CENVAT credit and depreciation claim on capital goods required fresh verification after a revised return and missing evidence.

CENVAT credit on capital goods was considered inadmissible to the extent depreciation had been claimed under section 32 of the Income-tax Act, 1961. A revised return reducing the depreciation claim did not by itself establish that the disputed amount was revenue expenditure, because satisfactory documentary evidence was still required. The appellate authority had accepted the revised return without adequate reasons or evidentiary support. The appellate order was therefore set aside and the matter remanded for fresh verification and redetermination of the ineligible credit on the basis of evidence to be produced by the assessee.

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Issues: Whether CENVAT credit on capital goods was inadmissible when depreciation had also been claimed in the income-tax return and whether the matter required remand for fresh verification of the revenue-expenditure claim and supporting evidence.

Analysis: The credit dispute arose from the prohibition against availing CENVAT credit in respect of the portion of duty on capital goods for which depreciation was claimed under section 32 of the Income-tax Act, 1961. The assessee later filed a revised return reducing the depreciation claim and asserting that part of the amount related to revenue expenditure. However, the record did not contain satisfactory documentary evidence to establish that the disputed amount was in fact revenue expenditure. The appellate authority had accepted the revised return without recording adequate reasons or evidentiary basis. The Tribunal also noted that the view of earlier decisions permitted credit to be examined afresh where the depreciation claim had been neutralised by revision of the return, but the factual foundation still had to be proved.

Conclusion: The appellate order was unsustainable and was set aside. The matter was remanded to the original adjudicating authority to redetermine the ineligible CENVAT credit after considering the evidence to be produced by the assessee. The departmental appeal was allowed by way of remand.

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