Revenue's appeal dismissed as Rule 3(5B) requires actual writing off of input values to trigger CENVAT credit reversal (5B)

CESTAT Allahabad dismissed Revenue's appeal regarding reversal of CENVAT credit on inputs allegedly written off under Rule 3(5B) of Cenvat Credit Rules, 2004. The tribunal held that Rule 3(5B) requires actual writing off of input values in books of account or provision for complete write-off to trigger reversal of credit. Since no such writing off or removal of inputs occurred in this case, the rule was not applicable, and the assessee was not required to reverse the CENVAT credit taken on the inputs.

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Issues involved: Alleged write off of cenvatable goods in balance sheets for multiple financial years, demand of central excise duty, applicability of Rule 3(5B) of Cenvat Credit Rules, 2004, rejection of submission by Adjudicating Authority, appeal allowed by Commissioner (Appeals), appeal by Revenue before Tribunal.

The Respondent, a manufacturer of tyres, tubes, and flaps, faced allegations from Central Excise officers regarding provisions for write off of cenvatable goods in their balance sheets for financial years 2011-12 to 2014-15. A show cause notice was issued demanding central excise duty under Rule 14 read with proviso to section 11A(1) of the Central Excise Act, along with interest and penalty. The Respondent contended that provisions made were for slow-moving obsolete spares, not write-offs, and were still part of their inventory for future use.

The Adjudicating Authority rejected the Respondent's submission, invoking the extended period of limitation and holding the provisions made akin to write-offs under Rule 3(5B) of Cenvat Credit Rules. However, the Commissioner (Appeals) allowed the appeal, noting that no items on which cenvat credit was taken had been written off, and the balance sheet did not reflect any write-offs. The Appellate Authority set aside the original order, leading the Revenue to appeal before the Tribunal, arguing that the provisions in the balance sheets were violative of Rule 3(5B) of Cenvat Credit Rules, 2004.

After hearing both sides, the Tribunal observed that the provisions in the balance sheets were not cases of actual write-offs but akin to write-offs. Citing legal precedents, the Tribunal emphasized the need to interpret taxing statutes based on clear expressions without implying additional provisions. Analyzing Rule 3(5B) of Cenvat Credit Rules, 2004, the Tribunal concluded that since there was no actual writing off or removal of inputs as required by the rule, the appeal of the Revenue was dismissed. The Respondent was entitled to any consequential benefits in accordance with the law.

In conclusion, the Tribunal found that the Respondent was not required to reverse the credit availed on inputs alleged to have been written off in their books of account under Rule 3(5B) of Cenvat Credit Rules, 2004, as there was no actual writing off or removal of inputs as mandated by the rule.

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