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TMI Blog2023 (11) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... Flaps and Compounded Rubber are holders of Central Excise registration AAACM4154GXM007. During the course of Audit, it was observed that the Appellant had availed CENVAT credit of Rs.34,84,905/- on input/capital goods that were earlier written off or where provisions were made for write-off in the books of accounts. It appeared to the department that the CENVAT credit on Obsolescent material which was earlier debited, was taken back on 30.06.2017, without utilising the same in the manufacture of final products , was ineligible in terms of proviso to Rule 3(5B) of CENVAT Credit Rules, 2004 which reads as follows: "If the value of any, i. input, or ii. capital goods before being put to use, on which CENVAT Credit has been taken is written off fully or partially or where any provision to write off fully or partially has been made in the books of account, then the manufacturer or service provider shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods: Provided, if the said input or capital goods is subsequently used in the manufacture of final products or provision of taxable services, the manufacturer or output service pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant not retaken credit on the goods provisionally written off for accounting purpose, it might have permanently lost its legal right to claim credit on the goods which were still being used for manufacturing. The Appellant had taken re-credit in accordance with the provisions of law and on advent of the new GST regime w.e.f 01.07.2017. The appellant submitted that in the GST regime, only for the goods which are finally written off, the registered person has to reverse the credit and therefore if the credit was not taken back, when the same goods were subject to final write off, another reversal would have called for resulting in double reversal. The Appellant pointed out that the impugned Order-in-Original, without appreciating the fact that the credit was taken under CENVAT Credit Rules, 2004, proceeded to hold that Section 17(5)(h) of the CGST Act, 2017 does not enable taking back of credit and accordingly held that under the GST regime, no provision has been made for reversal of credit, on a provisional write off. The very basis of such finding was flawed as the appellant did not retake credit under CGST Act, but under the CENVAT Credit Rules, 2004 prior to GST regime. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availment of re-credit came to light during the audit of accounts of appellant in September 2018 which is contrary to facts as ER1 was already filed by the Appellant. It was pointed out that the relevant period under consideration was 2014-2017, but the department sought to invoke the extended period under Section 11A(4) of the Central Excise Act, 1944 to issue the Show Cause Notice, on the ground that the Appellant had mis-stated and suppressed facts, with an intention to evade payment of duty. The impugned order failed to appreciate that CCR 2004 was repealed by CENVAT Credit Rules, 2017 and since there is no savings clause provided for in CENVAT Credit Rules, 2017, no demand can be made from the Appellant. 4.6 It was submitted that the impugned order wrongly confirmed the applicability of the extended time limit on erroneous basis and wrongly confirmed the interest even as re-credit taken by the appellant did not cause loss of revenue to the department and such interest could be demanded only up to 30.06.2017 on utilisation of credit for payment of central excise duty whereas utilisation of the same was for payment of GST. The impugned order failed to appreciate the fact that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 140(1) of the Act as transitional credit. It is pertinent to note that the material on which CENVAT credit was availed was not fully written off. In this regard, for the sake of convenience, the provisions of Rule 3(5B) of erstwhile CENVAT Credit Rules, 2004 are reproduced below: "If the value of any, i. input, or ii. capital goods before being put to use, on which CENVAT Credit has been taken is written off fully or partially or where any provision to write off fully or partially has been made in the books of account, then the manufacturer or service provider shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods: Provided, if the said input or capital goods is subsequently used in the manufacture of final products or provision of taxable services, the manufacturer or output service provider 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. I find in terms of the said provision that any assessee is entitled to take re-credit if the said inputs/ capital goods are subsequently put to use in the manufacture of final pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... states that when said inputs or capital goods are subsequently used in the manufacture of their products, the manufacturer is entitled to take the credit of the amount equivalent to the CENVAT Credit paid earlier. 11. In the instant case, the appellant has provided sufficient documentary evidence pertaining to the utilisation of inputs in the manufacture of their final products. As such, the demand of alleged ineligible CENVAT Credit cannot sustain. As the issue is of interpretational in nature, invocation of extended period is not justified as the ingredients required for extending the limitation are not satisfied in this case. In this regard, the appellant has relied upon many case laws in support of their contention that suppression cannot be invoked as pointed out at paragraph 4.8 above. As the demand cannot sustain, imposition of penalty and demand of interest also cannot survive. However, it is to be observed that the Departmental authorities are free to verify the utilisation of the impugned inputs whether used or not in the manufacture of their finished products by the appellant. 12. In view of the above, the impugned Order-in-Appeal No. 55/2022 (CTA-1) dated 25.11.2022 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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