CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL BANGALORE REGIONAL BENCH - COURT NO. 2 Central Excise Appeal No. 20131 of 2017 (Arising out of Order-in-Original No. BLR-EX-CUS-004-COM-20-2016-17 dated 26.10.2016 passed by the Commissioner of Central Excise & Service Tax, Bangalore – IV Commissionerate, Bengaluru.)

M/s. Model Infra Corporation Pvt. Ltd.

Survey No. 104, Majara Hasahalli, Doddaballapur, Karnataka – 561 203. ……….Appellant(s)

VERSUS Commissioner of Central Excise & Service Tax, Bangalore – IV Commissionerate, Ground Floor, H.M.T Bhavan, Ganganagara, Bangalore – 560 032. ……..Respondent(s)

APPEARANCE:

Mr. B. N. Gururaj, Advocate for the Appellant.

Mr. Rajashekar. B. N. N, Superintendent (AR) for the Respondent.

CORAM:

Hon'ble Mr. P.A. Augustian, Member (Judicial)

Hon'ble Mr. Pullela Nageswara Rao, Member (Technical)

Final Order No. 20025 /2026 Date of Hearing: 06.10.2025 Date of Decision: 09.01.2026 PER: P.A. AUGUSTIAN This appeal is filed by M/s. Model Infra Corporation Pvt. Ltd.

against Order-in-Original No. BLR-EX-CUS-004-COM-20-2016-17 dated 26.10.2016 passed by the Commissioner of Central Excise & Service, Bangalore.

2. The issue in the present appeal is regarding demand / recovery of CENVAT credit availed on inputs allegedly written off by the Appellant.

3. The brief facts are M/s. Model Infra Corporation Pvt., Ltd., the Appellant is holding Central Excise Registration and manufacturing Excavator parts falling under Chapter sub-Heading (CETH) 84314100 of Central Excise Tariff Act, 1985. The Appellant was also availing the Cenvat Credit facility under the Cenvat Credit Rules, 2004. During the course of verification of the Balance Sheet of the Appellant by the Internal Audit, it was observed that, during the year 2011-12, the Appellant had made a provision of Rs. 33,58,23,000/- towards reduction in the inventory in the consolidated Balance Sheet of the unit. On enquiry by the audit, it was stated that the raw material stock was written off as on 31.03.2012. The Appellant submitted the Profit and Loss account for the period 2011-12 and informed that, out of the above mentioned amount Rs.16.82 Crores pertains to their unit at Doddaballapur plant, Bengaluru. The credit involved at the rate of 10% duty on the goods written off worked out to Rs. 1,68,20,000/- (Cenvat), Rs.3,36,400/- (Ed Cess) and Rs. 1,68,200/-(SHE Cess) totalling to Rs.1,73,24,600/-. Thereafter alleging that Appellant availed ineligible CENVAT credit, show cause notice dated 03.03.2016 was issued and Adjudication authority as per the impugned order disallowed the CENVAT credit, confirmed demand / recovery along with interest and imposed penalty of Rs. 86,62,300/-. Aggrieved by said order, present appeal was filed.

4. When the appeal came up for hearing, the Learned counsel for the Appellant drew our attention to the finding in the impugned order and submits that Rule 3(5B) of Cenvat Credit Rules, 2004 applies only in case of inputs or capital goods before being put to use on which cenvat credit has been taken are written off, whereas in the present case, they have not written off any inputs or capital goods; they have only made provision in their Balance sheet 2011-12 to write-off the inventory in work-in-progress (WIP) and the same has been made only to normalize the inflated / escalated financial figures which were shown high during the previous years, to maintain viable Drawing Power (DP) limits to run the business; they contended that, there is no physical write-off of inputs or finished goods or work-in-progress on which cenvat credit is availed and it was only a created entry to offset the inflated financial statements shown during earlier years. The Learned counsel also draws our attention to the Audit Report dated 08.02.2013 and the letter dated 18.12.2012, wherein it is specifically stated that Rs. 16.82 crores of the above amount pertains to the Doddaballapur plant. Learned counsel further submits that when a statement was recorded on 17.02.2016, to a