2019 (4) TMI 17 - AT - Central Excise

Appeal modified, interest set aside, penalty upheld. CENVAT credit and depreciation claim rejected. Disentitlement emphasized. (4)

The appeal was disposed of by modifying the impugned order to set aside the interest due to the dropped demand, while upholding the penalty imposed under ... CENVAT Credit - capital goods - the appellant claimed both CENVAT Credit and depreciation on the same goods including the CENVAT component - Rule 4(4) of CCR - Held that:- The mere fact that they have availed depreciation disentitles them to credit. The subsequent filing of revised income tax return might have amounted to reduction of depreciation claim, but it does not make the original claim correct and accordingly the demand is sustainable. However, in this case the demand has been dropped by the lower authorities which has not been appealed against by the department. Since there is no demand, any interest on a zero demand can only be zero. Penalty - Held that:- It is for the act of taking credit wrongly which is not in doubt - the penalty imposed under section 11 AC read with CCR 2004 is sustainable and needs to be upheld. Appeal allowed in part. Issues involved:1. Claiming CENVAT credit and depreciation on the same goods2. Eligibility for credit of capital goods under Rule 4(4) of CCR 20043. Demand of interest under Rule 14 of CCR 2004 and Section 11AA4. Imposition of penalty under Section 11 AC read with CCR 2004Analysis:Claiming CENVAT credit and depreciation on the same goods:The appellant, a manufacturer of Plastic Pet forms and bottles, was found to have claimed both CENVAT Credit and depreciation on the same goods, including the CENVAT component. The Department contended that the appellant was ineligible for credit of capital goods under Rule 4(4) of CCR 2004. The lower authority dropped the recovery of CENVAT Credit after the appellant filed a revised income tax return reducing the depreciation amount initially claimed. However, interest was demanded from the date of taking the CENVAT Credit until rectifying the mistake, along with a penalty under Section 11 AC read with CCR 2004.Eligibility for credit of capital goods under Rule 4(4) of CCR 2004:The Tribunal referred to previous decisions where it was held that once an appellant claims depreciation on the CENVAT credit amount of capital goods, they are not entitled to credit as per Rule 4(4) of CCR 2004. The Tribunal emphasized that the disentitlement to credit arises when depreciation is claimed, irrespective of any subsequent reduction in the depreciation claim through revised income tax returns. The first appellate authority upheld this view, leading to the rejection of the appellant's appeal.Demand of interest under Rule 14 of CCR 2004 and Section 11AA:The Tribunal considered the imposition of interest from the date of taking the CENVAT Credit until the rectification of the mistake. However, since the demand itself was dropped by the lower authorities and not appealed against by the department, the Tribunal modified the impugned order to set aside the interest, stating that any interest on a zero demand would be zero.Imposition of penalty under Section 11 AC read with CCR 2004:The Tribunal found the penalty imposed under Section 11 AC read with CCR 2004 to be sustainable, as it was for the act of wrongly taking credit, which was not in doubt. Despite setting aside the interest due to the dropped demand, the Tribunal upheld the penalty, emphasizing the appellant's wrongful act of claiming credit on capital goods for which depreciation had been availed.In conclusion, the appeal was disposed of by modifying the impugned order to set aside the interest due to the dropped demand, while upholding the penalty imposed under Section 11 AC read with CCR 2004.