2002 (11) TMI 235 - AT - Central Excise

Summary

Issues involved: Appeal against order-in-appeal allowing Modvat credit but upholding penalty under Rule 173Q for contravention of Rule 57R(8) of the Central Excise Rules.

Summary:
The appellants availed Modvat credit on capital goods during 97-98 and 98-99, also claiming depreciation under Section 32 of the Income-tax Act in their Income-tax Returns, contrary to Rule 57R(8) which prohibits both actions. The adjudicating authority disallowed the credit, but the Commissioner (Appeals) reversed this decision citing precedent in Terna Shetkari Sahakari Sakhar Karkhana Ltd. v. CCE, Aurangabad. However, the penalty of Rs. 1 lakh under Rule 173Q was upheld by the Commissioner (Appeals).

The penalty was contested as the appellants had already filed revised Income-tax Returns correcting the depreciation claim mistake. The Managing Director confirmed this correction, and the adjudicating authority's order-in-original acknowledged the revised returns. Therefore, penalizing the appellants for contravening Rule 57R was deemed unjust as they had rectified the error with the Income-tax authorities.

Consequently, the impugned order imposing the penalty under Rule 173Q was set aside, and the appeal was allowed with appropriate relief as per the law.