Cenvat credit on capital goods survives when depreciation is withdrawn in a revised return, removing any double benefit.

Cenvat or Modvat credit on capital goods is not barred merely because depreciation was first claimed under income-tax law, where the assessee later files a revised return withdrawing or reducing the depreciation to exclude the excise duty element. The relevant restriction is aimed at preventing simultaneous double benefit on the same capital goods, and that bar does not survive once the depreciation claim is corrected. On that basis, the credit remains admissible and a penalty based on the disallowance also cannot be sustained.

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Issues: Whether Cenvat credit on capital goods could be denied merely because depreciation had initially been claimed under the income-tax law, where the claim was later withdrawn in a revised return.

Analysis: The credit mechanism under the excise law and the depreciation claim under the income-tax law cannot be availed simultaneously in respect of the same capital goods. However, where the assessee files a revised return and excludes the excise duty element from the depreciation claim, the statutory bar against double does not survive. The earlier Tribunal view relied upon below treated the purpose of the relevant rule as preventing simultaneous benefit and held that once depreciation is surrendered in the revised return, denial of credit is not justified. On that factual basis, the appellate authority found the credit admissible and also held that penalty could not stand.

Conclusion: The credit was rightly allowed and the denial of credit and penalty were not sustainable.

Final Conclusion: The revenue's challenge failed because the assessee had corrected the depreciation claim by revised return, removing the basis for disallowance of the excise credit.

Ratio Decidendi: Cenvat or Modvat credit on capital goods cannot be denied solely because depreciation was initially claimed, if the depreciation claim is subsequently withdrawn or reduced by a revised return so that double benefit is not retained.

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