2026-VIL-1632-CESTAT-CHE-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Provisions for write-off of raw materials, Reversal of Cenvat credit under Rule 3(5B) of CENVAT Credit Rules 2004, Subsequent use and re-availment – Appellant had made provisions for write-off of raw materials in the books of account but had not reversed the CENVAT credit attributable thereto as mandated under Rule 3(5B) of CENVAT Credit Rules 2004. Though the appellant claimed that provisions were proportionately released as materials were consumed and the credit was reversed only on revised provision amount, it failed to substantiate the subsequent consumption of written-off materials with supporting documentary evidence – Whether the appellant was liable to reverse CENVAT credit on provisions made for write-off of raw materials and whether the claim of subsequent use could defeat the statutory requirement of reversal – HELD – Prior to 1st March 2011, Rule 3(5B) applied only to full write-offs of inputs. The rule was amended vide Notification No. 3/2011-CE (N.T.) dated 01.03.2011, inserting the word "partially" to mandate reversal of CENVAT credit even for partial provisions made after that date. For the period under dispute, creating an accounting provision for raw materials triggered an immediate legal obligation to reverse the corresponding CENVAT credit - The plea that provisions are not equivalent to write-offs because materials remained physically intact and usable is not sustainable as the statute requires acts to be done in the particular manner prescribed. Rule 3(5B) provides that if the provisioned inputs are subsequently used in manufacturing, the credit may be re-availed, but this requires documentary evidence - The appellant's failure to furnish auditors certificate or itemized stores records linking released provisions to actual physical usage defeats the claim of subsequent use. The burden of proof regarding credit admissibility lies on the assessee. The appellant's silence and non-cooperation when requested to provide information amounts to suppression of facts satisfying the criteria for invocation of extended period of limitation. The maxim that no person can take advantage of their own wrong applies - The statutory requirement to reverse credit must be adhered to. The appeal is rejected and the demand confirmed
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