TaxTMI 
TaxTMI 
2022 (3) TMI 916
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....us varieties of pumps for industrial applications and are holding central excise registration. On examination of accounts, it was observed that they had contravened the provisions of Rule 3 (5B) of CENVAT Credit Rules, 2004 inasmuch as they had created provisions in the balance sheet for the old and slow-moving inputs during the period 2007 - 08, 2008 - 09 and 2009 - 2010 (upto August 2009) and had not reversed the CENVAT credit in relation to these provisions so made in the balance sheet. 3. Show Cause Notice was issued proposing to recover the CENVAT credit along with interest and also for imposing penalties. After due process of law, the original authority confirmed the demand, interest and imposed penalty. The order passed by the ori....
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....ed that the period involved is from 2007 - 08 upto August 2009. Rule 3 (5B) was inserted vide Notification No. 26/2007-CE (NT) dated 11.5.2007 and reads as under:- "Rule 3 (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." (emphasis supplied) From the above Rule, it can be seen that only when inputs on which CENVAT credit has been availed and then fully written off or when any provision is made to ful....
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....rsed. This rule was amended after 1.3.2011 by which even if part of the value is written off or a provision to write off has been made for part of the value of inputs / capital goods, the entire credit availed has to be reversed. In the present case the period is prior to 2011. The appellant has not written off, the value of inputs fully. He adverted to the Show Cause Notice dated 12.3.2010. The learned consultant argued that in para 3 of the Show Cause Notice, the department does not allege that the appellant has written off the value of inputs fully. It has merely alleged that the appellant has made provision for the old and slow-moving inputs. The copies of the balance sheet also was furnished by the learned consultant to substantiate hi....
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....oduced in 2007 and then the requirement was to reverse credit when fully written off. In the present case, the department does not allege that the appellant has fully written off the value of inputs. The allegation in para 3 of the Show Cause Notice is as under:- "During the scrutiny of their records and Balance Sheets for the years 2007-2008 and 2008-2009, it was noticed that in the Balance Sheets for the years 2007-2008 and 2008-2009 they have created a provision for the 'Old and Slow Moving Inventory'. As per Rule 3 (5B) of CCR, inserted vide Notification No.26/2007 CE (NT) dated 11.05.2007, "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 o....
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....,428,713 89,397,968 Finished Goods 9,660,374 1,114,267 Traded Goods 3,053,280 2,646,368 517,499,349 351,219,373 Less : Provision for Old and Slow Moving Inventory 72,192,852 49,825,039 445,306,497 301,394,334 2009 Rs. 2008 Rs. SCHEDULE 4 INVENTORIES [Schedule 16, Note A (d)] Raw Materials and Components 445,999,806 381,356,982 [including in transit Rs. 14,281,946 (2008: Rs. 34,797,586) Work in Process 123,742,319 123,428,713 Finished Goods 22,861,362 9,660,374 Traded Goods 3,862,456 3,053,280 596,465,943 517,499,349 Less : Provision fo....
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....ertain inputs, the value of which was partly written off their books of account during the period from April, 2004 to March, 2009. The learned consultant for the appellant points out that the relevant rule viz. Rule 3(5B) of the Cenvat Credit Rules, 2004, as it stood during the above period, did not require such reversal of Cenvat credit. It is submitted that such reversal of Cenvat credit was warranted only in a case where the entire value of the inputs was fully written off. In this connection, it is further submitted that the requirement of reversal of Cenvat credit on inputs in cases of partial writing off of value was brought into effect only on 1-3-2011 and, therefore, prior to that date, there was no such requirement. The provisions ....