9911796707
TMI Blog2009 (11) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... out payment of duty. After due process of law, the Commissioner rejected the plea of limitation to a portion of the demand raised by the appellants on the plea that the goods written off related to credit taken during the penod prior to 31-3-2003 and the show cause notice was issued on 24-4-2008. The Commissioner found that the assessee had written off the inputs and capital goods in the books of accounts during the year 2005-06 and not during the year 2002-03. The assessee had submitted that they had enhanced the inventory value of the raw material stock, work in progress and finished goods without making any corresponding changes in the actual stock records only to get increased drawing power from bank. There was no purchase of material involving taking credit. The Commissioner had relied on a Board s Circular which did not apply to the facts of the case. The Commissioner found that in terms of CBEC Circular dated 22-2-1995, it was obligatory on the part of the assessee to reverse the Modvat credit taken where the inputs were written off. The Commissioner heavily relied on the balance sheet and notes on accounts for the year 2005-06 as per which the Board of Directors had decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inputs and capital goods written off in the book of accounts of the assessee for the period 2005-06. He confirmed the demand of Rs. 33,72,163/- towards duty on 24962 pieces of PCBs clandestinely cleared under Section 11A(i) of the Central Excise Act, 1944 (the Act). He imposed equal amount of penalty of Rs. 2,85,46,601/- under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Act and another penalty of Rs. 33,72,163/- under Section 11AC being equal penalty as the duty found due on clandestine clearances. Applicable interest was demanded on the irregular credit demanded as well as the duty on clandestine clearances. A further penalty of Rs. 2,00,000/-was imposed on the assessee under Rule 25 of the Central Excise Rules, 2002. 2. The appellants have taken the following grounds in the appeal to assail the impugned order. Prior to 11-5-2007, there was no legal provision to recover Cenvat credit on inputs written off as obsolete in the books of accounts. Relevant Rule 3(5B) was inserted in Cenvat Credit Rules, 2004 by Notification No. 36/3007-CE (NT) dated 11-5-2007. It did not apply to write off done on 31-3-2006. A part of the demand was barred by limitation sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) Su-Vi Pharma Chem. Industries v. C.C.E. [2007 (211) E.L.T. 344 (Tri.-Mum.)] It was explained that the appellants had to enhance the inventory figures in the books of accounts in order to maintain their existing drawing power with the banks. Otherwise it would have resulted in lowering of their drawing power entailing immediate payment of excess loan facility to the bank. The appellant had to show higher security value for some time in the balance sheet, particularly in the inventory so that the inevitable (recovery by bank) could be postponed. The appellants had furnished statements showing the amounts enhanced at the end of each year from 2002-03 to 2004-05. The Commissioner had given an incorrect finding to the contrary that the assessee had not produced such documents. The enhancement of inventory figures in the books of accounts was made without there being any change in the statutory records. The Commissioner had no basis to reject this vital submission of the appellants as afterthought. In the absence of evidence for procurement of excess inputs, the impugned order holding write off were out of the stock held by the appellants was without any evidence. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Department could not lead to the inevitable conclusion that the appellants had been indulging in clandestine manufacture and removal of the final product without payment of duty. In the light of this binding precedent the demand of Rs. 33,06,042/- on 24962 PCBs allegedly clandestinely cleared was not sustainable. The Commissioner did no appreciate that all the documents showing enhanced stock were presented only to the banks and the regular books of accounts or the statutory records were never altered. The appellants always paid excise duty on the quantity and value of the goods which were actually manufactured and removed from the factory. The entire records including P L accounts and other financial records were accessible for inspection by the authorities. Since the entire case was based on the record of the appellants and facts and figures contained therein, there was no justification to invoke proviso to Section 11 of the Act. In this context, the appellant relied on the decision of Apex Court in the case of Amco Batteries Ltd. v. C.C.E. [2003 (153) E.L.T. 7 (S.C.)]. The demand was time barred as the department had taken notice of the alleged write off of inputs and capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department has not relied on any evidence except the balance sheet. The ER-1 returns for the material period had admittedly shown the balance of finished goods, PCBs, for the relevant period as nil. In the circumstances, we find that the demand towards clandestine clearance of PCBs cannot be sustained. As regards the demand towards worn out capital goods found to have been written off (missing) in the premises of the assessee, the assessee contested this finding as erroneous and perverse. We find that the Commissioner found the charge of writing off of inputs from the assessee s accounts solely based on the balance sheet figures. As regards the claim that the PCBs found to have been written off was only as per the balance sheet and that there was no stock of such finished goods in its records was held to have been not substantiated by the assessee. The assessee, on the other hand, claimed that as per their ER-1 returns accepted by the department, no such stock had been available with it. We find that the clandestine clearance should be found with positive evidence. Entries in the balance sheet alone did not constitute adequate evidence. As regards the charge that capital goods ..... X X X X Extracts X X X X X X X X Extracts X X X X
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