The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench held that Unutilized CENVAT in respect of credit inputs or capital goods purchased can be availed for set off against the liability of Excise Duty.
The assessee, M/s. Asta India Pvt. Ltd. appealed against the order of the Commissioner of Income Tax (Appeals) wherein the amount of Rs.2,93,36,409 represents unutilized CENVAT / VAT credit at the end of the relevant financial year and the AO has wrongly invoked provisions of Section 145A of the Act to enhance the value of the closing stock by the amount.
The issue raised in this case was that the CIT (A) erred in law and on facts confirming addition to closing stock by AO of Rs. 2, 93, 36, 409/- unutilized Cenvat credit u/s 145A of the Act.
It was submitted by the assessee that the assessee company is consistently following ‘exclusive method’ of accounting in this regard and thus non- inclusion of excise duty and other duties etc. in the closing stock and correspondingly in purchase as well as sale would not eventually impact the resultant profits.
It was pointed out that in the exclusive method of accounting adopted, the excise duty, VAT, etc. are excluded both from purchase as well as from the sales and closing stock remaining at the end of the financial year and therefore the financial results continue to reflect true and correct picture without any under-reporting of income.
CIT(A) has decided the issue against the assessee on the ground that required reconciliation between the financial accounts as per the inclusive method and exclusive method has not been furnished.
The tribunal headed by the Vice President, Rajpal Yadav held that the CENVAT credit is a credit or an entitlement in respect of Central Excise on inputs purchased in relation to the manufacture of final product. CENVAT credit is incidentally also available in respect of duty paid on capital goods as well such as machinery, plant, spare parts of machinery, etc. It is akin to a credit balance in a bank account that can be adjusted towards the liability of excise duty payable on goods manufactured.
“The CENVAT credit so accumulated in respect of inputs or capital goods purchased can be availed for set off against the liability of Excise Duty arising to the assessee in respect of output of service or manufacture of goods,” the tribunal observed.
Therefore, the tribunal said, “the CIT(A), in our view, ought to have given a reasonable opportunity to the assessee for substantiating its claim that method of accounting followed by the assessee does not impinge upon the provisions of Section 145A of the Act, in tandem with the action of the CIT(A) in A Y 2010-11.”Subscribe Taxscan AdFree to view the Judgment