2017 (10) TMI 202 - AT - Central Excise

Simultaneous availment of Depreciation as well as MODVAT credit on Capital goods - SCN dated 02.06.1998 issued in respect of years 94-95 to 96-97 - Held that - in respect of repeated opportunities appellants had not produced the supporting evidences and documents for verification in the denovo proceedings - there is no favor to the appellants and for which reason that part of the impugned order disallowing the credit availed by the appellants on capital goods to the tune of ₹ 44,52,091/- and demanding the same under Rule 57U (3) of the Rules, along with interest liability thereof does not call for any interference and therefore sustained. Penalty - Held that - the appellant had paid up the entire amount demanded before the adjudication proceedings. It should also be kept in mind that the matter is one related to interpretation on the quantum on which Income tax depreciation should not be claimed - penalty cannot be sustained and is set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues: Alleged simultaneous availment of depreciation on capital goods under Income Tax Act and Modvat credit under erstwhile Rule 57Q of Central Excise Rules, 1944.

Analysis:
1. The issue in appeal involves the alleged simultaneous availment of depreciation on capital goods under the Income Tax Act, 1961, and Modvat credit under Rule 57Q of the Central Excise Rules, 1944. The Department suspected that the appellant had availed both benefits simultaneously, leading to a demand of ?44,52,091. In the initial adjudication order, the Commissioner confirmed this demand and imposed penalties. The appellants appealed to CESTAT, which remanded the matter for denovo adjudication to address their grievances regarding lack of opportunity to present relevant records and not being provided with the auditor's report relied upon by the Department.

2. In the subsequent denovo proceedings, the appellants were given the auditor's report and asked to produce additional documents for verification. The adjudicating authority thoroughly analyzed the issue, considering the Modvat credit availed, deductions made, and discrepancies in the Chartered Accountant's Certificate provided by the appellants. Despite multiple opportunities, the appellants failed to produce supporting evidence during the denovo proceedings, leading to the sustained disallowance of the credit availed on capital goods and the demand of ?44,52,091 along with interest liability and penalties under Rule 57U of the Rules.

3. During the hearing, the appellants contended that they did not take Modvat credit on the depreciated portion of the capital goods' value. They submitted Chartered Accountant's Certificates, Income Tax returns, and argued against the imposition of penalties, claiming no intention to evade excise duty. However, the adjudicating authority upheld the impugned order, leading to the appellants once again appealing before the forum.

4. Upon hearing both sides and examining the facts on record, the forum found that the appellants had been given sufficient opportunities to present their case and supporting documents. The adjudicating authority had thoroughly analyzed the matter based on available evidence. While the sustained disallowance of credit availed on capital goods was upheld, the penalties imposed were set aside due to the appellant's payment of the demanded amount before adjudication, coupled with the nature of the issue related to the interpretation of Income tax depreciation claims. The forum partially allowed the appeal, setting aside the penalties but upholding the disallowance of credit availed on capital goods.