2018 (5) TMI 1407 - AT - Central Excise

CENVAT credit - Capital goods - Depreciation availed on capital goods - Held that - In the case of Jay Precsion products India Pvt. Ltd. 2010 (11) TMI 910 - CESTAT MUMBAI it was held that if the assessee has availed Cenvat credit of duty paid on capital goods as well as claimed depreciation under Section 32 of the Income Tax Act 1961 and on pointing out by the Revenue have foregone the depreciation availed under Section 32 of the Income Tax Act 1961 in that circumstances the assessee is entitled to avail CENVAT credit - appellant is entitled to avail Cenvat credit. Extended period of limitation - Penalty - Held that - As the period involved in this case is 2008-2009 and from the facts of the case it is not coming out when the audit took place in that circumstances the SCN has been issued by invoking extended period of limitation is not sustainable - penalty not imposable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of Cenvat credit on capital goods.

Analysis:
The appellant appealed against the denial of Cenvat credit on capital goods, as they had availed 50% of the credit during 2008-09 and also claimed depreciation under Section 32 of the Income Tax Act, 1961. The Revenue contended that since the appellant claimed both Cenvat credit and depreciation, they were not entitled to the credit. The appellant reversed the depreciation claimed on duty paid capital goods in the subsequent financial year, informed the Income Tax Department, and obtained a certificate from a Chartered Accountant confirming no depreciation claimed on duty paid capital goods. Despite this, a show cause notice was issued invoking an extended period of limitation, leading to the denial of Cenvat credit and imposition of a penalty. The appellant challenged this decision.

The appellant's counsel cited precedents like Prasad Machinery Pvt. Ltd. and Jay Precision Products India Pvt. Ltd., arguing that the appellant should be allowed the Cenvat credit. On the other hand, the Revenue's counsel referred to the decision in Yee Kay Technocrat (P) Ltd. to support the denial of credit. After hearing both sides, the judge analyzed the facts and the legal precedents. The judge found that the facts in the case were similar to those in Prasad Machinery Pvt. Ltd. and Yee Kay Technocrat (P) Ltd. The judge noted that previous decisions allowed Cenvat credit if depreciation was foregone after Revenue's intervention. Consequently, the judge ruled in favor of the appellant, allowing the Cenvat credit and declaring the demand with interest unsustainable.

Regarding the penalty, the judge noted that the show cause notice invoked an extended period of limitation based on alleged suppression of facts during an audit. However, as the audit date was not specified, the judge deemed the notice unsustainable. Consequently, the penalty on the appellant was deemed not imposable. The impugned order was set aside, and the appeal was allowed with any consequential relief.