2016 (2) TMI 1003 - AT - Central Excise

CENVAT credit - denied on the ground that depreciation was claimed on the goods - whether the Appellant have actually claimed the depreciation on the part of the excise duty on which Cenvat credit was availed? - Held that - the department concluded the denial of Cenvat credit on the basis of initial statement of the representative of the Appellant and data submitted by them. However subsequently the Appellant strongly claimed that the amount of credit availed on capital goods and proposed to be denied, was not included in the capital goods account and no depreciation was claimed thereon. In this regard, the Appellant referred to the audited balance sheet and produced Chartered Accountant s certificate. However it clearly appears from the findings of the impugned order that the claim of the Appellant was not properly verified by both the lower authorities - thus, the matter required to be remanded to original Adjudicating Authority for fresh consideration - appeal allowed by way of remand.

Summary

Issues:
1. Denial of Cenvat credit on capital goods due to claimed depreciation under section 32 of the Income Tax Act, 1961.

Analysis:
1. The appeal challenged the denial of Cenvat credit by the Commissioner(Appeals-II) based on the Order-in-Original rejecting the appellant's appeal. The appellant procured capital goods in 1994-95, booked as Capital Work in Progress (CWIP), and capitalized in 2000-01. The dispute arose regarding the debiting of Cenvat credit amount during capitalization. The department alleged that Cenvat credit was not debited from the capital goods account, leading to denial of credit. The Adjudicating Authority upheld this denial, prompting the appeal.

2. The Appellant, represented by the Manager (Excise), argued that correct data was submitted, debiting the entire Cenvat credit amount during capitalization in 2000-01, supported by a Chartered Accountant Certificate. The lower authorities misunderstood the submissions and denied credit without proper verification. The Appellant emphasized the need for a detailed discussion to clarify any doubts regarding the claimed depreciation on Cenvat amount.

3. The Revenue, represented by the Superintendent (AR), supported the findings of the impugned order, maintaining the denial of Cenvat credit.

4. The Member(Judicial) analyzed the legal position that Cenvat credit is disallowed if depreciation is claimed under section 32 of the Income Tax Act, 1961 on excise duty paid for capital goods. The dispute centered on whether the Appellant actually claimed depreciation on the excise duty amount linked to the Cenvat credit. The Appellant's contentions were supported by audited balance sheets and a Chartered Accountant's certificate. The Member noted that the lower authorities failed to properly verify the Appellant's claims, leading to a contradiction between the authorities' stand and the Appellant's submissions.

5. Given the lack of proper verification and dismissal of evidence by the lower authorities, the Member set aside the impugned order and remanded the matter to the original Adjudicating Authority for fresh consideration. The Adjudicating Authority was directed to conduct a denovo adjudication after affording a personal hearing to the Appellant within three months from the order's receipt. The appeal was allowed for remand to the original Adjudicating Authority.