Modvat credit on written-off inputs cannot be denied merely because goods remain in store-room or are treated as obsolete.

Modvat credit on inputs cannot be denied merely because the inputs were written off in the books of account or treated as obsolete. The Tribunal noted that there is no prescribed time limit for consumption of inputs and that credit cannot be disallowed on a presumption that the goods were not used in manufacture simply because they remained in the factory store-room. It also relied on earlier coordinate Bench decisions that had attained finality and found no reason to depart from that view. The result was that denial of Modvat credit was held unsustainable and the appeal succeeded.

---

---

Issues: Whether Modvat credit on inputs could be denied merely because the inputs were written off in the books of account or treated as obsolete.

Analysis: The Tribunal followed its earlier decisions holding that there is no prescribed time limit for consumption of inputs and that credit cannot be disallowed on a presumption that the inputs may not be used in manufacture merely because they remained in the factory store-room or were written off. It also noted that those decisions had attained finality and there was no reason to depart from the view taken by the coordinate Bench.

Conclusion: The denial of Modvat credit was not sustainable and the appeal was allowed.

---