2005 (7) TMI 228 - AT - Central Excise

Summary

Issues:
1. Availment of Modvat credits on capital goods.
2. Alleged mis-declaration under Rule 57T of the Central Excise Rules, 1944.
3. Imposition of penalties under Rule 57U(6) and Rule 173Q(1)(bb) of the Central Excise Rules, 1944.

Analysis:
1. The appellants availed Modvat credits on capital goods during 1995-96 and 1996-97, declaring they would not claim depreciation under Section 32 of the Income-tax Act. However, it was found they claimed depreciation on the total value of goods including duty paid. A show cause notice was issued, leading to a demand of Rs. 83,489/- and penalties by the original and first appellate authorities.

2. The appellants argued they withdrew the depreciation claim under the Income-tax Act, supported by revised IT assessment orders. The Tribunal noted a withdrawal of depreciation only amounting to Rs. 42,863/-, leaving Rs. 40,626/- irregularly taken. The main issue was the sustainability of penalties imposed by lower authorities.

3. The Tribunal found the appellants' mis-declaration under Rule 57T clear, as they claimed Modvat credit and depreciation simultaneously. Despite later withdrawing the depreciation claim, their initial intent to evade duty was evident. Citing case law distinctions, the Tribunal held the penalty under Rule 57U(6) and Rule 173Q(1)(bb) applicable, reducing it to Rs. 40,000/- considering the withdrawn depreciation amount.

In conclusion, the Tribunal upheld the penalties imposed on the appellants for irregularly availing Modvat credits due to mis-declaration, despite subsequent corrective actions. The judgment highlighted the significance of intent and adherence to declarations under tax laws, emphasizing the consequences of non-compliance with statutory provisions.