2012 (5) TMI 451 - AT - Central Excise

Tribunal rules on Cenvat credit interest, waives demand, and raises concerns on depreciation claims

The Tribunal found the appellant liable for interest on wrongly availed Cenvat credit but waived the balance amount of demand, interest, and penalty until ... Pre-deposit for adjudicated Cenvat credit demand - Cenvat credit on capital goods (50% at receipt, balance in subsequent year) - interest liability for wrongly availed Cenvat credit - compliance with Rule 4(4) of the Cenvat Credit Rules (depreciation and Cenvat interaction) - penalty under Section 11AC of the Central Excise Act - stay on recovery pending disposal of appealPre-deposit for adjudicated Cenvat credit demand - Cenvat credit on capital goods (50% at receipt, balance in subsequent year) - interest liability for wrongly availed Cenvat credit - stay on recovery pending disposal of appeal - Partial waiver of pre-deposit and interim stay on recovery granted subject to deposit - HELD THAT: - The Tribunal found that although taking 100% Cenvat credit at the time of receipt (instead of 50%) contravened the Cenvat Credit Rules, the assessee would become eligible for the balance 50% in the subsequent financial year. Consequently the practical liability arising from that irregularity is confined to interest on the amount wrongly availed for the period of irregularity. On this basis the Tribunal concluded that total waiver of pre-deposit was not justified but directed a partial pre-deposit as security for prosecution of the appeal. The deposit ordered would operate to waive the requirement of pre-deposit for the remaining demand, interest and penalty and stay recovery until final disposal of the appeal.Appellant directed to deposit Rs. 2,50,000 within eight weeks; on such deposit the balance pre-deposit requirement waived and recovery stayed pending disposal of the appeal.Compliance with Rule 4(4) of the Cenvat Credit Rules (depreciation and Cenvat interaction) - penalty under Section 11AC of the Central Excise Act - Adjudication on whether Cenvat credit was availed in contravention of Rule 4(4) (by also claiming depreciation on duty element) was not finally established and requires further consideration - HELD THAT: - The assessee produced a Chartered Accountant's certificate and invoice-wise breakup asserting that depreciation claimed under the Income-tax Act did not include the excise duty element. The Commissioner (Appeals) rejected the certificate by alleging it rested on forged documents, but did not identify which documents were forged or conduct any enquiry with the income-tax authorities. The Tribunal observed that no enquiry with the Income-tax Department had been made and the lower authority did not explain the asserted forgery. On a prima facie appraisal the Tribunal found the department's objection under Rule 4(4) to be unsupported by adequate inquiry and evidence and therefore not established at this stage. The matter requires proper examination of the invoices, the CA certificate and verification (including with the Income-tax records) in the appeal proceedings.The contention under Rule 4(4) was not accepted on the material before the Tribunal and remains to be examined in the appeal (needs verification/investigation in the appellate proceedings).Final Conclusion: Partial relief granted: appellant to make a pre-deposit of the directed amount within the stipulated period, on which the balance pre-deposit requirement is waived and recovery stayed; the substantive contention under Rule 4(4) was not finally upheld and requires further examination in the appeal. Issues:Application for waiver from pre-deposit of Cenvat credit demand, interest, and penalty confirmed against the appellant.Analysis:The appellant, a manufacturer of machinery for Empty Hard Gelatine Capsules, availed Cenvat credit of Rs. 24,35,765/- on capital goods in contravention of Cenvat Credit Rules during 2003-2004 and 2004-2005. The Additional Commissioner confirmed the demand with interest and penalty. The appellant claimed that they would become eligible for the balance credit in the next financial year. The Commissioner (Appeals) upheld the order. The appellant argued that they did not include the duty element while claiming depreciation under the Income-tax Act, supported by a Chartered Accountant's certificate and detailed invoices. The Departmental Representative contended that the appellant deliberately availed Cenvat credit while claiming full depreciation, invoking extended period and imposing penalty.The Tribunal found that the appellant availed full credit at the time of receipt, contrary to the Rules. However, they would be liable only for interest on the wrongly availed credit. The appellant's claim of not including the duty element in depreciation was supported by the Chartered Accountant's certificate. The Tribunal noted discrepancies in the Commissioner (Appeals) order regarding the alleged forged document. No enquiry with the income-tax department was conducted to verify the claim. The Tribunal directed the appellant to deposit Rs. 2,50,000 within eight weeks, waiving the balance amount of the demand, interest, and penalty until the appeal's disposal.This judgment addresses the appellant's application for waiver from pre-deposit of Cenvat credit demand, interest, and penalty. The Tribunal found the appellant liable for interest on the wrongly availed credit but raised concerns about the Department's contentions regarding depreciation and extended period invocation. The Tribunal directed the appellant to deposit a specified amount within a stipulated period, waiving the balance amount until the appeal's disposal.