2016 (8) TMI 1016 - AT - Central Excise

Recovery of interest and imposition of penalty - Rule 15 (2) of CCR 204 read with Section 11AC of the Central Excise Act, 1944 - period from the date of availing of credit upto the date of filing of the revised return - simultaneous availment of depreciation under the Income Tax Act and credit under cenvat scheme during the Assessment year 2007-08 & 2008-09 - filed revised return for the assessment years 2007-08, 2008-09, 2009-10 and 2010-11 on 23.3.2011 on the ground of irregularity found - Held that - as the appellant duly filed the revised IT return foregoing the benefit of depreciation already availed, and the allowance of credit not being denied by the lower authorities, this, is a sufficient ground for setting aside the penalty. With regard to the aspect of interest, the same is payable as payment of interest is automatic and there is no reason not to levy interest as the Revenue would suffer a loss when interest is not paid. - Decided partly in favour of appellant

Summary

Issues:
- Availment of credit on capital goods
- Claiming depreciation under the Income Tax Act
- Detection of irregularity by audit team
- Revised return filed by the appellant
- Confirmation of demand by adjudicating authority
- Imposition of penalty under Rule 15 (2) of CCR 2004

Analysis:
1. The appellant availed credit on capital goods on specific dates and also claimed depreciation under the Income Tax Act for certain assessment years. Subsequently, an audit team detected irregularities, leading the appellant to file revised returns for multiple assessment years. The adjudicating authority confirmed the demand, including interest from the date of credit availing to the revised return filing, and imposed a penalty under Rule 15 (2) of CCR 2004 read with Section 11AC of the Central Excise Act, 1944, which was upheld by the Commissioner (Appeals), prompting the present appeal.

2. The appellant's counsel argued that since the income tax returns were revised, they were eligible for credit without interest imposition. The counsel cited relevant case laws to support the argument. On the other hand, the Revenue contended that the appellant's actions violated Rule 4 (4) of Cenvat Credit Rules, 2004, by simultaneously claiming credit and depreciation. The Revenue referred to a tribunal decision and emphasized that the audit detection date was irrelevant for the limitation period.

3. The appellant explained that the depreciation benefit was inadvertently claimed, leading to immediate revision upon department notification. The appellant believed that the credit allowance by the original authority, based on the revised IT returns, justified not considering the penalty based on the circumstances. The Tribunal observed the simultaneous availment of benefits and the subsequent rectification through revised returns, leading to a single benefit being availed by the appellant.

4. The Tribunal found that since the appellant rectified the irregularity by filing revised IT returns, foregoing the depreciation benefit, and the credit allowance was not contested by lower authorities, the penalty imposition was deemed unnecessary. However, regarding interest, it was upheld as non-payment would cause revenue loss. Consequently, the penalty was set aside, and the interest levy was maintained, resulting in partial allowance of the appeal.

In conclusion, the Tribunal's decision balanced the appellant's rectification efforts with the need to uphold interest payment to prevent revenue loss, ultimately setting aside the penalty while affirming the interest levy.