2005 (1) TMI 175 - AT - Central Excise

Summary

Issues involved: Appeal challenging Modvat credit allowance on inputs written off but still in factory premises.

Summary:
In the appeal before the Appellate Tribunal CESTAT, NEW DELHI, the Revenue contested the correctness of the part of the impugned order where the Commissioner (Appeals) permitted Modvat credit amounting to Rs. 10,33,233/- on inputs that had been written off in the books but remained in the factory premises of the respondents.

The Revenue argued that following the termination of collaboration with M/s. Honda Motors, the use of the inputs in the factory became impracticable, necessitating the reversal of Modvat credit even if the inputs were still present in the factory. However, the Tribunal found no evidence to support the claim that production of Two Wheelers and parts thereof had ceased after the collaboration termination. Additionally, Rule 57F does not impose a time limit for input utilization, allowing credit denial only for non-use in manufacturing or removal of inputs. Since the conditions under Rule 57F were not met, the Tribunal held that writing off the input value in books did not justify credit denial when the inputs remained in the factory premises. The Tribunal cited precedents like Bharat Heavy Electricals Ltd. and Hindustan Zinc Ltd. to support this interpretation.

Consequently, the Tribunal upheld the Commissioner (Appeals)'s order, finding no illegality and dismissing the Revenue's appeal.