TaxTMI 
TaxTMI 
2010 (5) TMI 739
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....urther, the amount of duty of which credit was taken in these years was excluded from the value of the plant in the appellant's books so that no depreciation of the amount of such duty would be available in future. 3. The issue was taken up by the Revenue for investigation and after issue of show cause notice and adjudication process, the Modvat credit availed by the appellants was denied on the following grounds namely GACL had in the Income Tax Returns for the years 1996-97 to 1999-2000 claimed depreciation, there was delay in filing the modvat declaration and credit was taken after four years. In the impugned order Cenvat credit of duty amounting to Rs. 4,62,11,753/- with interest has been demanded and a penalty equal to the amount demanded under Section 11AC has been imposed and personal penalty of Rs. 2,00,000/- has also been imposed on the second appellant namely the Deputy Manager of Excise of the appellant's company. 4. Shri Prakash Shah, learned advocate, on behalf of the appellants presented detailed arguments. He also made written submissions relevant provisions of which are reproduced below for convenience. "3. Submissions : On claiming of depreciation : ....
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....it cannot be denied. 3.5 For the financial years 1997-98, 1998-99, 1999-2000, even going by Section 115JA there was a loss and hence there was no income tax liability and consequently the question of enjoying the benefit of depreciation in calculating the income tax did not arise. 3.6 Without prejudice to the aforesaid submissions, it is submitted that in any event the depreciation was not claimed in the years in which Modvat credit was claimed. While in the years 1997-98, 1998-99 and 1999-2000 depreciation was claimed (though no benefit enjoyed for computation of income tax), no Modvat credit was claimed in these years. In fact in these two years when modvat was claimed, the amount of modvat was excluded from the value of the plant in the books of account so that no depreciation thereon can be taken in future also. Reliance is placed on the following decisions in support of the submission that when in a given year modvat is not taken, there is no bar in that year to claim depreciation. There is no bar to claiming depreciation in a given year for that portion of the duty of which credit is not taken in that year: Suprajit Engineering Ltd. v. CCE - 2007 (212) E.L.T. 394, Ro....
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....e limitation. He relied upon the decision of the Tribunal in the case of Collector of C. Ex., Aurangabad v. Tigrania Metal & Steel Industries reported in 2001 (132) E.L.T. 103 (Tri. - Del.) and Chemfab Alkalis Ltd. v. CCE, Pondicherry reported in 2010 (251) E.L.T. 264 (Tri. - Chennai). Further, he also submitted that what is required as per the rule for becoming ineligible for Modvat credit is the fact that the assessee has claimed depreciation. Whether the depreciation benefit could be utilized or not because of whatever reasons such as company suffering losses or company being assessed under Section 115JA of Income tax Act is not relevant. Further, he also submitted that it is clear from the records that in the assessment order, deprecation benefit had indeed allowed. 6. During the relevant period Rule 57R provided that no credit of the specified duty paid on the capital goods shall be allowed, if the manufacturer claims depreciation under Section 32 of the Income tax Act or as Revenue explained under any other Section of the Income tax Act in respect of that part of the value of the capital goods which represents amount of specified duty of such capital goods. 7. The rule ....
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....urn is not permissible ignores the Provision 139(5) of the Income Tax Act, 1961. He ought to have considered this provision of the Act and satisfied himself by looking at the relevant income tax returns and other documents whether the claim merited consideration. We are of the view that he should at least do so. While doing so he may also consider the claim that the accounting practice followed by it, effectively washes out claim for depreciation under the Income Tax Act. The counsel for the appellant says that he will make submissions in these aspects supported by necessary evidence within two months from the receipt of this order. The Commissioner shall pass orders in accordance with law." The learned advocate relied on this paragraph to submit that what is required as per law is that the benefit of depreciation should have been enjoyed by the appellant. He submitted that in the first two years the appellants were assessed to Income tax under Section 115JA which provides for minimum alternative tax even though the company had suffered losses. It is his submission that while imposing minimum alternative tax, the depreciation claimed is not taken into account for calculating boo....
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....arly that in all the years the claim for depreciation made by the appellants was allowed. Therefore in the case of the appellant in this case, not only the appellants claimed depreciation, but the same was also allowed. Therefore, the decision of the Tribunal in para 6 reproduced above would not help the appellants. The case of Pasari Spinning Mills Ltd. v. CCE reported in 2002 (141) E.L.T. 172 (Tri. - Bang.) would also not be help since in that case it was held that when revised Income Tax Return is filed the same has to be considered along with statutory returns filed earlier and it has to be examined whether depreciation claimed was in fact availed. It is not the case of the appellant here that a revised return was filed. Even in that case the matter was remanded with a direction to the Commissioner to examine the revised return under Income tax Act. Similarly, the decision of the Tribunal in the case of Terna Shetkari SSK v. CCE, reported in 2003 (159) E.L.T. 777 (Tri. - Mum.) would also not be of help in view of the fact that in that case the assessee had proved that depreciation was not claimed by showing the returns and the assessment orders. In that case the appellants had ....
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....ot be said that they had availed double benefit. We are not impressed with his argument. What the learned advocate has relied upon is reproduction of facts but not the finding. The findings of the Tribunal contained in para 2 is very clear and the Tribunal had observed that a revised return was filed in the subsequent year. Therefore we do not think this decision would help the appellants. 11. Another submission that was made is that in any event depreciation was not claimed in the years in which Modvat credit was claimed. According to him depreciation was claimed in the years 1997-98, 1998-99 and 1999-2000 whereas Modvat credit was claimed only in the years 2000-2001 and 2001-2002. In the years when modvat was claimed, the amount of modvat was excluded from the value of the plant in the books of account so that no depreciation can be taken in future also. We are not convinced that this is the correct proportion as per law. The learned advocate relied upon the Tribunal decisions which we will consider. In Suprajit Engineering Ltd. v. CCE reported in 2007 (212) E.L.T. 394 (Tri. - Bang.), the Tribunal had observed in paras 6 and 6.1 as follows : "6. We have gone through the rec....
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....cturer claims as depreciation under Section 32 of the Income Tax Act. Even though it appears that in the first year, the appellants had violated the rule, actually they have not violated the rules for the simple reason that they had availed depreciation only in respect of that portion of duty on which they had not taken Cenvat credit. In these circumstances, we are of the view that there is no violation of the provisions of Cenvat Credit Rules. Hence, the impugned orders are not sustainable. We allow the appeals with consequential relief, after setting aside the impugned Orders-in-Appeal." 12. We do not think that this decision can be applied to the present case. In this case the appellant claimed full depreciation which was allowed by the Income tax Authorities in the year in which the plant and machinery was purchased/installed. Once full depreciation was claimed, the appellant is barred from availing Modvat credit. The decision in Roots Cast Pvt. Ltd. v. CCE reported in 2007 (216) E.L.T. 448 (Tri. -Chennai) relied upon the decision of the Tribunal in the case of Suprajit Engineering Ltd. which we have already discussed above. In any case Hon'ble Karnataka High Court on an app....
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.... more than 2 months, from the date of receipt of the said capital goods, the jurisdictional AC/DC may on sufficient course allow the filing of the declaration". From this rule, it is clear that condonation of only one month and in exceptional cases, condonation of 3 months (maximum) can be allowed by the JAC/DC. In this case, assessee has given the declaration 23 months after the receipt of the capital goods. They have produced no condonation application and suo motu taken benefit of such large amount of Modvat credit. The word "shall" puts a statutory binding to file declaration before receipt of the capital goods. The filing of declaration is therefore not a procedural requirement, but statutory requirement, which has not been followed by the assessee. This has been upheld by various Courts that filing of declaration within time is a statutory requirement and cannot be waived off. I rely upon the following judgments: (i) P. G. Conducts v. Collector of Central Excise - 1996 (81) E.L.T. 336 (T) - "Rule 57G does not only say that a declaration may be filed but lays down "shall file a declaration". The rule also prescribes "to obtain a dated acknowledgement....
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....also goes against the assessees since it is difficult to believe that when such huge quantum of capital goods are received, any company of the size of the appellant in this case would not ensure that the goods have been received under proper documents. All these factors go to show that appellant made a conscious decision not to avail Cenvat credit when goods were received and subsequently changed the opinion but failed to intimate the department or failed to take note of legal consequences. Under these circumstances we find that there was suppression/misdeclaration on the part of the appellants. As regards the visit of the audit party, we find the decisions cited by the learned DR are relevant. In view of the above, we find that the appeal filed by the appellants as regards duty demand and interest thereon has to be rejected and accordingly is rejected. As regards penalty under Section 11AC of Central Excise Act, 1944, we find that Commissioner has not given the option of payment of full duty, interest within thirty days along with penalty to the extent of 25% of duty payable in full settlement as per the provisions of law. Therefore, in line with the decision of the Tribunal in th....