CENVAT - Inputs written off as obsolete - Rule 3(5B) of CCR, 2004 does not have retrospective effect - Reversal of credit not called for - Revenue's appeal dismissed: CESTAT
By TIOL News Service
MUMBAI, NOV 12, 2014: ON scrutiny of the respondent's trial balance sheet for the year 2003-04, it was found that as on 31.3.2004, there were certain obsolete inputs, WIP worth Rs.1,22,20,110/- against which provision of Rs.73,33,865/- was made in the accounts by reducing the value.
The jurisdictional R/S, in November, 2007 enquired with the assessee the status of the said goods. Pursuant thereto, the assessee reversed CENVAT credit of Rs.23.90 lakhs. Not convinced with this reversal on the ground that the assessee had not submitted one-to-one co-relation of the inputs, a SCN was issued demanding duty of Rs.19.94 lakhs by invoking the extended period of limitation.
Whereas the adjudicating authority confirmed the demand, the Commissioner (A) set aside the same on the ground of limitation.
So, the Revenue is before the CESTAT.
The main ground in the appeal is that in terms of Rule 3(5B) of the CCR, 2004 introduced by Notification No. 26/2007-CE(NT) dated 11.5.2007, the respondent is required to pay an amount equivalent to the CENVAT credit taken on the said inputs. Support is also taken of Board Circular No. 645/36/2002-CX dated 16.7.2002. In the matter of limitation, it is submitted that since the respondent had not informed the department till date the whereabouts of inputs, inputs in WIP which have been written off as obsolete in the books of account in the year 2003-04, the extended period is rightly invoked.
The respondent assessee submitted that none of the items have been taken away or clandestinely removed by the respondent; it is only for the accounting purposes that they have reduced the value of the goods and this is in accordance with the requirement of accounting practices as also the income-tax law.; many a times the goods on which reduced value is taken are put to use in the subsequent period and the finished products so produced are cleared on payment of duty; that Rule 3(5B) has been introduced only w.e.f. 11.5.2007 and that also only in respect of the goods where the value is fully written off; rule was further amended vide Notification No. 3/2011-CE(NT) dated 1.3.2011 so as to include the cases which are partially written off; their case is covered by the amendment of 2011; the period involved is prior to 2003-04 and, therefore, the amended rule cannot be applied. It is also submitted that in 2007 when the issue was brought up and the rule was amended, though for fully written off cases, they decided to reverse the credit as on 1.4.2007; that these figures would include even the figures of trial balance sheet of 2003-04 on which the demand has been raised; that practically it is not possible for one-to-one correlation of each item and what has happened to the said item. Following case laws were inter alia cited in support viz. Hindalco Industries Ltd. 2011-TIOL-970-HC-MUM-CX, Ingersoll Rand (India) Ltd. 2012-TIOL-1107-HC-AHM-CX, Philips Electronics India Ltd. - 2010-TIOL-994-CESTAT-MUM, Sakata Inx (India) Ltd. - 2008-TIOL-2422-CESTAT-DEL, ADC India Communications Ltd. - 2012-TIOL-1291-CESTAT-BANG. In the matter of limitation since there was no removal or suppression of facts, extended period cannot be invoked.
The Bench extracted the findings of the Commissioner (A) and observed that the issue on merits is already settled in favour of the respondent inasmuch as the High Courts have taken the view that the said provisions are applicable only from the date of introduction.
Noting that the issue on merits is already settled in favour of the respondents in the case of Hindalco Industries Ltd. & Ingersoll Rand and the High Courts have taken the view that the provisions of Rule 3(5B) of CCR, 2004 are applicable only from the date of introduction& the demand in the case on hand is for the period prior to the date of introduction and also that the Revenue has not been able to elaborate what is the misrepresentation or misstatement done by the respondent so as to allege suppression of facts with intention to evade duty, the appeal of the Revenue was dismissed.
(See 2014-TIOL-2244-CESTAT-MUM)
