Cenvat credit on written-off inputs need not be reversed when judicial precedent supports retention despite contrary circulars.

Cenvat credit on inputs written off in the books could not be reversed merely because of the accounting write-off where the inputs remained in the factory and prior Tribunal rulings had already accepted retention of credit. The Tribunal held that Board circulars could not be used to displace settled judicial precedent on the issue. On that basis, the demand for reversal was unsustainable and the impugned order was set aside.

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Issues: Whether Cenvat credit taken on inputs written off in the books of account was liable to be reversed merely because of the write-off, and whether Board circulars could override Tribunal decisions on the issue.

Analysis: The issue had already been decided in several Tribunal decisions holding that credit on inputs lying in the factory is not to be denied merely because the inputs are written off in the accounts. The Tribunal noted that the Commissioner relied on Board circulars to hold otherwise, but the binding nature of a circular cannot be used to ignore judicial decisions where the issue has already been settled in favour of the assessee. Since the earlier Tribunal rulings supported the assessee's position, there was no reason to depart from them.

Conclusion: The assessee was not required to reverse Cenvat credit on the written-off inputs, and the contrary demand could not be sustained.

Final Conclusion: The impugned order was set aside and the appeal succeeded.

Ratio Decidendi: Written-off inputs do not, by that fact alone, justify reversal of credit when binding judicial precedent supports retention of the credit and a contrary administrative circular cannot override that position.

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