CENVAT credit on Capital Goods when depreciation on duty element reversed in revised ITR
Q: Whether CENVAT credit on Capital Goods will be allowed if depreciation claimed on duty element has been reversed in the revised income tax return ?
Where depreciation was originally claimed on duty paid on capital goods but, later revised return was filed reversing said depreciation claim and accepted by Income-tax authorities, same amounted to compliance with rule 4(4) of CENVAT Credit Rules, 2004 and hence, credit could not be denied
HIGH COURT OF BOMBAY
Commissioner of Central Excise & Customs, Aurangabad
Terna Sethkari Sahakari Sakhar Karkhana Ltd.
S.V. GANGAPURWALA AND N.W. SAMBRE, JJ.
WRIT PETITION NO. 2127 OF 2004
MARCH 21, 2014
Rule 4, read with rule 3, of the Cenvat Credit Rules, 2004 and rules 57Q, 57R, and 57T of the Central Excise Rules, 1944
2. The petitioner is questioning the order dated 1st May, 2003, passed by Customs, Excise and Gold (Control) Appellate Tribunal, Bench at Mumbai (hereinafter referred as “CEGAT”, for brevity), whereby the CEGAT has allowed the appeal preferred by the present respondent, wherein the order dated 18-4-2002 passed by the Commissioner of Central Excise, Aurangabad was questioned.
3. The Commissioner of Central Excise & Customs, Aurangabad, vide order dated 18-4-2002 has denied the credit availed by the assessee under Rule 57-Q of the Central Excise Rules, 1944, thereby the duty paid on capital goods under the provisions of Income Tax Act is entitled for the benefit of credit under Rule 57-Q of the Central Excise Rules, 1944. According to the appellant before the CEGAT, the above said act also contravened the express provision of Rule 57T of the Central Excise Rules, 1944.
4. As the Commissioner has imposed penalty in addition to disallowing the credit on the respondent herein, the same was questioned in an appeal. The appeal preferred by the respondent came to be allowed by order dated 1-5-2003, whereby the Appellate Tribunal had observed that the respondent had satisfactorily demonstrated that the respondent had not claimed depreciation for Income-tax purpose on the Modvat portion of the capital goods for the relevant period.
5. While assailing the above referred order passed by the CEGAT, the learned Asstt. Solicitor General has submitted that as the respondent-assessee has filed revised income-tax return and shown deduction of benefit of depreciation to the extent of modvat credit, the benefit of credit by filing revised income tax return is not admissible. For the said purpose the learned Asstt. Solicitor General has placed reliance upon clause (8) of Rule 57R of the Central Excise Rules, 1944. The said Rule reads thus :—
“No-credit of the specified duty paid on the capital goods shall be allowed, if the manufacturer claims depreciation under section 32 of the Income-tax Act, 1961 (43 of 1961), or as revenue expenditure under any other provisions of the said Income-tax Act, in respect of that part of the value of capital goods which represents the amount of specified duty on such capital goods.”
The learned Asstt. Solicitor General further submits that though the Rule in express terms does not provide for acceptance of the revised return, the said Rule needs to be read down to the effect that the credit as is sought for should not have been granted by the CEGAT, based upon the revised return and assessment thereof. The perusal of the order impugned discloses that the CEGAT has dealt with the said issue in detail. The CEGAT has considered all the factual matrix including that of the assessment orders passed by the income-tax authorities. The CEGAT has also given cogent reasons as to why the approach of the Commissioner, Central Excise in disallowing the credit is wrong. In that view of the matter, the contention raised by the learned Asstt. Solicitor General, that the assessment order passed by Income Tax Officer on the revised return submitted by the respondent should not have been accepted by the CEGAT is required to be rejected. That the reading down of the Rule as submitted by the learned Asstt. Solicitor General is also liable to be rejected in the light of reasons given by CEGAT in its order, which is impugned in the petition.
6. As such there is no case made out for interference. The writ petition is rejected. Rule discharged. No order as to costs