2017 (6) TMI 104 - AT - Central Excise

CENVAT credit - the inputs although written in their balance sheets but are still lying in their factory - applicability of provisions of Rules 3(5) of the CCR, 2004 - Held that - in this case in respondent s own case M/s BCH Electric Ltd. Versus Commissioner of Central Excise, Faridabad-I 2016 (6) TMI 469 - CESTAT CHANDIGARH , it was held that there is no provision for reversal of cenvat credit on inputs/ components which have been used in the manufacture of final product. In fact, as per Section 3 of the Central Excise Act, 1944, the goods manufactured by an assessee are to be cleared on payment of duty, therefore, reversal of cenvat credit on finished goods does not arise. The show cause notice has been issued by invoking extended period of limitation, the same is not maintainable. Demand set aside - appeal dismissed - decided against Revenue.

Issues Involved:
1. Reversal of Cenvat credit on finished goods written-off
2. Reversal of Cenvat credit on traded goods with no credit taken
3. Reversal of Cenvat credit on inputs provisioned but not written-off
4. Issuance of subsequent show cause notice within extended limitation
5. Applicability of Rule 14 of Cenvat Credit Rules, 2004

Analysis:
1. Reversal of Cenvat credit on finished goods written-off:
The Tribunal examined Rule 3(5B) of the Cenvat Credit Rules, 2004, which mandates the reversal of Cenvat credit on inputs or capital goods written off fully or partially. However, the rule does not require the reversal of credit on inputs used in the manufacture of final products. As per the Central Excise Act, goods are to be cleared on payment of duty, not reversal of credit. Therefore, the appellant is not obligated to reverse Cenvat credit on inputs used in the manufacture of finished goods that are later written off. This issue was resolved in favor of the appellant.

2. Reversal of Cenvat credit on traded goods with no credit taken:
Since no Cenvat credit was availed on traded goods, there is no requirement to reverse credit on those goods. Consequently, the appellant is not obliged to reverse the Cenvat credit on traded goods with no credit taken. This issue was decided in favor of the appellant.

3. Reversal of Cenvat credit on provisioned but not written-off inputs:
The appellant provisioned for writing off inputs but did not actually write them off. Subsequently, these inputs were used in the manufacture of final goods. Rule 3(5B) allows the appellant to take Cenvat credit on such inputs, as they were utilized in the manufacturing process. Therefore, the appellant is not mandated to reverse Cenvat credit on inputs provisioned in the balance sheet but not actually written off. This issue was resolved in favor of the appellant.

4. Issuance of subsequent show cause notice within extended limitation:
Show cause notices issued to the appellant for the relevant periods were found to be time-barred as they were issued beyond the statutory limitation period. The first notice was issued in 2010 for the period 2005-08 to 2008-09, rendering subsequent notices, including those invoking extended limitation, as legally unsustainable. Consequently, the impugned proceedings were set aside as time-barred, and this issue was decided in favor of the appellant.

5. Applicability of Rule 14 of Cenvat Credit Rules, 2004:
The appellant correctly availed Cenvat credit on inputs at the time of procurement, and no allegation of wrongful credit availing was made in the show cause notice. Hence, Rule 14 of the Cenvat Credit Rules, 2004, concerning wrongful credit availing, was deemed inapplicable to the case. This issue was resolved in favor of the appellant.

In conclusion, the Tribunal upheld the impugned order, dismissing the appeal filed by the Revenue due to the absence of any legal infirmity in the decision. The show cause notices were deemed time-barred, and the demand was found unsustainable based on legal precedents and the provisions of the Cenvat Credit Rules, 2004.

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