2017 (10) TMI 645 - AT - Central Excise

Simultaneous availment of Depreciation and CENVAT credit - Held that - since during the period 2000-2001 to 2004-2005, the appellants had been suffering heavy losses, which was much more than the depreciation, the depreciation did not affect the profitability and the same stood unabsorbed depreciation - Since there was no profit in the books of accounts of the appellant during the relevant period, the appellant did not avail double benefit i.e., Cenvat Credit as well as benefit of IT - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Disallowance of Cenvat Credit on capital goods during 2000-2001 to 2004-2005
- Claiming depreciation under Section 32 of the Income Tax Act
- Revision of IT return for the year 2005-2006
- Applicability of double benefit regarding Cenvat Credit and depreciation

Analysis:

1. Disallowed Cenvat Credit: The appellants had availed Cenvat Credit on capital goods during 2000-2001 to 2004-2005 but faced disallowance in the first round of adjudication. The Tribunal remanded the matter to the adjudicating authority to consider the revised return. The IT return for 2005-2006 was revised, but the returns for the period 2000-2001 to 2004-2005 were not revised, leading to the disallowance of Cenvat Credit.

2. Claiming Depreciation: The appellant claimed depreciation during 2000-2001 to 2004-2005, which remained unabsorbed until 2006 due to continuous losses. The accumulated depreciation was debited in the depreciation account, resulting in the reversal of claimed depreciation for the years 2000-2001 to 2004-2005. The revised IT return for 2005-2006 was accepted, indicating no double benefit as the losses exceeded the depreciation claimed.

3. Revision of IT Return: The IT return for 2005-2006 was revised and accepted by the authorities, demonstrating the appellant's compliance with the revised return requirement. The entire Cenvat Credit availed during 2000-2001 to 2004-2005 was debited to the depreciation account, effectively nullifying the claimed depreciation for those years.

4. Double Benefit Concern: The Tribunal observed that since the appellant suffered heavy losses during 2000-2001 to 2004-2005, exceeding the depreciation claimed, there was no impact on profitability. Debiting the depreciation with the total Cenvat Credit availed during that period in the IT return for 2005-2006 was deemed appropriate to prevent double benefit. The judgments cited by the appellant supported their case, while those cited by the Revenue were deemed inapplicable due to differing facts.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal and disposing of the cross objection. The decision was based on the absence of double benefit due to heavy losses suffered by the appellant during the relevant period, justifying the reversal of claimed depreciation and the availed Cenvat Credit.