XYZ reversed the CENVAT credit during Excise regime on slow / non – moving inputs for which provision was made in the books of accounts to write off the same. During GST regime, again re – credit of the same was taken under the transitional credit provisions since there is no such requirement under the GST provisions. Show Cause Notice issued for such wrong availment of transitional credit. Any case law or circular or clarification to defend the case?
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Transitional Credit on non - moving inputs
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You should defend the case by arguing that the reversal under the Excise regime was a temporary accounting adjustment for "non-moving" items, not a permanent forfeiture. Under the previous CENVAT Credit Rules (specifically Rule 3(5B)), such credit was reclaimable upon use. Since GST law does not mandate reversal for non-moving items, and the inputs were physically available for taxable supply, the transitional credit is a legitimate carry-forward of a vested right. Focus on proving the goods were never physically written off or destroyed.
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