2016 (8) TMI 537 - AT - Central Excise

Cenvat credit - revarsal alongwith interest and penalty - goods written off as obsolete items in annual reports - period involved is from 2002-03 to 2006-07 Held that - the period involved is prior to the amendment to Rule 3 by which sub rule (5B) and Sub-Rule (5C) was inserted. The amendment by which the assessee is required to reverse the credit in case the goods are written off, as obsolete was introduced only after 01-04-2007 and the period involved in the present case is prior to 01-04-2007. Therefore, by following the judgment of Bombay High Court in the case of CCE. Navi Mumbai Vs Hindal Co Industries Ltd. 2011 (6) TMI 662 - BOMBAY HIGH COURT and the judgment of Gujarat High Court in the case of CCE Vs Ingersoll Rand(India) Ltd. 2013 (2) TMI 32 - GUJARAT HIGH COURT , the impugned order is unustainable. - Decided in favour of appellant with consequential relief

Summary

Issues Involved:
Denial of credit on account of goods written off as obsolete items.

Analysis:
1. The appellant, engaged in manufacturing batteries, availed credit on inputs and input services but faced denial of credit due to writing off certain inputs as obsolete goods. The department contended that as the goods were not used in manufacturing final products, the credit needed to be reversed as per Cenvat Credit Rules, 2004. The Order-in-Original disallowed the credit, imposed penalties, and ordered recovery. The appellant appealed against this decision.

2. The appellant's counsel argued that the company's accounting policy required periodic write-offs of slow-moving inventory, and during the relevant period, there was no rule mandating credit reversal for obsolete goods write-offs. The counsel cited judgments to support the argument. The AR supported the findings in the impugned order.

3. The Tribunal noted that the period involved was before the introduction of the rule requiring credit reversal for goods written off as obsolete. The stocks were physically present in the factory and were maintained as scrap inventory. The value of these goods was written off as per accounting norms.

4. Referring to relevant case law, the Tribunal highlighted that the period of the dispute predated the insertion of rules mandating credit reversal for written-off goods. The Tribunal held that the appellant's case was similar to previous judgments where the benefit was allowed for goods shown as written off. As the issue was the same, the Tribunal found the appellant's contention meritorious and set aside the impugned order, allowing the appeal with consequential reliefs.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, arguments presented, relevant legal provisions, and the Tribunal's decision based on precedent and the specific circumstances of the case.