Cenvat credit cannot be reversed merely because inputs were written off in accounts when no removal from the factory is shown.

Mere write-off of inputs in financial accounts does not, by itself, amount to removal from the factory or justify reversal of Cenvat credit when there is no evidence that the inputs were cleared and they continued to remain in the manufacturer's possession. On the facts recorded, the demand was based only on accounting treatment showing the inputs at nil value, so the credit reversal demand failed and the related penalty could not be sustained.

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Issues: Whether Cenvat credit taken on inputs is required to be reversed merely because the inputs were written off in the books of account, when there was no evidence that the inputs were removed from the factory and the inputs continued to remain in possession of the manufacturer.

Analysis: The credit reversal demand was founded only on the accounting treatment of the inputs as written off and shown at nil value. The record did not show any clearance of the inputs from the factory or any other evidence of removal. The settled view of the Tribunal, followed in the case, is that mere write-off in financial accounts, by itself, does not amount to removal of inputs from the factory premises and does not justify denial or reversal of Cenvat credit where the goods remain available in the factory.

Conclusion: Cenvat credit reversal was not required on the facts found, and the demand and penalty could not be sustained.

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