2018 (11) TMI 348 - AT - Central Excise

Reversal of CENVAT Credit - credit attributable on the value of written off inputs, spares and capital goods in their accounts for the financial year 2009-10 - case of appellant is that inventory was partially written off during the year 2009-10 and the obligation to reverse CENVAT credit in case of partial written off of inputs and capital goods came into existence w.e.f 1.3.2011 and not prior to the said date. Held that - This provision to reverse the proportionate CENVAT credit on partially write off came into existence from 1.3.2011 whereas the period involved in the present case is 2009-10. The inventory against which the partial write off was made was available with the appellant and there was no physical removal of the goods. In reply to the show-cause notice also, the appellant has given a detailed chart showing that there was partial write off - The amendment w.e.f 1.3.2011 was not retrospective and it was prospective. Credit need not be reversed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against rejection of CENVAT credit reversal by Commissioner (A)
- Obligation to reverse CENVAT credit on written off inputs and capital goods
- Applicability of provision for partial write off
- Barred by limitation
- Suppression of facts by the appellant
- Interpretation of relevant legal provisions

Analysis:
The appeal in question challenges the order of the Commissioner (A) rejecting the appellant's plea regarding the reversal of CENVAT credit on written off inputs and capital goods. The appellant, engaged in manufacturing pig iron and unmachined casting, availed CENVAT credit under the CENVAT Credit Rules, 2004. The dispute arose when a show-cause notice was issued demanding the reversal of CENVAT credit for the financial year 2009-10. The Additional Commissioner confirmed the demand, leading to the appeal before the Commissioner (A) and subsequently to the present appeal before the Tribunal.

The primary contention raised by the appellant was that the obligation to reverse CENVAT credit on partial write off of inputs and capital goods came into effect from 1.3.2011, whereas the relevant period in this case was 2009-10. The appellant argued that there was no provision for full write off during the period in question and that the inventory against which the partial write off was made was still available with no physical removal of goods. The appellant also emphasized that the demand was time-barred, as the audit was conducted in January 2010, and the show-cause notice was issued in March 2015, beyond the limitation period.

In the analysis, the Tribunal found merit in the appellant's arguments. It noted that the provision to reverse proportionate CENVAT credit on partial write off came into existence from 1.3.2011, which was after the period under consideration. Citing a precedent, the Tribunal highlighted that prior to this amendment, manufacturers were not required to reverse any part of the credit on written off inputs. The Tribunal concluded that the impugned order was unsustainable both on merit and limitation grounds. Therefore, the Tribunal allowed the appeal, setting aside the Commissioner (A)'s order and providing consequential relief to the appellant.