2012 (5) TMI 451 - AT - Central Excise

Cenvat credit - 100% credit availed in the first year Held that - at the time of receipt of the capital goods while the credit should have been confined only to 50% of the duty amount and balance amount of the credit should have been taken in the next financial year, the appellant have taken full credit at the time of receipt of the capital goods, appellant would become eligible for the balance 50% of the credit and as such the appellant liability would be only in respect of interest on the amount of wrongly Cenvat credit taken for the period for which it was irregular, appellant are directed to deposit an amount of Rs. 2,50,000/- (Rupees Two Lakhs Fifty Thousand only) within a period of eight weeks from the date of this order. On deposit of this amount within the stipulated period, the requirement of pre-deposit of balance amount of Cenvat credit demand, interest and penalty would stand waived and recovery thereof stayed till the disposal of the appeal

Summary

Issues:
Application for waiver from pre-deposit of Cenvat credit demand, interest, and penalty confirmed against the appellant.

Analysis:
The appellant, a manufacturer of machinery for Empty Hard Gelatine Capsules, availed Cenvat credit of Rs. 24,35,765/- on capital goods in contravention of Cenvat Credit Rules during 2003-2004 and 2004-2005. The Additional Commissioner confirmed the demand with interest and penalty. The appellant claimed that they would become eligible for the balance credit in the next financial year. The Commissioner (Appeals) upheld the order. The appellant argued that they did not include the duty element while claiming depreciation under the Income-tax Act, supported by a Chartered Accountant's certificate and detailed invoices. The Departmental Representative contended that the appellant deliberately availed Cenvat credit while claiming full depreciation, invoking extended period and imposing penalty.

The Tribunal found that the appellant availed full credit at the time of receipt, contrary to the Rules. However, they would be liable only for interest on the wrongly availed credit. The appellant's claim of not including the duty element in depreciation was supported by the Chartered Accountant's certificate. The Tribunal noted discrepancies in the Commissioner (Appeals) order regarding the alleged forged document. No enquiry with the income-tax department was conducted to verify the claim. The Tribunal directed the appellant to deposit Rs. 2,50,000 within eight weeks, waiving the balance amount of the demand, interest, and penalty until the appeal's disposal.

This judgment addresses the appellant's application for waiver from pre-deposit of Cenvat credit demand, interest, and penalty. The Tribunal found the appellant liable for interest on the wrongly availed credit but raised concerns about the Department's contentions regarding depreciation and extended period invocation. The Tribunal directed the appellant to deposit a specified amount within a stipulated period, waiving the balance amount until the appeal's disposal.