2017 (2) TMI 567 - AT - Central Excise

Cenvat credit - Capitalization of Input services - restriction on availing depreciation - Rule 4(4) of CCR - Held that - it is clear that restriction in availing credit if the depreciation availed is only in respect of capital goods and not on services. Admittedly the Cenvat credit involved in the present case is of service tax paid on the services even though it is related to erection and installation of capital goods. Since there is no explicit provisions to restrict the Cenvat credit on input services if the assessee claims depreciation the cenvat credit cannot be denied therefore the impugned order is set aside - Appeal allowed.

Summary

Issues Involved:
Appellant availed Cenvat credit for input services related to erection and installation of capital goods. The contention was that since the value of services was capitalized and depreciation claimed, Cenvat credit under Rule 4(4) of Cenvat Credit Rules was not admissible.

Analysis:
The judgment dealt with the issue of whether the appellant could avail Cenvat credit for input services used in the erection and installation of capital goods, despite the services being capitalized and depreciation claimed. The Revenue argued that the appellant had availed double benefit by claiming Cenvat credit on service tax paid and then capitalizing the same amount for depreciation. The key point of contention was the applicability of Rule 4(4) of the Cenvat Credit Rules, 2004, which restricts Cenvat credit in respect of capital goods if depreciation is claimed under the Income-tax Act.

The Tribunal noted that Rule 4(4) specifically pertains to the value of capital goods for which depreciation is claimed and does not explicitly restrict Cenvat credit on input services. The judgment emphasized that the Cenvat credit in question was for service tax paid on services, even though they were related to capital goods' erection and installation. As there was no provision explicitly prohibiting Cenvat credit on input services if depreciation was claimed, the Tribunal ruled in favor of the appellant. The impugned order was set aside, and the appeal was allowed.

This judgment highlights the importance of interpreting tax laws and rules accurately to determine the admissibility of Cenvat credit. It clarifies that restrictions on Cenvat credit under Rule 4(4) apply to capital goods and not input services, providing clarity on the eligibility of Cenvat credit in similar cases involving the capitalization of services related to capital goods.