2017 (5) TMI 813

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....les, 2004/Central Excise Rules, 1944. The dispute in the present appeal is with reference to liability of the appellant to reverse the credit on inputs, which the Revenue claimed has been cleared by the appellant without use in the manufacturing process and shown in their accounts as "written off". Based on the examination of the trial balance for the year 2000-2001 to 2003-04, it appeared that the appellants have written off various amounts of value of inputs, by debiting material loss, bought out rejections, scraped in their books of accounts. The Revenue initiated proceedings against the appellants for recovery of the credit availed on these inputs, the value of which was shown as "written off" in their books of accounts. Various show ca....

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....(b) The inputs, which are used for intended purpose, are eligible for credit of duty paid on them. (c ) During the course of manufacturing process, due to various reasons some of the inputs are found either unfit or not upto the mark, due to various technical reasons and are not used by the concerned manufacturing sections. In such cases, there is no need to reverse the credit on such inputs as they have been used for intended purpose and however, could not become part of the final product as they get damaged or rejected during the course of manufacturing process. 3. Ld. Counsel relied on the various decided cases to support his submissions that the "write off" of inputs on account of damage or unfit during the course of manufac....

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....sustainable ground for the allegation of suppression, mis-statement, etc. 7. Ld. AR contested the grounds of appeal. He stated that the complete "write off" of the value of the inputs will clearly indicate that the said inputs were not put to use in the process of manufacture. It is for the appellant to establish that these inputs were put to use and got damaged only during the course of manufacture. He further stated that the Board‟s Circular dated 16.07.2002 stipulates that on the inputs, which are not used and are "written off" in the books of assessee, the credit shall not be entitled. The appellants failed to establish categorically that these inputs were in fact got damaged or rejected during the course of manufacture only. ....

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....ial loss of bought out items, which are rejected/scrapped. The accounts maintained by the appellant to this effect is the sole basis for proceedings against them. There is no other evidence to allege that the inputs on which credit has been availed were in fact cleared as such. The appellants explained the process of accounting. I have perused the flow of accounts, as explained by them. It is apparent that the „product non-conformity note‟ was generated in various shop floor/manufacturing facility like press shop, engine assembly, etc. These products non-conformity note indicate various reasons/defects in the components like crack, heavy scratch, not of specification, etc. These are found during the usage of these duty paid inpu....