Cenvat credit and depreciation coexist subject to duty component limits; limitation fails without suppression in an interpretative dispute.

Rule 4(4) of the Cenvat Credit Rules, 2002 bars credit only to the extent of the duty component of capital goods on which depreciation is actually claimed under section 32 of the Income-tax Act; the value of the capital goods does not change merely because credit is availed in instalments, and the merits objection was rejected. In a separate limitation issue, where no suppression of relevant facts was recorded and the dispute was interpretative, the extended period could not be invoked; the demand was therefore time-barred. The assessee obtained relief only on limitation.

---

---

Issues: (i) Whether depreciation claimed under the Income-tax Act barred availment of balance Cenvat credit on capital goods under Rule 4(4) of the Cenvat Credit Rules, 2002. (ii) Whether the demand was time-barred in the absence of suppression of facts.

Issue (i): Whether depreciation claimed under the Income-tax Act barred availment of balance Cenvat credit on capital goods under Rule 4(4) of the Cenvat Credit Rules, 2002.

Analysis: Rule 4(4) prohibits Cenvat credit only to the extent of the part of the value of capital goods representing duty on which depreciation is claimed under Section 32 of the Income-tax Act, 1961. The value of capital goods was held not to change from year to year merely because the credit is permitted in instalments. The Tribunal accepted that the duty element on capital goods is available as credit over time, but held that the rule does not support bifurcating value differently for the first and second year for the purpose of depreciation and credit.

Conclusion: The objection on merits was rejected and the order of the Commissioner (Appeals) was upheld.

Issue (ii): Whether the demand was time-barred in the absence of suppression of facts.

Analysis: No finding of suppression of relevant facts was recorded, and the dispute was one of interpretation since even the original authority had accepted the assessee's view. On that footing, the extended period of limitation was not available.

Conclusion: The demand was held to be barred by limitation and the assessee succeeded on this issue.

Final Conclusion: The appeal failed on merits but succeeded on limitation, resulting in relief to the assessee only to the extent of the demand being time-barred.

Ratio Decidendi: Rule 4(4) bars Cenvat credit only in respect of the duty component on which depreciation is actually claimed, and in the absence of suppression of facts the extended period of limitation cannot be invoked in a case involving a bona fide interpretative dispute.

---