Tribunal rules in favor of appellant, remands physical verification issue for reconsideration

The tribunal ruled in favor of the appellant, setting aside the demand for reversal of cenvat credit on written off inputs. The issue of demand raised on physical verification difference in books of accounts was remanded for reconsideration by the adjudicating authority, with instructions for a denovo adjudication order within two months. The appellant's submissions regarding the physical verification difference were to be taken into account in the reconsideration process.

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Issues involved:
1. Reversal of cenvat credit on the written off value of inputs
2. Demand raised on physical verification difference in books of accounts

Analysis:

Issue 1: Reversal of cenvat credit on the written off value of inputs
The appellant had written off part of the value of inputs in their books of account, which led to the department issuing a show cause notice for demanding cenvat credit on the written off value. The adjudicating authority and Commissioner (Appeals) upheld the demand. However, the appellant argued that the goods for which the value was written off were physically available in the factory, and there was no statutory provision for reversal of credit on written off inputs at that time. The appellant cited relevant judgments to support their argument. The tribunal found that there was no requirement to reverse cenvat credit on written off inputs, as established by previous court decisions. Therefore, the demand related to the written off value of inputs was set aside.

Issue 2: Demand raised on physical verification difference in books of accounts
The appellant clarified that the physical verification difference was due to the shortage of finished goods during movement from the factory to the depot, and not related to the written off value of inputs. The tribunal noted that both lower authorities had not considered this clarification and proceeded on the assumption that the entire cenvat credit was related to the written off quantity of inputs. The tribunal directed the matter to be remanded to the original adjudication authority for reconsideration based on the appellant's submissions. The adjudicating authority was instructed to pass a denovo adjudication order within two months, giving the appellant sufficient opportunities of hearing. The demand related to the physical verification difference was to be reconsidered in light of the appellant's correspondence on the matter.

In conclusion, the tribunal ruled in favor of the appellant regarding the reversal of cenvat credit on written off inputs and remanded the issue of demand raised on physical verification difference for further consideration by the adjudicating authority.

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