Balance sheet figures alone cannot justify CENVAT credit reversal on closing stock without proof of duty-paid goods.

The value shown in a balance sheet could not, by itself, be used to demand reversal of CENVAT credit on closing stock of raw materials and finished goods where the figures were composite and not segregated between duty-paid inputs, traded goods, and non-duty-paid stock. In the absence of evidence from the Revenue showing that the entire closing stock represented credit-bearing goods, the balance sheet entry was insufficient as the sole basis for computation. The assessee's explanation that part of the stock comprised traded goods and non-duty-paid materials remained uncontroverted, so the proposed reversal could not be sustained.

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Issues: Whether the value reflected in the assessee's balance sheet could be treated as the true basis for demanding reversal of CENVAT credit on closing stock of raw materials and finished goods.

Analysis: The demand was founded on the balance sheet figures for raw materials and finished goods, but those figures were shown to be composite and not segregated between duty-paid inputs, traded goods, and non-duty-paid stock. The balance sheet did not furnish a separate basis to isolate only the duty-paid materials on which credit had actually been taken. In the absence of supporting evidence from the Revenue to establish that the entire closing stock represented credit-bearing goods, the balance sheet entry could not be relied upon as the sole measure for computing reversal. The assessee's explanation that part of the stock comprised traded goods and non-duty-paid materials remained uncontroverted by evidence.

Conclusion: The balance sheet figures could not be used to demand reversal of CENVAT credit on the alleged closing stock, and the appeal succeeded.

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