2017 (3) TMI 1199 - AT - Central Excise

Tribunal overturns Commissioner's ruling on CENVAT credit, clarifies input vs. capital goods distinction.

The Tribunal ruled in favor of the appellant, setting aside the orders passed by the Commissioner (Appeals) of Central Excise & Customs. It was held ... CENVAT credit - availing of double benefit - the appellant in their respective balance sheets for the financial years 2004-2005 and 2005-2006, charged unutilized CENVAT credit to profit and loss account as “exceptional item” of expenditure - whether the appellant are required to reverse CENVAT credit amounting to ₹ 44,28,762/- and ₹ 5,04,995/- u/r 4(4) of CCR, 2004? - Held that: - an assessee is debarred to claim the depreciation of the value representing the credit availed on the capital goods as well as depreciation on the said value under the Income Tax Act - It is not indispute that the appellant’s products soon after became exempted, they have reversed credit of ₹ 51,93,990/- on the inputs lying in stock, contained in the semi-finished goods, as well as the finished goods. Besides, whatever credit availed on inputs during this exempted period had been reversed by them - there is no merit in the impugned orders - appeal allowed - decided in favor of appellant. Issues:Appeal against orders passed by Commissioner (Appeals) of Central Excise & Customs, Vapi regarding reversal of CENVAT credit on inputs and alleged double benefit.Analysis:The appellant, engaged in manufacturing excisable goods, had their products exempted from duty for a period. During a CERA audit, it was found that unutilized CENVAT credit was charged to profit and loss account as an exceptional item, leading to show cause notices for recovery of credit amounts. The appellant argued that the demand notice invoking Rule 4(4) of CCR, 2004, applicable to capital goods, was unsustainable as the goods in question were inputs. They contended that they had not availed double benefit as alleged, reversing the CENVAT credit on inputs post-exemption. The appellant's advocate highlighted that the Circular cited by the audit objection was not applicable to their case, and the demand confirmation was legally flawed.The Revenue's representative reiterated the findings of the Commissioner (Appeals), leading to the central issue of whether the appellant should reverse CENVAT credit under Rule 4(4) of CCR, 2004. The rule prohibits claiming depreciation on the value representing credit availed on capital goods and depreciation under the Income Tax Act. The judgment clarified that the appellant had indeed reversed the credit on inputs post-exemption, negating the allegation of availing double benefit. The demand notice was based on the credit shown in the profit and loss account, which was deemed unsustainable. Consequently, the impugned orders were set aside, and the appeals were allowed with any consequential relief as per law.In conclusion, the Tribunal ruled in favor of the appellant, emphasizing that the demand based on Rule 4(4) of CCR, 2004 was not applicable to the case involving inputs rather than capital goods. The appellant's actions of reversing the credit post-exemption demonstrated compliance, refuting the claim of double benefit. The judgment highlighted the legal interpretation of the rule and the specific circumstances of the case to overturn the lower authorities' decisions and provide relief to the appellant.