2019 (2) TMI 755 - AT - Central Excise

Appeal success: Correct calculation of depreciation for cenvat credit under Cenvat Credit Rules, 2004

The appeal was filed challenging the calculation of depreciation on capital goods for availing cenvat credit under the Cenvat Credit Rules, 2004. The ... CENVAT credit - removal of Capital goods after use - Rule 3(5B) of Cenvat Credit Rules - Held that:- The appellant has availed cenvat credit of the duty paid on the capital goods in accordance with the provisions of Cenvat Credit Rules, 2004. After the capital goods were put to use, the same were cleared in the year 2011-12. While clearing the goods, the goods, the appellant has reversed the credit availed at the time of receipt of the capital goods in the factory, reducing the same @ 2.5% per quarter for the period the credit was availed. Therefore, the computation of the department is incorrect. Besides, there is no suppression of fact as the present demand relates to application of the formula prescribed under Rule 3(5B) of Cenvat Credit Rules, 2004. Appeal allowed - decided in favor of appellant. Issues:1. Calculation of depreciation on capital goods for availing cenvat credit.2. Interpretation of Rule 4(2)(a) of the Cenvat Credit Rules, 2004.3. Application of Rule 3(5B) of Cenvat Credit Rules, 2004.4. Allegations of incorrect calculation leading to recovery of credit.5. Invocation of extended period of limitation for recovery.Analysis:1. The appeal was filed against an order-in-appeal passed by the Commissioner of Central Excise & CGST (Appeals), Nashik, regarding the availing of cenvat credit on capital goods during 2006-07 and subsequent clearance in 2011 after reversing the credit availed. The appellant contested the method of depreciation calculation, arguing that it should be based on the amount of credit availed till the clearance of capital goods by reducing the credit at a specified rate per quarter, as per Rule 4(2)(a) of the Cenvat Credit Rules, 2004.2. The appellant cited legal precedents, including the judgment of the Larger Bench of the Tribunal and decisions of the Hon'ble Madras High Court and the Tribunal in support of their contention regarding the correct calculation of depreciation under the Cenvat Credit Rules, 2004. The Revenue, represented by the Assistant Commissioner, reiterated the findings of the Commissioner (Appeals) during the hearing.3. Upon review of the records, the Member (Judicial) found that the appellant had followed the prescribed procedure for availing cenvat credit on duty paid for capital goods. The appellant had properly reversed the credit at the time of clearing the goods, reducing it at the specified rate per quarter. The Member concluded that the department's computation was incorrect, and there was no suppression of fact in the case. The demand for recovery based on the application of Rule 3(5B) of the Cenvat Credit Rules, 2004, was set aside, and the appeal was allowed.4. The judgment highlighted the importance of adhering to the provisions of the Cenvat Credit Rules, 2004, in calculating depreciation on capital goods for availing credit. It emphasized the need for accurate computation and proper application of the rules to avoid incorrect demands for credit recovery. The decision ultimately favored the appellant, overturning the previous order and providing relief in the matter of credit recovery.5. The detailed analysis of the issues involved in the judgment demonstrates the significance of legal interpretation and adherence to procedural rules in matters related to cenvat credit on capital goods. The Member's decision to set aside the demand for credit recovery showcases the importance of proper calculation methods and compliance with the applicable rules to avoid unnecessary financial liabilities for the appellant.