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2017 (4) TMI 86 - AT - Central ExciseReversal of CENVAT credit - Write off of stock of stores, spares and tools - Held that - the issue is no more res-integra. In CCE, Navi Mumbai vs. Hindalco Industries Ltd. 2011 (6) TMI 662 - BOMBAY HIGH COURT , where the Hon ble High Court has observed that since the issue relates to a period prior to the amendment of Rule-3 by insertion of sub-rule 5B & 5C, decided in favor of the assessee - since there was no provision under the Modvat credit already taken under Rules, 1994 that the assessee could not be directed to simply reverse the input goods because the same were not utilized for a certain period of time - appeal allowed - decided in favor of appellant.
Issues:
1. Reversal of Cenvat Credit on written-off stock of stores, spares, and tools for the period 2004-05 and 2005-06. Analysis: The case involved M/s. Ultratech Cement Limited appealing against a Show Cause Notice demanding the reversal of Cenvat Credit on written-off stock of stores, spares, and tools for the period 2004-05 and 2005-06. The Lower Appellate Authority had upheld the demand and penalty imposed under Rule 15 of the Cenvat Credit Rules, 2002. The appellant contended that during the disputed period, there was no provision for the reversal of credit when goods were written off. The appellant relied on judgments by the Hon'ble Bombay High Court and the Hon'ble High Court of Gujarat to support their argument. The appellant also referred to Notification No.26/2007-C.E.(N.T.) dated 11.05.2007. The Department, represented by the Ld. AR, reiterated the findings of the Lower Authorities. The issue was whether the appellant was required to reverse the Cenvat Credit availed on the written-off stock of stores, spares, and tools. The Tribunal referred to judgments by the Hon'ble High Courts of Bombay and Gujarat, which held that prior to the insertion of specific sub-rules in Rule 3, the benefit of Cenvat Credit was available on goods shown as written off. The Hon'ble High Court of Gujarat emphasized that the reduction in value for income-tax purposes did not equate to the physical writing off of stock. The Court highlighted the difference in accounting principles for tax purposes and stock maintenance for manufacturing activities. The Tribunal, respecting the decisions of the Hon'ble High Courts cited, ruled in favor of the appellant, setting aside the impugned order and allowing the appeal with consequential relief, if any. In conclusion, the Tribunal held that the appellant was not required to reverse the Cenvat Credit availed on the written-off stock of stores, spares, and tools for the period 2004-05 and 2005-06. The decision was based on the absence of specific provisions at the time and the principles outlined in the judgments of the Hon'ble High Courts of Bombay and Gujarat. The appeal was allowed, and the impugned order was set aside, providing relief to the appellant.
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