Modvat credit and depreciation claims require fresh scrutiny where income-tax allowance and revised returns affect eligibility.

Modvat credit was considered in light of an assessee's claim of depreciation under the Income-tax Act. The Tribunal noted that depreciation claimed in a return was not by itself sufficient to deny credit unless depreciation had actually been allowed by the Income-tax Department, and that revised returns and later income-tax orders could require reconsideration. It directed examination of Rule 57R(5) of the Central Excise Rules and the effect of the amendment to Section 43(1) of the Income-tax Act, with an opportunity for the assessee to produce supporting documents. The impugned order was set aside and the matter remanded for de novo consideration.

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Issues: Whether the impugned order denying Modvat credit on the ground that depreciation under the Income-tax Act had been claimed required interference and remand for fresh consideration.

Analysis: The appeal turned on the interaction between the claim of depreciation under the Income-tax Act and the eligibility to Modvat credit. The Tribunal followed its earlier co-ordinate Bench decisions, which had held that the matter required reconsideration where revised returns and subsequent income-tax orders were relevant, and that mere claim of depreciation in the return was not by itself sufficient to deny credit unless depreciation had in fact been allowed by the Income-tax Department. The proper course was to examine the effect of Rule 57R(5) of the Central Excise Rules and the amendment to Section 43(1) of the Income-tax Act, 1961, after giving the assessee an opportunity to produce supporting documents.

Conclusion: The impugned order was set aside and the matter was remanded to the Commissioner (Appeals) for de novo consideration.

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