TaxTMI 
TaxTMI 
2021 (9) TMI 1250
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....ntral Excise Act, 1944 on the amount confirmed. The Assistant Commissioner, Central Excise & Customs, Nashik-II Division is directed to work out the interest amount and recover the same along with duty and penalty." 2.1 Appellant had been proceeded against by a Show Cause Notice dated 31.08.1999 for irregular availment of Rs. 1,14,67,428 as MODVAT credit on capital goods against which they have claimed depreciation on the invoice value under Section 32 of Income Tax Act. 2.2 This show cause notice was followed by a further demand for Rs. 26,75,587 on 03.09.1999. 2.2.1 Both the show cause notices were disposed of by Order-in- Original no. 36 & 37/CEX/2000 dated 25th October 2000. These orders were challenged before the Tribunal in appeal no. E/277- 278/2001-Mum. Tribunal after consideration of the matter remanded the matter back to adjudicating authority by its Order No A/1042-1043/WZB/2004/C-I dated 11.06.2004 for de novo adjudication. 2.3 Pursuant to this remand, matter has been re-adjudicated by Commissioner by the impugned order. Aggrieved by the impugned order appellants have preferred this appeal. 2.4 The application for substitutio....
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....is covered in the favour of revenue by following orders: • Gujarat Alkalies & Chemicals Ltd [2010-TIOL-1812- CESTAT-AHM] • Surya Alumex [2021-TIOL-319-CESTAT-DEL] 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. 4.2 While remanding the matter tribunal has observed as follows: "3. We have heard both sides. The Commissioner has relied upon the statement of Shri Dattatraya Pandharna Adke, Senior Accounts Manager of the Assessee, wherein he has admitted that they have claimed modvat credit on capital goods as well as depreciation on that part of the value of the said capital goods which represents the amount of Central Excise duty paid on such capital goods. The appellants draw our attention to the further portion of Mr Adke's statement wherein he has stated that the modvat amount is credited to Profit and Loss Account as Income and depreciation is charged on capital assets on written down value basis which means that modvat amount is treated as income and depreciation amount is credited as expenditure and that this practice completely neutralize the e....
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....n under section of Income Tax Act, 1961, in respect of that part of the value of capital goods which represents the amount of specified duty on such capital goods. Further I also find that the assessee has also declared in their declaration filed from time to time under Rule 57 T of the Central Excise Rules, that they will not claim depreciation on that part of the value of capital goods, in view of the above facts I find that contraventions against the assessee are proved." 4.4 From the observations made in the impugned order we are of the view that the directions of the CESTAT while remanding the matter has been complied with. Commissioner has considered the statement of Shri Adke and has arrived at his findings. 4.5 Commissioner has also recorded in the impugned order about the personal hearing afforded by him to the appellant on 04.01.2005, which was attended by Shri R B Datar, Chairman and Managing Director of the Company, Shri J S Tambe, Store Executive and Shri Umapathy D. Commissioner records that during the hearing the Chairman made his submissions in the matter on that date. No further submissions were made by the appellant till the date of impugned orde....
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.... (NT) dated 01.03.1997 reads as follows: "(8) 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, 1961 (43 of 1961), or as revenue expenditure under any other provisions of the said Income-tax Act, in respect of that part of the value of capital goods which represents the amount of specified duty on such capital goods." From the plain reading of the said Rules, it is noted that Rule 57 R (8) as per the notification No 6/97-CX (NT) was pari materia with the Rule 57 R (5) as it existed earlier. Since both the Rules were in pari materia it is not the case for the retrospective operation as claimed by the appellant, but at the best can be said to quoting of wrong sub-rule number in the Show Cause Notice. In such a situation the decision of Hon'ble Calcutta High Court referred by the appellant counsel would not be applicable. Hon'ble Supreme Court has in case of N B Sanjana [1978 (2) ELT J 399 (SC)] laid down the law as follows: "14. We are not inclined to accept the contention of Dr. Syed Mohammad that the expression 'levy' in Rule 10 means actual collection of some amount.....
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.... I am looking after all the Central Excise matters of our company. I am familiar with Central Excise Law and procedure particularly pertaining to availment of modvat credit on inputs and capital goods. Our company procures inputs required for manufacture of our final products viz Earth Leakage Circuit Breaker, Miniature Circuit Breaker etc. We also procure plant and machinery for manufacture of final product and also avail modvat credit in respect of capital goods. We file declaration as per the provisions of Rule 57T and Rule 57Q from time to time. I give answer to your questions as under: Q 1. You had filed declaration/ intimation from time to time for declaring Capital Goods to be procured and Capital Goods received buy your factory? In the declaration/ intimations you had declared that you will not claim the depreciation under Section 32 of the Income Tax Act, 1961, on that part of value of the said capital goods which represent the amount of specified duty paid on such capital goods. Is it true? Ans: Yes, it is true that we have declared that we will not claim depreciation on capital goods, which represents the amount of specified duty paid on capital goods. Q 2. As p....
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....he value of the capital goods which represented the specified duty. Having claimed the depreciation under Section 32 of the Income Tax Act, 1962 of the value representing the specified duty, appellants are not allowed the modvat credit of that amount. Appellants have sought to justify their action by taking recourse to the accounting practice. When the rules clearly provide that amount claimed as modvat credit should not be part of the value on which depreciation is claimed appellants are barred. It is settled principle in law that when statue provides a manner for doing some things then that is the only manner in which it is to be done and all other manner of doing the same barred. In case of Mahavir Prasad [(1999) 8 SCC 266] Hon'ble Supreme Court stated- "It is a well settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner." 4.9 While reading through the statement and the arguments advanced on this aspect we are reminded of the observations made by Justice O Chinappa Reddy in case of McDowell [1985 SCC (3) 230] "The march of the law against tax avoidance scheme....
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.... a rejection of accepted and established canons and that, if so general an attack upon schemes for tax avoidance as the revenue suggest is to be validated, that is a matter for Parliament. The function of the courts is to apply strictly and correctly the legislation which Parliament has enacted: if the taxpayer escapes the charge, it is for Parliament, if it disapproves of the result, to close the gap. General principles against tax avoidance are, it was claimed, for Parliament to lay down. We were referred, at our request, in this connection to the various enactments by which Parliament has from time to time tried to counter tax avoidance by some general prescription. The most extensive of these is Income and Corporation Taxes Act 1970, sections 460 et seq. We were referred also to well known sections in Australia and New Zealand (Australia, Income Tax Assessment Act 1936 -51, section 260, New Zealand, Income Tax Act 1976, section 99, replacing earlier legislation). Further it was pointed out that the capital gains tax legislation (starting with the Finance Act 1965) does not contain any provision corresponding to section 460. The intention should be deduced therefore, it was said....
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....the learned advocate relied upon several decisions of the Tribunal and submitted that where the benefit of depreciation under Section 32 of the Income Tax Act for calculating the income tax has not been enjoyed, there can be no bar to the claiming of Modvat Credit. 8. In Terna Shetkari Sahakari Sakhar Karkhana Ltd. Vs. CCE reported in 2001 (138) ELT 1225 (Tri. Mum.), the Tribunal as follows: "6. We do not find it possible for us to say that Modvat credit under Rule 57Q should be disallowed in a case simply because the manufacturer claimed depreciation on the value of the capital goods representing that amount of duty. It appears to us that the object behind Rule 57R is to ensure that the manufacturer does not get benefit both of the capital goods Modvat credit and of the depreciation provision of the Income Tax. He has to avail of either one or the other. The amendment made by the Finance Act, 1988 to Section 43(1) of the Income Tax Act to actual cost illustrates this point. By the amendment explanation 9 has been added below Section 43(1) providing that the actual cost of asset acquired on or after 1-3-1994 included the amount of additional duty of customs or Central E....
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....be pertinent to reproduce the relevant portion of the assessment order for the assessment year 1997-98 in respect of depreciation. "13. Claim for depreciation: The Assessee Company had claimed depreciation of Rs. 69,18,30,093/- in computation of income filed along with return of income which was based on W.D.V. as per return of income filed for previous year by the assessee. During the assessment the assessee company has re-submitted the claim of depreciation of Rs. 70,47,52,374/- based on opening WDV as on 01.04.1996 and also addition/deduction made during the F.Y. 1996-97. After verification of addition/deduction made during the year and also allowing depreciation of Rs. 1,49,02,364/- @ 25% on interest of Rs. 5,96,09,456/- paid for Phospharic Acid and depreciation @12.50% of Rs. 1,25,87,914/- on interest of Rs. 10,07,03,312/- paid for Hydrogen Peroxide, the claim of depreciation is allowed totaling to Rs. 73,22,42,652/-." 9. Further, when we go through the assessment order it is seen that there are several cases where the assessing officer has clearly disallowed certain claims. Some of the examples are disallowances under Rule 6(D), disallowance under Section 37....
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....ctrosmelt Ltd. reported in 2008 (224) ELT 391 (Tri. Mum.) where also, the assessee has filed a revised return where depreciation was not claimed. In the case of Sri Vishnu Shankar Mill Ltd. Vs. CCE reported in 2007 (208) ELT 194, the income tax authorities had detected Cenvat Credit value of goods for calculating taxable income and certify assessment order was produced. On this basis the Tribunal held that there was no simultaneous availment. The decision of the Tribunal in Abhishek Synthetic Pvt. Ltd. reported in 2005 (182) ELT 339 (Tri. Bang.) also does not help since in that case also even though appellants took credit simultaneously, the assessee took remedial action on realizing the mistake and filed a revised Income Tax Return. In the case of Ennar Spinning Mills reported in (2009-TIOL-814- CESTAT-MAD) also, it was taken note of by the Tribunal that even though initially there was simultaneous availment of Modvat Credit and depreciation, since revised return was filed in the subsequent year, it cannot be said that assessee availed both benefits simultaneously. However, in this case, the learned advocate relied upon the discussion in para 1 wherein the Tribunal had observed as....
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....capital goods received in a factory at any point of time in a given financial year shall be taken only for an amount not exceeding fifty percent of the duty paid on such capital goods in the same financial year: Provided that the Cenvat credit in respect of capital goods shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year if the said capital goods are cleared as such in the same financial year. (b) The balance of Cenvat credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer if the capital goods, other than components, spares and accessories [ refractories and refractory materials, moulds and dies] and goods falling under heading No.68.02 and subheading No.6801.10 of the First Schedule to the Tariff Act are in the possession and use of the manufacturer of final products in such subsequent years. 4(4): The Cenvat credit in respect of capital goods shall not be allowed in respect of that part of the value of capital goods which represents the amount of duty on such capital goods, which the manufacturer claims as depreciation under....
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....d that the Tribunal committed a serious error in not considering sub-rule (4) of Rule 4 of Cenvat Credit Rules." 4.12 In similar set of facts Delhi bench has vide its order in case of Surya Alumex relied upon by the Special counsel held as follows: "5. After hearing both the parties and perusing the record, it is observed and held as follows: Following are the admitted facts (i) that the appellant had purchased various capital goods during the year 2013-14 and 2014-15. (ii) The appellant claimed the depreciation on entire invoice value including the excise duty as well. (iii) 100% CENVAT Credit on these capital goods has also been availed on 31.7.2014. 6. The rectification of alleged availment has been made in the balance sheet for the 2015-16. 7. It is also observed that when the appellant was subsequently asked about the said adjustment to have been made in the balance sheet for the year 2015-16 and 14-15, the appellant did not respond nor submitted any revised balance sheet for the aforesaid period. In absence thereof, it actually remained unclear as to whether the double benefit claimed by the appellant i.e. 100% av....
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.... or for a deliberate violation of the provisions of the particular statute. Interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable. The levy of interest is geared to actual amount of tax withheld and the extent of the delay in paying the tax on the due date. Essentially, it is compensatory and different from penalty - which is penal in character." 4.14 Further when we hold that appellants by way of making misdeclaration have availed of the modvat credit which was not admissible to them the penalty imposed on them is justified. In case of Prudential Spinner Ltd [2011 (267) ELT 291 (SC)], Hon'ble Apex Court held- "2. A show cause notice was issued by the appellant herein in which it was stated that the assessee had cleared the finished goods either on less payment of duty or without payment of duty for certain invoices and thus violated the provisions of the Central Excise Rules read with Section 11A of the Central Excise Act. In the show cause notice, it was specifically stated that in view of the aforesaid short payment or non-payment, penalty equal to the duty payable should be paid by t....