By TIOL News Service

MUMBAI, FEB 09, 2017: THE appellant availed CENVAT credit in respect of Input service relating to erection and installation of capital goods. The service on which credit is taken was capitalized and depreciation was claimed.

It is the contention of the department that since the value of services including service tax was capitalized, the CENVAT Credit in terms of Rule 4(4) of CCR, 2004 is not admissible.

The lower authorities upheld the demand and, therefore, the appellant is before the CESTAT.

The appellant sought an adjournment.

The AR while reiterating the findings of the lower authority submitted that the appellant had availed double benefit and this was not permissible in law.

The Bench extracted rule 4(4) of the CCR, 2004 which reads -

Rule 4. Conditions for allowing CENVAT credit.

(4) The CENVAT credit in respect of capital goods shall not be allowed in respect of that part of the value of capital goods which represents the amount of duty on such capital goods, which the manufacturer or provider of output service claims as depreciation under section 32 of the Income-tax Act, 1961 (43 of 1961).

And observed thus -

"…On going through the above rule, it is clear that restriction in availing credit if the depreciation availed, is only in respect of capital goods and not on services. Admittedly the Cenvat credit involved in the present case is of service tax paid on the services even though it is related to erection and installation of capital goods. Since there is no explicit provisions to restrict the Cenvat credit on input services if the assessee claims depreciation, the cenvat credit cannot be denied, therefore the impugned order is set aside…."

The Appeal was allowed.

(See 2017-TIOL-366-CESTAT-MUM)