2014 (7) TMI 68 - AT - Central Excise

CENVAT Credit - Capital goods - availing depreciation while availing cenvat credit - Cenvat credit account unutilized - interest and equivalent amount of penalty - Held that - As demand of duty and interest has not been disputed, demand of duty and interest are confirmed. With regard to the penalty as held by the Tribunal in Indian Leaf Springs Mfg. Co. (2013 (7) TMI 337 - CESTAT BANGALORE) wherein it was held that if Cenvat credit is taken and simultaneously depreciation is also claimed for income tax purposes, further the Cenvat credit lying in Cenvat credit account unutilized in that situation, mandatory penalty is not imposable. Therefore, following the decision of this Tribunal, I set aside the imposition of penalty in both cases against the appellants. - Decided in favour of assessee.

Summary

Issues:

1. Appeal against penalty confirmed under CENVAT Credit Rules, 2004.

Analysis:

The appellant appealed against the penalty confirmed against them for contravening the provisions of CENVAT Credit Rules, 2004. The case involved the appellant procuring capital goods in 2007-08 and claiming Cenvat credit of duty paid on them while also claiming depreciation for Income Tax purposes. Rule 4(4) of CENVAT Credit Rules, 2004 states that if depreciation is claimed, Cenvat credit on duty paid for capital goods cannot be availed. Consequently, duty demand, interest, and penalty were confirmed against the appellant. The appellant challenged this order through appeals.

During the hearing, the appellant's counsel did not dispute the liability of duty and interest. However, the counsel argued that since the Cenvat credit on the capital goods was not utilized at all, there was no intention to avail inadmissible credit. The counsel requested the waiver of the penalty based on a previous decision of the Tribunal in Indian Leaf Springs Mfg. Co. P. Ltd. vs. CCE, where it was held that in such cases where Cenvat credit was unutilized, a penalty was not mandatory.

The Tribunal considered the arguments and upheld the demand for duty and interest as undisputed. However, following the precedent set in the case of Indian Leaf Springs Mfg. Co., the Tribunal ruled that since the Cenvat credit was unutilized and as per the legal position, the penalty was not mandatory in such situations. Therefore, the Tribunal set aside the imposition of the penalty against the appellants in both cases.

In conclusion, the Appeals were disposed of with the penalty against the appellants being waived based on the legal interpretation and precedent established by the Tribunal in similar cases.