The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed re-credit of cenvat credit as capital goods are used in manufacture of final products, thereby granting relief to M/s. MRF Limited.
the Appellants engaged in manufacture of Tyres for Motor Vehicles, Tyre Flaps and Compounded Rubber and during the course of Audit, it was observed that the Appellant had availed cenvat credit of Rs.34,84,905/- 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.
As the Appellant failed to reverse the ineligible cenvat credit, a Show Cause Notice was issued to the Appellant seeking to recover the ineligible CENVAT credit in terms of rule 14(1)(ii) of CENVAT Credit Rules, 2004 read with Section 11A(4) of Central Excise Act, 1944 and to levy interest under Section11AA and to impose penalty under Rule 15(2) of CENVAT Credit Rules, 2004 read with Section11 AC of Central Excise Act, 1944.
It was submitted that the impugned order failed to discuss the submissions made by the Appellant for re-taking the cenvat credit on 30.06.2017 and seeking to transition the said credit in terms of the provisions of the CGST Act. It was mentioned that the impugned order failed to appreciate the fact that, had the Appellant not retaken credit on the goods provisionally written off for accounting purpose, it might have permanently lost its legal right to claim credit on the goods which were still being used for manufacturing. The Appellant had taken re-credit in accordance with the provisions of law and on advent of the new GST regime w.e.f 01.07.2017.
A Single Member Bench comprising Vasa Seshagiri Rao, Technical Member observed that “In view of the above, we have to hold 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.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
