Custom, Excise & Service Tax Tribunal
M/S Kluber Lubrication India Pvt Ltd vs The Commissioner Of Central Tax, Mysore ... on 12 March, 2026
Central Excise Appeal Nos. E/21272/2017,
20405/2023, 20772/2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 2
Central Excise Appeal No. 21272 of 2017
(Arising out of Order-in-Original No. MYS-EXCUS-000-COM-GVK-01-17-18 dated
24.05.2017 passed by the Commissioner of Customs, Central Excise, Service Tax,
Mysore Commissionerate, Mysore.)
M/s. Kluber Lubrication India Pvt. Ltd.
No. 347/A, Hebbal Industrial Area, Metagalli,
Mysore, Karnataka - 570 016. .......Appellant(s)
VERSUS
Commissioner of Central Excise, Customs & Service Tax,
S1/S2, Vinaya Marga,
Siddhartha Nagar,
Mysore - 570 011. .....Respondent(s)
WITH Central Excise Appeal No. 20405 of 2023 (Arising out of Order-in-Appeal No. MYS-EXCUS-000-APP-YCS-250-2022-23 dated 14.03.2023 passed by the Commissioner of Central Tax (Appeals), Mysore.) M/s. Kluber Lubrication India Pvt. Ltd.
No. 347/A, Hebbal Industrial Area, Metagalli, Mysore, Karnataka - 570 016. .......Appellant(s) VERSUS Commissioner of Central Tax, 3rd Floor, GST Bhavan, S1&S2, Vinaya Marga, Siddhartha Nagar, Mysore - 570 011. ........Respondent(s) AND Central Excise Appeal No. 20772 of 2024 (Arising out of Order-in-Appeal No. MYS-EXCUS-000-APP-IA-16/2024-25 dated 24.05.2024 passed by the Commissioner of Central Tax (Appeals), Mysuru.) M/s. Kluber Lubrication India Pvt. Ltd.
No. 347/A, Hebbal Industrial Area, Metagalli, Mysore, Karnataka - 570 016. ..........Appellant(s) VERSUS Commissioner of Central Tax, 3rd Floor, GST Bhavan, S1&S2, Vinaya Marga, Siddhartha Nagar, Mysore - 570 011. ........Respondent(s) Page 1 of 11 Central Excise Appeal Nos. E/21272/2017, 20405/2023, 20772/2024 APPEARANCE:
Mr. Syed Peeran, Advocate with Mr. Rohan Karia and Mr. Nischal, K. M, Advocates for the Appellant.
Mr. M. A. Jithendra, Authorized Representative (AR) for the Respondent CORAM:
HON'BLE MR. P.A. AUGUSTIAN, MEMBER (JUDICIAL) HON'BLE MR. PULLELA NAGESWARA RAO, MEMBER (TECHNICAL) Final Order Nos. 20290-20292 /2026 Date of Hearing: 10.10.2025 Date of Decision: 12.03.2026 Per: Pullela Nageswara Rao These 3(three) appeals are filed assailing the Order-in-Original No. MYS-EXCUS-000-COM-GVK-01-17-18 dated 24.05.2017 passed by the Commissioner of Customs, Central Excise, Service Tax, Mysore Commissionerate, Mysore, Orders-in-Appeal No. MYS-EXCUS-000-APP- YCS-250-2022-23 dated 14.03.2023 and Order-in-Appeal No. MYS- EXCUS-000-APP-IA-16/2024-25 dated 24.05.2024 passed by the Commissioner of Central Tax (Appeals), Mysuru, respectively.
2. The issue involved is whether cenvat credit availed by the appellants is required to be reversed in terms of Rule 3(5B) of the CENVAT Credit Rules, 2004 on account of 'writing down' the value of the inputs in accordance with the accounting principles.
3. Briefly stated the facts of the case are that the appellant M/s. Kluber Lubrication India Pvt. Ltd. are manufacturers of lubricants and other chemical preparations classifiable under Chapter Heading 27, 28, 34, 38 and 39 of the Central Excise Tariff Act, 1985. The appellants procured raw materials such as lubricants and other chemicals which are essential for the manufacture of lubrication oils and hold inventory of the same in anticipation of orders from their customers. These raw Page 2 of 11 Central Excise Appeal Nos. E/21272/2017, 20405/2023, 20772/2024 materials are procured locally as well as through imports. The duty paid on the inputs (raw materials / consumables etc.) procured is availed as cenvat credit. The appellant as per Accounting Standards 1 and 2 as per their internal policy 'write down' the value of the inputs which are slow moving / obsolete. As per the principles of internal accounting policy of the appellant's company the 'writing down' of the value is required to be made on slow moving / obsolete inputs based on the age of the inputs.
The provision of 'write down' is made at 100% i.e. fully, if the inventory is expected to be consumed after 48 months. Even though the value of the inputs is written down, the same are available with the appellants for use i.e., the written down inputs are not removed from the factory of the appellant. The provision to write down the value on the slow- moving inputs is done on 31st March of every year. The appellants follow the practice of writing-off certain inventories which have become obsolete on the principle that the same are incapable of being used in the future. On such inputs, the appellant reversed the entire cenvat credit availed on them. The Department initiated proceedings against the appellant on the ground that the appellants are required to reverse proportionate cenvat credit under Rule 3(5B) of the CENVAT Credit Rules, 2004 on account of partially 'writing off' the value of the inputs. The show cause notice dated 08.04.2015 was issued for contravention of Rule 3(5B) of the CENVAT Credit Rules, 2004 demanding an amount of Rs. 4,73,86,575/-. The show cause notice on Adjudication, confirmed the demand along with the interest and penalty. Aggrieved, the appellant filed Writ Petition No. 61276/2016 before the Hon'ble High Court of Karnataka, which was remanded by the Hon'ble High Court for fresh consideration. In the Denovo Adjudication a demand of Rs.1,06,22,540/- was confirmed along with interest and penalty was imposed under Rule 3(5B) of the Cenvat Credit Rules, 2004 read with Section 11A(4) of Central Excise Act, 1944. The demand has been confirmed by invoking the extended period of limitation. Further, a ROM filed for rectification of mistakes is pending before the Adjudication Authority.
Page 3 of 11Central Excise Appeal Nos. E/21272/2017, 20405/2023, 20772/2024
4. In Appeal No. E/20405/2023, the appellant was issued show cause notice (SCN) no. 06/2018-19 dated 09.05.2018 proposing demand of Rs. 42,03,561/- being cenvat credit availed in contravention to Rule 3(5B) of the CENVAT Credit Rules, 2004, on the allegation that the appellant made the provision in their books of accounts to 'partially write off' the value of inputs without reversing the proportionate credit. On Adjudication demand was confirmed along with interest and penalty. On Appeal before the Commissioner (Appeals), the appeal was partially allowed, wherein it was held that the appellants are required to reverse proportionate cenvat credit in terms of Rule 3(5B) the Cenvat Credit Rules, 2004 on account of partially 'writing down' the value of the inputs in their books of account and the matter was remanded to the Lower Authority for addressing the dispute regarding the quantification of the demand.
5. Based on the above remand direction, Denovo proceedings were initiated despite the request of the appellant to keep the Denovo proceedings in abeyance /call book. On Denovo Adjudication, the appeal was rejected on the finding that the appeal cannot be kept in abeyance / call book. From the above, it can be noted that the issue in the Appeal No. E/21272/2017 and E/20405/2023 is on merits i.e. reversal of proportionate credit availed in respect of 'writing down' the value of the inputs under Rule 3 (5B) of the CENVAT Credit Rules, 2004. Appeal No. E/20772/2024 was filed to protect the interests of the appellants and to ensure that no recovery of demand is initiated by the Revenue as confirmed vide the Denovo Order-in-Original dated 02.11.2023.
6. The appellant during the hearing, reiterated the submissions in their grounds of appeal and further submitted that; the appellant being a private limited company are governed by the accounting policies issued by the Institute of Chartered Accountant of India (ICAI); provisions in the books of account to 'write down' the value of slow moving goods partially on percentage basis as per the age of the inputs, in terms of Inventory Policy and Accounting Standards 1 and 2; even though the value of the inputs is written down, the same are available Page 4 of 11 Central Excise Appeal Nos. E/21272/2017, 20405/2023, 20772/2024 for use i.e. these goods are not removed from the factory; in cases wherein inputs are obsolete, the appellants have written-off the value and consequently reversed the entire credit as they cannot be used in future which fact is not disputed by the Department; the provision to write-down in the books of accounts regarding slow moving /non- moving goods is made only to fulfil the accounting principles; provisional entry is made to reduce the asset value only from the accounting perspective and has no nexus with respect to quality of the asset or capability of the inputs for usage in the manufacturing process. The making of general provision in the Books of Accounts does not amount to 'writing off' the asset, but it is only a mechanism whereby the value of assets is reduced to a certain extent to reflect the accurate value of the inputs in terms of Accounting Standards. The appellant further submits that; the difference between 'writing down' and 'writing off' in the books of accounts is that writing down in respect of inventory is made on the basis of similar or related items as a result of variation in inventory valuation, whereas 'write off 'is identifying a particular item of inventory which is obsolete and not likely to be used for any reason and deleting the same from the inventory fully or partially; reversal of Cenvat Credit under Rule 3(5B) of the Cenvat Credit Rules, 2004 is not required for 'writing down' of inputs since the inputs continue to exist in stock and are used subsequently in the manufacture of final products. Proviso to Rule 3(5B) of the CENVAT Credit Rules, 2004 clearly states that the manufacturer can re-avail in respect of inputs which are initially written off and subsequently used in the manufacture of final products.
7. Learned Counsel submits that there are plethora of decisions /judgements passed by the Courts /Tribunal holding that merely 'writing down' the value of inputs from books of account as per accounting standards for taking benefit of depreciation under Income-tax Act, 1961 would not imply that inputs have been 'written off fully or partially' and hence credit is not required to be reversed in terms of Rule 3(5B) of Cenvat Credit Rules, 2004. In this regard, reliance is placed on the decision in the matter of M/s. Solvay Specialties India Pvt. Ltd. Vs. Page 5 of 11 Central Excise Appeal Nos. E/21272/2017, 20405/2023, 20772/2024 Commissioner of Central Excise, Surat-II, 2018 (12) G.S.T.L. 82 (Tri. - Ahmd.) wherein it is held that:-
"7. On a plain reading of the said Rule it is clear that in the event the value of any input or capital goods before being put to use on which Cenvat credit has been availed are written off fully or partially or any provision has been made to write off fully or partially than the manufacturer or service provider are required to reverse /pay Cenvat credit availed on such inputs or capital goods. In the present case from the very beginning the appellant have submitted that they have only written down the value of the raw materials in their books of account and has not written off the value fully or partially. Also, the claim of the appellant is that all these raw materials are still available in their factory and are in usable conditions; the value is written down as per the accounting principle and since the credit availed is on inputs, therefore, under the CCR, 2004, there is no bar in taking depreciation benefit' under Income-tax Act, 1961. Further, I find that there is no evidence to the effect that the inputs whose value had been written down had been removed from the factory. Thus, reducing the value of the raw materials keeping in view the accounting principles and Income-tax benefit, if any, it cannot be construed that the value of the inputs are written off from the books of account and are not usable resulting into invoking of Rule 3(5B) of Cenvat Credit Rules, 2004. Consequently, the impugned order is set aside, and the appeal is allowed with consequential relief, if any, as per law".
8. Learned Counsel further relied on the decision in the matter of M/s. General Motors Pvt. Ltd. Vs. Commissioner of CGST & C.E., Pune, [2022 (11) TMI 1460-CESTAT MUMBAI] wherein the demand of CENVAT Credit in terms of Rule 3(5B) of the CENVAT Credit Rules, 2004 for the period from 2013-17 was set aside, inter alia by holding that 'writing down' the value of the inputs from books of account as per accounting standards for taking benefit of depreciation under Income Page 6 of 11 Central Excise Appeal Nos. E/21272/2017, 20405/2023, 20772/2024 Tax Act, 1961 would not imply that the inputs have been 'written off fully or partially'.
9. Learned Counsel further relied on the following decisions:-
(i). M/s. Heavy Engineering Corporation Ltd. Vs. Commissioner of C.E. & S.T.. Ranchi Commissionerate, 2025 (3) TMI 260-CESTAT KOLKATA
(ii) M/s. Steel Authority of India Ltd. Vs. Commissioner of Central GST, Chattisgarh, 2024 (10) TMI 1336-CESTAT NEW DELHI
(iii) M/s. BCH Electric Ltd. Vs. Commissioner of Central Excise, Faridabad-1, 2016 (6) TMI 469-CESTAT CHANDIGARH
(iv) Commissioner of Central Excise Vs. Ingersoll Rand (India) Ltd., 2014 (300) E.L.T 347 (Guj.)
(v) M/s. Jaisawal Neco Industries Ltd. Vs. Principal Commissioner of Central Tax, Raipur, 2022 (11) TMI 1001 - CESTAT NEW DELHI
(vi) M/s. Takata India Pvt. Ltd. Vs. Commissioner of Central Excise, Alawar, 2022 (4) TMI 1359 - CESTAT NEW DELHI
(vii) Hindustan Zinc Ltd. Vs. C. CGST, Udaipur, 2021 (10) TMI 482 - CESTAT NEW DELHI
10. Learned Counsel further submitted that prior to 01.03.2013, there was no recovery mechanism to recover any Cenvat Credit under Rule 3(5B) of the Cenvat credit Rules, 2004 which was introduced only on 01.03.2013 vide Notification No. 3/2013-CE (NT) dated 01.03.2013. In this regard, learned counsel relied on the following decisions:-
(i) Hewlett Packard India Sales Pvt. Ltd. Vs. CST, LTU, Bengaluru, 2024 (8) TMI 718-CESTAT BANGALORE
(ii) M/s. Stumpp, Schuele and Somappa Springs Pvt. Ltd.
Vs. Commissioner of Central Excise and Service Tax, Page 7 of 11 Central Excise Appeal Nos. E/21272/2017, 20405/2023, 20772/2024 LTU, Bangalore, 2025 (5) TMI 571 - CESTAT BANGALORE
(iii) M/s. GKN Driveline (India) Ltd. Vs. CCE, Delhi-III, 2023 (9) TMI 1131 -CESTAT CHANDIGARH
(iv) Haver Ibau India Pvt. Ltd. Vs. C.C.E. & S.T. -
VADODARA-II, 2023 (10) TMI 677-CESTAT
AHMEDABAD
(v) M/s. Ericsson India Pvt. Ltd. Vs. CCE, Jaipur, 2019 (3) TMI 776 - CESTAT NEW DELHI
11. Hence the demand for the period from April 2010 to February 2013 is not sustainable on account of absence of recovery mechanism during the relevant period.
12. The Learned Counsel further submits that the demand for the period prior to 01.03.2011 is also not sustainable since the provision in Rule 3(5B) relating to reversal of credit on the value of inputs 'written off partially' was introduced for the first time on 01.03.2011. In this regard, reliance is placed on the decision passed in the matter of M/s. Bharat Heavy Electricals Ltd. Vs. Commissioner of Central Excise, Final Order No. 21016/2024 dated 16.10.2024 passed by CESTAT, Bengaluru (Appeal No. E/27087/2013).
13. Learned Counsel further submitted that the entire demand in Appeal No. E/21272/2017 for the period from April 2010 to March 2013 is barred by limitation, as there is no suppression of facts from the knowledge of the Department, since the appellants have been duly filing their Central Excise returns declaring all the details. Therefore, suppression cannot be alleged in this regard, reliance is placed on the decision in the matter of M/s. Kalyani Steels Ltd. Vs. Commissioner of Central Excise, Belgaum- [2024 (3) TMI 6 -CESTAT Bangalore] wherein it was held that extended period of limitation is not invokable in cases wherein all particulars have been duly declared in ER-1 Returns and the appellant has already been subjected to Audits. In this regard, reliance is placed on a similar decision in the matter of M/s. Federal Page 8 of 11 Central Excise Appeal Nos. E/21272/2017, 20405/2023, 20772/2024 Mogul TPR India Ltd. Vs. Commissioner of Central Excise, Bangalore II Commissionerate, [2024 (4) TMI 31-CESTAT Bangalore]. It is a settled position of law that when the demand is based on audit objection, the extended period is not invokable. In this regard, reliance is placed on the decisions in the matter of BST Infratech Ltd. Vs. CCE - [2022 (62) G.S.T.L. 334 (Tri. - Kolkata)]; Gannon Dunkerley & Co. Ltd. Vs. CST, New Delhi - [2021 (47) GST 35 (Tri. - Del.)]; and Safal Constructions Pvt. Ltd Vs. CCE - [(2023) 5 Centax 218 (Tri.-Ahmd)]. Learned Counsel further submits that the Department has not shown any positive act done by the Appellants evidencing suppression of facts for not reversing the Cenvat Credit. Hence, the extended period of limitation is not invokable inasmuch as the impugned order has failed to bring out any evidence to show any positive act of suppression on the part of the Appellant. Reliance is placed on the Hon'ble Supreme Court decision in CCE Vs. Chemphar Drugs and Liniments, [1989 (40) E.L.T. 276 (S.C.)] and Pushpam Pharmaceuticals Company Vs. Collector of Central Excise, Bombay-[1995 (78) E.L.T. 401 (S.C.)].
14. Learned Authorized Representative (AR) reiterated the findings in the impugned orders.
15. Heard both sides and perused the records.
16. We find that these 3(three) appeals are filed with respect to demand of cenvat credit /reversal of cenvat credit for the goods which have been 'written down' in the books of account as per the accounting principles of the Institute of Chartered Accountant of India (ICAI). Appeal No. E/20015/2024 is with respect to keeping the Denovo Adjudication in abeyance which the Department has not acceded and proceeded with the Denovo Adjudication. We find the appellants have raised the issue that the demand is not sustainable on the grounds that there was no recovery mechanism of the cenvat credit payable under Rule 3(5B) of Cenvat Credit Rules, 2004 till 01.03.2013. Further we find that the reversal of cenvat credit for 'partially write off' is only introduced on 01.03.2011. In this case, we find that the appellant has Page 9 of 11 Central Excise Appeal Nos. E/21272/2017, 20405/2023, 20772/2024 only 'written down' the value of the slow moving inputs /consumables for accounting purposes and the inputs are available in the factory for use at a later date. The inventory of these slow moving inputs /consumables is reviewed on 31st March of every year. The Appellant is reversing the cenvat credit on the inputs /consumables which are 'written off' as they are obsolete and not useable. Therefore, the issue involved in this case is only with respect to 'writing down' the value of inputs /consumables which are not removed from the factory and are available for future use in the manufacture of the products. Further, we find that this exercise is carried every year, wherein slow moving items are identified, and the value is 'written down' for accounting purposes. Further, the obsolete inputs /consumables are identified which are not useable and are 'written off' and the proportionate cenvat credit is being reversed. The appellant is also raised the issue of time bar for invoking the extended period since the demand was raised based on the Audit of the appellant, the details of the reversals of the 'writing down' of the inventory is also mentioned in their returns and therefore, there is no suppression of facts or willful mis-statement with an intension to evade duty therefore, the extended period is not invokable and for this reason also the impugned order is unsustainable. We find that on merits, since the goods on which the demand was raised are only those inputs /consumables wherein the value was 'written down' and not 'written off', therefore the demand /reversal of cenvat credit is untenable. Further the provision for reversal of cenvat credit for 'partial write off' under Rule 3(5B) of Cenvat Credit Rules, 2004 came into effect from 01.03.2011. Further, the recovery mechanism to recover any Cenvat Credit under Rule 3(5B) of the Cenvat credit Rules, 2004 was introduced only on 01.03.2013 vide Notification No. 3/2013-CE (NT) dated 01.03.2013. The period of demand in the 2(two) cases is from April 2010 to March 2013 and April 2016 to June 2017, hence for the period April 2010 to March 2013 there is no recovery mechanism to recover any Cenvat Credit under Rule 3(5B) of the Cenvat credit Rules, 2004.
Page 10 of 11Central Excise Appeal Nos. E/21272/2017, 20405/2023, 20772/2024
17. In view of the above discussion, and decisions /judgements in the case laws cited, supra, we find that the impugned orders are liable to be set aside.
18. Accordingly, the impugned orders are set aside and Appeal Nos. E/21272/2017, E/20405/2023 are allowed with consequential relief, in accordance with law. Consequently, Appeal No. E/20772/2024 filed by the appellant to keep the recovery proceedings in abeyance consequent to the denovo Order-in-Original is dismissed as infructuous.
(Order was pronounced in Open Court on 12.03.2026) (P. A. AUGUSTIAN) MEMBER (JUDICIAL) (PULLELA NAGESWARA RAO) MEMBER (TECHNICAL) hr/Sasi Page 11 of 11