TMI Blog2021 (9) TMI 1250X X X X Extracts X X X X X X X X Extracts X X X X ..... on is claimed appellants are barred. It is settled principle in law that when statue provides a manner for doing some things then that is the only manner in which it is to be done and all other manner of doing the same barred. Since the appellants have taken the inadmissible credit, the demand of interest in respect of the inadmissible credit is justified in terms of provisions of. It is now settled law that interest under Finance Act, 1994 is statutory liability put on the person who has unduly withheld the amounts due to government - Further when it is held that appellants by way of making misdeclaration have availed of the modvat credit which was not admissible to them the penalty imposed on them is justified. Appeal dismissed - decided against appellant. - Excise Appeal No. 3036 of 2005 - FINAL ORDER NO. A/86857/2021 - Dated:- 23-9-2021 - MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) AND DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL) Shri Praveer Shetty, Advocate, for the Appellant Shri Karan Adik, Special Counsel, Authorised Representative for the Respondent ORDER This appeal is directed against order in original No 18/CEX/2005 dated 31.05.2005 of Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chartered Accountants Certificate), non furnishing of reasons and coming to conclusion of contravention of a Rule 57 R (5) not even cited in the impugned Show Cause Notice vitiate the impugned Order for violation of fundamental rules of natural justice. The show cause notice and the order are premised upon different provisions of law besides the show cause notice itself being premised upon a Rule which did not even exist during the period for which the contravention is alleged. The Central Excise Law has to be construed strictly and any interpretation of ambiguity must be in favour of the Assessee. Hon ble Calcutta High Court has in the case of Smt Renuka Prasad [2014 SCC Online Cal 8878] held that unless the amended Act is expresses to apply retrospectively ordinarily, it would be deemed to apply prospectively. Order of tribunal remanding the matter is not complied with. In further written submissions filed by the Appellant Counsel on 16.08.2021, following was submitted: On basis of the computation made the appellants did not had any intention of taking any benefit not intended under law towards taxation (Income Tax or Excise). The impugned order disregards th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certificate. Fresh order shall be passed after extending a reasonable opportunity to the appellants of being heard in their defence. 4.3 Matter was remanded by the tribunal to Commissioner with specific direction for consideration of the statement of Mr. Adke in entirety and the Certificate of the Chartered Accountant. Commissioner has in the impugned order observed as follows: I have gone through the statement of Shri Adke, Accounts Officer and balance sheet for the year 1994-95 to 1996-97 and profit and loss account for the year 1994-95 to 1996-97 as directed by CESTAT in their order No A/1042-1043/WZB/04/C-I dtd 11.6.2004. It is true that assessee has availed the cenvat credit as well as depreciation on the capital goods. However, the modvat amount is credited to profit and loss account as income and depreciation is charged on capital assets on written down value basis which means that modvat amount is treated as income and depreciation amount is credited as expenditure and that this accounting practice completely neutralize the effect of depreciation on account of modvat. I do not agree with the assessee s view as per modvat Rule 57 R (5) assessee is not entitle for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below the belt that is the conscience of the matter. Since Commissioner has afforded the opportunity of hearing and waited for four months for any further submissions to be made by the appellants in the matter we do not see any merits in the submissions made by the appellant in respect of violation of principle of natural justice and reject the plea advanced in this respect. 4.6 Appellant have challenged the impugned order with regards to quoting of Rule 57 R (8) in the Show Cause Notice which as per them was incorporated only with effect from March, 1997 for the issues pertaining to the period 1995, 1996 1997, and Commissioner confirming the demand against them by referring to Rule 57 R (5). The Rule 57 R (5) as it was introduced by notification No 4/94-CX (NT) dated 01.03.1994, reads as under: No credit of the specified duty paid on the capital goods shall (5) be allowed, if such manufacturer claims depreciation under section 32 of the Income-tax Act, 1961 (43 of 1961) on that part of value of capital goods which represents the amount of specified duty paid on such capital goods. This rule was amended by notification no 14/96-CX (NT) dated 23.071996 to read as f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCR 418 (AIR 1970 SC 1173) : If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under different power does not vitiate the exercise of the power in question. This is a well settled proposition of law. In this connection reference may usefully be made to the decisions of this court in B. Balakotaiah v. Union of India, (1958) SCR 1052= (AIR 1958 SC 232) ; and Afzal Ullah v. State of U.P., (1964) 4 SCR 1991 - (AIR 1964 SC 264). Hon ble Madras High Court has in case of Carbonink Products [1992 (61) ELT 19 (Mad)] held as follows: 5 . Sec. 11A of the Act was introduced by Act 25 of 1978 and came into force with effect from 17-11-1980. On and from that date, Rule 10 of the Central Excise Rules went out of the Statute Book. Therefore, the reference to Rule 10 of the Rules in the show cause notice, dated 26-11-1980 is clearly a mistake. But in the final order dated 6-6-1981, the 2nd respondent has referred to Sec. 11A of the Act as having replaced Rule 10 of the Rules. Therefore, the mere quoting of a wrong provision of law in the show cause notice will not vitiate or invalidate the proceedings. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ans: The modvat amount is credited to Profit and Loss account as income and depreciation is charged to capital assets on written down value basis. It means that modvat amount is treated as Income and depreciation amt is treated as expenditure. This procedure completely neutralizes the effect of depreciation on account of modvat as a simple accounting contra entry. Hence the question of reversing modvat credit does not arise. Q 5. You have claimed modvat credit as well as depreciation on capital goods. This you have wrongly availed modvat credit on capital goods which has resulted in contravention of provisions of Rule 57 R of Central Excise Rules, 44. What you have to say in the matter? Ans: As we have claimed modvat credit as income and depreciation as expenditure, the practice completely neutralizes the effect of depreciation on account of modvat-as a simple accounting contra entry. Hence we have not contravened the provisions of Rule 57 R of Central Excise Rules, 1944. Q 6. In addition to above, whether you want to add anything more? Ans: We have nothing to add more in the matter. 4.8 From the facts as stated above and available from the records of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile obliging the court to accept documents or transactions, found to be genuine, as such, it does not compel the court to look at a document or a transaction in blinkers, isolated from any context to which it properly belongs. If it can be seen that a document or transaction was intended to have effect as part of a nexus or series of transactions, or as an ingredient of a wider transaction intended as a whole, there is nothing in the doctrine to prevent it being so regarded: to do so is not to prefer form to sub stance, or substance to form. It is the task of the court to ascertain the legal nature of any transaction to which it is sought to attach a tax or a tax consequence and if that emerges from a series or combination of transactions, intended to operate as such, it is that series or combination which may be regarded. For this there is authority in the law relating to income tax and capital gains tax: See Chinn v. Hochstrasser [1981] A.C. 533 and Inland Revenue Com missioners v. Plummer [1980] A.C. 896. For the commissioners considering a particular case it is wrong and an unnecessary self limitation, to regard themselves as precluded by their own finding that documents or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and duty of the courts to determine their nature in law and to relate them to existing legislation. While the techniques of tax avoidance progress and are technically improved, the courts are not obliged to stand still. Such immobility must result either in loss of tax, to the prejudice of other taxpayers or to Parliamentary congestion or (most likely) to both. To force the courts to adopt, in relation to closely integrated situations, a step by step, dissecting, approach which the parties themselves may have negated, would be a denial rather than an affirmation of the true judicial process. In each case the facts must be established, and a legal analysis made: legislation cannot be required or even be desirable to enable the courts to arrive at a conclusion which corresponds with the parties' own intentions. 4.10 In view of the above discussions we cannot agree with the accounting maze that appellants have tried to create for justifying their wrong. 4.11 Ahmedabad bench has in case of Gujarat Alkalies and Chemicals Ltd held as follows: 6. During the relevant period Rule 57R provided that no credit of the specified duty paid on the capital goods shall be allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the capital assets which will include element of duty would not be available. It would then happen that the manufacturer merely because he had made a claim for depreciation would be debarred from taking Modvat Credit. In addition, the Commissioners view that the filing of a revised return is not permissible ignores the Provision 139(5) of the Income Tax Act, 1961. He ought to have considered this provision of the Act and satisfied himself by looking at the relevant income tax returns and other documents whether the claim merited consideration. We are of the view that he should at least do so. While doing so he may also consider the claim that the accounting practice followed by it, effectively washes out claim for depreciation under the Income Tax Act. The counsel for the appellant says that he will make submissions in these aspects supported by necessary evidence within two months from the receipt of this order. The Commissioner shall pass orders in accordance with law. The learned advocate relied on this paragraph to submit that what is required as per law is that the benefit of depreciation should have been enjoyed by the appellant. He submitted that in the first two yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The last paragraph reproduced above clearly shows that the income was assessed under Section 143(3) of the I.T. Act as well as under Section 115 JA of the I.T. Act. 10. In fact the Commissioner in para 4.2 has reproduced the relevant portions of the assessment orders in respect of assessment years 1996-97, 1998-99 and 1999-2000 which show very clearly that in all the years the claim for depreciation made by the appellants was allowed. Therefore in the case of the appellant in this case, not only the appellants claimed depreciation, but the same was also allowed. Therefore, the decision of the Tribunal in para 6 reproduced above would not help the appellants. The case of Pasari Spinning Mills Ltd. Vs. CCE reported in 2002 (141) ELT 172 (Tri. Bang.) would also not be help since in that case it was held that when revised Income Tax Return is filed the same has to be considered along with statutory returns filed earlier and it has to be examined whether depreciation claimed was in fact availed. It is not the case of the appellant here that a revised return was filed. Even in that case the matter was remanded with a direction to the Commissioner to examine the revised return under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore it was his submission that the decision of the Tribunal in that case would be squarely applicable to the case of the appellants in view of the fact that appellants also reversed the depreciation in the subsequent year. Further, since appellants had not claimed Cenvat Credit earlier at all, it cannot be said that they had availed double benefit. We are not impressed with his argument. What the learned advocate has relied upon is reproduction of facts but not the finding. The findings of the Tribunal contained in para 2 is very clear and the Tribunal had observed that a revised return was filed in the subsequent year. Therefore we do not think this decision would help the appellants. 11. Another submission that was made is that in any event depreciation was not claimed in the years in which Modvat Credit was claimed. According to him depreciation was claimed in the years 1997-98, 1998-99 and 1999-2000 whereas Modvat credit was claimed only in the years 2000-2001 and 2001-2002. In the years when modvat was claimed, the amount of modvat was excluded from the value of the plant in the books of account so that no depreciation can be taken in future also. We are not convinced t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he duty, which is not availed as Cenvat credit. As regards the second year, as per Rule 4(2)(b), the appellants availed the Cenvat credit. Cenvat Rule 4(4) makes it clear that Cenvat credit 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. Even though it appears that in the first year, the appellants had violated the rule, actually they have not violated the rules for the simple reason that they had availed depreciation only in respect of that portion of duty on which they had not taken Cenvat credit. In these circumstances, we are of the view that there is no violation of the provisions of Cenvat Credit Rules. Hence, the impugned orders are not sustainable. We allow the appeals with consequential relief, after setting aside the impugned Orders-in- Appeal. 12. We do not think that this decision can be applied to the present case. In this case the appellant claimed full depreciation which was allowed by the Income Tax Authorities in the year in which the plant and machinery was purchased/installed. Once full d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation claimed in the balance sheet of the year 2013-14 and 2014-15. Accordingly, I do not find any infirmity in the findings of the Commissioner (Appeals) where it has been held that the adjudicating authority has grossly erred in interpreting the provisions of Rule 4(4) of CENVAT Credit Rules, 2004. Once the full depreciation was claimed, the respondent could not claim availment of cenvat credit on capital goods. Corrective measures taken by the appellant but in subsequent financial year definitely does not make good irregular availment of CENVAT Credit during the previous year. No doubt the objective /idea of the Rule 4(4) of CENVAT Credit Rules, 2004 is to prevent the double benefit but as already discussed above, the appellant has failed to produce any evidence that double benefit which admittedly was claimed by him, as to actually been reversed for the relevant financial year. 4.13 Since the appellants have taken the inadmissible credit, the demand of interest in respect of the inadmissible credit is justified in terms of provisions of. It is now settled law that interest under Finance Act, 1994 is statutory liability put on the person who has unduly withheld the amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t payment of duty. Finally, by exercising the powers under Section 11AC, penalty was also imposed to the extent of equal amount of the duty which is 100% penalty. 3. Being aggrieved by the aforesaid order passed by the Commissioner of Customs and Central Excise, an appeal was filed before the Tribunal. Before the Tribunal, only one issue was raised by the respondent, which was with regard to the quantum of penalty under Section 11AC of the Central Excise Rules. No other issue was raised and, therefore, we are not required to go into any other aspect of the matter except for deciding as to whether or not the quantum of penalty imposed by the Tribunal is justified or not in the facts and circumstances of the present case. In this connection, we may appropriately refer to the decision of the Division Bench of this Court in Union of India v. Rajasthan Spinning and Weaving Mills and Commissioner of Customs and Central Excise v. Lanco Industries Ltd. reported in 2009 (13) SCC 448 = 2009 (238) E.L.T. 3 (S.C.). In the said judgment, scope and ambit of Section 11-AC was considered and decided by this Court. 4. The learned counsel appearing for the appellant relies on the said ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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