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TMI Blog2022 (3) TMI 916X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the appellant is more akin to partially writing off the value of inputs. The rule requiring reversal of credit even when there is partial write off of the value of the inventory has come into application only after the amendment with effect from 1.3.2011. On perusal of the balance sheet, it can be seen that the appellant has not fully written off the value of inventory - It is very evident from the balance sheet that the value of the inputs has not been fully written off. In such circumstances, Rule 3(5)(B) does not apply for the disputed period. The Tribunal in the case of M/S. SANGHAVI ENGINEERING VERSUS CCE, HYDERABAD [ 2012 (7) TMI 821 - CESTAT BANGALORE] as well as M/S. KIRLOSKAR FERROUS INDUSTRIES LTD. VERSUS COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE, BELGAUM [ 2018 (11) TMI 348 - CESTAT BANGALORE] had occasion to analyse the very same issue and has held that the requirement of reversal of credit when the value has been partially written off would take effect only after 1.3.2011. The demand cannot sustain - Appeal allowed - decided in favor of appellant. - Excise Appeal No.40678 of 2020 - Final Order No. 40124/2022 - Dated:- 21-3-2022 - Ms. Sulekha Bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count. On the basis of the figures appearing in the balance sheet showing the provision made for old and slow-moving materials, the department has alleged that the appellant ought to have reversed the credit on the provision so made. He submitted that the period involved is from 2007 08 upto August 2009. Rule 3 (5B) was inserted vide Notification No. 26/2007-CE (NT) dated 11.5.2007 and reads as under:- Rule 3 (5B). If the value of any, - (i) input, or (ii) capital goods before being put to use, on which CENVAT credit has been taken is written off fully or where any provision to write off fully has been made in the books of account, then the manufacturer shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods. (emphasis supplied) From the above Rule, it can be seen that only when inputs on which CENVAT credit has been availed and then fully written off or when any provision is made to fully write off the inputs, the Rule will apply. In other words, it is not required to reverse the credit if the inputs have been partially written off. The law in this regard was amended with effect from 1.3.2011 wherein the require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of inventory is fully written off / completely removed from the books of accounts by way of reduction in inventory value which would be done only when completely obsolete. 7. He relied upon on the decision of the Tribunal in the case of Sanghavi Engineering Vs. CCE, Hyderabad 2013 (297) ELT 277 (Tri. Bang.) and Kirloskar Ferrous Industries Ltd. Vs. CCE, Belgaum 2018 (11) TMI 348 CESTAT Bang. He prayed that the appeal may be allowed. 8. The learned AR Ms. Sridevi Tritula supported the findings in the impugned order. She argued that the appellant having made provisions in the balance sheet for the old and slow-moving inventory has to reverse the credit in terms of Rule 3 (5B) of CENVAT Credit Rules, 2004. 9. Heard both sides. 10. The relevant Rule 3 (5B) which was introduced with effect from 11.5.2007 and also the amendment brought forth with effect from 1.3.2011 has been already noticed as above. 11. From the above Rule, it can be seen that credit has to be reversed even if partially written off for the period prior to 1.3.2011. The Rule was introduced in 2007 and then the requirement was to reverse credit when fully written off. In the present case, the depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds 9,660,374 1,114,267 Traded Goods 3,053,280 2,646,368 517,499,349 351,219,373 Less : Provision for Old and Slow Moving Inventory 72,192,852 49,825,039 445,306,497 301,394,334 2009 Rs. 2008 Rs. SCHEDULE 4 INVENTORIES [Schedule 16, Note A (d)] Raw Materials and Components 445,999,806 381,356,982 [including in transit ₹ 14,281,946 (2008: ₹ 34,797,586) Work in Process 123,742,319 123,428,713 Finished Goods 22,861,362 9,660,374 Traded Goods 3,862,456 3,053,280 596,465,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period, did not require such reversal of Cenvat credit. It is submitted that such reversal of Cenvat credit was warranted only in a case where the entire value of the inputs was fully written off. In this connection, it is further submitted that the requirement of reversal of Cenvat credit on inputs in cases of partial writing off of value was brought into effect only on 1-3-2011 and, therefore, prior to that date, there was no such requirement. The provisions cited by the learned consultant are reproduced below :- Prior to 1-3-2011 3 (5B). If the value of any, - (i) input, or (ii) capital goods before being put to use, on which Cenvat credit has been taken is written off fully or where any provision to write off fully has been made in the books of account, then the manufacturer shall pay an amount equivalent to the Cenvat credit taken in respect of the said input or capital goods. From 1-3-2011 3 (5B). If the value of any,- (i) input, or (ii) capital goods before being put to use, on which Cenvat credit has been taken is written off fully or partially or where any provision to write off fully or partially has been made in the book ..... 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