2017 (11) TMI 1175

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....credit of duty paid on various inputs in terms of Cenvat Credit Rules, 2004. 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, scrapped 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....

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....of rejection and based on that, accounts are accordingly entered. The inputs so rejected during process, become part of scrap. For accounting purpose, the value of such rejected items, is "written off" and shown accordingly. (b) The inputs, which are used for the intended purpose of manufacture are eligible for credit of duty paid on them. If due to various technical reasons such inputs get rejected and are not used by the concerned manufacturing sections, there is no need to reverse the credit on such inputs as they have been used for intended purpose. 4. Ld. Counsel relied on various decided cases to support his submissions that the "write off" of inputs on account of damage or become unfit during the course of manufacture, ca....

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....d for the allegation of suppression, mis-statement, etc. 8. 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. 9. We have heard both....

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....e in fact put to intended use, cannot be questioned for any other reason. In the present case, admittedly, the appellant written off the full value of some of the inputs stating that these are material 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....

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....s of manufacture. When the duty paid inputs were issued for the process of manufacture and later, during the course of usage, either got damaged or found not upto the mark, these are rejected and scraped. At the time of clearance as scrap, duty as applicable, are discharged. As such, in terms of the legal principle as examined by these decisions, I find that denial of credit is not justifiable. 12. Revenue emphasized on non-maintenance of record to establish that these are in fact line rejections. As explained earlier in this order, the accounts flow as demonstrated by the appellant indicate that the inputs do get rejected in the shop floor/manufacturing area and these are reported for accounting and ultimately, their value is "wri....