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December 2011

Assessee availed credit relating to capital goods used in provision of service — Revenue claimed that the credit was availed in excess of 20% of the tax paid every month — Application of restriction held erroneous — Credit allowed by way of a remand.

By Puloma Dalal, Jayesh Gogri
Chartered Accountants
Reading Time 1 mins
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Facts:

The appellant availed credit of duty on capital goods for which a demand was raised to the tune of over twelve crore including penalty u/s.78. The demand was raised on the grounds that the appellant availed credit in excess of 20% of the tax paid every month.

Held:

It was clear that the Commissioner erroneously applied the restrictions mentioned under Rule 6(3) to the credit used towards capital goods. The restriction under the said Rule is in respect of credit utilised on inputs and input services. Credit utilised by the assesse pertained to capital goods. The claim of the appellant was therefore held valid and the order was remanded to the Commissioner for fresh proceedings.

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