2014 (7) TMI 572 - AT - Central Excise

Waiver of pre deposit - CENVAT Credit on inputs and capital goods - claim of cenvat credit as revenue expenditure in the Income tax return filed - adjudicating authority claimed interest for the period 1.4.2011 to 13.10.2011 under rule 14 of Cenvat Credit Rules on the ground that they have claimed revenue expenditure under Income Tax Act in March 2011 - Held that - there is no dispute that appellant availed cenvat credit of ₹ 72,80,926/- in the financial year 2010-11. They have also claimed revenue expenditure of the said amount in the income tax return in the financial year 2010-11. It was reversed only in the next financial year as on 14.10.2011 - benefit of cenvat credit and the income tax benefit cannot be available simultaneously - Prima facie, it appears that the applicant is not eligible to avail credit where they have taken benefit of revenue expenditure under the Income Tax Act. In this context, demand of interest under Rule 14 of CCR is prima facie justified - stay granted partly.

Summary

Issues:
1. Application for waiver of predeposit of interest and penalty.

Analysis:
The applicant filed an application seeking waiver of predeposit of interest amounting to Rs. 8,24,890 and a penalty of Rs. 1 lakh. The case involved the reversal of cenvat credit on inputs and capital goods by the appellants who were engaged in the manufacture of textile machineries. The adjudicating authority imposed interest under Rule 14 of Cenvat Credit Rules for the period when the appellants claimed revenue expenditure under the Income Tax Act. The advocate for the applicant argued that there was no provision for reversal of credit based on claiming revenue expenditure on inputs. He cited precedents and contended that the demand for interest was unjustified. On the other hand, the Authorized Representative for Revenue argued that even though the credit was not utilized, it should have been reversed, and interest was due based on previous decisions and circulars.

The Tribunal found that the appellants availed cenvat credit in one financial year and claimed revenue expenditure in the income tax return for the same amount in the same financial year. However, the reversal of credit was done in the subsequent financial year. The Tribunal referred to a Board's circular highlighting the issue of claiming unutilized credit as expenditure for Income Tax purposes while maintaining it in the Cenvat credit account for future use, cautioning against dual benefits. The Tribunal noted that simultaneous benefits of cenvat credit and income tax benefits might not be permissible. The Tribunal differentiated the cited precedents by the advocate, indicating that they were not directly applicable to the current case. The Tribunal found the demand for interest under Rule 14 of CCR prima facie justified, directing the applicant to make a predeposit of Rs. 1,00,000 within six weeks, with the waiver of the balance amount of interest and penalty during the appeal's pendency.

In conclusion, the Tribunal analyzed the conflicting arguments regarding the reversal of credit, income tax benefits, and the demand for interest under the Cenvat Credit Rules. The decision emphasized the need to prevent dual benefits and directed the applicant to make a predeposit while staying the recovery of the balance amount during the appeal process.