2007 (12) TMI 334 - AT - Central Excise

Summary

Issues involved: Appeal against imposition of penalty and demand of interest on availing credit in respect of capital goods while also claiming depreciation under the Income-tax Act.

Issue 1: Demand of Interest

The appellant availed credit on capital goods and also claimed depreciation under the Income-tax Act. The revenue raised an enquiry regarding this, leading the appellant to reverse the credit. A show cause notice was issued for penalty and interest. The appellant argued that interest is payable only if the manufacturer fails to pay the determined amount within three months from the notice of demand. Since the duty was paid before the notice, the demand of interest was deemed unsustainable. The Tribunal concurred, citing Rule 57U, which states the liability for interest if payment is not made within three months from the notice. As the duty was paid prior to the notice, the demand for interest was set aside.

Issue 2: Imposition of Penalty

The appellant mistakenly claimed depreciation under the Income-tax Act while availing credit on capital goods. Upon realizing the error, the appellant promptly reversed the credit. The adjudicating authority imposed a penalty, which the appellant contested, arguing against allegations of fraud or wilful misstatement. The Tribunal noted that the appellant was aware of the availability of credit on capital goods if depreciation under the Income-tax Act was not claimed. Considering the circumstances, the penalty was reduced from Rs. 25,600 to Rs. 5,000, as it was deemed appropriate to meet the ends of justice.

Conclusion:

The appeal was disposed of with the decision to set aside the demand of interest due to the duty being paid before the notice, and to reduce the penalty from Rs. 25,600 to Rs. 5,000 based on the appellant's prompt action upon realizing the mistake.