Cenvat credit and excise duty demands fail where book entries or timing objections are unsupported by facts.

Cenvat credit on capital goods written off in the books was held not recoverable where there was no allegation that the goods remained unused or were removed from the factory, so mere book write-off did not justify reversal. Credit taken before receipt of inputs was also found unsustainable for demand purposes because no finding showed that the inputs were never received; timing alone was insufficient. Duty on durable and returnable packaging was likewise disallowed, as no additional consideration for the packaging was proved and duty had already been discharged on the transaction value. The impugned order was set aside in entirety, with consequential relief.

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Issues: (i) Whether Cenvat credit availed on capital goods written off in the books was recoverable, (ii) whether Cenvat credit taken before receipt of inputs was sustainable, and (iii) whether duty demand on durable and returnable packaging was justified in the absence of additional consideration.

Issue (i): Whether Cenvat credit availed on capital goods written off in the books was recoverable.

Analysis: The demand was examined against the CBEC circular relied upon by the department. The decisive consideration was that the goods were neither alleged to have remained unused nor to have been removed from the factory. Mere write-off in the books, without such factual basis, was treated as insufficient to require reversal.

Conclusion: The demand of Cenvat credit, along with interest and equal penalty, was held unsustainable and was set aside in favour of the assessee.

Issue (ii): Whether Cenvat credit taken before receipt of inputs was sustainable.

Analysis: The credit was disputed only on the ground of timing. However, there was no allegation that the inputs were never received in the factory. In the absence of such a finding, the mere fact that credit was taken before actual receipt did not justify confirmation of the demand as sustained in the impugned order.

Conclusion: The confirmed demand of Cenvat credit, interest and equal penalty was held unsustainable and was set aside in favour of the assessee.

Issue (iii): Whether duty demand on durable and returnable packaging was justified in the absence of additional consideration.

Analysis: The levy was tested on the basis of transaction value. No evidence was produced to show that any additional consideration had been received for the packaging charges. Since duty had been discharged on the transaction value, the further demand could not be sustained.

Conclusion: The demand of central excise duty, interest and equal penalty on the packaging component was held unsustainable and was set aside in favour of the assessee.

Final Conclusion: The impugned order was set aside in entirety and the appeal succeeded, with consequential relief.

Ratio Decidendi: Cenvat credit or duty demand cannot be sustained merely on book entries or timing objections when the underlying goods are actually received or used and no supporting factual basis such as non-receipt, non-use, removal, or additional consideration is established.

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