2017 (3) TMI 552 - AT - Central Excise

CENVAT credit - reversal on the ground that dual benefit of CENVAT Credit as well as benefit under income tax cannot be claimed simultaneously - whether the Appellants are required to reverse CENVAT Credit availed on the inputs, the value of which is shown as Revenue expenditure in the balance sheet? - Held that - To be eligible to CENVAT Credit on inputs, nowhere in the CCR, 2004 it is stipulated that benefit of credit as well as benefit under Income Tax Act,1961 cannot be availed; and the credit be recoverable from the assessee on the ground of availing such dual benefit - The availment of dual benefit of CENVAT Credit as well as income tax benefit on the inputs could be a critera for determination of income tax liability, however, the CENVAT Credit in absence of any stipulation under CCR 2004, cannot be denied to the Appellant - the demand has been issued beyond five years from the relevant date as prescribed u/s 11A of CEA,1944, therefore, the demand is also time barred - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of CENVAT Credit on inputs and treatment in balance sheet.
2. Prohibition on claiming dual benefit of CENVAT Credit and income tax benefit simultaneously.
3. Enforcement of demand beyond the prescribed limitation period.

Analysis:
Issue 1: The appeal concerns the Appellants, engaged in manufacturing chemicals, who availed CENVAT Credit on inputs during a specific period. The dispute arose when the expenditure on these inputs, reflected in the balance sheet, led to a demand notice for recovery of the credit. The Adjudicating Authority confirmed the demand, which was upheld by the Commissioner (Appeals), prompting the present appeal.

Issue 2: The Appellant's Chartered Accountant argued that since the credit was on inputs and not capital goods, the treatment in the balance sheet is inconsequential. It was contended that Rule 4(4) of CENVAT Credit Rules 2004 only prohibits claiming depreciation and credit on capital goods, not on inputs. The Revenue's Authorized Representative, however, maintained that the Appellant cannot claim both income tax benefit and CENVAT Credit simultaneously, regardless of the nature of the goods.

Issue 3: The limitation period for enforcing the demand was a crucial point of contention. The Appellant's representative argued that the demand, issued in 2010, was beyond the five-year limit as the relevant date for computation should be the date of credit reversal or the due date of filing returns. The Commissioner's view was that the limitation period starts after reflecting the expenditure in the balance sheet.

The Tribunal analyzed the relevant provisions of the CENVAT Credit Rules 2004 and Income Tax Act, emphasizing that the prohibition on claiming dual benefits pertains to capital goods, not inputs. As such, the Appellant's right to CENVAT Credit on inputs cannot be denied. Moreover, the demand was deemed unenforceable due to exceeding the statutory limitation period. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief as per law.