Mere Chartered Accountant’s certificate without documentary evidence is not sufficient for duty treatment of obsolete stock

Owens Corning India Ltd Vs Commissioner of Central Tax (CESTAT Mumbai)

CESTAT Mumbai in the matter of obsolete stock usage vis-à-vis reversal of CENVAT Credit or discharge of duty u/r 3(5B), it is held that mere Chartered Accountant’s certificate without documentary evidence is not sufficient. Matter remanded for the purpose of producing documentary evidence.

Facts- The appellants are engaged in manufacture of glass fiber, chopped strand mats, roving of glass fiber etc. and availing Cenvat credit in respect of inputs, capital goods and input services used in relation to manufacture of final products.

During the CERA Audit it was revealed that they had made ‘provision for obsolence of inventory/stores’ for the period 2009-10 to 2011-12, but had not reversed the Cenvat Credit availed on such inventory/stores during the said period in accordance with Rule 3(5B) ibid. Since the inputs, for which provision was made during the year 2009­10 and 2010-11, were subsequently used by the appellant in the manufacture of the final product and the appellant had reversed the provision amount to that extent therefore only interest was proposed for those years. Whereas for the year 2011-12 duty liability of Rs. 10.10 lakhs along with interest was proposed alongwith interest as per the show cause notice dated 28.3.2014. For the years 2015-16 and 2016-17 another periodical show cause notice dated 18.6.2018 was issued proposing duty amounting to Rs.38,13,454/- since the appellant failed to pay an amount equivalent to the cenvat credit taken on the slow moving/obsolete inventory for which provision was made/written off during those years as required u/r. 3(5B) ibid alongwith applicable interest and penalty.

Conclusion- Time and again it has been held that the Chartered Accountant’s certificate is not primary document. The SAP entry, as per the learned counsel, itself shows the intention to use such disputed items in manufacturing process subsequently but as per the Tribunal’s order dated 19.12.2017 the appellant was required to show, to the adjudicating authority, from the records that the obsolete stock was used and written back into the records on being sold on discharge of payment of duty. The appellant are under obligation to produce documentary evidence before the adjudicating authority as per the order (supra) of this Tribunal, which they failed to produce.

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