Dated 25th November, 2019

 Subsequent judgment of the Apex Court cannot be used to re-open assessment or disturb past assessment which have been concluded-Department cannot be authorised to re-open the assessment, which stood closed on the basis of the law as it stood at the relevant time.

Cenvat credit cannot be denied on the value written off in the books even though the inputs got obsolete since the same were lying in the factory1. The position changed only after 01.03.2011 with amendment in the statute.

Facts of the case:-

The Appellant were engaged in the manufacture of excisable goods namely, chemical dies and were availing credit of excise duty paid on inputs and capital goods used in the manufacture of finished goods. During audit, objection was raised that certain amount in respect of inputs were written off in the balance sheet. The SCN was issued proposing the recovery of the Cenvat Credit amount attributed to the value written off inputs in the light of board Circular2 dated 16.07.2002, wherein it was prescribed that if the value of inputs or capital goods is written off in the balance sheet, Cenvat Credit on such inputs/capital goods should be reversed. The matter was adjudicated against the Appellant and also they did not got relief at the Appellate level.

Contention of the Appellant:-

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 Circulars 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. Reliance on the certain judgmentswere made where in the department contentions have been negated.

Further the value of the inputs written off in the balance sheet were admittedly laying in the factory, therefore, so long the inputs are lying in the factory no Cenvat credit is required to be reversed. Further, the Appellant submitted that the value of inputs written off is partial value and not 100% value of the inputs, for this reason also even though the partial value was written off cenvat credit cannot be demanded. The insertion of amended Sub-Rule 5(B) in Rule 3 of Cenvat Credit Rules, whereby even in the case of partial written off value of inputs, the Cenvat credit needs to be reversed which was brought under the statutew.e.f 01.03.2011 therefore, prior to this date in case of written off partial value of inputs, Cenvat credit was not required to be reversed.

Judgment of the Tribunal:-

The moot question to bedecided in the present case is that during the relevant period when the appellant have written off partial value of the inputs and accounted forin the balance sheet whether the appellant is required to reverse of the amount the Cenvat credit in respect of inputs of which the value waswritten off.

The Hon’ble tribunal relied on the judgement of Ingersoll Rand (Indian) Limited passed by the Hon’ble Gujarat High Court where in it was held that “The Board's circular could not have created a liability which did not exist under the rules.The reversal of the credit would amount to collection of duty which would be wholly unauthorised. In the mentioned case we are not governed by such statutory provisions. In absence of such statutory provisions, merely on the strength of the Board's circulars, it would not be open for the Department to enforce reversal of Cenvat credit.”

In the matter of Ingersoll Rand (Indian) Limited the Hon’ble Gujarat high court relied on various other judgements and also on the judgement ofIndian Petrochemicals Corporation Ltd. (supra) wherein the Bombay High Court has held that “..It is clear that this is a case of goods which are not obsolete but goods which are lying unutilised and which can be utilised. The Tribunal in a long line of judgements where goods have been shown as written off in the books, have taken a view that the benefit is available..”

In view of the above judgementof the Hon’ble GujaratHigh Court it was clearly held that on the basis of boththe Circulars the demand cannot be raised in absence of any statutory provision for the reversal of credit in case of written off value of inputs. Therefore, even though the inputs got obsolete but, since, the same is lying in factory, Cenvat credit cannot bedenied.

Further the amended provision of sub-Rule 5(B) of Rule 3 of cenvat credit rules provide that in case of partial written off value of the inputs the reversal of cenvat credit is required, however the provision came into effect from 01.03.2011. Therefore, prior to this date there was no statutory provision for reversal of credit in case partial value of the inputs is written off. Therefore, during the period in question there was no statutory provision for reversal of cenvat credit in case of the value of the inputs is written off.

Hence based on the above discussion, impugned order is set aside. Appeal is allowed.


2 645/36/2005-CX

3 2012-TIOL-1107-HC-AHM-CX

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