2007 (6) TMI 168 - AT - Central Excise

Tribunal allows Cenvat credit and depreciation on capital goods under Income-tax Act.

The Tribunal upheld the Commissioner's decision allowing the respondent to avail Cenvat credit on capital goods and claim depreciation on the same amount ... Cenvat credit on capital goods - claim of depreciation under Incometax and its effect on excise credit - prevention of double benefit of tax credit and depreciation - availment of credit after revision of incometax return - penal action unsustainable where credit is held admissibleCenvat credit on capital goods - claim of depreciation under Incometax and its effect on excise credit - availment of credit after revision of incometax return - The respondent was entitled to retain Cenvat credit on capital goods after revising its incometax return to withdraw the depreciation claimed on the excise duty component. - HELD THAT: - The Commissioner (Appeals) applied the Tribunal's earlier ratio that Modvat/Cenvat credit on capital goods cannot be denied solely because depreciation was initially claimed; the object of the rule preventing simultaneous benefits is to ensure both benefits are not retained together. Where the assessee files a revised incometax return withdrawing the depreciation claim to the extent of the excise duty credit availed, there is no reason to deny the Cenvat credit. The appellate authority found the facts here squarely fit that principle and held the credit admissible. [Paras 3]Cenvat credit allowed as the respondent revised its incometax return withdrawing the depreciation claim; the impugned denial of credit set aside.Penal action unsustainable where credit is held admissible - Penal action for taking the Cenvat credit was not sustainable once the credit was held admissible. - HELD THAT: - Having concluded that the credit was properly admissible in view of the subsequent revision of the incometax return and the settled tribunal view preventing double benefit only where both benefits persist, the Commissioner (Appeals) held that any penalty based on alleged impropriety in availing the credit could not be sustained. [Paras 3]Penalty/penal action rejected as unsustainable in light of the admissibility of the credit.Final Conclusion: The revenue's appeal is dismissed; the Commissioner (Appeals) rightly allowed the respondent's appeal by applying the Tribunal's ratio that Cenvat credit on capital goods is admissible where the assessee withdraws the corresponding depreciation in a revised incometax return, and consequential penal action cannot be sustained. Issues:1. Availing of Cenvat credit on capital goods and claiming depreciation on the same amount under the Income-tax Act.Analysis:The appeal was filed by the revenue against the Order-in-Appeal that allowed the respondent to avail Cenvat credit on capital goods and claim depreciation on the same amount under the Income-tax Act. The revenue contended that the respondent was not eligible to avail the credit of the excise duty as they had already claimed depreciation on the same amount. The Commissioner (Appeals) based the decision on a previous case law by the CESTAT, which stated that Modvat credit on capital goods cannot be denied solely because depreciation was initially claimed. The Commissioner found that the respondent revised their income-tax return, reducing the claim by the amount of credit availed on the capital goods, which made the credit admissible. The Commissioner concluded that penal action was not sustainable once the credit was found to be admissible.The Commissioner's decision was based on the Tribunal's judgment and no contrary decisions were presented by the revenue. The Commissioner's reliance on the Division Bench decision of the Tribunal was crucial in allowing the appeal of the respondent. The Tribunal's previous ruling emphasized that if the depreciation was not claimed in the revised returns, there was no reason to deny the Modvat credit. Therefore, the Commissioner found the appeal to be well-reasoned, following the Tribunal's judgments, and rejected the appeal filed by the revenue.In conclusion, the Tribunal upheld the Commissioner's decision, emphasizing that the credit availed by the respondent was admissible based on the revised income-tax return, which reduced the depreciation claim by the amount of credit on capital goods. The Tribunal found no grounds for interference in the well-reasoned order that followed the Tribunal's previous judgments.