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2019 (11) TMI 119

..... value was written off was lying in the factory as the Revenue has not proved contrary that either the goods are not available or the same was disposed of or otherwise. Therefore, even though the inputs got obsolete but, since, the same is lying in factory, cenvat credit cannot be denied - the amended provision of sub-Rule 5(B) of Rule 3 of Cevat Credit Rules whereby it is provide that in case of partial written off value of the inputs the reversal of cenvat credit is required, however this provision came into effect from 01.03.2011 , therefore, prior to this date there was no statutory provision for reversal of credit in case partial value of the inputs is written off, therefore, during the period in question there was not statutory provision in reversal of cenvat credit in case of the value of the inputs is written off. Appeal allowed - decided in favor of appellant. - Excise Appeal No. 1233 of 2011 - Final Order No. A/12063/2019 - 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 manu .....

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..... ssion of fact on the part of the appellant, hence, the extended period for demand was wrongly invoked. He further submits that the value of inputs written off is partial value and not 100% value of the inputs, for this reason also even though the partial value was written off cenvat credit cannot be demanded. He invited our attention to the insertion of amended Sub-Rule 5(B) in Rule 3 of Cenvat Credit Rules, whereby even in the case of partial written off value of inputs, the cenvat credit needs to be reversed which was brought under the statute w.e.f 01.03.2011 therefore, prior to this date in case of written off partial value of inputs, cenvat credit was not required 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 .....

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..... f of the goods. Be that as it may, the C.B.E. & C. issued yet another circular dated 16-7-2002 and provided as under :- (i) In cases, where unused inputs are fully written off, Board s instructions dated 22-2-1995 shall apply i.e. the credit availed must be paid back. (ii) In cases where the value of the inputs is partially written of/reduced in the accounts of the company, but the inputs are still capable of and available for use in the manufacture of finished goods, there would be no question of payment of Cenvat credit availed. (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 inp .....

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..... adverse to the trade, would not bind the assessees. In case of M/s. Inter Continental (India) v. Union of India & Ors. reported in 2002 (2) G.L.R. 1337 = 2003 (154) E.L.T. 37 (Guj.), a Division Bench of this Court observed - It is well established in law that the circulars issued by the Board may bind the officers of the department yet the position would be different with regard to an assessee who is always entitled 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 .....

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..... y withdrawn. In the present case, the circulars which have been in force are meant to ensure that while assessing the income accrued by way of interest on a sticky loan, the notional interest which is transferred to a suspense account pertaining to doubtful loans would not be included in the income of the assessee, if for three years such interest 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 conditi .....

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..... to take the credit of the amount equivalent to the Cenvat credit paid earlier subject to the other provisions of these rules. 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 .....

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