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TMI Blog2016 (11) TMI 1284X X X X Extracts X X X X X X X X Extracts X X X X ..... During the scrutiny of the profit and loss account for the financial year ending 31-03-2009, it was noticed by the department that the appellants have accounted a receipt of an amount of Rs. 25,14,783/- as "xtraordinary income", which was also reflected in their income tax returns. Department entertained the view that, the amount being the inputs written off in their books of accounts, the appellant is liable to reverse the credit under the provisions of Rule 3(5B) of the Cenvat Credit Rules, 2004 . The department issued several letters directing the appellant to submit required documents pertaining to the said amount of "extra ordinary income" and also requested to immediately reverse the credit availed on the said inputs along with inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s situation as a case of writing off of the Cenvat credit availed on inputs, in the books of accounts of the appellant, and demanded reversal of Cenvat credit availed on these inputs, in terms of Rule 3(5B) of Cenvat Credit Rules, 2004. 3.2 He submitted that there is litigation going on between the appellant and the vendors due to supply of inferior quality inputs. The appellants have decided not to make the payments of these invoices to the vendors and therefore, the dues to such vendors was written off pursuant to the Board resolution. Accordingly, proper entries were made in the 'extra ordinary income' ledger account. 3.4 He submitted that writing off the amounts due to vendors cannot be equated with writing off the stocks /inputs and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong with interest. The appellant having not reversed the credit, the demand, interest and penalty imposed is legal and proper. 5. I have heard both sides, 6. The appellants have accounted 'extra ordinary income' in their books on account of writing off of the vendors dues to the tune of Rs. 25,14,783/-. Such writing off was as a result of the decision taken in the Board meeting. Thus it is crystal clear that the appellants have decided not to make payments to the vendors as per the invoices relating to the said amount. The Chartered Accountant has given a certificate dated 04-05-2012 which shows the details of the name of supplier, invoice date, invoice value and description of materials, which is as under: S.No. Name of the party Invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and had kept it pending. After passage of time, they have decided by the Board resolution not to make such payment at all. Pursuant to the Board resolution, they accounted an amount which is pending payment to vendors as 'extra ordinary income'. In essence, the appellants have neither paid value of goods nor duty on the goods. The appellant have not actually paid duty on the goods. There is no specific plea put forward by appellants that though they did not pay value of the goods, the duty on the goods have been paid. The provisions of Rule 3(5B) Cenvat Credit Rules, 2004 for that matter the Cenvat credit scheme itself, come into application only if duty is paid. The vendor /supplier having not received the consideration, it is apparent th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CENVAT credit taken in respect of the said input or capital goods: Provided that if the said input or capital goods is subsequently used in the manufacture of final products or the provision of taxable services, the manufacturer or output service provider, as the case may be, shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier subject to the other provisions of these rules.' 9. The intention of this provision is that when credit has been availed on inputs, and when such inputs are not used in the manufacture of final products, the assessee has to reverse the credit. The situation in the present case is also that, the appellants have no intention to use the inputs in manufacture. They have n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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