2024 (10) TMI 1336

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....s provided under Cenvat Credit Rules, 2004 (hereinafter referred as CCR 2004). While auditing the records of the appellant, it was pointed out by the auditors that the appellant has made the provision of Rs.20,07,37,034/- against the stock value of Rs.28,14,81,491/- in the Financial Year 2016 & 17, for non-moving/ obsolete /surplus inventories on which the Cenvat Credit was not reversed by the appellant as is required under rule 3 (5B) of CCR 2004. Though the appellant contended that the said rule does not apply but no documentary evidence could be produced by the appellant. Resultantly, vide SCN No. 16827 dated 16.12.2020 Cenvat Credit amounting to Rs.3,30,81,463/- was proposed to be reversed alongwith the interest and the penalty of the s....

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....passed in furtherance thereof, both are liable to be set aside. 4. Based on these submissions, ld. Counsel has mentioned that appellant was not required to reverse the Cenvat Credit as the value of inventory was never written off. The Department has wrongly invoked rule 3 (5B) of CCR 2004. Invocation of extended period while issuing the impugned Show Cause Notice has also been objected for want of any evidence qua suppression of any fact on part of the appellant while relying upon the decision in the case of Commissioner of Central Excise, Chennai-I versus Chennai Petroleum Corporation Ltd. reported in 2007 (211) E.L.T. 193 (S.C.) & Rajasthan Tourism Development Corporation Ltd. Vs. CCE, Jaipur-I reported in 2017 (5) G.S.T.L. 169 (Tri.-D....

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....been written off in their books of account in accordance of rule 3 (5B) of CCR." For this purpose I have perused the rule. It reads as follows:- "Rule 3(5B): If the value of any input or capital goods before being put to use on which CENVAT credit has been taken is written off fully or partially or where any provision to write of fully or partially has been made in the books of account, the manufacturer or service provider is required to pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods." 8. On a plain reading of the said Rule it is clear that in the event the value of any input or capital goods before being put to use on which Cenvat credit has been availed are written off fully or partial....

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....ant has created a general provision for slow/non-moving inventory and have taken the stand that they have not written off the inventory from the asset account in actuality the provision has been made by appropriation in the profit and loss account without writing off any amount/ value from the asset / inventory account. I observe that there is a difference between writing off inputs vis-à-vis provision of slow moving inventory the goods continued to lie in the appellant's factory and gradually used in manufacture of dutiable final products such goods cannot be called as the inventory written off. I draw my support from the decision of Hon'ble Supreme Court in the case of Reliance Energy Ltd. vs. Maharashtra State Road Develop....

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....ble to identify the details of inventory or assets for which the provision has been made as to whether those inventories have become obsolete, I hold that the demand confirmed invoking Rule 3(5B) in the circumstances is not sustainable. There is also no denial to the fact that in case where such non/slow moving inventory had become obsolete the appellant had already reversed the credit. 13. With respect to invocation of extended period of limitation I observe that the provision in the records of the appellant (balance-sheet/ P & L accounts) was the activity in accordance of normal accounting practice. Appellant is found to have committed nothing which may amount to evasion of tax. His defence since the stage of replying to the show cause....