2012 (7) TMI 813 - AT - Central Excise

Tribunal grants waiver on Cenvat credit reversal case due to rule non-compliance

The Tribunal allowed the appellant's application for waiver of pre-deposit concerning the reversal of Cenvat credit on declared obsolete and unserviceable ... Waiver of pre deposit - Inputs written off which were purchased in 1997-1998 over a period of time as an unserviceable inputs - Held that:- provisions of Rule 3(5B) has been invoked by the authorities seeking the reversal of Cenvat credit on the inputs which were declared as obsolete/unserviceable. The said Rule 3(5B) during the relevant period, when the Show Cause Notice was issued, sought the reversal of Cenvat credit only if such inputs which are declared as obsolete/unserviceable are fully written off. It is an admitted fact that this is not factual position in this case, inasmuch as the appellant has not fully written off the value of such inputs which were obsolete or unserviceable. The amended sub-rule (5B) of Rule 3 of Cenvat Credit Rules, 2004 came into statute on 1-3-2011. The period involved in this case being prior to that, we are of the considered view that on this point itself, the appellant has made out a prima facie case for the waiver of pre-deposit of the amounts involved - Stay granted. Issues:1. Applicability of Rule 3(5B) of Cenvat Credit Rules, 2004 regarding reversal of Cenvat credit on declared obsolete/unserviceable inputs.2. Interpretation of the provisions of Rule 3(5B) in relation to the requirement of fully writing off the value of obsolete/unserviceable inputs.3. Effect of the amendment to sub-rule (5B) of Rule 3 of Cenvat Credit Rules, 2004 in 2011 on cases prior to its enactment.Analysis:The judgment deals with a Stay Petition seeking the waiver of pre-deposit of duty, interest, and penalty imposed on the appellant for writing off inputs declared as obsolete and unserviceable. The revenue authorities contended that the appellant must reverse the Cenvat credit on such inputs as per Rule 5 of Cenvat Credit Rules, 2004. The appellant argued that the amendment to Rule 3(5B) in 2011 required full or partial write-off of obsolete inputs for credit reversal, and since they had only partially written off the value and some inputs were used in production, they should not be considered obsolete. The Departmental Representative (D.R.) supported the authorities' findings, stating that the appellant had declared the goods as obsolete and unserviceable themselves, making them ineligible for further use due to their chemical nature and expiry date.Upon review, the Tribunal found that Rule 3(5B) was invoked by the authorities for credit reversal on inputs declared obsolete/unserviceable. However, during the relevant period, the rule required full write-off for credit reversal, which was not the case here. The amended sub-rule (5B) came into effect in 2011, post-dating the period in question. Consequently, the Tribunal held that the appellant had a prima facie case for waiver of pre-deposit due to the lack of full write-off as mandated by the amended rule. The Tribunal noted that arguments regarding input utilization could be addressed during the final appeal disposition. As a result, the application for waiver of pre-deposit was allowed, and recovery stayed pending appeal resolution.