Cenvat credit on capital goods cannot be denied solely because of a balance sheet write-off when the goods are used in manufacture.

Cenvat credit on capital goods cannot be denied merely because the goods were written off in the balance sheet, where they are stated to have remained in the factory and been used in manufacture of excisable goods. The accounting treatment was treated as irrelevant to credit entitlement, which depends on the actual use of the capital goods in the factory rather than their book value. On that prima facie view, the challenged order was considered inconsistent with settled Tribunal practice, and recovery was stayed until disposal of the appeal.

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Issues: Whether denial of Cenvat credit on capital goods was justified merely because the value of the capital goods had been written off in the balance sheet, and whether recovery ought to be stayed pending disposal of the appeal.

Analysis: The dispute concerned credit on capital goods said to have remained in the factory and used in the production of excisable goods. The balance sheet entry of write-off was held to be irrelevant for determining entitlement to credit, since credit depends on the use of the capital goods in the factory and not on accounting treatment. The order under challenge was found prima facie inconsistent with the settled view of the Tribunal on the point.

Conclusion: Denial of credit on the sole basis of balance sheet write-off was not sustained prima facie, and recovery was stayed till disposal of the appeal.

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