Court allows CENVAT credit as depreciation under Income-tax Act, penalty set aside. Revenue's appeal dismissed.

The court ruled in favor of the assessees, allowing the disallowed CENVAT credit claimed as depreciation under the Income-tax Act. The penalty imposed on the assessees was set aside, and their appeal was granted. The judge determined that the entire credit amount was legitimately reduced from the cost of fixed assets for claiming depreciation under the Income-tax Act, based on the evidence presented. The Revenue's appeal against the dropping of demand of interest was dismissed due to the assessees' eligibility for the credit.

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Issues: Disallowance of CENVAT credit claimed as depreciation under the Income-tax Act; Imposition of penalty on the assessees.

Analysis:
1. The judgment revolves around the disallowance of CENVAT credit to the assessees, who are manufacturers of sugar and molasses, on the grounds that the amount was simultaneously claimed as depreciation under the provisions of the Income-tax Act. The penalty imposed on the assessees is equal to the disallowed amount.

2. The judge, after hearing both sides, found that the assessees had reduced the credit on the Ethanol Plant from the cost of Fixed Assets for the purpose of claiming depreciation under Section 72 of the Income-tax Act, 1961. The Commissioner (Appeals) had a different view, stating that a portion of the amount deducted for depreciation did not pertain to CENVAT credit availed on the machineries. However, based on the balance sheet and Chartered Accountant's Certificate presented by the assessees, the judge was convinced that the entire credit amount was indeed reduced from the cost of fixed assets for claiming depreciation under the Income-tax Act.

3. Consequently, the judge held that the assessees were entitled to the credit amount that was disallowed, set aside the order denying credit and imposing a penalty, and allowed the appeal of the assessees. Any consequential relief due to the assessees was also granted in accordance with the law. The Revenue's appeal against the dropping of demand of interest by the lower appellate authority was dismissed as a consequence of establishing the assessees' eligibility for the credit in question.

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