03 March 2012
A company has not availed Cenvat Input credit on Capital Goods but has claimed Depreciation instead.Subsequently it wants to reverse the Depreciation claimed ,and claim Cenvat Input credit. Will there be any violation of Rule 4(4)of the CCR? In the year it has reversed the Depreciation does it become eligible for the claiming the Cenvat Input Credit?
04 March 2012
there is no violation of CCR. Reverse the depreciation benefit. Take certificate from Income tax dept. for the same and avail credit of capital goods. Please do not forget to inform Jurisdictional central excise authority , i.e. range/division. There may be objection for delayed availment of Cenvat but there is no legal ground for dept, to stop u availing credit at later stage. Thanks NILESHKUMAR B.Com, LLM, MBA, CWA Consultants and Advocates C.Excise, Customs, Service Tax, Export Import, FEMA
07 March 2012
Thank you for your reply, Can you please clarify if there a problem if the Assets are in use for 3-4 years.Rule 4(i) specifies that Credit is to be taken immediately but does this time limit apply to Capital Goods?Is there any violation of CCR if the reversal of Depreciation and claim of Credit is 4 years old?
14 March 2012
Dear Mr Jhanwar, Thanks for your help.Can you please give the brief outlines of the judgement? I could not locate it. Does it relate to delayed Input credit by reversing Depreciation. Thanks again.
Writ Petition No. 3423 of 2001, W.M.P. No. 4745 of 2001 and W.V.M.P. No. 626 of 2002, decided on 22-4-2003
Stay/Dispensation of pre-deposit - Discrimination - Different decisions in similar matters whether sustainable - Modvat on capital goods - Depreciation claim withdrawn in revised income-tax return - Financial losses sustained continuously over four years period - In similar other cases relief granted by Tribunal by remanding matter for verification of revised income-tax returns - Order directing pre-deposit of credit set aside and writ petition allowed - Section 35F of Central Excise Act, 1944. [para 7]
Petition disposed off
CASE CITED
Tamil Nadu Jai Bharathi Mills Ltd. v. Commissioner — 1998 (99) E.L.T. 213 (Mad.) — Followed [Para 5]
REPRESENTED BY : Shri K. Jayachandran, Advocate, for the Petitioner.
Shri Vaidyalingam, S.C.G.S.C., for the Respondent.
[Order]. - The writ petition has been filed aggrieved by the order dated 8-8-2000 made in the stay application pending appeal before the Customs, Excise and Gold (Control) Appellate Tribunal in Stay Order No. 672 of 2000.
2. The point to be resolved before the Tribunal is that whether there is violation under Rule 57R(8) of the Central Excise Rules, 1944 which make the petitioner liable for penalty under Rule 57U(6).
3. The brief fact is that in respect of capital goods imported by the petitioner, during November, 1995, the petitioner originally filed the returns under the provisions of the Income-tax Act claiming depreciation. In the original return filed for the year 1996-97, the petitioner claimed depreciation in respect of the imported capital goods for relevant financial year ended 31-3-1996. Subsequently, the petitioner filed a revised return on 26-6-1998, wherein the claim of depreciation has been withdrawn. In the meanwhile, the petitioner claimed Modvat credit during April, 1996 to July, 1996 and March, 1997. The Commissioner of Central Excise was of the view that the claim of depreciation under Income-tax Act would disentitle the petitioner for the benefit of Modvat credit and the petitioner is also liable to pay penalty under Rule 57U(6) and as such the Modvat credit has been reversed and penalty in a equal sum of Rs. 27,47,003/- has been levied. The correctness of the said order was carried on appeal before the CEGAT. The petitioner filed an application for stay of reversal of the Modvat credit and imposition of penalty under Section 35F(4) of the Central Excise Act. The Tribunal granted the relief in respect of the penalty however, directed the petitioner to pay the entire amount of Modvat credit as a condition precedent for entertaining the appeal. The correctness of the said order is now questioned before this Court.
4. This Court admitted the writ petition and ordered interim stay in the year, 2001. Now the respondent has come out with an application for vacating the stay. Since the issue involved in the present writ petition lies in a very narrow compass, with the consent of the Counsel appearing for the respective parties, the writ petition itself is taken up for final disposal.
5. Mr. Jayachandran, learned Counsel appearing for the petitioner very strenuously contended that the Full Bench of the Tribunal has taken the view that if the assessees file revised return withdrawing the depreciation claimed in the original returns, such assessees are entitled to the benefit under the Modvat. For the purpose of verification, whether such revised return has been filed before the Income-tax authorities, the matters have been remanded by the Tribunal by setting aside the order of the Commissioner. In the present case also such revised return has been filed before the Income-tax authorities and that has been accepted by the Tribunal, which is evident from Para 2 of the order of the Tribunal, which is impugned. If the appeal is directed to be taken for final disposal without the precondition of deposit the petitioner will also have the very same benefit of remittal order from the Tribunal. He further contended that the financial position of the petitioner is also not in appreciable position. For the assessment years 1996-1997 to 1999-2000 and continuously the petitioner is sustaining loss in a sum of Rs. 55 lakhs, 81 lakhs, 35 lakhs and 76 lakhs respectively. Hence taking into consideration of the financial loss also, the Tribunal may be directed to dispose of the appeal by waiving the pre-deposit of Rs. 27,47,003/-. For that purpose he very much relied on the Division Bench judgment of this Court in Tamil Nadu Jai Bharathi Mills Ltd. v. Commissioner of Cus. & C. Ex. (A), Trichy [1998 (99) E.L.T. 213 (Mad.)], wherein this Court has held as follows :-
“5. The first respondent has refused to grant the waiver under Section 35F of the Act on the ground that prima facie, the petitioner has no case in the appeal. Secondly, the petitioner/appellant cannot be held to suffer undue hardship if it is made to pay the duty as assessed. This conclusion the 1st respondent has arrived at, after looking into the balance sheet produced by the appellants for the year ending 31-3-1995, even though the said balance sheet shows less. However, the balance sheet for the year ending 31-3-1996 had not been produced, even though it cannot be said that it could not have been available. As the financial position of the appellant as on the date of consideration of the application has to be considered in order to find out whether undue hardship would be caused to the appellant, in the event, it is directed to pay the entire duty assessed, we are of the view that it is necessary that the appellant seeking waiver under Section 35F of the Act, must place before the Authority the latest financial position. Therefore, we are of the view that the appellant should be given an opportunity to produce the latest balance sheet and profit and loss account for the year ending 31-3-1996.”
6. As seen from the judgment cited, it is evident that the consideration necessary for granting relief u/s 35F(4) is prima facie case and the financial position of the petitioner. The contention of the learned Counsel for the petitioner that the Tribunal in similar cases set aside the order of the Commissioner has not been refuted by the departmental Counsel and hence prima facie the petitioner has made out a case in his favour. The financial position of the petitioner is also not in a appreciable position as it was sustaining loss from the year 1996-97 to 1999-2000. Hence, I am of the view that an equitable order in favour of the petitioner has to be passed.
7. For this course of action learned Counsel for the respondent is not having any objection. Having regard to the facts and circumstances as stated above and in the light of the law laid down in the above judgment by the Division Bench of this Court, I am of the view that the order of the Tribunal directing the petitioner to deposit a sum of Rs. 27,47,003/- has to be set aside and is hereby set aside and the Tribunal is hereby directed to take the appeal on file and dispose of the same on merits within a period of eight weeks from the date of receipt of copy of this order. The petitioner is directed to cooperate with the dispose of the appeal.
8. With this observation, the writ petition is disposed of. Consequently, W.M.P. No. 4745 of 2001 and W.V.M.P. No. 626 of 2002 are closed. No costs.
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