2007 (6) TMI 102 - AT - Central Excise

Cenvat/Modvat - Department contended that appellant is not liable for credit in respect to which they claim depreciation - Held that department contention was correct and allowed

Summary

Issues:
1. Interpretation of Rule 4(4) of the Cenvat Credit Rules, 2002 regarding availment of Cenvat credit on capital goods when depreciation is claimed under the Income-tax Act.
2. Whether the value of capital goods should be bifurcated into 50% for the first year and 50% for the second year for the purpose of Cenvat credit.
3. Applicability of extended time-limit due to difference in interpretation.

Analysis:

Issue 1: Interpretation of Rule 4(4) of the Cenvat Credit Rules
The case involved a dispute regarding the interpretation of Rule 4(4) of the Cenvat Credit Rules, 2002, which prohibits the availment of Cenvat credit on capital goods if depreciation has been claimed under the Income-tax Act. The Commissioner (Appeals) held that claiming depreciation under the Income-tax Act barred the appellant from taking the balance credit of duty on capital goods. However, the Tribunal opined that the value of capital goods for the purpose of Rule 4 should not be bifurcated into 50% for the first year and 50% for the second year. The Tribunal emphasized that the entire duty paid on capital goods is available as credit in installments spread over the years, with no requirement to vary the value of the goods annually. Therefore, the Tribunal upheld the decision of the Commissioner (Appeals) on this issue.

Issue 2: Bifurcation of Value of Capital Goods
The Tribunal clarified that there is no need to bifurcate the value of capital goods into 50% for the first year and 50% for the second year as claimed by the appellant. It highlighted that the Cenvat credit on capital goods can be taken over multiple years, with the value of the goods remaining constant for the purpose of availing the credit. The Tribunal emphasized that the value of capital goods under Rule 4(4) does not change annually and that the credit can be taken in installments without the need for a strict 50-50 division between years. Therefore, the Tribunal rejected the appellant's argument regarding the bifurcation of the value of capital goods.

Issue 3: Applicability of Extended Time-Limit
Regarding the extended time-limit, the Tribunal noted that there was no finding of suppression of relevant facts by the appellant. It observed that the disagreement in interpretation between the original authority and the appellant did not amount to suppression. Consequently, the Tribunal concluded that the appeal of the appellant succeeded on the grounds of limitation, indicating that the extended time-limit was not applicable in this case.

In conclusion, the Tribunal allowed the appeal on the issue of limitation but upheld the decision of the Commissioner (Appeals) concerning the interpretation of Rule 4(4) of the Cenvat Credit Rules and the value of capital goods for the purpose of availing Cenvat credit.