TMI Blog2019 (11) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2011 - Final Order No. A/12063/2019 - Dated:- 1-11-2019 - RAMESH NAIR MEMBER (JUDICIAL) AND RAJU MEMBER (TECHNICAL) Sh. Anand Nainawati, Advocate for the Appellant Sh. L. Patra, Authorised Representative for the Respondent ORDER Brief facts of the case are that the appellant are engaged in the manufacture of excisable goods namely, Chemical dies and are availing credit of excise duty paid on inputs and capital goods used in the manufacture of finished goods during the period in question i.e 2004-2005 to 2008-2009. During the EA-2000, audit objection was raised that certain amount in respect of inputs were written off in the balance sheet. The SCN was issued proposing the recovery of the Cenvat Credit amount attributed to the value written off inputs in the light of Circular No. 645/36/2005-CX dated 16.07.2002. The adjudicating authority confirmed the demand invoking the Circular dated 16.07.2002 wherein it was prescribed that if the value of inputs or capital goods is written off in the balance sheet, Cenvat Credit on such inputs/capital goods should be reversed. Being aggrieved by the Order- In-Original appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to be reversed. 3. On the other hand, Shri L. Patra, Ld. Assistant Commissioner (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order. 4. We have carefully considered the submission made by both the sides and perused the records. We find that the moot question to be decided in the present case is that during the relevant period when the appellant have written off partial value of the inputs and accounted for in the balance sheet whether the appellant is required to reverse of the amount the cenvat credit in respect of inputs of which the value was written off. The main reliance of the department for demand of cenvat credit is the Board Circulars No. 101/12/1995-CX dated 22.02.1995 and Circular No 645/36/2005-CX dated 16.07.2002. We find that these Circular were dealt with by the Hon ble Gujarat High Court in the case Ingersoll Rand (Indian) Limited wherein the following judgment was passed:- 10 . With this background, we may peruse the two circulars heavily relied upon by the revenue. These circulars have been issued by the C.B.E. C. in exercise of powers under Section 37B of the Central Excise Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) In respect of capital goods viz. components, spare parts, etc., which are written off before use and hence are not proposed to be used, the Cenvat credit availed will have to be paid back on the same lines as applicable to inputs as mentioned in (i) above. 13 . In this circular, there was greater clarity. In particular, in para (ii), it was provided that in case where the value of the inputs is partially written off or reduced in the accounts of the company but the inputs are still capable of or available for use in the manufacture of finished goods, there would be no question of demand of Cenvat credit availed. However, in cases where unused inputs were fully written off, the earlier circular would prevail. In other words, the reversal of Modvat credit would be compulsory. 14 . To our mind, such a circular could not provide for the reversal of Modvat credit in cases which are covered prior to introduction of Rule 5B of the Cenvat Credit Rules. As already noted, there was no provision under which the Modvat credit already taken under the Rules of 1944 could be directed to be reversed simply because the input goods w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to contest the validity or legality of such instructions. 17 . It is equally well-settled that under such powers, the authority can clarify the position emerging from the statutory provisions and may even in a given situation relax the rigour of law. In case of Keshavji Ravji Co. v. Commissioner of Income-Tax reported in 183 ITR 1, the Supreme Court observed as under :- This contention and the proposition on which it rests, namely, that all circulars issued by the Board have a binding legal quality incurs, quite obviously, the criticism of being too broadly stated. The Board cannot pre-empt a judicial interpretation of the scope and ambit of a provision of the Act by issuing circulars on the subject. This is too obvious a proposition to require any argument for it. A circular cannot even impose on the tax-payer a burden higher than what the Act itself, on a true interpretation, envisages. The task of interpretation of the laws is the exclusive domain of the courts. However, -- this is what Sri Ramachandran really has in mind -- circulars beneficial to the assessees and which tone down the rigour of the law issued in exercise of the statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest is not actually received. The very fact that the assessee, although generally using a mercantile system of accounting, keeps such interest amounts in a suspense account and does not bring these amounts to the profit and loss account, goes to show that the assessee is following a mixed system of accounting by which such interest is included in its income only when it is actually received. Looking to the method of accounting so adopted by the assessee in such cases, the circulars which have been issued are consistent with the provisions of Section 145 and are meant to ensure that assessees of the kind specified who have to account for all such amounts of interest on doubtful loans are uniformly given the benefit under the circular and such interest amounts are not included in the income of the assessee until actually received if the conditions of the circular are satisfied. The circular of October 9, 1984, also serves another practical purpose of laying down a uniform test for the assessing authority to decide whether the interest income which is transferred to the suspense account is, in fact, arising in respect of a doubtful or sticky loan. This is done by providing that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 . On the basis of such statutory provisions, it may be open for the Department to insist on reversal of Cenvat credit under similar circumstances. However, admittedly, in this case we are not governed by such statutory provisions. In absence of such statutory provisions, merely on the strength of the Board s circulars, it would not be open for the Department to enforce reversal of Cenvat credit. 21 . In a short order in case of Indian Petrochemicals Corporation Ltd. (supra), the Bombay High Court also upheld the assessee s contention making following observations :- 2. We find from the order of the Commissioner dated 24-12-2004 that it was the contention of the respondent that there is no prescribed time limit for using the capital goods under the Cenvat rules and hence credit cannot be denied for goods lying unutilized. In other words, it is clear that this is a case of goods which are not obsolete but goods which are lying unutilized and which can be utilized. The Tribunal in a long line of judgments where goods have been shown as written off in the books, have taken a view that the benefit is available. Those judgments h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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