2013 (2) TMI 311 - AT - Central Excise

Waiver of pre-deposit - Stay Petition - Provision of slow/non-moving inventory - Rule 3(5B) of CENVAT Credit Rules, 2004 - slow/non-moving inventory written off to the tune of 95% - Held that - The assessee have retrieved significant percentage of quantity of inputs for which provision was made for subsequent use, it may not be a case of write off fully attracting the provisions of Rule 3(5B) of CENVAT Credit Rules. Waive pre-deposit dues and Stay granted

Summary

Issues:
Interpretation of Rule 3(5B) of CENVAT Credit Rules regarding provision made for slow/non-moving inventory.

Analysis:
The appellant had made a provision of Rs.6,91,15,100 in their books of accounts for slow/non-moving inventory. The original authority, in response to a show-cause notice, applied Rule 3(5B) of CENVAT Credit Rules and confirmed a demand of Rs.1,10,58,416 along with interest and penalty. The appellant argued that they had not fully written off the value of the inventory, only writing off 95%, and had retrieved materials valued over Rs.90 lakhs for use in manufacturing during the subsequent year. The Tribunal noted that since a significant percentage of the provisioned inputs were retrieved for later use, it may not constitute a full write-off under Rule 3(5B). Consequently, the Tribunal waived the predeposit of dues and stayed the recovery pending appeal disposal. The Commissioner's findings and reasoning were reiterated by the learned Commissioner, A.R., but the Tribunal found merit in the appellant's argument regarding the utilization of the provisioned materials for manufacturing purposes. The Tribunal's decision was based on the interpretation of Rule 3(5B) and the specific circumstances of the case, where the retrieved materials indicated that the slow/non-moving inventory was not entirely written off as initially assumed.