Order Date – 23 November 2023 

Parties: M/s. MRF Limited Vs Commissioner of GST and Central Excise

Facts –

• The Appellant, M/s. MRF Limited, had availed CENVAT credit on input/capital goods that were earlier written off or where provisions were made for write-off in the books of accounts.
• It appeared to the department that the CENVAT credit on Obsolescent material which was earlier debited, was taken back on 30.06.2017, without utilising the same in the manufacture of final products , was ineligible in terms of proviso to Rule 3(5B) of CENVAT Credit Rules, 2004 and liable for reversal.
• Since the appellant failed to reverse the same a Show Cause Notice dated 27.06.2019 was issued to the Appellant seeking to recover the ineligible CENVAT credit along with interest and penalty. The demand was confirmed the Adjudicating Authority and Commissioner (Appeals-I) upheld the Order-in-Original.

Issue –

• Whether the Appellant is eligible to avail CENVAT re-Credit on inputs, provisionally written off in the books of accounts, in terms of Rule 3(5B) of CENVAT Credit Rules, 2004 or not?

Order –

• The Tribunal observed that the Appellant has provided documents pertaining to the utilisation of inputs in the manufacture of final products. As most of the input items which were earlier provisionally written off have been utilised by the Appellant in the manufacture and the remaining input materials are in the process of being used subsequently.
• Hence it was held that the appellant is eligible to retake the credit which was initially provisionally written off. The provisions of Rule 3(5B) of erstwhile CENVAT Credit Rules, 2004 are very clear which states that when said inputs or capital goods are subsequently used in the manufacture of their products, the manufacturer is entitled to take the credit of the amount equivalent to the CENVAT Credit paid earlier.
• Further invocation of extended period is not justified as the ingredients required for extending the limitation are not satisfied in this case. As the demand cannot sustain, imposition of penalty and demand of interest also cannot survive. Thus the appeal is allowed.