2013 (10) TMI 663 - AT - Central Excise

Reversal of cenvat credit on removal of capital goods - Rule 3(5) - Method of Calculating Depreciation Waiver of Pre-deposit - Whether during prior to 27.02.10 for calculating the depreciation @ 2.5% for each quarter of a year or part thereof only written down method could be adopted - The provisions of proviso to Rule 3(5) during the period prior to 27.02.10 cannot be interpreted on the basis of the wordings of the proviso as the same stood w.e.f. 27.02.10 - During period prior to 27.02.10, no method for calculating depreciation @ 2.5% per quarter on part thereof was prescribed, the same could be calculated by adopting any method - when two interpretation of statutory provision are equally possible, the interpretation which is beneficial to the Assessee which should be adopted - Prima facie during period prior to 27.02.10 also, straight line method must be adopted - The appellant therefore have strong prima facie case in their favour - The requirement of pre-deposit of Cenvat Credit demand, interest and penalty waived for hearing of the appeal and recovery stayed - stay granted.

Summary

Issues:
Calculation of depreciation on used capital goods for payment under Rule 3(5) of the Cenvat Credit Rules, 2004 before and after the amendment on 27.02.10.

Analysis:
The case involved a dispute regarding the method of calculating depreciation on used capital goods for payment under Rule 3(5) of the Cenvat Credit Rules, 2004 before and after the amendment on 27.02.10. The appellant, a manufacturer of HDPL Bags, had taken Cenvat Credit on capital goods amounting to about Rs.10 Lakhs during May & June 1999, which were later disposed of between April '09 and Jan. '10. The Department contended that prior to 27.02.10, the calculation of depreciation for payment should be by the 'written down method,' resulting in a higher amount payable. A Show Cause Notice was issued for recovery of Cenvat Credit along with interest and penalty, which was confirmed by the Assistant Commissioner and upheld by the Commissioner (Appeals).

The appellant argued that the method of calculating the amount payable using the straight-line method was prescribed only in the amendment to Rule 3(5) w.e.f. 27.02.10, and thus, prior to this date, the method was not specified. They contended that there was a strong prima facie case in their favor, requesting a waiver of the requirement for pre-deposit of the demand, interest, and penalty for the appeal hearing.

After hearing both sides, the Tribunal analyzed that while the rate of depreciation of 2.5% per quarter or part thereof was consistent before and after 27.02.10, the method of calculation was not explicitly stated before the amendment. The Tribunal opined that since no method was prescribed for calculating depreciation before 27.02.10, any method could be adopted. Considering that when two interpretations of a statutory provision are possible, the one beneficial to the Assessee should be chosen, the Tribunal held that the straight-line method should be adopted even for the period before 27.02.10. Consequently, the requirement of pre-deposit of the demand, interest, and penalty was waived for the appeal hearing, and recovery was stayed. The stay application was allowed, favoring the appellant's case.