Modvat credit and depreciation bar applies only when depreciation is actually availed, not merely claimed.

Modvat credit on capital goods was not barred under Rule 57-R(5) merely because depreciation had been claimed in the income-tax return; the disqualification arose only if depreciation was actually availed. The High Court read the word "claimed" in the rule as meaning "availed" and accepted that the relevant question was whether the assessee had in fact taken depreciation. As the Tribunal had remanded the matter to verify actual availing of depreciation, that approach was upheld and the Revenue's objection was rejected.

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Issues: Whether Modvat credit on capital goods was barred under Rule 57-R(5) of the erstwhile Central Excise Rules, 1944 merely because depreciation had been claimed in the income-tax return, and whether the Tribunal was right in remanding the matter to verify actual availing of depreciation.

Analysis: The expression "claimed" in the rule was read as meaning "availed". The bar against simultaneous benefit applied only where depreciation had in fact been availed on the capital goods. Since the Tribunal had remanded the matter to ascertain whether depreciation was actually taken or not, no error was found in that approach.

Conclusion: The Revenue's contention was rejected and the remand order of the Tribunal was upheld.

Ratio Decidendi: Under Rule 57-R(5), the disqualification arises only on actual availing of depreciation, not on a mere claim that is later withdrawn or not pursued.

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