Modvat credit cannot be denied merely because part of the input value was written off in accounts.

Mere write-off of part of the value of inputs or spares in the books of account does not, by itself, justify denial of Modvat credit. Where the goods remain in stock and there is no statutory prohibition or other legal basis to presume non-use, the credit entitlement continues unaffected. The Tribunal applied its earlier view and rejected the departmental premise that partial book write-off reduces Modvat eligibility, holding that the demand and penalty could not stand on that ground.

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Issues: Whether Modvat credit on inputs/spares is liable to be denied merely because a portion of their value was written off in the books of account.

Analysis: The dispute turned on the effect of book write-off of part of the value of inputs/spares on eligibility to Modvat credit. The Tribunal followed its earlier view that a mere write-off in accounts does not, by itself, justify denial of credit when the inputs remain in stock and there is no legal basis to presume non-use. The departmental demand and penalty were founded on the premise that partial write-off reduced entitlement to credit, but the issue had already been resolved against that approach in similar facts.

Conclusion: The denial of Modvat credit was not justified and the issue is decided in favour of the assessee.

Ratio Decidendi: Mere write-off of part of the value of inputs in the books of account does not extinguish entitlement to Modvat credit in the absence of a statutory prohibition or other legal basis for denial.

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