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 the factory premises. The Tribunal rejected the Revenue's argument that collaboration termination with M/s. Honda Motors rendered input use impracticable, emphasizing that Rule 57F does not impose a time limit for input utilization. As the conditions under Rule 57F were satisfied, the Tribunal dismissed the Revenue's appeal, citing precedents like Bharat Heavy Electricals Ltd. and Hindustan Zinc Ltd.

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Issues: Whether Modvat credit could be denied merely because the value of inputs was written off in the books of account, when the inputs continued to remain in the factory premises and had not been removed as such.

Analysis: The rule did not prescribe any time limit for utilisation of inputs. Credit could be denied only where the inputs were not used in the manufacture of goods or where they were removed as such. Mere write-off in the accounts, without removal of the inputs from the factory and without evidence that production had ceased, did not attract denial of credit.

Conclusion: The denial of Modvat credit was not justified and the assessee was entitled to retain the credit.

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