Case Law Details
GKN Driveline (India) Ltd Vs CCE (CESTAT Chandigarh)
Introduction: The Central Excise and Service Tax Appellate Tribunal (CESTAT) Chandigarh recently delivered a pivotal judgment in the case between GKN Driveline (India) Ltd and the Commissioner of Central Excise, New Delhi. The case involved a crucial point of law related to the reversal of Cenvat Credit availed on inputs under Rule 3(5B) of the Cenvat Credit Rules, 2004. This article aims to dissect the landmark judgment, offering detailed analysis under various subheadings.
Factual Background: GKN Driveline (India) Ltd, engaged in the manufacture of motor vehicle parts, was under scrutiny for reversing Cenvat Credit on inputs that were written off in their financial records. The case dates back to an audit in 2010, following which a demand of Rs. 98,74,704/- was issued against the appellant. A subsequent order confirmed a reduced demand of Rs. 58,55,479/- along with an equal penalty amount.
The Core Issue: Rule 3(5B) and Its Retrospective Application: The primary point of contention was whether the recovery mechanism under Rule 3(5B) could have retrospective application. GKN Driveline argued that there was no provision for such recovery during the relevant period and cited multiple case laws to support their stance. The introduction of an explanation to Rule 3(5B) in 2013 was said to be prospective, thus not applicable to the disputed period.
Provision for Writing Off and the Cenvat Credit: GKN Driveline was required to maintain an inventory of slow-moving items, which they had provisionally written off in their financial books. As per the proviso to Rule 3(5B), they were entitled to reclaim the Cenvat Credit if these goods were used subsequently. The appellant had, indeed, released provisions worth Rs. 2,53,92,631/- for items that were eventually used.
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