CENVAT credit and income-tax depreciation on the same duty element are incompatible; non-disclosure can justify extended limitation.

CENVAT credit on capital goods is barred to the extent depreciation has been claimed under Section 32 of the Income-tax Act on the same duty element, because simultaneous tax depreciation and credit on that amount is prohibited. The text also notes that where this overlap was not disclosed to the department and was detected only on audit, with no rectification after being pointed out, the authorities treated the non-disclosure as suppression of material facts and intent to evade duty. On that basis, the extended period of limitation was invoked and the demand, interest, and penalty were sustained.

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Issues: (i) Whether CENVAT credit was admissible where depreciation had been claimed under Section 32 of the Income-tax Act, 1961 on the same duty element of capital goods; (ii) Whether the demand was time-barred in the absence of suppression or intent to evade duty.

Issue (i): Whether CENVAT credit was admissible where depreciation had been claimed under Section 32 of the Income-tax Act, 1961 on the same duty element of capital goods.

Analysis: The relevant CENVAT Credit Rules prohibited availing credit on capital goods to the extent depreciation had been claimed under the Income-tax Act on the duty suffered by those goods. The factual position that depreciation and credit were simultaneously availed on the same amount was not disputed. Once depreciation was claimed on that duty element, the corresponding credit could not be allowed.

Conclusion: The credit was inadmissible and the finding against the assessee on merits was correct.

Issue (ii): Whether the demand was time-barred in the absence of suppression or intent to evade duty.

Analysis: The simultaneous availment was not reflected to the department until audit scrutiny, and the mistake was not rectified even after being pointed out. On these facts, the Tribunal found suppression of material facts and intent to evade duty. The extended period was therefore invocable.

Conclusion: The demand was not time-barred and the invocation of the extended period was upheld against the assessee.

Final Conclusion: The order confirming demand, interest, and penalty was sustained, and the appeal failed.

Ratio Decidendi: Where depreciation is claimed under the Income-tax Act on the duty element of capital goods, CENVAT credit on that same duty is barred, and non-disclosure of such simultaneous availment justifies invocation of the extended limitation period.

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