2019 (1) TMI 426 - AT - Central Excise

CENVAT Credit - capital goods - simultaneous availemnt of credit and Depreciation - violation of Rule 4(4) of the CENVAT Credit Rules (CCR), 2004 - Credit of Education Cess on CVD and Secondary and Higher Education Cess on CVD - Rule 3(1) of CCR, 2004 - Held that - The documents placed on record namely, the Demand Notice under Section 156 of the Income Tax Act after taking cognizance of the revised return for the assessment year 2013-14, would satisfy the legal requirements of law - Further, the fact that the revised return was acted upon by the Income Tax Department and a consequent demand was raised under Section 156 ibid even though for the subsequent period, evidences the fact that the wrong claim made by the assessee during the previous year was wiped out thereby entitling the assessee to the benefit of availing CENVAT Credit of duty on the capital goods - credit allowed. Credit of Education Cess and Secondary and Higher Education Cess on CVDCredit of Education Cess and Secondary and Higher Education Cess on CVD - contravention of Rule 3(1) of CCR - Held that - Rule 3(1)(vii) specifically allows the manufacturer or producer of final products to avail Credit including Education Cess on excisable goods and the Secondary and Higher Education Cess on excisable goods and the claim of the assessee, therefore, appears to be correct - The denial, if at all, of the CENVAT Credit, could only be in accordance with the provisions of law for any violation or contravention, etc. The authorities having not pointed out any such thing, the denial is held to be incorrect and unsustainable for which reason, the same is set aside - credit allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Availing CENVAT Credit on capital goods and claiming depreciation in violation of CENVAT Credit Rules.
2. Allegation of availing Credit of Education Cess on CVD and Secondary and Higher Education Cess on CVD in contravention of CCR, 2004.

Issue 1: Availing CENVAT Credit on capital goods and claiming depreciation:
The appellant, a manufacturer of motor vehicle parts, availed CENVAT Credit on capital goods and claimed depreciation under Section 32 of the Income Tax Act, 1961. The Revenue alleged this violated Rule 4(4) of the CENVAT Credit Rules, 2004. A Show Cause Notice was issued for recovery of the credit availed. The adjudicating authority confirmed the recovery of credit after re-working the amounts, which was upheld by the first appellate authority. The appellant contended that upon realizing the mistake, they filed a revised income tax return for the subsequent year withdrawing the claim for deduction. The appellant relied on relevant High Court decisions. The Revenue supported the lower authorities' findings. The Tribunal considered the contentions, relevant High Court decisions, and documents on record. The Tribunal noted that the revised return filed by the appellant was acted upon by the Income Tax Department, leading to a demand under Section 156 of the Income Tax Act for the subsequent period. Consequently, the wrong claim made by the assessee was rectified, entitling them to the benefit of availing CENVAT Credit on capital goods. Therefore, this ground of appeal was allowed.

Issue 2: Allegation of availing Credit of Education Cess on CVD and Secondary and Higher Education Cess:
Regarding the allegation of availing Credit of Education Cess and Secondary and Higher Education Cess on CVD in contravention of Rule 3(1) of CCR, the appellant argued that Rule 3(1)(vii) allows Credit of Education Cess and Secondary and Higher Education Cess paid on imported goods under CVD. The denial of credit by the lower authorities was contested without any reason provided. The Revenue supported the lower authorities' findings. Upon review, the Tribunal found that Rule 3(1)(vii) permits manufacturers to avail Credit, including Education Cess and Secondary and Higher Education Cess on excisable goods. As the authorities did not cite any violation or contravention, the denial of CENVAT Credit was deemed incorrect and unsustainable. Therefore, this ground of appeal was also allowed. The appeal was allowed with consequential benefits, if any, as per law.

This detailed analysis of the judgment delves into the issues of availing CENVAT Credit on capital goods, claiming depreciation, and the allegation of availing Credit of Education Cess on CVD and Secondary and Higher Education Cess. The Tribunal's decision was based on a thorough examination of the contentions, relevant legal provisions, and precedents cited by both parties, ultimately resulting in the allowance of the appeal on both grounds.