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Benefit of CENVAT credit cannot be denied to assessee once the depreciation mistakenly claimed under income tax law on same duty component is given up by assessee. Tribunal cannot modify the Order-in-Original to the extent it is not appealed by the department before Commissioner (Appeals).
Facts
Appellant utilised MODVAT credit of duty paid on import of machinery in 1999 and also claimed depreciation in respect of same duty component in their income tax returns for that year and subsequent years. After detection of this mistake in 2002, all income tax returns were revised but for one year in which the time limit for filing of revised return had expired. Therefore, in the said year, a rectification application was made u/s. 154 of the Income Tax Act along with revised computation and depreciation claim was given up. Income Tax Department accepted the revised return for other years, but rejected the rectification application. The attempt of filing a rectification application was allowed by Commissioner Income Tax (Appeals) on 30/04/2005, but on further appeals by aggrieved parties, it failed upto the Supreme Court. In the proceedings under central excise law, show cause notice was issued denying claim of MODVAT credit. However, in the Order-in-Original, it was held that they would be eligible for credit after the date of acceptance of withdrawal of depreciation by the department i.e. filing of revised return or as the case may be date of order of Commissioner Income Tax (Appeals) accepting the claim for rectification application u/s. 154 (30/04/2005) and ordered recovery of credit accordingly. No appeal was preferred by the Excise Authorities against the said Order-in-Original. However, against the recovery of MODVAT credit, appellant filed the appeal. The appeal was allowed by Commissioner (Appeals), but department preferred an appeal before Tribunal. The Tribunal allowed the department’s appeal and restored the Order-in-Original and also modified the portion by which assessee was held as entitled to CENVAT credit from 30/04/2005. The Appellant preferred appeal before High Court raising a substantial question of law as to whether the Tribunal was justified in restoring Order-In-Original directing recovery of MODVAT credit by disregarding the admitted fact that claim for depreciation was given up under income tax law.
Held
Hon’ble High Court observed that the appellant started up with a claim for two benefits and ended up losing both the benefits. It is only after the detection by the department, an attempt was made to withdraw one of the two benefits. The mistake was explained on the ground that its head office and factory are located in different States. It was held that once the claim for depreciation under Income Tax Act was given up, the benefit of MODVAT credit cannot be denied. It further held that order of Tribunal modifying the Order-in-Original to the extent it allowed credit after 30/04/2005 is also not correct as the said order was not appealed against by the department before Commissioner (Appeals). As regards the year in which appellant gave up depreciation but lost legal battle with Income Tax Department, the Original Authority is directed to work out the amount of depreciation given up for the purpose of finding out the extent to which benefit is available.
