TMI Blog2019 (5) TMI 971X X X X Extracts X X X X X X X X Extracts X X X X ..... gation in the show-cause notice was that the expenses on account of inputs used in the manufacture of pre-launch series of cars was debited to launch material account and the same amounted to writing off - HELD THAT:- This is a mere accounting practice. Law cannot disregard the practices prevalent in the industry. If a particular industry treats such costs as expenses and denotes the same as expenses in the profit loss account it cannot be held that the same has been written off assuming them to be obsolete. What is to be seen is whether any provisions of Cenvat Credit Rules have been violated. It can be argued only on the basis of accounting standards that the impugned goods are written off. Therefore, the provisions of Rule 3(5B) of CENVAT Credit Rules, 2004 are not attracted. The necessary condition for availing credit is receipt of inputs under the cover of invoice, payment of duty of the same and utilization of the inputs in the manufacture. None of these events have been challenged in the show-cause notice. It is not the case of Revenue that the said inputs have not been received in the factory or not utilized in the manufacture or removed as such from the factory withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 55,38,521/- and details of Cenvat credit taken amounting to ₹ 93,73,210; ₹ 6.35 Cr disclosed in Schedule 4 of the balance sheet pertained to imported material components not received in the factory except the commercial invoices (and no credit was taken); on being asked to explain the non-disclosure of stock in the balance sheet as on 31/12/2008, which was purchased and on which credit of ₹ 93,73,210/- was taken, he stated that since the said value of all purchases during the year ending 31/12/2008 was debited to launch material account which is a part of the Launch expense account as disclosed in the profit and loss account, the value of stock as on 31/12/2008 was shown as nil; on being asked whether the nullifying of stock by debiting it to launch expenses account does not amount to write off of the value of stock and whether in such case, provisions of Rule 3(5) (b) of Cenvat Credit Rules, 2004 not attracted, he stated that it was not write off of the value of stock, but taking the charge in the profit and loss account in the year 2008 itself. 3.1. Shri Bhaskar, GM (Fin), in the statement dated 18/01/2010, stated that the inventory of raw mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable. Thus, the Cenvat Credit taken on raw material/inputs of ₹ 96,75,223/- was required to be paid the Respondents. The Respondents used the guidelines under Accounting Standard on stock valuation to suit their convenience and needs. The said accounting standard does not recommend non-maintenance of records of inventory stock nonetheless Respondents have linked the same in a way-zero value of input stock because of its intended use in preseries cars, hence no stock of records were maintained. The accounting standard cannot override the statutory provisions, in terms of provisions of Rule 9(5) of CCR, 2004 the maintenance of proper records for the receipt, disposal and inventory of the input and capital goods. As per Rule 3(5B) the payment of Cenvat Credit is required if the value of such credit taken input/capital goods is written off Respondents have contravened these provisions by taking the shelter of application of accounting standard. 3.3. When three major inputs were verified - engines, radiators and tyres submitted by Shri Bhaskar on 10/5/2010, it was observed that prior to 31/12/2008 there was import of only three engines and two radiators and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roper records for receipt, disposal, consumption and inventory of the inputs on which they avail Cenvat Credit. Shri Bhaskar, GM (Finance) in his statement dated 29/4/2010 has admitted the fact that they had not maintained stock register/ record in respect of the inputs procured by them and lying in stock as on 31/12/2008 , and therefore he was not in a position to submit the stock register and submitted a list of pre-series cars manufactured by them during the period from 30/1/2009 to 15/6/2009, and also a list showing the details of clearances of some of the said pre-series cars. Shri Bhaskar was asked to produce the relevant record for correlating the input stock as on 31/12/2008 with the manufacture of pre-series cards and also to produce physical stock taking report as on 31/12/2008, in respect of the inputs lying in stock as on that date to which he replied that no such stock record was maintained to correlate the same and that no physical stock taking was conducted in respect of the stock of inputs as on 31/12/2008 and hence, no such report is available . In the background of factual position an admitted by Shri Kausik Basu Shri Bhaskar, the Commissioner failed to appre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cac model is launched for commercial use, it is necessary that adequate tests are carried out and necessary permissions or certifications obtained. The cars manufactured and used for this purpose are called pre-series cars; the disputed CENVAT credit on inputs was used by the Respondent in relation to manufacture of 39 nos. pre-series cars of Skoda Fabia model which were cleared on payment duty; these cars were not meant for sale but were used for carrying out various pre-commercial launch tests and obtaining necessary regulatory approvals and certification such as homologation certificate, which is a compliance certificate required to sell cars in India which includes various tests of the horn, headlight, tyres, crush, endurance test, etc.; unless these tests are carried out and necessary approvals are obtained they will not be able to sell cars in the commercial market and therefore these tests are mandatory. He relies upon various judgements as detailed below, wherein it was held that any input which go in carrying out of tests without which product cannot be sold in the market, will be entitled for CENVAT credit: (a) Flex Engineering Ltd Vs. Commissioner of Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent would not be able to manufacture and sell cars in India. Therefore, reliance placed by the Revenue on Rule 3 (5B) is inappropriate and unsustainable in law. 4.3. The learned Counsel for Respondents further submits that as per the provisions of Rule 9(5) of CCR, 2004, the assess was required to maintain proper records for receipt, disposal, consumption and inventory of inputs on which they avail CENVAT Credit and which has been admitted by Shri Bhaskar G.M. (Finance) in his statement. It is on record that the Respondent produced list of such inputs along with necessary CENVAT documents i.e. Invoices and Bills of Entries, during investigation as well as before the Ld. Commissioner during adjudication, on the basis of which the CENVAT has been claimed. The Respondent during the course of the investigation submitted particulars in writing evidencing the receipt of inputs along with duty paid particulars. The Learned Commissioner after perusal of these documents satisfied himself to the fact that the payment of duty is not in question and accordingly concluded that receipt, usage and duty paid nature are fulfilled, which are the essential for CENVAT Credit, the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sage of the inputs used in the manufacture of such pre-launch series of cars. We find that Shri Bhaskar Swaminathan, GM Finance Account of the appellants in his statement dated 18/01/2010 29/04/2010 submitted the details of pre-series cars manufacture and cleared. We also find that vide letter date 10/05/2010, Shri Bhaskar has submitted invoice/ bill of entry wise details of inputs and the credit availed by them on the same. Therefore, we find that the allegation of non-maintenance of record is not proved. The only allegation made out in the show-cause notice appears to be that such account has not been maintained in the SAP. We don't find any merit in this argument that the said records should have been maintained in the SAP. The respondent contended that they have mentioned the receipt of inputs and the credit availed thereof in the ER-1 Returns. Therefore, we find that the provisions of Rule 9(5) of CENVAT Credit Rules, 2004 are by and large complied with. Therefore, we don't find any reason to interfere with the findings of Learned Commissioner as far as the maintenance of record is concerned. 5.1 Another allegation in the show-cause notice was that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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