Cenvat credit and depreciation cannot be claimed on the same duty element; later credit was disallowed.

Rule 4 of the Cenvat Credit Rules barred simultaneous enjoyment of Cenvat credit and depreciation on the same duty element of capital goods. The HC held that an assessee who claimed depreciation under section 32 of the Income-tax Act on the unutilized balance could not later avail the remaining credit in the next year. The Tribunal had failed to apply sub-rule (4) and wrongly allowed the assessee to retain the depreciation benefit while also claiming the balance credit. The relief to the assessee was therefore set aside and the Revenue's position accepted on the main question of law.

---

---

Issues: Whether an assessee who availed 50% Cenvat credit on capital goods in one year and claimed depreciation under section 32 of the Income-tax Act on the unutilized balance could again avail the remaining credit in the subsequent year.

Analysis: Rule 4 of the Cenvat Credit Rules governs the availment of credit on capital goods, and sub-rule (4) restricts the simultaneous enjoyment of Cenvat credit and depreciation on the same duty element. The Court found that the Tribunal failed to apply sub-rule (4) and erred in allowing the assessee to retain the tax benefit of depreciation while also taking the unutilized credit in the later year. The assessee could not claim depreciation under section 32 on the non-utilized Cenvat credit and still seek the balance credit in the next assessment year.

Conclusion: The issue was answered in favour of the Revenue and against the assessee.

Final Conclusion: The Tribunal's relief to the assessee was set aside and the appeal succeeded on the main question of law, while the observation regarding penalty and interest did not alter the allowance of the appeal.

Ratio Decidendi: An assessee cannot simultaneously claim depreciation under the Income-tax Act on the unutilized duty element of capital goods and subsequently avail the same credit under the Cenvat Credit Rules, where the governing rule prohibits such dual benefit.

---