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Electronics Corporation of India Ltd. Versus C.C.E., Hyderabad-III

2015 (5) TMI 1010 - CESTAT BANGALORE

Modvat and Cenvat credits reversed (paid back) - value of inputs lying in the factory were reduced for the relevant financial years, while preparing Annual Balance Sheets - Demand for Central Excise duty in respect of inputs written off in Annual Balance Sheets - Held that:- Prior to amendment of Rule 5B of the Cenvat Credit Rules on 11-5-2007, there was no provision requiring reversal of the credit when the inputs were partially or fully written off but no removal. In view of the precedent deci .....

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ess recording in the Annual Balance Sheet and why no reconciliation statement was submitted and copy of the relevant registers were also not provided. Even though it is more than 16 years and even now, the appellant did not have all the details. - Decided against assessee.

Demand on OMC computer systems supplied against order of the Department of Telecommunication (DOT), Government of India - Held that:- The appellant claimed that they could explain the payment of differential duty in .....

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per : B.S.V. Murthy, Member (T)]. - Demand for Central Excise duty in respect of inputs written off in Annual Balance Sheets for which seven show cause notices were issued has been confirmed in the Order-in-Original to the extent of ₹ 5,30,41,191/-. Interest also has been demanded. No penalty has been levied on this amount by the Commissioner. The period involved is from 1988 to 2004 in seven show cause notices. 2.1 Learned counsel for the appellant made the following submissions in r .....

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. According to the prescription in Accounting Standard No. 2 (AS-2), the statutory auditors in the process of providing values of the inventory, accounting treatment is provided, whereby the values might be shown as completely written off or they may be partly written off having regard to the period of retention. This prescription has no nexus with the utility of the goods as inputs for the finished goods. That is to say, that a certain goods has always the same utility value as it has when it w .....

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osing recovery of credit taken equivalent to the duty calculated on reduced values. 2.4 The total demands levied under the assumption that if the values of inputs are reduced/written off, which was resorted to by applying Accounting Standard-2 at the time of taking stock of inventory while preparing Annual Report (Balance Sheets) and in accordance with Section 211(2B) of the Companies Act, 1956 the credit to the extent of values reduced is to be reversed/paid back. 2.5 The order is not .....

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goods as such lost their full value. (iii) There were no such inputs in stock where the values were completely written off. Only values were reduced; they were not wholly reduced. (iv) There is no clearance of any input goods. Hence there can be no incidence of duty as all the goods are in factory only. (v) The provisions of Modvat scheme or the provisions of Cenvat scheme apply only in cases where goods are cleared from the factory. There is no statutory warrant to issue the subject notices in .....

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y entered into the factory and were accounted in the balance. The utilisation of credit at that time or later was not incorrect and such instant credit was available as per provisions and it was utilized. Therefore admittedly the credit was correctly utilized. It cannot now be said that the credit was wrongly utilized because the value of inputs lying in the factory was reduced later. No such situations of notional reduction of values are envisaged in the credit scheme. Nor can propriety of such .....

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x) On 11-5-2007, Rule 5B to Cenvat Rules was inserted by Notification No. 26/2007-C.E. (N.T.), dated 11-5-2007 to the effect that in cases where the value is fully written off the credit should be reversed and the reversed credit can be (however) taken back if the goods are used in manufacture in the factory. 2.6. There were two Circulars issued by the C.B.E. & C. Circular No. 101/12/95-CX, dated 22-2-1995 was issued inter alia holding that if credit were to be written off for stock acc .....

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nd submissions of the counsel. Prior to amendment of Rule 5B of the Cenvat Credit Rules on 11-5-2007, there was no provision requiring reversal of the credit when the inputs were partially or fully written off but no removal. In view of the precedent decision, cited by learned counsel and also other submissions which were made, we find that this demand is not sustainable and accordingly, is set aside. 4.1. In addition to the above, there are two demands. The first demand is for ₹ 20,9 .....

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was Computer Manufacturing Group (CMG). It was submitted that officers did not look into RG 1 register maintained by CMG. Learned counsel however could not explain as to why there was an observation about excess recording in the Annual Balance Sheet and why no reconciliation statement was submitted and copy of the relevant registers were also not provided. Even though it is more than 16 years and even now, the appellant did not have all the details. Therefore we are not able to consider the subm .....

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