2018 (4) TMI 592 - AT - Central Excise

Reversal of CENVAT credit - Revenue demanded different reversal of the CENVAT credit on the value declared in Balance Sheet after adjusting the reversal amount - Held that - it would be apparent that the figures of closing balance of included value of traded goods. In these circumstances the figures from Balance Sheet cannot be relied to compute the value of duty paid raw material and finished goods. In absence of above figures of Balance Sheet cannot be treated as true measure of quantity of duty paid raw material on which the credit has been taken and the value of finished goods manufactured from duty paid raw material. Since there is no evidence to substantiate allegations, credit allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of reversal of CENVAT credit, interest, and penalty based on the value of finished goods and raw materials shown in the Balance Sheet.

Analysis:
The appellant, a small-scale manufacturer availing exemption under Notification No. 8/2003, faced a demand for reversal of CENVAT credit after crossing the exemption limit. The appellant procured inputs from duty-paid sources after exhausting the exemption limit, informing the Range Officer at the start of each financial year. The Revenue calculated the reversal amount based on the values in the Balance Sheet, which the appellant disputed. The appellant argued that the Balance Sheet figures included traded goods and non-duty paid raw materials, making it unreliable for determining duty-paid raw material quantities. Additionally, the appellant claimed to have procured non-duty raw materials, some of which were not challenged with evidence. As the Balance Sheet figures lacked evidence to support the allegations, the appeal was allowed.

This judgment highlights the importance of accurate documentation and evidence in determining the value of duty-paid raw materials and finished goods for CENVAT credit reversal. The appellant's proactive approach in informing the authorities about their procurement practices and providing a certificate from a Chartered Accountant was crucial in supporting their case. The Revenue's reliance solely on the Balance Sheet figures without considering the nature of the goods included led to an inaccurate assessment, emphasizing the need for thorough scrutiny and verification of financial records in such cases. The decision underscores the principle that unsubstantiated claims by the Revenue cannot be the basis for demanding CENVAT credit reversal, emphasizing the significance of providing concrete evidence to support any allegations in tax-related matters.

Overall, the judgment provides clarity on the factors to consider when determining the value of duty-paid raw materials and finished goods for CENVAT credit reversal, emphasizing the need for accurate documentation, transparency in procurement practices, and the importance of evidence to substantiate claims in tax disputes.