2009 (7) TMI 979 - AT - Central Excise

Summary

Issues: Denial of Modvat credit for capital goods due to initial availing of depreciation under the Income Tax Act; Interpretation of "claimed" depreciation for Modvat credit eligibility; Applicability of recent decisions on revising Income Tax Returns without depreciation claim.

In the judgment, the Appellate Tribunal CESTAT, Ahmedabad addressed the issue of denial of Modvat credit amounting to Rs. 5,74,059/- to the appellant concerning capital goods because they had initially availed depreciation under the Income Tax Act. Despite the appellant filing revised Income Tax Returns without the depreciation claim, the authorities rejected the claim citing that the revised return was submitted after objections raised by the audit, thus disallowing the benefit. Consequently, the demand was confirmed, and a penalty of the same amount was imposed.

The Tribunal noted that the issue had been settled by various decisions, stating that when revised Returns are filed without the claim of depreciation, it should be considered as if no depreciation was claimed. The interpretation of the term "claimed" was elucidated by the Bombay High Court, emphasizing that it should be understood as "availed." The Tribunal cited decisions such as Sri Vishnu Shankar Mill Ltd. and Abhishek Synthetics Pvt. Ltd. to support the principle that only when depreciation on capital goods is actually availed, Modvat credit is not permissible.

The Tribunal referred to a recent decision of the Delhi Bench in ACC Ltd. v. Commissioner of CE., Bhopal, which directed the deposit of a partial amount due to revising Income Tax Returns without the depreciation claim not being sufficient grounds for allowing Modvat credit on capital goods. However, the Tribunal found that this decision was interim and did not consider earlier decisions favoring the assessee. Given the Bombay High Court's supportive decision, the Tribunal unconditionally allowed the stay petition, setting aside the impugned order and remanding the matter to the Original Adjudicating Authority for a fresh decision based on the judgments cited, emphasizing the verification of non-claim of depreciation in the Income Tax Returns. The appeal was disposed of accordingly.