Appeal success for Electrical Wire Manufacturer: Modvat/Cenvat credit allowed with depreciation under Income Tax Act

The Tribunal allowed the appeal in favor of the appellant, engaged in manufacturing Electrical PVC Insulated Wire and Cables, regarding the availing of modvat/cenvat credit simultaneously with depreciation under Section 32 of the Income Tax Act, 1961. The Tribunal found that the appellant had not claimed depreciation on the duties paid on the capital goods based on the Chartered Accountant's certificate submitted, and as the Department failed to provide evidence to counter this, the appellant was entitled to the modvat/cenvat benefit. The impugned order demanding cenvat credit, interest, and penalty was set aside.

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Issues:
- Availing modvat/cenvat credit simultaneously with depreciation under Section 32 of the Income Tax Act, 1961.

Analysis:
The case involved the appellant, engaged in manufacturing Electrical PVC Insulated Wire and Cables, who was alleged to have availed modvat/cenvat credit on capital goods while also claiming depreciation under Section 32 of the Income Tax Act, 1961. The Adjudicating Authority confirmed the demand of cenvat credit, imposed interest, and penalty, which was upheld by the Commissioner (Appeals).

Upon examination, it was found that the appellant submitted a Chartered Accountant's certificate to demonstrate that they had not claimed depreciation under Section 32 of the Income Tax Act, 1961 on the modvat/cenvat demand. The certificate clearly stated that the appellant was not claiming depreciation in respect of Central Excise Duty or countervailing duty paid on the capital goods. The lower appellate authority, however, contended that the appellant had claimed depreciation on the value of the capital goods representing the modvat credit.

The Tribunal noted that the Chartered Accountant's Certificate provided by the appellant unequivocally showed that they were not claiming depreciation concerning the duties paid on the capital goods. As the Department did not present any material to refute the certificate, the Tribunal concluded that there was no basis to deny the modvat/cenvat benefit to the appellant. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.

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