Cenvat credit availed in Feb 2016 against capital goods invoice dated 08/2014

[Kuldeep Kapoor]

Due to oversight Capital goods invoice of year 08/2014 was misplaced and found in Feburary 2016 and and entry in RG 23 C -Part II made in Feburary 2014 . I already had cenvat of approximately 3 crore in books in Feburary 2016 and this was not utilized.

Please wether i should reverse the Cenvat amount in March 2017

[Himansu Sekhar]

Sir,

As per clarifications issued vide Circular No. 990/14/2014-CX-8 Dated 19.11.14 issued from F.No 267/72/2013-CX.8 (Pt), it appears that the conditions of one year is also applicable for the capital goods. If we read Rule 4(1) (third proviso) and 4(7) (sixth proviso) of CCR 2004 in isolation it will appear that the limitation is not applicable. But the words Cenvat Credit (stress given) in the said sub rules show the intention of the law makers. Had it been for inputs and input services they must have mentioned specifically.

For your consideration.

 

[KASTURI SETHI]

Dear Querist,

Not required to reverse the credit taken on capital goods in Feb.,16. You have availed the whole credit prior to expiry of second financial year. Assessee can take full credit in second year, if he does not take credit on capital goods in first year.You have qualified the condition of Rule 4 (2) (a) of the Credit Rules inasmuch as 'NIL' credit taken in first financial year, does not exceed 50%. There are so many case laws to strengthen this view. You have not committed an offence by not taking credit in first financial year.

[YAGAY andSUN]

It will totally depend on the accounting treatment which had been provided while capitalization of capital goods. If the capital goods are capitalized along with the amount of CENVAT credit and you had availed depreciation on such amount in the 2014 and 2015 then you would not be able to avail the CENVAT credit. Further, it is not understood by us that if Invoice was found in Feb 2016 then how can it be entered in Feb 2014. It seems that there is some typo error in your query.

Please check facts.

[Himansu Sekhar]

There appears a typographical error in the body of the text when the heading reflect the date of availment is Feb,16. Kasturi sir is correct,but after the amendment there is an anomaly. The circular tells when the entry is made in the register, then for subsequent amounts there is no bar. When the availment is not made even for a nil amount, it appears, the limitation of one year is applicable when the entire entry is made after two years.

[KASTURI SETHI]

Dear Querist,

Go through all case laws carefully, especially, para no. 9 of Spenta International Ltd.

2014 (311) E.L.T. 649 (Tri. - Bang.) = 2010 (6) TMI 743 - CESTAT BANGALORE EMPEE SUGARS & CHEMICALS LTD. Versus COMMISSIONER OF C. EX., GUNTUR

2007 (216) E.L.T. 216 (Tri. - Kolkata) = 2007 (4) TMI 102 - CESTAT, KOLKATA HERBICURE PVT. LTD., KOLKATA Versus COMMR. OF C. EX., KOLKATA-VII

2007 (216) E.L.T. 133 (Tri. - LB) =2007 (8) TMI 25 - CESTAT, MUMBAI SPENTA INTERNATIONAL LTD. Versus COMMISSIONER OF CENTRAL EXCISE, THANE

[YAGAY andSUN]

We are sharing with you a latest judgement which is in your favour. But also please check the facts on the accounting treatment on capitalisation of capital goods with or with out CENVAT credit to avoid any unwarranted situation which may occur in near future.

2017 (1) TMI 593 - CESTAT MUMBAI Precision Metal Products Pvt Ltd Vs CCE
 

[KASTURI SETHI]

Dear Sh.Himansu Sha Ji,. Circulars have no statutory force. I have seen Board backtracks whenever there is a hullabaloo by the trade or any Court settles the dust. Whenever there is not clarity in law we resort to judgements. Sometimes case laws are conflicting on the same issue. So an assessee has to be cautious while following any judgement.

Your participation is valuable as we learn from each other.

[Himansu Sekhar]

There appears no decision of the honourable tribunals after the amendmentsinCCR . Sir with due regard to your views with humility I differ. After all the decisions are for the prior periods. Though Board has clarified basing upon the apex court decision that the circulars are not binding upon the afj. Authority, the department is bound by the circulars.

Kindly do not take it otherwise. My understandings on the issue just placed.

[KASTURI SETHI]

Sh.Himansu Shaw Ji,. Difference of opinion is not bad. It leads to better results.

[Himansu Sekhar]

Thank you sir

[KASTURI SETHI]

Sh.Himansu Sha Ji,

You have not uploaded your profile on TMI. I am interested. Will you do so ?

[YAGAY andSUN]

Law develops when it is discussed.

[KASTURI SETHI]

Yes Sir.

[KASTURI SETHI]

2011 (266) E.L.T. 81 (Tri. - Ahmd.) = 2010 (10) TMI 447 - CESTAT, AHMEDABAD SHREE RAMA MULTITECH LTD. Versus COMMISSIONER OF C. EX., AHMEDABAD

 

AI Summary

Cenvat credit timing rules: capital goods credit can be claimed in a subsequent financial year if first-year claim was nil. Whether Cenvat credit taken later against an earlier capital goods invoice must be reversed hinges on the Credit Rules' timing conditions and on accounting treatment: if no credit was taken in the first financial year and Rule conditions are met, full credit in a subsequent year may be permissible; however, if capitalisation included Cenvat and depreciation was claimed on that basis, subsequent credit may be disallowed or require adjustment.