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2016 (11) TMI 1284 - CESTAT HYDERABAD

2016 (11) TMI 1284 - CESTAT HYDERABAD - TMI - Reversal of CENVAT credit - Rule 3(5B) of the Cenvat Credit Rules, 2004 - availing credit without paying duty to the supplier - amount booked as extraordinary income - Held that: - The appellants having decided not to make payment to the vendors, for whatever reason that may be, it is equal to a situation of writing off the inputs especially when they have accounted the amount as ‘extra-ordinary income’. This income amount includes the duty portion o .....

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f the dues to the vendor is not the same as writing off of inputs and that Rule 3(5B) is not applicable is not tenable. - Circular No.877/15/2008-CX dated 17-11-2008 regarding reversal of Cenvat credit in the case of trade discount, and therefore, is not at all applicable. Be that as it may, the circular clarifies that by way of discount if price is reduced and consequently duty is also reduced, the reduced excise duty only will be available as credit. In the present case, the appellant not .....

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. They are registered with the Central Excise Department and are availing the Cenvat credit facility on inputs and capital goods used in the manufacture of their finished products. 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 ₹ 25,14,783/- as  xtraordinary income , which was also reflected in their income tax returns. Department entertained the view .....

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to Shri B.K. Gurbani, Managing Director of appellant requiring him to submit the details of Cenvat credit taken on inputs written off and accounted in the year 2008-09 in the extraordinary income ledger along with copies of invoices and also other statutory records. 2. Thereafter, a show cause notice was issued to the appellants proposing to recover Cenvat credit of ₹ 3,40,194/- which was availed on the inputs and packing material, written off in their books of accounts, along with interes .....

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behalf of the appellant, the Ld. Counsel Shri R. Muralidhar submitted as follows: 3.1 During the financial year 2008-09, the appellant accounted for extraordinary income of ₹ 25,14,783/- by writing off the dues to vendors /suppliers. This was consequent to the items supplied by vendors in 2005-06 being of inferior quality. The extraordinary income was disclosed and reflected in their income tax returns. The department treated this situation as a case of writing off of the Cenvat credit ava .....

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er 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 therefore, provisions of Rule 3(5B) Cenvat Credit Rules, 2004 are not attracted. It is also submitted that the goods are physically available and appellants are very much in possession of these goods. The appellants have produced a Chartered Accountants certificate to establish that in fact the goods are physicall .....

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judicating authority has confirmed the demand without proper consideration of the actual facts put forward by the appellant. 4. On behalf of the department, the Ld. AR Shri Arun Kumar reiterated the finding in the impugned order. He submitted that the appellants have written off the amount due to the vendors. In effect, it is writing off of the inputs. It is also clarified by the appellant that they have no intention to make payment to the vendors. In such circumstances, Rule 3(5B) Cenvat Credit .....

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ng 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 Invoice No/date Involice value Rs. Description of materials 1. M/s Venkate .....

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emix (Raw Material) In the certificate, the total invoice value is Rs.,25,24,718/- and it also shows that the Cenvat credit is ₹ 3,28,302/-. 7. As per Rule 3(1) a manufacturer is allowed to take credit of the duty of excise paid on the inputs. Though the appellants contend that they have taken credit on the invoices issued by the supplier, they now submit that they have not paid any amount to the supplier as raised in the invoice. If the appellant has not paid the consideration of the good .....

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h 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 .....

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nt as extra-ordinary income . This income amount includes the duty portion of the goods also. Therefore, appellant ought to have reversed the credit along with interest as they have not paid the duty on the goods. The facts reveal that the appellant have attempted to avail credit without paying duty in the guise of accounting the same as extra ordinary income . The availment of credit without paying duty on the goods has resulted in a situation of loss of revenue. The facts of the case present a .....

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been made in the books of account, then the manufacturer or service provider, as the case may be, shall pay an amount equivalent to 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 .....

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