2017 (2) TMI 1070 - AT - Central Excise

CENVAT credit - whether the appellants are eligible to CENVAT credit on the goods received from M/s B.G. India Energy Services Pvt. Ltd. (known as M/s Gujarat Gas Co. Ltd.) under lease arrangement? - Held that - the credit cannot be admissible on such capital goods on which depreciation has been claimed u/s 32 of the Income Tax Act, 1961. It is the capital goods which is eligible to depreciation and alternatively CENVAT Credit. The appellant had claimed that even if the lessor had availed depreciation, the CENVAT credit cannot be denied on such capital goods in the hands of lessee. The argument is fallacious inasmuch as the credit is allowed on the capital goods and not on qua manufacturer or lessor of the capital goods. Extended period of limitation - Held that - the appellant has failed to establish that all the facts were communicated to the Department in 2008 and not suppressed - extended period of limitation has correctly invoked and the demand is not barred by limitation as claimed by the Appellant. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Availability of CENVAT credit on capital goods procured on lease basis.
2. Interpretation of Rule 4(4) of CENVAT Credit Rules, 2004.
3. Applicability of previous judgments on the case.
4. Bar of limitation in recovery of credit.

Analysis:
1. The appeal questioned the availability of CENVAT credit on capital goods obtained on lease from M/s B.G. India Energy Services Pvt. Ltd. The dispute arose as the lessor had claimed depreciation under Section 32 of the Income Tax Act, 1961, on the capital goods, leading to a proposed recovery of the credit by the issuance of a show cause notice. The appellant contended that since the lessor is neither a service provider nor a manufacturer, there should be no restriction on the lessee availing the CENVAT credit. Reference was made to a Tribunal judgment upheld by the Karnataka High Court to support this argument.

2. The interpretation of Rule 4(4) of CENVAT Credit Rules, 2004 was crucial in determining the admissibility of the CENVAT credit. The rule states that the credit on capital goods shall not be allowed to the extent of the value of capital goods on which depreciation under Section 32 of the Income Tax Act was claimed. The Tribunal clarified that the credit is granted on the capital goods themselves, not on the manufacturer or lessor. The judgment cited by the appellant regarding denial of credit due to non-production of a certificate was distinguished from the present case, where the lessor had indeed claimed depreciation.

3. The Tribunal addressed the applicability of previous judgments to the current case. It was highlighted that the cited judgment did not align with the facts of the present situation, where the lessor had availed depreciation, making the CENVAT credit inadmissible to the lessee. The Tribunal emphasized the specific circumstances of the case and the provisions of the CENVAT Credit Rules in reaching this conclusion.

4. The issue of limitation in recovering the credit was also examined. The appellant claimed that all relevant facts were communicated to the department in 2008, thereby invoking a bar of limitation on the recovery. However, the Tribunal found discrepancies in the evidence presented, including illegible documents and contradictory statements, leading to the rejection of the limitation defense. The Tribunal concluded that the demand for recovery was not barred by limitation and upheld the decision against the appellant.

In conclusion, the Tribunal dismissed the appeal on both merit and limitation grounds, affirming the decision against the appellant regarding the inadmissibility of CENVAT credit on the leased capital goods due to the lessor's depreciation claim under the Income Tax Act.