2017 (1) TMI 696 - AT - Central Excise

CENVAT credit - capital goods - denial on the ground that depreciation charged on the same - Held that - as per sub-rule 4 of Rule 4 of CCR, there is a prohibition for availing CENVAT credit as well as depreciation under the Income Tax Act. The appellant has availed 50% CENVAT credit in the first year and 50% in the second year and when it was pointed out that they have also claimed depreciation, then they rectified the fact of depreciation by making necessary adjustments in their account so as to wash out the deprecation claimed under the Income Tax Act. According to the appellant, by following the necessary accounting treatment, they have rectified the lapse - the CA certificate certifying that the appellants have not availed double benefit of depreciation as well as CENVAT credit was not produced before the authorities below - this case needs to be remanded back to the original authority to verify from the records produced by the appellant as to whether they have reversed the depreciation by following the account treatment as submitted by them - appeal allowed by way of remand.

Summary

Issues:
1. Whether the appellant is entitled to CENVAT credit on capital goods along with depreciation under the Income Tax Act.
2. Whether the impugned order passed by the Commissioner (A) upholding the demand of CENVAT credit along with interest is sustainable in law.

Analysis:
Issue 1:
The appellant, engaged in manufacturing PVC pipes, availed CENVAT credit on capital goods purchased in September 2004, which included basic excise duty and education cess. The appellant claimed depreciation on the balance of plant and machinery account, inclusive of the duty amount. The appellant availed 50% CENVAT credit in the first year and the balance in the second year. The appellant adjusted the duty amount from the plant and machinery account in subsequent years to avoid double benefit. The appellant argued that the accounting treatment nullified the depreciation claimed under the Income Tax Act. Citing relevant case laws, the appellant contended that Rule 4(4) of CENVAT Credit Rules is invoked only when double benefits are claimed, which was not the case here.

Issue 2:
The Assistant Commissioner confirmed the demand for CENVAT credit, which was upheld by the Commissioner (A). The appellant challenged the order, claiming it was passed without considering the factual position and records. The appellant argued that they did not avail double benefits as depreciation was adjusted through accounting treatment. The AR defended the impugned order, stating that CENVAT credit and depreciation cannot be claimed simultaneously. The Tribunal noted the prohibition under Rule 4 of CCR against availing both benefits. However, considering the appellant's submissions and the CA certificate produced later, the Tribunal found the need to remand the case to verify if the depreciation was appropriately reversed as claimed by the appellant. The Tribunal emphasized the importance of examining the records and CA certificate before passing a reasoned order.

In conclusion, the Tribunal allowed the appeal by remanding the case back to the original authority for further verification based on the appellant's accounting treatment and the CA certificate, ensuring a fair opportunity for the appellant to present relevant documents before a final decision is made.