2007 (6) TMI 224 - HC - Central Excise

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

COMMISSIONER OF C. EX., NAGPUR Versus MAHARASHTRA ELECTROSMELT LTD.

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. ... Cenvat/Modvat credit - Capital goods - Whether the CESTAT is right in allowing of Modvat credit when simultaneous availment of Modvat credit on capital goods and depreciation in income-tax was not allowed in terms of Rule 57-R(5) of the erstwhile Central Excise Rules, 1944 merely on the ground that the depreciation was subsequently not claimed in the revised return? 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.