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2012 (12) TMI 260 - AT - Central ExciseCenvat credit alleged that appellants had not reversed the cenvat credit on the inputs so shown as written off in their balance sheet Held that - It is not Revenue s case that the inputs were cleared from the factory. Merely because the same were written off in the books of account and the value shown as nil, by itself, cannot be considered to amounting to removal of the inputs from the factory premises in the absence of any evidence to that effect - inputs were still in their possession. Revenue has not rebutted the above submission of the appellant and there is no allegation or finding that the inputs stand cleared from the factory - Cenvat Credit Rules, 2004 were amended on 16-5-2005 - The question whether this new provision will apply for inputs written off prior to 16-5-2005 was examined by the Mumbai High Court in the case of CCE v. Hindalco Industries Ltd. - 2011 (6) TMI 662 - BOMBAY HIGH COURT and held that the provisions cannot be invoked in such a situation.
Issues:
Recovery of Cenvat credit on inputs written off in the balance sheet. Analysis: 1. The appellants were engaged in manufacturing Sunglasses and Spectacle frames under Chapter 90 of the Central Excise Tariff Act, 1985, availing Modvat/Cenvat credit on various inputs. 2. A scrutiny revealed inputs worth Rs. 1,05,60,430/- were written off in the balance sheet, leading to a show cause notice for recovery of Cenvat credit on these inputs. The appellant's Senior Manager Finance explained the write-off based on inventory valuation methods. 3. The Original Adjudicating Authority confirmed the recovery of Rs. 16,89,669/- and imposed penalties, which was upheld by the Commissioner (Appeals), prompting the present appeal. 4. The appellant contended that the inputs were still in possession and not cleared, citing Tribunal decisions supporting their stance. 5. Lower authorities referenced Board Circulars but failed to rebut the appellant's claim that the credit availed on written-off inputs was appropriate, despite the circulars' provisions. 6. The Commissioner (Appeals) held that the complete write-off of inputs mandated credit reversal, disregarding the inputs' availability for use in the factory. 7. The Tribunal noted that the inputs were not cleared from the factory, emphasizing that writing off inputs does not equate to their removal without evidence. Various Tribunal decisions supported this view. 8. Citing precedents, the Tribunal concluded that writing off obsolete inputs doesn't necessitate Cenvat credit reversal if the goods remain in the factory premises. 9. A referenced case's facts differed from the present scenario, as the inputs in question were still usable, distinguishing it from the appellant's situation. 10. Another case cited by the Revenue involved inputs not physically available post-write-off, unlike the appellant's case where inputs remained in possession. 11. The Tribunal found no evidence of inputs being cleared from the factory, aligning with previous decisions and overturning the recovery order, granting relief to the appellant. 12. A separate observation by another Member reiterated agreement with the decision, highlighting the timeline of events and a relevant amendment to the Cenvat Credit Rules. 13. The Cenvat Credit Rules amendment postdates the inputs' write-off, and a High Court ruling clarified that the new provision wouldn't apply retroactively, supporting the Tribunal's decision. This detailed analysis of the judgment addresses the recovery of Cenvat credit on inputs written off in the balance sheet, emphasizing the legal principles, precedents, and interpretations that influenced the final decision in favor of the appellant.
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