2021 (6) TMI 398 - AT - Central Excise

CENVAT Credit - capital goods - availment of credit while availing depreciation - appellant claimed the depreciation on entire invoice value including the excise duty as well and 100% CENVAT Credit on these capital goods has also been availed on 31.7.2014 - HELD THAT - When the appellant was subsequently asked about the said adjustment to have been made in the balance sheet for the year 2015-16 and 14-15, the appellant did not respond nor submitted any revised balance sheet for the aforesaid period. In absence thereof, it actually remained unclear as to whether the double benefit claimed by the appellant i.e. 100% availment of Cenvat Credit on the capital goods purchased in the year 2013-14 and 2014-15 and also claiming depreciation thereupon has actually been surrendered by the appellant or not. Infact Rule 4(4) of CENVAT Credit Rules, 2004 do not permit CENVAT Credit in respect of part of value of capital which represents duty of amount on such capital goods or which the manufacturer or producer of output service claims as depreciation under section 32 of the Income Tax Act. The adjustment in the balance sheet of 2015-16 cannot be considered as reversion of the depreciation claimed in the balance sheet of the year 2013-14 and 2014-15 - there is no infirmity in the findings of the Commissioner (Appeals) where it has been held that the adjudicating authority has grossly erred in interpreting the provisions of Rule 4(4) of CENVAT Credit Rules, 2004. Once the full depreciation was claimed, the respondent could not claim availment of cenvat credit on capital goods - appeal dismissed.

Summary

Issues: Alleged wrongful availment of Cenvat credit on capital goods leading to disallowance, appeal against Order-in-Original and Commissioner (Appeals) decision, interpretation of Rule 4(4) of CENVAT Credit Rules, 2004.

Analysis:
1. The appellant, engaged in the manufacture of aluminium alloy ingot and aluminium dross, faced allegations of wrongful Cenvat credit availment on capital goods purchased during 2013-14 and 2014-15. The appellant claimed depreciation and 100% Cenvat credit on these goods, leading to a show cause notice for disallowance of Cenvat credit, recovery, interest, and penalty.

2. The Order-in-Original rejected the disallowance proposal, but the department appealed to the Commissioner (Appeals), who allowed the appeal. The appellant, aggrieved by this decision, approached the Tribunal for redressal.

3. During the hearing, the appellant's counsel argued based on the findings in the Order-in-Original, emphasizing that the appellant surrendered the benefit of Income Tax Act in 2015-16 after initially claiming depreciation and Cenvat credit on capital goods. Case laws were cited to support the appeal's merit.

4. The Authorised Representative for the department countered the appeal, highlighting specific findings in the challenged order. The Tribunal examined the admitted facts, including the purchase of capital goods, full depreciation claim, and 100% Cenvat credit availment.

5. The Tribunal noted the rectification made in the balance sheet for 2015-16 but observed the lack of response or revised balance sheet submission by the appellant for 2014-15. The appellant's failure to clarify the alleged double benefit raised concerns regarding compliance with Rule 4(4) of CENVAT Credit Rules, 2004.

6. Considering the violation of Rule 4(4) by the appellant and the absence of evidence proving the reversal of double benefits, the Tribunal upheld the Commissioner (Appeals) decision. Corrective measures in subsequent years were deemed insufficient to rectify irregular Cenvat credit availment in previous years, emphasizing the rule's objective to prevent double benefits.

7. Despite the appellant's reliance on relevant case law, the Tribunal found it inapplicable to the present case's circumstances. Consequently, the appeal was dismissed, affirming the decision of the Commissioner (Appeals) and highlighting the importance of compliance with Cenvat credit rules and prevention of double benefits.