Cenvat Credit admissibility when the inputs were written off by mistake but later on rectified.

PJ-Case law-2012/13-1574

Case:- M/s. EVEREADY INDUSTRIES INDIA LTD. VS COMMISSIONER OF CENTRAL EXCISE, MYSORE

Citation:- 2013-TIOL-578-CESTAT-BANG

Brief Facts:- This application filed by the appellant seeks waiver of pre-deposit and stay of recovery in respect of the adjudged dues which include CENVAT credit of Rs. 4,25,645/- denied to them for the period 2007-08 and 2008-09. In adjudication of a show-cause notice dated 18.03.2010 which had inter alia demanded Rs. 4,25,645/- being the amount of CENVAT credit taken by the assessee on inputs allegedly written off their books of accounts, the original authority confirmed the demand against them under Rule 14 of the CENVAT Credit Rules 2004 read with Rule 3(5B) of the said Rules as also with Section 11A of the Central Excise Act. It also demanded interest thereon under Section 11AB of the Act, apart from imposing a penalty equal to duty on the assessee under Rule 15(2) of the CCR 2004 read with Section 11AC of the Act. Aggrieved, the assessee preferred an appeal to the Commissioner (Appeals) and the latter rejected that appeal after sustaining the order of the lower authority. Hence the present appeal of the assessee.

Appellant’s Contention:-The learned counsel for the appellant submitted that the writing-off was only a clerical mistake and that this mistake was rectified on 31.03.2009 by restoring the relevant quantities/values of the slow-moving raw-materials to the relevant accounts. It is their further submission that all this was done under intimation to the department prior to issue of the show cause notice. In his endeavour to establish this case of the appellant, the learned counsel refers to certain documents available on record. One of these documents is a copy of a “certificate” by the appellant which states that they had “not written off any raw-material or finished goods during the year 2007-08 and 2008-09”. Another document is copy of a letter dated 28.06.2010 which is claimed to have been submitted by the appellant to the Superintendent of Central Excise, Mandya Range and states that the alleged writing-off was, in fact, a wrong entry of account head due to a clerical mistake and this mistake was rectified during the year 2009-2010. This letter further reads thus:

“We have attached the details of stocks, which were considered for the difference in standard cost and actual cost. You can notice that, these inputs still exist and we have used some of these materials after 2007-08.”

However, this letter is not immediately accompanied by any “details of stocks”. The learned counsel for the appellant, in this context, invites attention to certain accounts found elsewhere in this compilation. The learned counsel has laid focus on the document seen on page 74 of this compilation, which is said to be the ‘Journal Entry' passed on 31.03.2009. This entry comprises debit of Rs. 22,18,707/- under Account Code 1361 and credit of equal amount under Account Code 4580, both towards slow-moving stock. This entry shows ‘31.03.2009' as voucher date. The voucher is termed “Adjustment Journal”. Another supporting document is on page No. 73 of this compilation and the same appears to be a summary of several Journal Entries which include particulars of JV (Journal Voucher) No. BT1200903AJV000260 dated 31.03.2009, against which an amount of Rs. 22,18,707/- is also indicated towards “reversal” in respect of slow-moving stock. The learned counsel claims that all these documents were produced with letter dated 28.06.2010 before the original authority well before adjudication of the case. It is further pointed out that these materials were ignored by the said authority and that a grievance made against the same came to be ignored by the appellate authority too. It is submitted that the learned Commissioner (Appeals) mindlessly sustained the order-in-original observing that there was no evidence of restoration of quantities/values of raw-materials earlier written off the books of accounts. It is submitted that the documentary evidence adduced by the assessee was not considered at all.

Respondent’s Contention:-The learned Additional Commissioner (AR) has endeavoured to defend the appellate Commissioner's order by submitting that there is no clear evidence of the requisite documents having been submitted to the original authority.

Reasoning of Judgment:-We have considered the submission from both parties and perused the record. we find that the case of the department is that the assessee had written off their books of accounts certain quantities/values of certain slow-moving raw- materials during the aforesaid period and, therefore, they should pay an amount equal to the CENVAT credit taken thereon, in terms of Rule 3(5B) of the CCR 2004.
The documentary materials produced by the appellant would, by and large, indicate that the party had categorically stated before the original authority that they had not written off their books of accounts any quantity/value of slow- moving stock and that the confusion had arisen on account of a clerical mistake whereby a wrong account head happened to be entered in the inventory account. From the records, it appears that his plea was raised in the so- called “certificate”. However, this document does not show that it was received by any officer of the department. Ignoring this document, one has, now, to look at the appellant's letter dated 28.06.2010 addressed to the Central Excise Range Officer. This letter indicates that it was accompanied by certain “details of accounts”. These “details of accounts” have been produced by the appellant in the form of Journal Voucher, summary of Journal Vouchers etc. The learned counsel for the appellant has emphatically submitted that these details were available to the original authority but not considered by it. In any case, it is submitted, all these materials were placed before the appellate authority also. In this connection, a copy of the memorandum of appeal filed with the Commissioner (Appeals) is produced by the counsel and attention is invited to the relevant paragraphs therein. One of the grounds of the appeal is clearly to the effect that the appellant had taken back the amount credited, in the financial year 2009- 10. A copy of the relevant document showing “reversal” of CENVAT credit appears to have been enclosed as Annexure- 11 to the said memorandum of appeal. Having carefully perused the relevant documents, there is no doubt about the case made out by the assessee before the lower appellate authority. They clearly pleaded that the CENVAT credit in question had been reversed. They produced certain documents which purported to prove their case. Nevertheless, nowhere in the impugned order is there any reference to any of these materials. This is enough to hold that the appellate Commissioner's order suffers from non-application of mind and hence deserves to be set aside. However, the fact remains that the case of the assessee and any documentary evidence in support thereof need to be examined by the original authority.
The impugned order is set aside and this appeal is allowed by way of remand with a direction to the original authority to undertake de novo adjudication of the dispute in accordance with law after giving the assessee a reasonable opportunity of adducing evidence and of being personally heard on all relevant issues. The stay application also stands disposed.

Decision:- The appeal is allowed by way of remand.

Comment:- The appeal was allowed by way of remand by accepting the assessee’s contention that the writing off of the inputs was a clerical mistake and there were evidences that supported the fact that there was clerical mistake which were not considered by the lower appellate authorities while deciding the case. Accordingly, the matter was remanded back to the original authority.

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PJ-Case law-2012/13-1574

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