2024 (6) TMI 1260 - AT - Central Excise

CENVAT Credit - credit denied only on the basis of board circular 783/16/2001-CX dated 28.04.2004 - undervaluation of asset - it is alleged that the excise duty on inputs procured is charged as expenditure to cost of raw material consumed , thereby resulting in dual benefit - HELD THAT - Form the circular, it can be seen that the circular only give a guideline to the field formation that in case of any expenditure claimed on account of Cenvat credit, the same will amount to double benefit one in Cenvat credit and other in income tax. Accordingly, the said fact may be intimated to the income tax department. It is found that the board circular does not stipulate that in such situation the Cenvat credit should be denied - even the board circular does not suggest that in such situation the availment of Cenvat credit is incorrect illegal or in contravention to any of the provision of Cenvat Credit Rules, 2004. Therefore, in these circumstances, the department could not make out any case that the appellant is not eligible for Cenvat credit. From the decision in SHREE PANDURANG SSK LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-III, 2017 (2) TMI 567 - CESTAT MUMBAI , it can be seen the case of the department was the appellant have taken the double benefit, one by taking Cenvat credit in the Cenvat account and other by capitalizing the input service whereby they can get income tax benefit. Discarding the view of the department, the Tribunal held that when the Cenvat credit was taken in conformation to the Cenvat Credit Rules, 2004 effect given in the income tax will not affect the eligibility of the Cenvat credit. The appellant are entitled for the Cenvat Credit - the impugned order is set aside - appeal allowed.

Summary

Issues:
1. Denial of Cenvat credit based on circular 783/16/2001-CX dated 28.04.2004.
2. Compliance with Cenvat Credit Rules, 2004 for availing Cenvat credit.

Analysis:
1. The Appellant, engaged in manufacturing copper products, faced denial of Cenvat credit due to an alleged undervaluation of assets in the balance sheet. The objection raised by the Central Excise Revenue Audit Authorities was based on the board circular No. 783/16/2004-CX dated 28.04.2004. The show cause notice contended that the Appellant was not entitled to Cenvat credit for amounts expensed out in the profit and loss account. The Appellant challenged this denial, arguing that their accounting method was compliant with income tax provisions and Cenvat Credit Rules, citing relevant case laws like SHREE PANDURANG SSK LTD. vs. COMMISSIONER OF CENTRAL EXCISE, PUNE-III [2017 (52) S.T.R. 69 (Tri. -Mumbai)].

2. The Tribunal analyzed the board circular and the Cenvat Credit Rules, 2004 to determine the eligibility of the Appellant for Cenvat credit. The circular highlighted the treatment of unutilized Cenvat credit balance in income tax returns, cautioning against unintended dual benefits. However, it did not explicitly mandate denial of Cenvat credit. The Tribunal emphasized that the Appellant had complied with all conditions for availing Cenvat credit under the Central Excise Act, 1944 and Cenvat Credit Rules, 2004. The case of SHREE PANDURANG SSK Ltd. was referenced to illustrate that legitimate Cenvat credit availed as per rules should not be denied based on income tax implications.

3. In a similar case considered by the Tribunal, it was ruled that Cenvat credit on services related to capital goods, even if capitalized for income tax purposes, should not be denied unless explicitly restricted by the Cenvat Credit Rules. The Tribunal emphasized that compliance with the Cenvat Credit Rules is crucial for determining the eligibility of Cenvat credit, irrespective of how the credit is treated for income tax purposes. Based on these principles, the Tribunal set aside the impugned order and allowed the appeal, affirming the Appellant's entitlement to Cenvat credit.