Order date – 22 November 2022

 Facts –

• The Appellant, M/s Jaisawal Neco Industries Ltd, is engaged in the manufacture of pig iron, iron ore pellet, sponge iron, M.S. Billets, Alloy Steel Billets, M.S. Rolled Products, etc. falling under the First Schedule to the Central Excise Tariff Act, 1985, and also availing Cenvat credit on various inputs, capital goods and input services in terms of the provisions of the Cenvat Credit Rules, 2004 (Credit Rules).
• Pursuant to audit for the period 2014-15 up to june 2017, it appeared to revenue that the appellant have created a provision for non/slow moving inventory. However, they have not reversed towards Cenvat credit availed in respect of the value of such provision, in terms of Rule 3(5)(B) of the CCR.
• A sow-cause notice was issued on 28/08/2019 to demand reversal of Cenvat credit along with interest and further penalty was proposed invoking the extended period of limitation with further proposal to impose penalty under Rule 15.

Issue –

• Whether the provision created for non/slow moving inventory will attract Rule 3(5)(B) of the Cenvat Credit Rules, 2004?

Order –

• The Tribunal finds that the appellant have only created a general provision for slow/non-moving inventory and have admittedly not written of the inventory from the inventory or the asset account. In actuality, such provisions have been made by appropriation in the profit and loss account, without writing of any amount/value from the asset/inventory account.
• Tribunal also find that Rule 3(5B) of CCR is attracted only when the value of the asset and/or inventory is written off fully or partially or wherein any specific provision to write off a fully or partially has been made in the books of account.
• It is apparent that the appellant have made a general provision, which is not attributable to any particular asset/inventory. Admittedly, revenue has not been able to identify the details of inventory or asset, for which the general provision has been made.
• It is further evident that the appellant have demonstrated that such provision has been made year to year by way of increasing or reducing the provision, depending on the usage of inventory as required.
• Appeal allowed.