2004 (7) TMI 544 - AT - Central Excise

Summary

Issues: Interpretation of Rule 57S(1) - Deduction of excess depreciation claim

In this case, the appellant, engaged in the manufacture of excisable goods, availed Modvat facility on capital goods under Rule 57Q of Central Excise Rules. Upon scrutiny of RT 12 returns for April 1996, it was discovered that the appellant cleared capital goods claiming excess depreciation of Rs. 15,349 under Rule 57S(1). A show cause notice was issued, seeking recovery under Rule 57U(1) read with Rule 9(2) of the Central Excise Rules. The Assistant Commissioner denied the excess depreciation claim, ordered recovery, and imposed a penalty of Rs. 2000. The appellant appealed to the Commissioner (Appeals) who upheld the lower authority's decision, leading to the current appeal.

The main issue revolved around the interpretation of the second proviso to Rule 57S(1), specifically concerning the phrase "a year of use or fraction thereof." The appellant argued that the deduction of 2.5% for each quarter should apply even if the capital goods were used for only a part of that quarter. However, the Assistant Commissioner and the Commissioner (Appeals) held that the deduction should be based on a full quarter of use or a fraction thereof, not on a fraction of a quarter. The appellant relied on interpretations from the Companies Act, 1956, and the Income Tax law to support their argument.

Upon careful consideration, the Tribunal found that the phrase "a year of use or fraction thereof" does not pertain to the fraction of a quarter but only to the year of use or a fraction thereof. The Tribunal agreed with the Assistant Commissioner's interpretation, which was affirmed by the Commissioner (Appeals). The Tribunal noted that the Commissioner (Appeals) had independently adopted the reasoning of the Assistant Commissioner in arriving at the decision. Consequently, the Tribunal found no fault in the Assistant Commissioner's order and rejected the appeal.