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TMI Blog2025 (3) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Years 2010-11 to 2014-15, in respect of Raw materials, components, stores, loose tools etc. The Central Excise Auditors, while conducting audit, found the figures from the respective balance sheets of HEC. By not reversing the CENVAT Credit of Rs.11,80,18,142/- on the amount taken as provisions in the books of company, HEC were found to have violated the provisions of Rule 3(5B) of the CENVAT Credit Rules, 2004 . 2.1. Accordingly, a demand notice was issued and after due process, vide the impugned order, the demand was confirmed, along with interest and equal amount of duty as penalty,. Aggrieved against the confirmation of the demands and imposition of penalty, the appellant has filed this appeal. 3. The appellant submits that as per Inventory Management System, they follow the accounting policy of valuation of inventories, categorised as the slow-moving items at the end of each financial year, if such inputs were lying in stock for a specified period; it is intended to determine the profit & loss at the end of the year. They have stated that it is based on the principle of conservatism and to comply with the Accounting Standards, which was never with an intention to write o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. Rs. 1,53,40,000/-, whereas the Department considered the accumulated value of each of the five years together, amounting to Rs.101,94,77,000/-. It is the appellant's contention that this incremental figure, on the other hand, varied from year to year due to reassessment of inventory, based on the accounting policy of valuation of inventories. Therefore, since there was no violation of Rule 3(5B) of CENVAT Credit Rules, the appellant contends that no question of reversal of CENVAT Credit arose in this case and the Department should have considered only the incremental value of provision, if at all. 3.3. The appellant also submits that the Ld. Principal Commissioner ought to have appreciated that the major portion of the demand, in respect of the period 2010-11 to 2014-15 under the Show Cause Notice dated 30-03-2016, is time-barred, being beyond the normal period of one year from the relevant date. The appellant submits that they are a wholly owned Govt. of India undertaking where complete set of records were maintained and accounts audited by statutory auditors appointed by CAG as well as supplementary audit by representatives of CAG-New Delhi; the Central Excise Auditors while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the end of each financial year, if such inputs were lying in stock for a specified period. It is intended to determine the profit & loss at the end of the year. It is based on the principle of conservatism and to comply with the Accounting Standards, which was never with an intention to write off any portion of inventory in the Books of Accounts. Since it is not concerned with obsolete items, which are unusable, we hold that the provision of Rule 3(5B) of the CENVAT Credit Rules was not applicable. We observe that the issue is no more res integra as the issue has been decided by this Tribunal in the case of M/s. Steel Authority of India Ltd. vs Commissioner of Central Excise, Durgapur reported in 2025-TIOL-231-CESTAT-KOL, wherein it has been held that the provisions of Rule 3(5B) of the CENVAT Rules are not applicable in such cases. The relevant part of the said decision is reproduced below: "5. Heard the parties, considered the submissions and perused the record. 6. We find that the issue came up before this Tribunal in the appellant's own case reported as 2024 (10) TMI 1336-CESTAT NEWDELHI, wherein the facts of the case are as under:- "The appellant herein is engaged i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tially than the manufacturer or service provider are required to reverse/pay Cenvat credit availed on such inputs or capital goods. Thus it is clear that provisions of rule 3(5B) CCR are applicable only when the value of asset and or inventory is written of fully or partially, or wherein any specific provision to write-off fully or partially has been made in the books of accounts. 9. In the present case from the very beginning the appellant have submitted that they have only written down the value of the raw materials in their books of account and has not written off the value fully or partially. Also, the claim of the appellant are that all these raw materials are still available in their factory and are in usable conditions; the value is written down as per the accounting principle and since the credit availed is on inputs, therefore, under the CCR, 2004, there is no bar in taking depreciation benefit' under Income-tax Act, 1961. Further, I find that there is no evidence to the effect that the inputs whose value had been written down had been removed from the factory, thus, reducing the value of the raw materials. Keeping in view the accounting principles and Income-tax ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de only a general provision and the department has not been able to identify the details of inventory or assets for which the provision has been made as to whether those inventories have become obsolete, I hold that the demand confirmed invoking Rule 3(5B) in the circumstances is not sustainable. There is also no denial to the fact that in case where such non/slow moving inventory had become obsolete the appellant had already reversed the credit." 7. On going through the decision in the appellant's own case, we find that the facts are not in dispute that the appellant has made provisions in books of accounts for partial writing down the value in respect of the slow moving and non-moving of inventories and spares whereas the provision of Rule 3(5B) of Cenvat Credit Rules are applicable when the provision in the books of accounts, the stock/inventories have been written off which is not the case in hand. Therefore, relying on the appellant's own case, we hold that the provision of Rule 3(5B) of Cenvat Credit Rules, 2004 are not applicable to the facts of the present case, therefore, no demand is sustainable against the appellant. As no demand is sustainable against the appellant, n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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