The complete case as reported is produced below for information of members.
DATE : 08-11-2006
EQUIVALENT CITATION(S) :
2007-(079)-RLT -0132 -CESAT
CATCHNOTE / WORDS AND PHRASES :
HEADNOTE :
JUDGE(S) :
S L Peeran
T K Jayaraman
TEXT :
SUPRAJIT ENGINEERING LTD. v. CCE, BANGALORE.
Final Order Nos. 1854 & 1855/2006 in Appeal Nos. E/506 & 507/2005, dated November 8, 2006.
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, BANGALORE
Counsel : Shri S. Raghu - Appellant.
Shri K. Sambi Reddy - Respondent.
Per T. K. Jayaraman :
These appeals have been filed against the Orders-in-Appeal No. 88 & 89/2005 dated 31.03.2005 passed by the Commissioner of Central Excise (Appeals), Bangalore.
The appellants purchased Capital Goods. They availed 50% of Cenvat Credit in the first year as per the Rule prevailing and also in respect of 50% of unavailed portion, they availed depreciation. At the end of the second year, they availed the balance 50% of the credit. Revenue proceeded against the appellants on the ground that they had contravened Rule 4(4) of Cenvat Credit Rules, which states that the Cenvat credit of capital goods shall not be allowed in respect of that part of the value of capital goods which represents the amount of duty on such capital goods which the manufacturer claims as depreciation under Section 32 of the Income Tax Act, 1961. When the irregularity was pointed out, the appellants reversed the Cenvat Credit taken under protest. The original authority, in the Orders-in-Original, appropriated the Cenvat credit reversed and further demanded interest under Rule 12 of Cenvat Credit Rules read with Section 11AB of the Central Excise Act. Further, he imposed penalties under Rule 13(1) of Cenvat Credit Rules. The appellant approached the Commissioner (Appeals). The Commissioner (Appeals), in the impugned orders, upheld the Orders-in-Original. The appellants are aggrieved over the impugned Orders-in-Appeal and have come before this Tribunal for relief.
Shri S. Raghu, the learned Advocate, appeared for the appellants and Shri K. Sambi Reddy, the learned JDR, for the Revenue.
The learned Advocate urged the following points :-
(i) On a perusal of the Cenvat Credit Rules, it can be seen that it is clearly stipulated that the cenvat credit is not available if an assessee claims depreciation under Section 32 of IT Act on that portion of the amount which represents the excise duty. That is to say that during a financial year, an assessee can claim either cenvat credit or depreciation and cannot claim both. This rule did not pose any problem earlier as the assessees' were allowed to take full duty amount as cenvat credit. But, when the Government introduced a provision in the Cenvat Credit Rules that an assessee can claim only 50% of duty as cenvat credit in a financial year, this has given rise to an interpretation regarding claiming of depreciation under IT Act. The law is very clear that depreciation cannot be claimed and cenvat credit cannot be availed simultaneously. In this case, with regard to cenvat credit, since the appellant is allowed only 50% of duty as cenvat credit, balance 50% being ineligible for cenvat credit in that financial year, the appellant has rightly claimed depreciation on the said amount under the IT Act. There is no double benefit as presumed in the Show Cause Notice. Cenvat credit is availed on the 50% and depreciation is availed on balance 50% on which no cenvat credit has been availed in that financial year. The appellant has not violated the law. The Commissioner has failed to substantiate the department's contention by way of any rules or case-laws.
(ii) The demand is barred by limitation, as the appellant had not suppressed any information with an intention to evade duty. As the appellant had held a bona fide view, larger period cannot be invoked. The following case-laws were relied on :-
a. CCE vs. Dewarane Macnelli & Co. Ltd. - 1991 (56) ELT 645.
b. Refco Icematic Company vs. CCE - 1998 (27) RLT 327.
c. Shakti Iron & Steel Co. Ltd. - 1999 (30) RLT 641.
d. Vallabh Cement - 1998 (98) ELT 106.
e. Ellora Mechanical - 1998 (24) RLT 175 (CEGAT) = 1998 (98) ELT 109.
f. Movika Pharmaceuticals - 1998 (27) RLT 230.
g. New Vikram Cement - 1998 (27) RLT 474.
h. Jana Jeevan Foods (P.) Ltd. - 1999 (30) RLT 686.
i. Sterlite Industries (I) Ltd. - 1998 (27) RLT 419.
j. Gurunanak Steel & Allied Industries - 2001 (42) RLT 37 (T).
k. Aldowin & Others - 2003 (56) RLT 620 (T).
l. Surat Textiles Mills Ltd. - 2004 (62) RLT 351 (SC).
(iii) The appellants reversed the amounts involved under protest much before the issue of Show Cause Notice. Hence, interest and penalty are not demandable vide the decision in the Rashtriya Ispat Nigam Ltd. - 2003 (54) RLT 317 (Tri.-Bang.) which has been affirmed by the Supreme Court as reported in 2004 (163) ELT A53 (SC).
The learned JDR said that both the benefit of cenvat credit and depreciation cannot be availed simultaneously and, therefore, the impugned orders are legal and proper.
We have gone through the records of the case carefully. We reproduce the relevant provisions of Cenvat Credit Rules below :-
Rule 4 : Conditions for allowing Cenvat Credit :-
4(2)(a) : The CENVAT credit in respect of capital goods received in a factory at any point of time in a given financial year shall be taken only for an amount not exceeding fifty percent of the duty paid on such capital goods in the same financial year :
Provided that the CENVAT credit in respect of capital goods shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year if the said capital goods are cleared as such in the same financial year.
(b) The balance of CENVAT credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer, if the capital goods, other than components, spares and accessories [refractories and refractory materials, moulds and dies] and goods falling under Heading No. 68.02 and sub-heading No. 6801.10 of the First Schedule to the Tariff Act, are in the possession and use of the manufacturer of final products in such subsequent years.
4(4) : The CENVAT credit in respect of capital goods shall not be allowed in respect of that part of the value of capital goods which represents the amount of duty on such capital goods, which the manufacturer claims as depreciation under Section 32 of the Income-Tax Act, 1961 (43 of 1961).
A careful reading of Rule 4 reveals that in respect of Capital Goods received in a factory at any point of time in a given financial year, only 50% of the duty paid can be taken as Cenvat Credit. In the present cases, the appellants had taken only 50% of the duty paid on Capital Goods in the first year. On this point, there is no dispute. That means, in respect of the balance 50% of the duty on capital goods, as per rule, the appellant had not taken cenvat credit in the first financial year. There is nothing in the rules, which debars the appellant from availing depreciation on the balance 50% of the duty, which is not availed as Cenvat credit. As regards the second year, as per Rule 4(2)(b), the appellants availed the cenvat credit. Cenvat Rule 4(4) makes it clear that Cenvat credit shall not be allowed in respect of that part of the value of Capital goods which represents the amount of duty on such capital goods which the manufacturer claims as depreciation under Section 32 of the Income Tax Act. Even though it appears that in the first year, the appellants had violated the rule, actually they have not violated the rules for the simple reason that they had availed depreciation only in respect of that portion of duty on which they had not taken cenvat credit. In these circumstances, we are of the view that there is no violation of the provisions of Cenvat Credit Rules. Hence, the impugned orders are not sustainable. We allow the appeals with consequential relief, after setting aside the impugned Orders-in-Appeal.
Pronounced in open Court on 8.11.2006.
BACKWARD REFERENCE :
[Referred]
1998-(XC2)-GJX -3421 -TRIB Jana Jeevan Foods Pvt. Ltd. V. Cce, Hyderabad.
1991-(XC2)-GJX -0325 -TRIB Collector Of Central Excise V. Dewarance Macneill & Co. Ltd.
1998-(XC2)-GJX -3894 -TRIB Shakti Iron & Steel Co. Ltd. V. Commissioner Of C. Excise, Patna.
2004-(XC2)-GJX -0547 -SC Commissioner Of Central Excise, Surat V. Surat Textile Mills Ltd.
2003-(XC3)-GJX -0281 -TRIB Aldowin V. Commissioner Of Central Excise, Chennai-ii.
1997-(XC2)-GJX -3156 -TRIB Ellora Mechanical Products (P) Ltd. V. Cce, Meerut.
1997-(XC2)-GJX -3298 -TRIB Vallabh Cement V. Collector Of Central Excise, Indore.
2002-(XC2)-GJX -3964 -TRIB Rashtriya Ispat Nigam Ltd. V. Commissioner Of C. Ex., Visakhapatnam.
2000-(XC1)-GJX -2841 -CEGATGuru Nanak Steel & Allied Industries V. Commissioner Of Central Excise, Kanpur-ii.
FORWARD REFERENCE :
RULES, SECTIONS & NOTIFICATIONS REFERENCE :
CENTRAL EXCISE ACT, 1944
Section 11AB
Section 32
HEADINGS/ITEMS REFERENCE :
CENTRAL EXCISE TARIFF ACT 1985
Heading No. 68.02
Heading No. 6801.10
CAclubindia
