TMI Blog2010 (5) TMI 739X X X X Extracts X X X X X X X X Extracts X X X X ..... also goes against the appellants since it would show that appellant made a conscious decision to avail depreciation and not Cenvat credit when capital goods had been received in the factory - there was suppression/misdeclaration on the part of the appellants - If the appellants deposit the full amount of Cenvat credit demanded with interest and 25% of the duty demanded within thirty days from the date of receipt of this order, they would not be required to pay 75% of the duty towards penalty under Section 11AC of Central Excise Act, 1944. As regards personal penalty of ₹ 2,00,000/- imposed on the Deputy Manager of the company, in view of the fact that the manager was acting only as an employee and this is not a case of clandestine removal and also in view of the fact that penalty has been imposed under Section 11AC of Central Excise Act, 1944 on the appellant-company, we consider that there would be no need to impose any penalty on Shri U.M. Mane, Deputy Manager. Appeal allowed - decided partly in favor of assessee. - E/594-595/2005 - Final Order Nos. A/489-490/2010-WZB/AHD - Dated:- 19-5-2010 - Shri B.S.V. Murthy and Ashok Jindal, JJ. Shri Prakash Shah with J.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7R(5) has been interpreted by the Tribunal and the High Court in the following decisions as having the object of ensuring that a manufacturer does not get benefit of both the capital goods modvat credit as also of depreciation under the provisions of Income Tax : (a) 2001 (138) E.L.T. 1225 - Terna Shetkari Sahakari Sakhar Karkhana Ltd. v. CCE (b) 2002 (141) E.L.T. 172 - Pasari Spinning Mills Ltd. v. CCE (c) 2003 (159) E.L.T. 777 - Tern Shetkari SSK v. CCE. (d) 2008 (224) E.L.T. 391 - CCE v. Maharashtra Electrosmelt Ltd. Thus where the benefit of depreciation under Section 32 of the Income Tax Act for calculating the income tax has not been enjoyed, there can be no bar to the claiming of Modvat Credit. 3.3. In the present case for the years 1996-97 to 1999-2000 when GACL had claimed depreciation, it was assessed to tax under the provisions of minimum alternate tax contained in Section 115JA of the Income Tax Act and for calculation of such tax the depreciation claimed under Section 32 has no bearing. 3.4 The Income Tax Assessment Order for the financial year 1996-97 appears at pages 200 to 212 of the appeal. It would be apparent from page 211 that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents had been misplaced. On the same being traced, the credit was taken. It is settled law that there being no time limit prescribed for the taking of credit, the substantive benefit of credit cannot be denied on the ground of delay in taking the credit as is laid down by the following decisions: (a) Phillips India Ltd. v. CCE - 2005 (191) E.L.T. 1028 (b) Surya Prabha Mills Ltd. v. CCE - 2002 (149) E.L.T. 929. To the same effect is the Board Circular No.l99/33/96-CXdated 23-4-96. On larger period of limitation: 3.9 The appellant bona fide believed that since appellant had not taken the credit in the years in which the depreciation was claimed and vice versa, there was no breach of the relevant provisions of law. Further, it was bona fide believed that since the assessment was done under the provisions of minimum alternative tax under Section 115JA for which benefit of depreciation under Section 30 of the Income Tax is not enjoyed, no double benefit was taken and hence there was no violation of the provisions of law. That such a view was a reasonable one follows from the fact that such a view has not been taken by the Tribunal in the case of Suprajit Engineering Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in 2001 (138) E.L.T. 1225 (Tri. - Mum.), the Tribunal as follows: 6. We do not find it possible for us to say that Modvat credit under Rule 57Q should be disallowed in a case simply because the manufacturer claimed depreciation on the value of the capital goods representing that amount of duty. It appears to us that the object behind Rule 57R is to ensure that the manufacturer does not get benefit both of the capital goods Modvat credit and of the depreciation provision of the Income Tax. He has to avail of either one or the other. The amendment made by the Finance Act, 1988 to Section 43(1) of the Income Tax Act to actual cost illustrates this point. By the amendment explanation 9 has been added below Section 43(1) providing that the actual cost of asset acquired on or after 1-3-1994 included the amount of additional duty of customs or Central Excise duty in respect of which claim of credit has been made and allowed under the Central Excise Rules . This provision appears to us to be a mirror image of sub-rule (5) of Rule 57R on the implication that claim for credit should not only have been made but should have been allowed. The position that claim for depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of income filed for previous year by the assessee. During the assessment the assessee-company has re-submitted the claim of depreciation of Rs. 70,47,52,374/- based on opening WDV as on 1-4-1996 and also addition/deduction made during the F.Y. 1996-97. After verification of addition/deduction made during the year and also allowing depreciation of Rs.l,49,02,364/- @ 25% on interest of Rs.5,96,09,456/- paid for Phospharic Acid and depreciation @12.50% of Rs.1,25,87,914/- on interest of Rs.10,07,03,312/- paid for Hydrogen Peroxide, the claim of depreciation is allowed totaling to Rs. 73,22,42,652/-. 9. Further, when we go through the assessment order it is seen that there are several cases where the assessing officer has clearly disallowed certain claims. Some of the examples are disallowances under Rule 6(D), disallowance under Section 37(2A) disallowance under Rule 6(B), disallowance of portion of guest house expenses etc. Even though income tax was levied under Section 115JA, the assessment order discussed all the issues in detail and worked out the profit and finally in the last paragraph it was observed as follows: The Income Assessed u/s. 143(3) of the I.T. Act, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy assessment order was produced. On this basis the Tribunal held that there was no simultaneous availment. The decision of the Tribunal in Abhishek Synthetics Pvt. Ltd. reported in 2005 (182) E.L.T. 339 (Tri. -Bang.) also does not help since in that case also even though appellants took credit simultaneously, the assessee took remedial action on realizing the mistake and filed a revised Income Tax Return. In the case of Ennar Spinning Mills reported in 2009-TIOL-814-CESTAT-MAD = 2009 (246) E.L.T. 263 (Tri.-Chennai) also, it was taken note of by the Tribunal that even though initially there was simultaneous availment of Modvat credit and depreciation, since revised return was filed in the subsequent year, it cannot be said that assessee availed both benefits simultaneously. However, in this case, the learned advocate relied upon the discussion in para 1 wherein the Tribunal had observed as under: On appeal by the assessee, the Commissioner (Appeals) set aside the denial of credit and imposition of penalty after holding that although credit had been availed and depreciation had been claimed, in the Income Tax Return filed in the subsequent year, they have deducted the duty amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such capital goods in the same financial year if the said capital goods are cleared as such in the same financial year. (b) The balance of Cenvat credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer if the capital goods, other than components, spares and accessories refractories and refractory materials, moulds and dies and goods falling under heading No. 68.02 and sub-heading No. 6801.10 of the First Schedule to the Tariff Act. Are in the possession and use of the manufacturer of final products in such subsequent years. 4(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 claims as depreciation under Section 32 of the Income Tax Act, 1961 (43 of 1961). 6.1 A careful reading of Rule 4 reveals that in respect of capital goods received in a factory at any point of time in a given financial year, only 50% of the duty paid can be taken as Cenvat credit. In the present cases, the appellants had taken only 50% of the duty paid on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 944, the learned advocate submitted that it is settled law that substantive benefit of Modvat credit cannot be denied for delay in filing the Modvat declaration. For this purpose he relied upon the decisions of the Tribunal in the case of J.B.M. Tools Ltd. v. CCE reported in 2002 (144) E.L.T. 561 and Grasim Industries Ltd. reported in 2006 (204) E.L.T. 230. We find that both these decisions related to the period subsequent to 9-2-1999 the date on which sub-rule (13) was inserted under Rule 57(T) of Central Excise Rules, 1944, and this rule vested powers with the Assistant Commissioner to allow credit where he is satisfied that duty has been paid and capital goods have been actually used. This sub-rule was introduced by Notification No. 7/99-C.E.-N.T., dated 9-2-1999. In J.B.M. Tools case, the department proposed to deny the credit on the ground that the declaration was filed on 31-3-99 in respect of machinery acquired much earlier. In the case of Grasim Industries Ltd., declaration was filed on 12-7-2000 beyond the period of three months. In both these cases, the declarations were filed after 9-2-99 and therefore the department was required to examine and consider the declarations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are parallel to that of Rule 57T for capital goods . 14. We find ourselves in agreement with the above observations. 15. Since we have held that the appellant is not eligible for the Cenvat credit, we are not considering the learned advocate s submissions regarding availment of credit belatedly. 16. As regards limitation, we find that appellant s claim that they had a bona fide belief that since the assessment was done under the provisions of MAT under Section 115JA for which depreciation allowance is not taken into account, they could avail Cenvat credit subsequently. The Rule 57R reproduced above is very clear. What is relevant is not the procedure or the process of assessment but the claim made by the assessee. The rule requires the assessee to determine when capital goods are received whether he would like to claim depreciation on the portion of specified duty or avail Cenvat credit. He cannot avail both. Therefore once depreciation was claimed and allowed (in this case), the question of availing Cenvat credit does not arise. If the appellants were to take precautions of consulting the department and seeking advice before reversing the depreciation claim and availing Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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