Cenvat credit reversal for partially written-off inputs depends on express statutory backing, not circulars alone.

Cenvat credit reversal for partially written-off inputs was not required for the relevant period because the applicable Cenvat Credit Rules did not then contain an express reversal provision. Departmental circulars could not, by themselves, create a liability where the governing rules were silent, and the later insertion of Rule 3(5B) showed that such written-off value was brought within the reversal mechanism only from its introduction. Where the inputs remained available in the factory, a mere accounting write-off was insufficient to trigger denial or reversal of credit without statutory backing.

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Issues: Whether Cenvat credit was required to be reversed in respect of inputs whose value was partially written off in the books of account during the relevant period, before the insertion of Rule 3(5B) of the Cenvat Credit Rules, 2004.

Analysis: The dispute turned on whether the departmental demand could rest on the Board circulars when the statutory rules, as applicable to the relevant period, did not contain any express provision requiring reversal of credit for partially written-off inputs. The circulars were read in the light of the governing law and the later insertion of Rule 3(5B), which specifically brought such written-off value within the reversal mechanism only from the date of its introduction. The inputs were also treated as still available in the factory, and the mere accounting write-off was held insufficient, by itself, to create a duty liability in the absence of statutory backing.

Conclusion: Cenvat credit reversal was not exigible for the relevant period, and the demand based only on the circulars could not be sustained. The finding is in favour of the assessee.

Ratio Decidendi: A departmental circular cannot create a liability to reverse Cenvat credit unless the governing rules expressly provide for such reversal; prior to the insertion of Rule 3(5B), partial write-off of input value in the accounts did not by itself justify denial or reversal of credit.

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