TaxTMI 
TaxTMI 
2019 (11) TMI 119
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....al goods is written off in the balance sheet, Cenvat Credit on such inputs/capital goods should be reversed. Being aggrieved by the Order- In-Original appellant filed the present appeal. 2. Shri. Anand Nainawati, Ld. Counsel appearing on behalf of appellant submits that the Hon'ble Gujarat High Court on the identical issue after considering the Circular dated 22.02.1995 and 16.07.2002 clearly held both the Circular as ultra vires, on the ground that there is no provision in the Cenvat Credit Rules for such reversal, hence by way of Circular demand of cenvat credit on written off value cannot be raised. He placed reliance on the following judgment:- • Ingersoll Rand (India)Ltd-2014 (300) ELT 347 (Guj.) • Hindalco Industries Ltd-2011 (272)ELT 161 (Bom.) • Dai Ichi Karkaria Ltd-1999 (112)ELT 353 (S.C) • Bharat Forge Ltd-2015 (317) ELT 111 (T) • Reliance Life Insurance Company Ltd-2018 (4) TMI-1407-CESTAT Mumbai • Nizam Sugar Factory-2006 (197) ELT 465 (S.C) • Pragathi Concrete Products (P) Ltd-2015 (322) ELT 819 (SC) • Balckstone Polymers-2014 (301) ELT 657 (T) • Cad....
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....evenue. These circulars have been issued by the C.B.E. & C. in exercise of powers under Section 37B of the Central Excise Act, 1944 ('the Act', for short). In the circular dated 22-2-1995, it was inter alia provided as under :- "Instances have been brought to the notice of the Board where Modvat credit taken on inputs by the assessee was not reversed even after writing off of the materials on which the credit was taken. Cases have also been noticed where the credit had not been adjusted even though the write-off of the input materials had taken place three or four years ago. In such situation, it is obligatory on the part of the assessees to straight away reverse the Modvat credit taken under intimation to the Ranger Officers concerned. Utilisation of Modvat credit taken on inputs, which had actually been written off for stock account purposes, clearly will amount to misconstruction and abuse of the Modvat scheme." 11. This circular thus provided that where the credit has not been adjusted even though write-off of the input material has taken place, in such a situation it is obligatory on the part of the assessee to reverse the Modvat credit. It was further provid....
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....cted to be reversed simply because the input goods were not utilised for a certain period of time. We also note that there is significant difference in the accounting approach for the income-tax purpose and the approach for stock maintenance for the purpose of manufacturing activities relevant for the question of excise. Therefore, merely because the value of goods diminished in the books of account of the assessee would not by itself permit the Department to insist on reversal of the credit particularly when such goods were still available in the factory in usable condition. 15. In absence of any such authority under the rules, the C.B.E. & C. could not have issued circular for reversal of the credit. The reversal of the credit would amount to collection of duty which would be wholly unauthorised. The Board's circular could not have created a liability which did not exist under the rules. Section 37B of the Act permits the Board to issue circulars. It provides that the Board, if it considers it necessary or expedient for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods, may issue such orders, inst....
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....ower under Section 119 of the Act or under corresponding provisions of the predecessor Act are binding on the authorities in the administration of the Act. The Tribunal, much less the High Court, is an authority under the Act. The circulars do not bind them. But the benefits of such circulars to assessees have been held to be permissible even though the circulars might have departed from the strict tenor of the statutory provision and mitigated the rigour of the law. But that is not the same thing as saying that such circulars would either have a binding effect in the interpretation of the provision itself or that the Tribunal and the High Court are supposed to interpret the law in the light of the circular. There is, however, the support of certain judicial observations for the view that such circulars constitute external aids to construction." 17.1 This decision was followed in a later judgment in case of UCO Bank v. Commissioner of Income-Tax reported in 237 ITR 889 = 1999 (111) E.L.T. 673 (S.C.) where the Supreme Court observed as under :- "In the premises the majority decision in the State Bank of Travancore v. CIT [1986] 158 ITR 102 (S.C.), cannot be looked ....
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....for the first three years will not be treated as interest on a doubtful loan. But if after three years the payment of interest is not received, from the fourth year onwards it will be treated as interest on a doubtful loan and will be added to the income only when it is actually received." 18. Under the circumstances, with the aid of the circulars noted above, the Department could not have collected the duty which was otherwise not permissible under the rules. We may notice that the rules themselves were later on amended to cover such a situation. The Modvat scheme was substituted by the Cenvat scheme framed under the Cenvat Credit Rules. In such rules, Rule 5B was introduced as under :- (5B) If the value of any, - (i) input, or (ii) capital goods before being put to use, on which Cenvat credit has been taken is written off fully or where any provision to write off fully has been made in the books of account, then the manufacturer shall pay an amount equivalent to the Cenvat credit taken in respect of the said input or capital goods : Provided that if the said input or capital goods is subsequently used in the manufactu....
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.... making following observations :- "6. In Commissioner of Central Excise v. Indian Petrochemicals Corporation Limited, 2008 (226) E.L.T. 339 a Division Bench of this Court had noted that the Tribunal in a long line of judgments had taken the view that where the goods have been shown as written off goods, the benefit is available. In the present case, as already noted earlier, the period to which the dispute relates is prior to the insertion of sub-rules (5B) and (5C) in Rule 3. The Tribunal held that the case of the assessee was covered by several of its judgments which have been adverted to in para 11 of the judgment. Counsel appearing on behalf of the Revenue has not submitted before the Court that any of those judgments have been overruled by any decision of this Court or of the Supreme Court. This case relates to a period prior to the amendment of Rule 3 by the insertion of sub-rules (5B) and (5C). In that view of the matter and for the reasons already noted, the Appeal would not raise any substantial question of law and shall accordingly stand dismissed. There shall be no order as to costs." 23. Under the circumstances, we are of the opinion that both the appe....