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2019 (12) TMI 939 - AT - Central ExciseCENVAT Credit - capital goods - Area based exemption availed - N/N. 39/2001-CE dated 31.07.2001 - allegation that the department that they had claimed depreciation of said capital goods under Section 32 of the Income Tax Act, 1961 and they are not taking/availing Cenvat credit in terms of Cenvat Credit Rules, 2004 - compliance with the condition of Rule 4(4) of Cenvat Credit Rules, 2004 or not - HELD THAT:- The appellant have received the capital goods in the year 2005-06; they, though claimed depreciation under Section 32 of Income Tax Act on the said capital goods but the said depreciation was returned by filing a revised Income Tax return in the subsequent Financial Year; Cenvat credit to the tune of ₹ 2,72,769/- is related to service tax paid on the construction of factory building, however, on the said building the appellant had claimed depreciation. The appellant during the relevant Financial Years i.e. 2005-06 when the capital goods were received and in the Financial Year 2006-07 when the depreciation was claimed, the appellant were suffering losses therefore, even though the depreciation was claimed it does not have any effect under the Income Tax. The objective of non-claiming of depreciation is to avoid double benefit i.e. one is the benefit of Cenvat credit and the other is depreciation in Income Tax which reduce the income tax liability. Since the appellant had no profits in relevant Financial Years, even claiming of depreciation did not lead to double benefit - thus, compliance of Rule 4 (4) of Cenvat Credit Rules, 2004 has been made. Denial also on the ground that appellant have taken 100% credit instead of 50%, we find that the year of receipt of capital goods is 2005-06, whereas the credit was taken in October 2007 - HELD THAT:- As per Rule 4(4), it is clear provision that part of taking 50% credit is applicable only if Cenvat credit is availed in the year of receipt of capital goods. As per proviso to sub-rule, the assessee is entitled for the credit of remaining 50% in the subsequent Financial Years. That means, in the subsequent year of receipt of capital goods, the appellant is entitled for 100% Cenvat credit. Therefore, on this ground, the denial of Cenvat credit is not correct and legal. CENVAT Credit - input services - construction services - denial of credit on the ground that appellant have claimed depreciation on building - HELD THAT:- The appellant even though claimed the depreciation on the building which was subsequently returned, the credit was taken in respect of service tax paid on construction of factory building, as submitted by the appellant - Cenvat credit in respect of setting-up of factory building is clearly covered in terms of inclusion clause of definition of Input Services as provided in Rule 2(l) of Cenvat Credit Rules, 2004. Merely because the appellant have availed Cenvat credit showing it of building as capital goods, admissibility of Cenvat credit of service tax paid on construction of building does not get extinguished. It was held in plethora of judgments by this Tribunal that merely because the credit was taken under wrong head, the same is not sufficient to deny the credit. The appellant have rightly availed the Cenvat credit on capital goods and on construction service - Appeal allowed - decided in favor of appellant.
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