2008 (11) TMI 504 - AT - Central Excise

Tribunal grants early appeal hearing, upholds right to choose credit or depreciation

The Tribunal allowed the stay petition and granted an early hearing for the appeal due to the significant revenue involved. It ruled in favor of the ... Stay/Dispensation of pre-deposit - Cenvat/Modvat Issues:1. Availment of Cenvat credit in respect of capital goods.2. Dispute regarding the utilization of Cenvat credit for duty payment.3. Applicability of Modvat Credit Rules in the case.4. Stay petition and early hearing request for appeal.Analysis:1. The appellant, engaged in manufacturing electronic goods, was availing benefits under Notification No. 39/2001 by paying duty out of available CENVAT credit and subsequently seeking a refund for duty paid out of PLA. The issue arose when the appellant initially availed MODVAT credit for capital goods but reversed it to claim depreciation under income tax provisions, thereby rendering CENVAT credit unavailable as per Cenvat Credit Rules.2. The dispute centered on the non-availment of Cenvat credit for capital goods by the appellant. The Revenue contended that the appellant should have utilized the credit for duty payment in their final product, which would have prevented them from paying duty out of PLA. In contrast, the appellant argued that their choice to claim depreciation under income tax law precluded them from availing Cenvat credit for capital goods, as per Modvat Credit Rules.3. The Tribunal found merit in the appellant's argument, stating that they cannot be compelled to avail credit on capital goods for which depreciation was claimed under income tax law. Such compulsion would contradict Modvat Rules, and the authorities' views against the appellant were not acceptable. Consequently, the stay petition was unconditionally allowed.4. Both parties agreed to an early hearing of the appeal due to the significant revenue involved. The Tribunal accepted the request and scheduled the appeal for disposal on a specified date. This decision ensured a timely resolution of the appeal, considering the substantial amount at stake.This judgment clarifies the interplay between Cenvat credit, depreciation under income tax law, and Modvat Credit Rules in the context of duty payment for manufactured goods. The Tribunal's ruling upholds the appellant's right to choose between availing Cenvat credit or claiming depreciation, emphasizing compliance with relevant legal provisions and protecting the appellant from undue pressure to avail credits against their chosen tax benefits.