2007 (6) TMI 224 - HC - Central Excise

Court confirms remand to verify depreciation on capital goods, Modvat credit not allowed without actual depreciation

The High Court upheld the Tribunal's decision to remand the matter to verify whether the assessee had actually availed depreciation on the capital goods. ... Simultaneous availment of Modvat credit and depreciation - interpretation of the word 'claimed' to mean 'availed' - entitlement to Modvat credit where depreciation has not been actually availed - Rule 57-R(5) - prohibition on simultaneous availing of Modvat credit and depreciation - remand for verification of actual availing of depreciationInterpretation of the word 'claimed' to mean 'availed' - entitlement to Modvat credit where depreciation has not been actually availed - Whether Modvat credit is precluded merely because depreciation was 'claimed' in the return of income, or only when depreciation has been actually availed. - HELD THAT: - The Court held that the term 'claimed' in the relevant rule must be understood as 'availed'. Consequently, the statutory bar on simultaneous availment of Modvat credit and depreciation applies only if the assessee has actually availed depreciation on the capital goods; a mere assertion of having claimed depreciation in a return does not automatically preclude Modvat credit. The Court therefore accepted the Tribunal's reasoning that factual determination is required whether depreciation was in fact availed. [Paras 3]The word 'claimed' means 'availed'; Modvat credit is not automatically barred by a mere claim of depreciation - only actual availing of depreciation precludes Modvat credit.Remand for verification of actual availing of depreciation - simultaneous availment of Modvat credit and depreciation - Whether the Tribunal was justified in remanding the matter for verification of whether depreciation was actually availed by the assessee. - HELD THAT: - Applying the interpretation that only actual availing of depreciation bars Modvat credit, the Court found no fault with the Tribunal's decision to remit the matter for fresh consideration. The remand was appropriate to enable factual verification of whether depreciation had in fact been availed by the assessee in view of the revised return in which depreciation was not claimed. [Paras 4]The Tribunal's remand to verify whether depreciation was actually availed is upheld; the matter requires fresh consideration on that factual point.Final Conclusion: The revenue's appeal is dismissed; no question of law arises from the Tribunal's order and the case is remitted for factual verification whether depreciation was actually availed, as only actual availing precludes Modvat credit. Issues:- Interpretation of Modvat credit and depreciation under the Central Excise Act, 1944.Analysis:The Commissioner of Central Excise filed an appeal challenging the order of the CEST Appellate Tribunal regarding the allowance of Modvat credit when simultaneous availment of Modvat credit on capital goods and depreciation in income-tax was not allowed. The Tribunal remanded the matter for fresh consideration after the respondent No. 1 assessee contended that they had filed a revised return of income wherein depreciation had not been claimed. The revenue argued that once the assessee had claimed depreciation on capital goods, Modvat credit should not be allowed. However, the High Court clarified that the word 'claimed' in the rule should be understood as 'availed.' Therefore, Modvat credit is not allowable only when the assessee has actually availed depreciation on the capital goods. The High Court upheld the Tribunal's decision to remand the matter to verify whether the assessee had actually availed depreciation on the capital goods.The High Court concluded that there was no merit in the appeal filed by the revenue as no question of law arose from the impugned order. Consequently, the appeal was dismissed with no order as to costs.