Cenvat credit on capital goods and depreciation claims requires verification of the revised income-tax return before credit can be denied.

Cenvat credit on duty-paid capital goods was treated as unavailable where depreciation had also been claimed on the same duty component under the income-tax return, because the bar under the erstwhile Rule 57R and its later Cenvat equivalent depended on that factual position. A revised income-tax return had been filed, but the record did not clearly show whether the revised claim was accepted by the income-tax authority. Since entitlement to credit turned on the assessment order on the revised return, the matter was sent back for verification and fresh decision after hearing both sides.

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Issues: Whether Cenvat credit on capital goods was barred where depreciation on the duty component had been claimed under income-tax returns, and whether the impugned order required reconsideration in light of the revised return and its acceptance by the income-tax authority.

Analysis: The respondents had availed 50% Cenvat credit on duty-paid capital goods. The departmental objection was that depreciation had also been claimed on the same duty component, attracting the bar under sub-rule (5) of Rule 57R of the erstwhile Central Excise Rules, later reflected in Rule 4(4) of the Cenvat Credit Rules, 2002. The record showed that a revised income-tax return had been filed, but it was not clear whether the revised claim had been accepted by the income-tax authority. Since the factual position bearing on the availability of credit depended on the assessment order on the revised return, the matter required verification by the adjudicating authority.

Conclusion: The impugned order was set aside and the matter was remanded for fresh decision after examining the assessment order on the revised income-tax return and after giving both sides an opportunity of hearing.

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