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2019 (4) TMI 27 - CESTAT CHENNAICENVAT Credit - wrong utilization of CENVAT Credit - Rule 4(2)(a) of the CENVAT Credit Rules, 2004 - whether the confirmation of demand of wrongly utilized 50% Credit in respect of capital goods and interest thereon by the Commissioner is in order and subsequently, whether the waiver of penalty under Section 78 ibid is legally correct? Held that:- Sub-Rule (4) of Rule 4 of the CENVAT Credit Rules, 2004 states that Credit in respect of capital goods shall not be allowed in respect of that value of capital goods which the manufacturer or provider of output service claims depreciation under Section 32 of the Income Tax Act, 1961. Thus, availing credit on capital goods when depreciation was also claimed is against the provisions of law. The Department had sought the assessee to reverse the Credit. The assessee though availed Credit on capital goods, had not utilized it. For this reason, the assessee contended that the availment of Credit was only a book entry and therefore, the demand of interest cannot sustain. The Hon’ble High Court in the case of Commissioner of C.Ex., Madurai Vs. M/s. Strategic Engineering (P) Ltd. [2014 (11) TMI 89 - MADRAS HIGH COURT] had held that the demand of interest or penalty cannot sustain when the credit wrongly taken has been reversed - In the case before us, the appellant has not reversed the wrongly availed Credit. Actually, there would be no meaning in recovering the wrongly availed 50% Credit as the appellant would be eligible for this Credit in the next financial year. It may be correct that they have not utilized the Credit for payment of duty/tax. Time limitation - Held that:- The Credit having been held to be wrongly availed and ordered to be adjusted to the subsequent financial year, the plea of the appellant that the demand of interest alone is hit by limitation cannot sustain. Appeal allowed - decided in favor of appellant.
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