.e.f. 01.03.2013.' Following the above precedent and since period of recovery pertains to 2006-07 to 2008-09, the impugned order is set aside - Appeal allowed.

Summary

Issues:
Appeal against Order-in-Original No.24/2012 dated 28.03.2013 passed by the Commissioner of Central Excise, Bangalore.

Analysis:
The case involves the appellant, engaged in manufacturing various products falling under different chapters of the Central Excise Tariff Act, 1985. The department discovered that the appellant failed to reverse the credit involved on inputs written off as required under Rule 3(5B) of the Cenvat Credit Rules, 2004. A show-cause notice was issued for recovery of credit amounting to Rs.1,14,03,656/- for the period 2006-07 to 2008-09. The demand was confirmed with interest and penalty, leading to the present appeal.

The appellant argued that they did not completely write off the value of inputs and that the provision to reverse credit on partially written off inputs came into effect only from 01.03.2011, making it inapplicable retrospectively. They cited various judgments to support their contention. The appellant also highlighted that the recovery provision was inserted to Rule 3(5) only from 01.03.2013, further challenging the demand based on this ground.

The Revenue, on the other hand, reiterated the findings of the Commissioner, stating that the appellant failed to prove that the inputs in question were used in manufacturing the final products. After hearing both sides, the Tribunal examined the facts and legal provisions closely.

The Tribunal referred to previous judgments and held that the recovery of the cenvat credit by the Commissioner was erroneous. It emphasized that the recovery mechanism introduced through an Explanation to Rule 3(5) only from 01.03.2013 could not be applied retrospectively. The Tribunal pointed out that the Department was aware of the credit adjustment since February 2007, and the show-cause notice was issued after two years, making the invocation of the extended period of limitation unsustainable.

Based on the precedents and the period of recovery being 2006-07 to 2008-09, the Tribunal set aside the impugned order and allowed the appeal with consequential relief as per law. The decision was pronounced in open court, concluding the matter in favor of the appellant.