2005 (1) TMI 175 - AT - Central Excise

CESTAT Upheld Modvat Credit for Written-off Inputs; Rule 57F Conditions Satisfied

The Appellate Tribunal CESTAT, NEW DELHI upheld the Commissioner (Appeals)'s decision allowing Modvat credit on inputs written off but still present in ... Modvat credit - denial of Modvat credit for non-utilisation or removal of inputs under Rule 57F - written off inputs - availability of inputs in factory premisesModvat credit - Rule 57F - written off inputs - availability of inputs in factory premises - Whether Modvat credit can be denied where inputs, though written off in the books and collaboration terminated, were still lying in the assessee's factory and no material showed cessation of production - HELD THAT: - The Tribunal held that denial of Modvat credit could be sustained under Rule 57F only on the two statutory grounds: that the inputs were not used in manufacture of goods, or that the inputs were removed as such. There is no time-limit prescribed in Rule 57F for utilisation of inputs. In the present case there was no material to show that the respondent had ceased production after termination of collaboration; nor were the inputs shown to have been removed from the factory. Mere writing off the value of inputs in the books therefore does not satisfy the conditions for denial under Rule 57F. The Tribunal applied this legal principle and treated the case as covered by earlier decisions taking a similar view. [Paras 4, 5]Modvat credit could not be denied on the basis that inputs were written off or that collaboration had terminated when inputs remained in the factory and no statutory ground for denial under Rule 57F was made out; the impugned order granting credit is upheld.Final Conclusion: The Revenue's appeal is dismissed and the Commissioner (Appeals)'s order allowing the Modvat credit is upheld. Issues involved: Appeal challenging Modvat credit allowance on inputs written off but still in factory premises.Summary:In the appeal before the Appellate Tribunal CESTAT, NEW DELHI, the Revenue contested the correctness of the part of the impugned order where the Commissioner (Appeals) permitted Modvat credit amounting to Rs. 10,33,233/- on inputs that had been written off in the books but remained in the factory premises of the respondents.The Revenue argued that following the termination of collaboration with M/s. Honda Motors, the use of the inputs in the factory became impracticable, necessitating the reversal of Modvat credit even if the inputs were still present in the factory. However, the Tribunal found no evidence to support the claim that production of Two Wheelers and parts thereof had ceased after the collaboration termination. Additionally, Rule 57F does not impose a time limit for input utilization, allowing credit denial only for non-use in manufacturing or removal of inputs. Since the conditions under Rule 57F were not met, the Tribunal held that writing off the input value in books did not justify credit denial when the inputs remained in the factory premises. The Tribunal cited precedents like Bharat Heavy Electricals Ltd. and Hindustan Zinc Ltd. to support this interpretation.Consequently, the Tribunal upheld the Commissioner (Appeals)'s order, finding no illegality and dismissing the Revenue's appeal.