Cenvat credit and depreciation claim cannot coexist where returns show credit was deducted before depreciation; demand and penalty fail.

Cenvat credit on capital goods was examined against a claim of depreciation under the Income-tax Act. The Income Tax Returns indicated that depreciation was claimed only after reducing the amount of Cenvat credit, so the record did not show simultaneous availment of both benefits. In the absence of evidence of such dual benefit or any intent to evade duty, the demand was held unsustainable. With the substantive allegation failing, the extended period of limitation and equal penalty also could not be sustained, and the matter was decided in favour of the assessee.

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Issues: Whether the appellant had simultaneously availed Cenvat credit on capital goods and depreciation under the Income-tax Act so as to attract denial of credit, invocation of the extended period, and imposition of equal penalty.

Analysis: The Income Tax Returns showed that depreciation was claimed only after deducting the amount of Cenvat credit on the capital goods. On that basis, the evidence did not support a finding of simultaneous availment of depreciation and credit. The records also did not justify an inference of intent to evade duty, and the demand based on the alleged violation was therefore unsustainable. Once the substantive allegation failed, the extended period and the equal penalty also could not stand.

Conclusion: The issue was decided in favour of the assessee. The demand and penalty were not warranted.

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