2001 (8) TMI 192 - AT - Central Excise

Summary

Issues involved: Interpretation of Rule 57R regarding claiming Modvat credit and depreciation under Section 32 of the Income Tax Act, 1961.

Summary:
The appellant, a sugar manufacturer, acquired capital goods and claimed Modvat credit on duty paid. However, Rule 57R prohibits claiming credit on duty paid on capital goods if depreciation is also claimed under Section 32 of the Income Tax Act. The Commissioner proposed disallowing the credit and imposing a penalty equal to the duty. The appellant contended that revised income tax returns were filed excluding the duty claimed as credit, and any depreciation claimed was effectively nullified by accounting practices.

The Tribunal found that the purpose of Rule 57R is to prevent double benefits of Modvat credit and depreciation. An amendment to the Income Tax Act supports this view, indicating that the actual cost includes duty for which credit has been allowed. The Tribunal disagreed with the Commissioner's dismissal of the appellant's revised returns, citing the provision in the Income Tax Act allowing for rectification of mistakes. The Tribunal emphasized that the Commissioner should consider all relevant documents and submissions before making a decision. The appellant was given an opportunity to provide further evidence, and the Commissioner was directed to pass orders accordingly.

Ultimately, the appeal was allowed, and the impugned order was set aside, highlighting the importance of proper consideration of both Modvat credit and depreciation claims under the relevant laws.