2023 (12) TMI 243 - AT - Central Excise

Reversal of CENVAT Credit - credit availed on inputs alleged to have been written off in their books of account in accordance with Rule 3(5B) of Cenvat Credit Rules, 2004 - HELD THAT - The condition precedent under Rule 3(5B) of CCR, 2004 is, if the value of any inputs/goods have been written off fully or partially or where any provision to write off fully has been made in the books of account, in respect of value of any inputs, then the manufacturer or service provider, as the case may be, shall pay an amount equivalent to the Cenvat credit taken in respect of the said inputs. In the facts and circumstances of this case, there being no writing off or removal of inputs under the provisions of Rule 3(5B) of CCR, 2004, the same is not attracted - Appeal of Revenue dismissed.

Summary

Issues involved: Alleged write off of cenvatable goods in balance sheets for multiple financial years, demand of central excise duty, applicability of Rule 3(5B) of Cenvat Credit Rules, 2004, rejection of submission by Adjudicating Authority, appeal allowed by Commissioner (Appeals), appeal by Revenue before Tribunal.

The Respondent, a manufacturer of tyres, tubes, and flaps, faced allegations from Central Excise officers regarding provisions for write off of cenvatable goods in their balance sheets for financial years 2011-12 to 2014-15. A show cause notice was issued demanding central excise duty under Rule 14 read with proviso to section 11A(1) of the Central Excise Act, along with interest and penalty. The Respondent contended that provisions made were for slow-moving obsolete spares, not write-offs, and were still part of their inventory for future use.

The Adjudicating Authority rejected the Respondent's submission, invoking the extended period of limitation and holding the provisions made akin to write-offs under Rule 3(5B) of Cenvat Credit Rules. However, the Commissioner (Appeals) allowed the appeal, noting that no items on which cenvat credit was taken had been written off, and the balance sheet did not reflect any write-offs. The Appellate Authority set aside the original order, leading the Revenue to appeal before the Tribunal, arguing that the provisions in the balance sheets were violative of Rule 3(5B) of Cenvat Credit Rules, 2004.

After hearing both sides, the Tribunal observed that the provisions in the balance sheets were not cases of actual write-offs but akin to write-offs. Citing legal precedents, the Tribunal emphasized the need to interpret taxing statutes based on clear expressions without implying additional provisions. Analyzing Rule 3(5B) of Cenvat Credit Rules, 2004, the Tribunal concluded that since there was no actual writing off or removal of inputs as required by the rule, the appeal of the Revenue was dismissed. The Respondent was entitled to any consequential benefits in accordance with the law.

In conclusion, the Tribunal found that the Respondent was not required to reverse the credit availed on inputs alleged to have been written off in their books of account under Rule 3(5B) of Cenvat Credit Rules, 2004, as there was no actual writing off or removal of inputs as mandated by the rule.