Appeal allowed: CENVAT credit receivables rightly claimed as deduction

The appeal was filed against the disallowance of Central Excise Duty written off by the assessee. The Assessing Officer added back the Excise duty recoverable to the income due to lack of evidence on non-recoverability. The ld. CIT(A) upheld the addition, emphasizing the importance of evidence. However, the Tribunal allowed the appeal, considering the nature of the business and the practice in the manufacturing sector. It was found that the writing off of unutilized CENVAT credit had been allowed in a previous assessment year. The Tribunal concluded that the CENVAT credit receivables rightly claimed as a deduction, and the appeal of the assessee was allowed.

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Issues:
Disallowance of Central Excise Duty written off

Analysis:
The appeal was filed against the order of the ld. CIT(A)-37, Delhi dated 28.02.2018. The assessee, engaged in manufacturing hosiery knitwears, declared income of Rs. 2,57,28,240/- for the year under consideration. The Assessing Officer noted that the assessee had written off VAT recoverable of Rs. 1,48,130/- and Additional Excise Duty (AED) recoverable of Rs. 7,84,058/-. The assessee justified the write-off by stating that the Central Excise duty had not been charged to the purchase account and was considered recoverable from the Government. However, the Assessing Officer added back the Excise duty recoverable of Rs. 7,84,058/- to the income, citing lack of evidence regarding non-recoverability from the Government.

The ld. CIT(A) upheld the addition, emphasizing the lack of evidence on non-recoverability from the Government. It was noted that even during the appellate proceedings, the onus to establish non-recoverability was not discharged. The CIT(A) referred to a previous case and highlighted the importance of evidence, such as the RG-23A Part-II register, in supporting claims for relief. The CIT(A) also pointed out that in the previous case, it was established that CENVAT credit pertained to input and the purchase cost of inputs had been debited net of CENVAT credit in the Profit & Loss account.

Upon review, it was found that the writing off of unutilized CENVAT credit had been allowed by the revenue in a previous assessment year. Despite this, the issue was examined, considering the nature of the business and the practice in the manufacturing sector. The assessee, following a regular practice, claimed the difference in loss incurred due to rate differentials between input and output Excise Duty as a business expenditure. The Tribunal observed that the CENVAT credit receivables, which could not be set off, were rightly claimed by the assessee as a deduction. Consequently, the appeal of the assessee was allowed, and the decision was pronounced in the open court on 17/03/2022.

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