2011 (1) TMI 544 - AT - Central Excise

Cenvat credit - Benefit of depreciation - Since the appellants had taken the benefit of cenvat credit on capital goods and also depreciation under the Income-Tax Act - It is clearly in contravention of Rule 4(4) of Cenvat Credit Rules 2002 - Held that - they had claimed the benefit of depreciation under income-tax Act for the Financial Years 2001-02 and 2002-03. As soon as the department pointed out the mistake they filed revised income-tax returns for the Financial Year 2003-04 i.e. Assessment Year 2004-05 and foregone the benefit already availed by them - Thus denial of the credit by the original authority is not justified. He relies on the decision of the Tribunal in the case of Prasad Machinery Pvt. Ltd. v. CCE Ahmedabad 2007 -TMI - 2684 - CESTAT AHMEDABAD . Demanded in terms of Section 11A - Limitation - Section 11A provides for issue of show cause notice demanding duty short-levied non-levy or short paid. In certain situations the show cause notice can be issued demanding duty for a period of five years from the relevant date as defined in the Central Excise Act - Learned consultant as not been able to show as to how the date of audit when the department came to know of the irregularity becomes relevant date in the light of the above provision defining the relevant date under Section 11A - Decided against the assessee.

Summary

Issues:
1. Availment of cenvat credit on capital goods in violation of Rule 4(4) of Cenvat Credit Rules, 2002.
2. Denial of credit by the original authority and confirmation of demand, interest, and penalty by the Commissioner (Appeals).
3. Claim of time-barred demand and reliance on case laws regarding the interpretation of the relevant date for issuing show cause notice under Section 11A of Central Excise Act, 1944.

Analysis:
1. The appellant availed cenvat credit on capital goods during the financial years 2001-02 and 2002-03, totaling Rs. 2,77,439, which was in violation of Rule 4(4) of Cenvat Credit Rules, 2002. The irregularity was noticed during a departmental audit in December 2004. The appellants subsequently filed revised income-tax returns for the Financial Year 2003-04, forgoing the benefit already availed in the earlier years. The original authority disallowed the credit, leading to the appeal against the order.

2. The learned consultant argued that the denial of credit was unjustified as it was due to oversight, and they rectified the mistake by amending the income-tax returns for the subsequent year. However, the Tribunal found that the eligibility of credit is subject to not availing the benefit of depreciation under the Income-tax Act. Allowing credit after forgoing the benefit retroactively would nullify the violation during the relevant years. The Tribunal differentiated this case from a precedent where the revised return was filed for the concerned financial year itself.

3. Regarding the time-barred demand, the Tribunal examined the relevant date for issuing a show cause notice under Section 11A of the Central Excise Act, 1944. The learned consultant's argument that the date of audit should be considered as the relevant date was rejected. The Tribunal emphasized that the relevant date for invoking the extended period should be based on the obligations of the assesses, not the date of detection by the department. The decisions cited by the consultant did not discuss the definition of the relevant date in the context of issuing show cause notices under Section 11A, making them inapplicable as binding precedent.

In conclusion, the Tribunal rejected the appeal, finding no merit in the arguments presented. The denial of cenvat credit was upheld, considering the violation of rules and the retrospective amendment of income-tax returns. The Tribunal also clarified the interpretation of the relevant date for issuing show cause notices, emphasizing the importance of assesses' obligations in determining the timeline for demands under the Central Excise Act.