2010 (5) TMI 739 - AT - Central Excise

Tribunal denies GACL's Modvat credit claim, upholds penalty under Section 11AC.

The Tribunal ruled against GACL, disallowing their claim for Modvat credit due to prior depreciation claims on the same capital goods. GACL's delay in ... MODVAT credit - Hydrogen Peroxide Plant purchased in 1996 - GACL availed 50% of the Modvat Credit in 2000-01 and the balance 50% in 2001-02. GACL did not claim the depreciation in respect of the plant during these two years - denial of credit on the ground that GACL had in the Income Tax Returns for the years 1996-97 to 1999-2000 claimed depreciation, there was delay in filing the modvat declaration and credit was taken after four years - Held that: - 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 depreciation was claimed, the appellant is barred from availing Modvat credit - 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. Extended period of limitation - Held that: - The fact that no declaration was filed immediately after receipt of capital goods and the same was filed after 23 months 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. Issues Involved:1. Claiming of Depreciation and Modvat Credit2. Delay in Filing Modvat Declaration3. Delay in Taking Modvat Credit4. Larger Period of Limitation5. Imposition of PenaltyIssue-wise Detailed Analysis:1. Claiming of Depreciation and Modvat Credit:The central issue was whether GACL could claim Modvat credit on capital goods despite having claimed depreciation under Section 32 of the Income Tax Act for the same goods in previous years. Rule 57R(5) of the Central Excise Rules prohibits claiming Modvat credit if depreciation is claimed on the same capital goods. The Tribunal noted that GACL had claimed depreciation for the years 1996-97 to 1999-2000, and this depreciation was allowed by the Income Tax authorities. Despite GACL's argument that the depreciation did not affect their tax liability due to assessment under Section 115JA (Minimum Alternate Tax), the Tribunal held that the mere claim and allowance of depreciation disqualified GACL from availing Modvat credit. The Tribunal referenced multiple precedents, including Terna Shetkari Sahakari Sakhar Karkhana Ltd. v. CCE and Pasari Spinning Mills Ltd. v. CCE, to support this interpretation.2. Delay in Filing Modvat Declaration:GACL filed the Modvat declaration 23 months after receiving the capital goods, contrary to the requirement to file before receipt or within a maximum of three months in exceptional cases. The Tribunal upheld the Commissioner's view that timely filing of the declaration is a statutory requirement, not merely procedural. The Tribunal cited P.G. Conducts v. Collector of Central Excise and Asian Paints Ltd. v. CCE to emphasize that the declaration must be filed within the prescribed time limits.3. Delay in Taking Modvat Credit:GACL argued that the delay in taking Modvat credit was due to misplacement of duty-paying documents, and upon finding them, they took the credit. The Tribunal did not find this argument convincing, noting that the substantial delay and the large amount of credit involved indicated a conscious decision by GACL not to avail the credit initially. The Tribunal did not consider this issue further, having already determined GACL's ineligibility for Modvat credit due to the depreciation claim.4. Larger Period of Limitation:The Tribunal found that GACL's actions constituted suppression or misdeclaration, justifying the invocation of the extended period of limitation. GACL's belief that they could claim Modvat credit after reversing depreciation was deemed unreasonable. The Tribunal emphasized that the rule clearly required the assessee to choose between claiming depreciation or Modvat credit at the time of receiving the capital goods.5. Imposition of Penalty:The Tribunal upheld the imposition of a penalty under Section 11AC of the Central Excise Act, 1944, but allowed GACL the option to pay 25% of the duty demanded as penalty if paid within thirty days, in line with the Tribunal's decision in Swathi Chemicals. The personal penalty of Rs. 2,00,000/- on the Deputy Manager was set aside, as he was acting in his capacity as an employee, and the penalty on the company was considered sufficient.Conclusion:The Tribunal rejected GACL's appeal regarding the duty demand and interest but provided a conditional relief on the penalty amount. The appeal of the Deputy Manager against the personal penalty was allowed. The judgment reaffirms the strict interpretation of rules regarding simultaneous claims of depreciation and Modvat credit, timely filing of declarations, and adherence to statutory requirements.