At, Customs Excise Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad
By, THE HONORABLE JUSTICE: DR. D.M. MISRA
For Petitioner: Dhaval Shah, Advocate And For Respondents: Sameer Chitkara, A.R.
1. This is an appeal filed appeal against Order-in-Appeal No. SUR-EXCUS-002-APP-115-14-15 passed by the Commissioner (Appeals), Central Excise, Customs and Service Tax, Surat-II. Briefly stated the facts of the case are that the appellant was issued a demand notice on 13-3-2013 for recovery of the credit amounting to Rs. 4,62,22,178/- availed during the periods 2008-2009 to 2011-2012 alleging that even though the inputs on which credit was availed and the va
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lue thereof written down in their books of account but the credit was not reversed as per Rule 3(5B) of Cenvat Credit Rules, 2004. On adjudication the demand was confirmed with interest and penalty. Aggrieved by the said order, they filed appeal before the Ld. Commissioner (Appeals) who in turn, rejected their appeal. Hence, the present appeal.
2. Ld. Advocate for the appellant vehemently argued that the appellant had only written down the value of the inputs/raw materials in their books of account, which has been misunderstood by the department that they have 'written of the value of the input raw materials from their books of account and accordingly demand notice was issued for recovery of the credit with interest. He submits that the inputs are still lying in the factory premises and are in usable condition and recording depreciation in the value of inputs for accounting purposes has nothing to do with the admissibility of credit on the duty paid. Therefore, demand of Cenvat credit availed on inputs is unsustainable in law. In support he has referred to the judgment of this Tribunal in the cases of B.H.P.V. Ltd. v. CCE, Visakhapatnam - 2009 (240) E.L.T. 49 (Tri.-Bang.) and Ray Ban Sun Optics India Ltd. v. CCE, Jaipur : 2012 (283) E.L.T. 276 (Tri.-Del.). Further, explaining the meaning of written down value in the context of Income-tax Act, 1961, the Ld. Advocate referred to the judgment of Hon'ble Supreme Court in the case of Madeva Upendra Sinai & Ors. v. UOI : 1975 (3) SCC 765 and the relevant provisions of the said Act, to advance his point of argument that "written down value" and "written off" are two different concepts and cannot be applied interchangeably.
3. Ld. AR for the Revenue reiterated the findings of the Ld. Commissioner (Appeals).
4. Heard both sides and perused the records.
5. The short issue involved in the present case is: whether the appellants are required to reverse the credit availed on inputs alleged to have been written off in their books of account in accordance with Rule 3(5B) of Cenvat Credit Rules, 2004. Before analyzing the issue it is worth mentioning the relevant Rule 3(5B) of the Cenvat Credit Rules, 2004 as was in force during the relevant time, which 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."
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 partially or any provision has been made to write off fully or partially than the manufacturer or service provider are required to reverse/pay Cenvat credit availed on such inputs or capital goods. In the present case from the very beginning the appellant have submitted that they have only written down the value of the raw materials in their books of account and has not written off the value fully on partially. Also, the claim of the appellant are that all these raw materials are still available in their factory and are in usable conditions; the value is written down as per the accounting principle and since the credit availed is on inputs, therefore, under the CCR, 2004, there is no bar in taking depreciation benefit' under Income-tax Act, 1961. Further, I find that there is no evidence to the effect that the inputs whose value had been written down had been removed from the factory. Thus, reducing the value of the raw materials keeping in view the accounting principles and Income-tax benefit, if any, it cannot be construed that the value of the inputs are written off from the books of account and are not usable resulting into invoking of Rule 3(5B) of Cenvat Credit Rules, 2004. Consequently, the impugned order is set aside and the appeal is allowed with consequential relief, if any, as per law