2026-VIL-1458-CESTAT-KOL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Rule 3(5B) CENVAT Credit Rules 2004 - Written-off Vendor Dues versus Written-off Input Stocks - Appellant procured inputs from suppliers and availed CENVAT credit. Over a period of time, amounts payable to suppliers were written off in books of accounts due to quality issues and closure of supplier companies. Department raised demand for reversal of CENVAT credit contending that writing-off amounts indicated inputs were not used in manufacture - Whether CENVAT credit reversal is required when amounts due to vendors are written off in books of accounts if the input goods were actually used in manufacture of final products - HELD - The proper reading of Rule 3(5B) clarifies that CENVAT credit reversal is specified when the inputs or capital goods on which CENVAT credit is taken are written off as unusable stocks, not when dues to vendors are written off. The written off here means writing off of stocks as unusable, clarified by the Proviso which specifies that if initially goods are written off as unusable but subsequently found to be used, reversed credit can be taken back. Revenue has not adduced evidence showing that input stock registers reflect writing-off of actual input stocks. The entire premise of non-usage of inputs is based on written-off amount of total dues to vendors only - The Chartered Accountant Certificate produced by appellant clearly stated that goods in question were not written off from books of account and such certificate is required to be accepted unless rebutted by factual evidence by Revenue - The reduction of price payable by Appellant to suppliers due to quality difference is a commercial transaction between them and excise duty paid on transaction value was never disputed. Absence of any positive evidence that inputs on which credit has been taken are not used in manufacture of finished goods requires rejection of Revenue argument. Accordingly, demand for reversal of CENVAT credit is set aside – The appeal allowed is on merits - Extended Period - Suppression and Knowledge of Department - Appellant had written off amounts due to vendors which were recorded in books of account. Department during audit on 3.3.2015 came to know through Spot Memo that Appellant had written off amounts in respect of vendors but no Show Cause Notice was issued at that time. Show Cause Notice was issued in January 2018, almost three years later. Whether extended period of limitation can be invoked for demand when fact of write-off came to knowledge of Department in March 2015 - HELD - Appellant has written off dues to vendor and recorded same in books of account. This cannot be taken as any suppression on part of Appellant who in fact has declared these facts. Revenue on 3.3.2015 itself came to know that Appellant had written off amounts but no Show Cause Notice was issued. The issue is a matter of interpretation of Rule 3(5B) wherein Appellant's interpretation is backed by cited case laws. Absence of suppression, Department's knowledge from 3.3.2015, and the fact that the issue is a matter of interpretation where Appellant's view is supported by precedent, make it clear that no case of suppression has been made out - Confirmed demand for extended period is set aside on account of time-bar.
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