2023 (10) TMI 677 - AT - Central Excise

Reversal of cenvat credit on certain amounts written off by the vendor - Rule 3(5B) of Cenvat Credit Rules, 2004 - HELD THAT - The credit is required to be reversed only in the circumstances when inputs or capital goods on which credit has been taken is written off fully or partially - In the instant case, the appellant have vehemently asserted that the goods have been used in the manufacture of final products. This assertion was also made before the lower authorities as well as in the present appeal. No evidence has been produced by Revenue to show that the said goods were not used in the manufacture of final product. In this background the Rule 3(5B) itself cannot be invoked for recovery of cenvat credit. The primary condition for invoking Rule 3(5B) is non use of inputs/ capital goods on which credit has been taken. The instant case is only of non-payment / waiver of the price which the appellant were require to pay to the vendor. It is apparent that the recovery provisions for amount recoverable under Rule 3(5B) was introduced only w.e.f. 01.03.2013. The present dispute is for the period prior to the said date. In these circumstances, notification of Rule 14 to recover these amounts is doubtful. There are no merit in the impugned order. The same is set aside and appeal is allowed.

Summary

Issues involved:
Appeal against demand of reversal of cenvat credit on amounts written off by the vendor.

Summary:
The appellant, a company, had purchased goods from its principal and the principal wrote off the amount. The Revenue invoked Rule 3(5B) of Cenvat Credit Rules, 2004 for demanding reversal of cenvat credit. The appellant argued that the goods were used in manufacturing final products, thus not subject to Rule 3(5B). They highlighted the absence of recovery provision for the disputed period before March 2012. Additionally, they relied on Circular No. 990/14/2014-CX(NT) and previous tribunal decisions supporting their stance. The Authorized Representative supported the impugned order.

The Tribunal analyzed Rule 3(5B) and noted that credit reversal is required only when goods on which credit was taken are written off fully or partially. The appellant contended that the goods were used in manufacturing, not written off. The Tribunal found no evidence that the goods were not used in production. The proviso to the rule also supported allowing credit when goods are used in manufacturing final products.

Referring to the decision in GKN Driveline India Ltd., the Tribunal noted that recovery provisions for Rule 3(5B) were introduced only from March 2013, not applicable to the disputed period. Consequently, the impugned order was set aside, and the appeal was allowed.