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2015 (3) TMI 911 - CESTAT CHENNAI

2015 (3) TMI 911 - CESTAT CHENNAI - TMI - Modvat / Cenvat credit - Capital goods - Respondents have also claimed depreciation under Section 32 of Income Tax Act - Lower appellate authority has not only set aside the interest and 11AC penalty but also set aside adjudication order allowing credit from 30.5.2004 and held that respondents are entitled to the modvat credit from the date of taking credit w.e.f 30.6.99 - Held that:- no credit shall be allowed, if the manufacturer claims depreciation un .....

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o doubt that the respondents succeeded in their appeal before CIT (A), but the fact remains established from the above that respondents suppressed the facts before the department on availing simultaneous benefit. The respondent's plea of communication lapse is beyond acceptable. - The deliberate misdeclaration and willful suppression of facts by the respondents was established by the adjudicating authority. The undisputed fact that, but for the Departmental officers detecting the case on 5.3 .....

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No. E/306/2005, E/CO/9/2005 - Dated:- 25-3-2015 - Hon ble Shri R. Periasami,J. For the Appellant : Shri M. Rammohan Rao, DC (AR) For the Respondent : Shri C. Saravanan, Advocate ORDER This is an appeal filed by Revenue against Order-in-Appeal No.3/2005 (M-IV) dt. 22.1.2005 passed by Commissioner (Appeals), Chennai. 2. The brief facts of the case are that M/s.Lumax Samlip Industries Ltd., (LSIL, for short), the respondent herein are the manufacturers of "Head Lamp Assembly" and Motor v .....

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der Section 32 of the Income Tax Act, 1961, therefore in terms of sub-rule (8) of Rule 57R of Central Excise Rules, they are not eligible to avail the capital goods credit. Show cause notice dt. 28.5.2004 was issued to the respondent for recovery of ineligible modvat credit under Rule 57U (2) read with Section 11A along with interest and penalties under Rule 57U read with Section 11AC and Rule 173Q of Central Excise Rules. The adjudicating authority vide OIO No.15/2004 dt. 28.9.2004 ordered reco .....

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nt preferred appeal and the Commissioner (Appeals) vide impugned order dt. 22.1.2005 set aside the OIO dt. 28.9.2004 and restored the credit w.e.f. 30.6.1999 i.e from the date of availing credit and set aside both interest and both the penalties. The said OIA was reviewed by the Department and the Revenue filed appeal before Tribunal. 4. The Division Bench of the Tribunal vide Final order No.1702/2009 dt. 12.11.2009 has rejected the department's appeal. The Revenue filed ROM application and .....

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a wrong premise. It is an error on the face of record and therefore, it is necessary to rectify the mistake on final order passed by the Tribunal. Accordingly, we recall the final order dt. 12.11.2009 for hearing to rectify the mistake therein." 5. Heard both sides. 6. The Ld. A.R for the Revenue reiterated the grounds of appeal and findings of the original adjudication order. He submits that the Commissioner (Appeals) has erred in restoring the credit from the date of taking credit and set .....

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ation. Only after the investigation by the department on 5.3.2002, the respondent has filed revised IT return on 27.3.2002. He further submits that revised return was rejected by the Income Tax Authority and on appeal the Commissioner of Income Tax (Appeals) allowed their appeal only on 31.5.2004. But for the Department, their deliberate intention to avail both credit and depreciation could not have come to notice. The respondents enjoyed the credit and therefore there is clear suppression of fa .....

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9;ble Delhi High Court had dismissed the appeal. The respondent again preferred S.L.P before the Apex Court against the Delhi High Court's order and the Hon'ble Supreme Court has dismissed the SLP on 6.8.2012. He submits that dismissal of respondent's application attained finality and depreciation availed under Income Tax Act stands confirmed. Therefore, the respondents are not eligible for modvat credit on the capital goods and also liable for interest and penalty and he relied on t .....

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appeal and submits that their manufacturing unit is located at Sriperumbudur at Chennai and their Head office is located at Delhi. Due to communication gap between the manufacturing unit and their head office they were not aware of the depreciation claimed as the Income Tax return was filed from their Headoffice, Delhi. He further submits that they have filed appeal before Commissioner (Appeals) only against the interest and penalty. Revenue has not filed any appeal against the adjudication ord .....

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A) order. He further submits that if at all there is a case, it is for the IT department who should have denied the depreciation. The case law relied by Revenue has not attained finality. He relied on the following case laws :- 1) Terna Shetkari Sahakari Sakhar Karkhana Ltd. Vs CCE Aurangabad 2001 (138) ELT 1225 (Tri.-Mum.) 2) Chandrapur Magnet Wires (P) Ltd. Vs CCE Nagpur 1996 (81) ELT 3 (SC) 3) Alcobex Metals Ltd. Vs CCE Jaipur-II 2003 (161) ELT 350 (Tri.-Del.) 4) K.V. Mills Vs CCE Coimbatore .....

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is clear suppression of facts. He also submits that case laws relied by respondent's advocate in the case of Dai Ichi Karkaria Ltd. (supra) is not applicable. He submits that only in the order-in-appeal, Commissioner of Central Excise has crystallized the depreciation issue. Therefore, he pleaded for setting aside the impugned order. 10. I have carefully considered the submissions and also perused the documents, the written synopsis, and list of dates and events submitted by the respondents .....

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ailed on the capital goods wherein the respondents have also claimed depreciation under Section 32 of Income Tax Act. The period involved in this case relates to June'99. The Commissioner (Appeals) has set aside the entire order only on the ground that respondents have succeeded their appeal before Commissioner of Income Tax (Appeals). The relevant paragraph of the impugned order is reproduced as under :- "4.2 It is also seen from the records that the lower authority has restored the cr .....

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tions, amendments, additions, deletions made in the revised returns and approved by the department dates back to the applicable financial year for which the returns were filed and status quo ante restored vis a vis the original returns. I also find that the Commissioner of Income Tax (Appeals), vide her Order dated 31.5.2004 has interalia held that the intimations submitted under Section 154 of the Act by the Appellant on 28.03.2002 was based on the wrong computations of depreciation to that ext .....

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if the plea for withdrawal of their depreciation claim had not been allowed. Viewed in this context, it is evident that, if in addition to this increased Income Tax liability, if the corresponding credit is denied abinitio, it would result in a double jeopardy of sorts for the Appellants." In this circumstances, I have no hesitation in holding that the Appellant is entitled to avail of the impugned Modvat credit from the date of taking the credit i. e 30.06.99" As evident from the abo .....

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not to be allowed or denied in certain circumstances. The Sub Rule (8) of Rule 57R which is relevant for the present appeal is reproduced as under :- "(8) No credit of the specified duty paid on the capital goods shall be allowed, if the manufacturer, claims depreciation under section 32 of the Income-tax Act, 1961 (43 of 1961), or as revenue expenditure under any other provisions of the said Income-tax Act, in respect of that part of the value of capital goods which represents the amount .....

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his factory. One of the declarations under Rule 57T stipulates that they shall not claim depreciation under Section 32 of the Income Tax Act. 13. With the background of the above rules and on perusal of records, I find that in the instant case, the respondent had filed T1 declaration on 26.11.98 under Rule 57T of Central Excise Rules intimating the Department that they intend to avail credit of the duty paid on capital goods. They have filed T2 declaration on 27.5.99 before A.C Division and decl .....

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vailed credit of duty paid on the capital goods and also claimed depreciation under Section 32 of the Income Tax Act. 14. It is an admitted fact that only on 26.3.2002 i.e. after the case was detected by the department, they decided to file an application before Income tax authorities under Section 154 of the IT Act. I find that the said declaration filed under Section 154 of the IT Act was initially dismissed by the Asst. Commissioner of Income Tax vide order dt. 9.1.2004, it is relevant to rep .....

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ssary rectification entry was duly passed in the books of accounts of the company in the year ending 31.3.2000. If this was the case, then why did the assessee not file the petition u/s 154 till 28.3.2003?. This itself creates a doubt about the bonafide intention of the assessee. (ii) The rectification petition was filed only after the offence case was registered against the assessee company by the office of the Commissioner of Central Excise, Chennai-II. By getting its wrong claim rectified, th .....

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ence case was registered by Central Excise authorities only to circumvent the provisions law they resorted this method. No doubt that the respondents succeeded in their appeal before CIT (A), but the fact remains established from the above that respondents suppressed the facts before the department on availing simultaneous benefit. The respondent's plea of communication lapse is beyond acceptable. The CIT (A) order referred above has been taken into consideration by the adjudicating authorit .....

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emand and imposition of penalty under Section 11AC. 16. Whereas I find that the Commissioner (Appeals) in the impugned order has not brought out any valid reasons against findings of OIO and set aside both interest and penalty under Section 11AC and other penalties by referring to CIT (A)'s above order and by citing Tribunal decision. The deliberate misdeclaration and willful suppression of facts by the respondents was established by the adjudicating authority. The undisputed fact that, but .....

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o be restored. 17. In addition to the above findings discussed in the preceding paragraphs, I find that the documents available in the appeal file and submissions made by both revenue and respondents reveals the subsequent proceedings against the said Commissioner Income Tax (Appeals) order dt.31.5.2004. There are appellate Tribunal decisions and higher Judicial orders pronounced after the impugned order passed by LAA and during the pendency of this present revenue appeal and this leads to the f .....

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iled appeal before Income Tax Appellate Tribunal (ITA), Delhi. The Hon.ITAT vide order dt.20.10.2006 has allowed the revenue appeal and set aside the said CIT (A) order. It is seen that the respondent has filed an appeal under Section 260A of the Income Tax Act, 1961 before the Hon'ble High Court of Delhi against the above ITAT's order. The Hon'ble High Court of Delhi dismissed their appeal vide order in ITA No.771/2007 dt. 29.10.2010. The respondent again preferred SLP before the Ho .....

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e, considering the subsequent ITAT decision and the judicial proceedings before Hon'ble Delhi High Court and Hon'ble Supreme Court, it is settled law that respondent's claim depreciation under Section 32 of the Income Tax Act stands vindicated after the apex court judgment. 19. It is pertinent to state that this fact was also recorded in Division Bench of this Tribunal's MISC Order No.460/2009 dt. 19.8.2009 while allowing the early hearing application filed by the respondents. Th .....

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ot; This clearly shows that the respondents themselves brought on record before this Tribunal that the respondents had filed appeal before the Delhi High Court. 20. Therefore, taking into account above facts and circumstances of this case, it is evident that respondents have filed T1 and T2 declaration before the Central Excise authorities and declared that they shall not claim any depreciation under Section 32 of the Act, whereas the Hon.Apex Court in their order dt. 6.8.2012 settled the issue .....

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of CCE & CC Aurangabad Vs Bageshwari Sahakari Sakhar Karkhana Ltd. (supra) on the identical issue wherein the assessee claimed depreciation as well as availed credit has held that penalty under Section 11AC is imposable. The relevant paragraphs of the said judgement is reproduced as under :- "4. One peculiar circumstance in this? appeal needs to be recorded. The show cause notice did allege the assessee of suppression of facts and wilful misstatement. It is alleged that the declaration .....

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as one under Section 32 of the Income-tax Act, 1961. The declaration in such circumstances must be said to be a misstatement aimed at evasion of the duty and penalty was, therefore, imposable. Unfortunately, none of the three adjudicating authorities so far have discussed this angle and hence, in order to ascertain that requirement of Section 11AC is fulfilled, we have considered certain facts in the matter. 5. In the circumstances, the appeal is? allowed. We hold that the respondent-assessee is .....

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nal in the case of Gujarat Alkalies & Chemicals Ltd. Vs CCE Vadodara-I (supra), in an identical issue of capital goods credit, has also upheld the demand where the assessee has availed depreciation and also upheld the Section 11AC penalty. 21. It is pertinent to place on record that CIT (A)'s order dt. 31.5.2004 was set aside by ITAT on 20.10.2006 and the Hon'ble Delhi High Court also dismissed their appeal on 29.10.2010 and the SLP was dismissed by the apex court on 6.8.2012. The re .....

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