Terna Shetkari Sahakari Sakhar Vs. Commissioner of Central Excise - Court Judgment

Excerpt:
1. by orders passed on 18.4.2002, the commissioner of central excise.aurangabad denied the credit availed by the assessee under rule 57q of the duty paid on capital goods under the provisions of the income tax act and thus contravened the express provisions of rule 57t the commissioner also imposed penalty. the assessee appealed this order to the tribunal. the tribunal in its orders passed on 14.8.01 disposing of the appeal, had noted the contentions of the assessee that although, in the return filed by it before the income tax authorities, it had claimed depreciation, it had revised the return in which while calculating the value of the capital goods for the purpose of assessment of income tax it had excluded the element of duty which it had taken on its credit. these returns having been accepted by the department, had been final. no depreciation had thus been claimed. it had also recorded the claim that consequent upon the amendment made to the definition of the term "capital cost" made by the finance act, 1998 retrospectively from 1.4.94, the income tax act thus did not allow depreciation. the third was that the system of accounting followed by the appellant was such that it excluded in its taxable income the amount of modvat credit taken does nullify any depreciation for income-tax 2. the tribunal accepted that the mere fact that the assessee had claimed depreciation of the amount of duty taken as modvat credit would not by itself result in the modvat credit attract the provisions of sub-rule (5) of rule 57r prohibiting it to be taken, depreciation is claimed for the income tax act. it said that such a practice would result in the assessee being denied both the depreciation as well as modvat credit. it is only in those cases where depreciation was claimed and allowed that the department could reverse the modvat credit. having settled the question of law, the tribunal remanded the matter to the commissioner to satisfy himself by looking at the income tax returns and other documents that the assessee had not been granted depreciation for purpose of income tax of that part of the capital goods. the commissioner considered the submissions made by the appellant and passed orders again denying the credit and imposing penalty. this appeal is against that order.3. before the commissioner, the appellant had produced copies of its income tax returns that it initially filed and subsequently revised for the three "assessment years" commencing from 1996-1997. it had also produced a certificate dated 18.3.02 issued by the jurisdictional income-tax officer certifying for the assessment year 1996-97 and 1997-98, that "the claim of depreciation is made by the assessee after deducting the excise modvat claim." it had produced an assessment order passed by the additional officer of income tax for the assessment year 1998-99. the depreciation statement that form part of each of the returns in question that it had filed for the years in question indicates with regard to plant and machinery that shows a deduction from the value of plant and machinery claimed for depreciation on account of "modvat claim on capital goods" representing the amount of modvat credit. the amount claimed as depreciation being 25% of the written down value does not include in it any depreciation on account of modvat credit. the commissioner however has declined to accept these documents on the ground that a formal assessment orders has not been produced. this as we have noted, is clearly wrong as to the year 1998-99 in which the assessment order has been produced. so far as that year is concerned, the assessment has become final. so far as the other two years are concerned, the return of the assessee itself would indicate that no deprecation had been claimed. we do not see how the fact that assessment has not been finalised has any bearing on the issue. we do not think that the income tax authorities would so assess the assesseee's return as to give it relief in taxation that it did not claim. this is all the more so in view of the fact that by the amendment made by the finance act to section 43 of the income tax the definition of "actual cost" of assets has been restricted as not to include in it the excise duty claimed as modvat. the only possible reason that could be advanced for not accepting these returns it was permissible to file one more set of returns in which to further revise and claim depreciation. the answer to this lies in the certificate dated 13.2.02 of the jurisdictional income tax officer certifying that the assessee which was referred to above. this certificate also refers to the date of filing the original return and the fact that no revised return was filed.4. in our opinion therefore, the appellant had satisfactorily demonstrated before the commissioner it did not claim depreciation for income tax purpose on the modvat portion of the capital goods in question. the remaining portion of the commissioner's order deals with the claim in the alternative made by the appellant. since we find that the appeal succeeds on its main contention, it is not necessary for us to address these aspects.

Judgment:
1. By orders passed on 18.4.2002, the Commissioner of Central Excise.

Aurangabad denied the credit availed by the assessee under Rule 57Q of the duty paid on capital goods under the provisions of the Income Tax Act and thus contravened the express provisions of Rule 57T the Commissioner also imposed penalty. The assessee appealed this order to the Tribunal. The Tribunal in its orders passed on 14.8.01 disposing of the appeal, had noted the contentions of the assessee that although, in the return filed by it before the income tax authorities, it had claimed depreciation, it had revised the return in which while calculating the value of the capital goods for the purpose of assessment of income tax it had excluded the element of duty which it had taken on its credit. These returns having been accepted by the department, had been final. No depreciation had thus been claimed. It had also recorded the claim that consequent upon the amendment made to the definition of the term "capital cost" made by the Finance Act, 1998 retrospectively from 1.4.94, the Income tax Act thus did not allow depreciation. The third was that the system of accounting followed by the appellant was such that it excluded in its taxable income the amount of modvat credit taken does nullify any depreciation for income-tax 2. The Tribunal accepted that the mere fact that the assessee had claimed depreciation of the amount of duty taken as modvat credit would not by itself result in the modvat credit attract the provisions of Sub-rule (5) of Rule 57R prohibiting it to be taken, depreciation is claimed for the income tax Act. It said that such a practice would result in the assessee being denied both the depreciation as well as modvat credit. It is only in those cases where depreciation was claimed and allowed that the department could reverse the modvat credit. Having settled the question of law, the Tribunal remanded the matter to the Commissioner to satisfy himself by looking at the income tax returns and other documents that the assessee had not been granted depreciation for purpose of income tax of that part of the capital goods. The Commissioner considered the submissions made by the appellant and passed orders again denying the credit and imposing penalty. This appeal is against that order.

3. Before the Commissioner, the appellant had produced copies of its income tax returns that it initially filed and subsequently revised for the three "assessment years" commencing from 1996-1997. It had also produced a certificate dated 18.3.02 issued by the Jurisdictional income-tax officer certifying for the assessment year 1996-97 and 1997-98, that "the claim of depreciation is made by the assessee after deducting the excise modvat claim." It had produced an assessment order passed by the additional officer of income tax for the assessment year 1998-99. The depreciation statement that form part of each of the returns in question that it had filed for the years in question indicates with regard to plant and machinery that shows a deduction from the value of plant and machinery claimed for depreciation on account of "modvat claim on capital goods" representing the amount of modvat credit. The amount claimed as depreciation being 25% of the written down value does not include in it any depreciation on account of modvat credit. The Commissioner however has declined to accept these documents on the ground that a formal assessment orders has not been produced. This as we have noted, is clearly wrong as to the year 1998-99 in which the assessment order has been produced. So far as that year is concerned, the assessment has become final. So far as the other two years are concerned, the return of the assessee itself would indicate that no deprecation had been claimed. We do not see how the fact that assessment has not been finalised has any bearing on the issue. We do not think that the income tax authorities would so assess the assesseee's return as to give it relief in taxation that it did not claim. This is all the more so in view of the fact that by the amendment made by the Finance Act to Section 43 of the Income Tax the definition of "actual cost" of assets has been restricted as not to include in it the excise duty claimed as modvat. The only possible reason that could be advanced for not accepting these returns it was permissible to file one more set of returns in which to further revise and claim depreciation. The answer to this lies in the certificate dated 13.2.02 of the jurisdictional income tax officer certifying that the assessee which was referred to above. This certificate also refers to the date of filing the original return and the fact that no revised return was filed.

4. In our opinion therefore, the appellant had satisfactorily demonstrated before the Commissioner it did not claim depreciation for income tax purpose on the modvat portion of the capital goods in question. The remaining portion of the Commissioner's order deals with the claim in the alternative made by the appellant. Since we find that the appeal succeeds on its main contention, it is not necessary for us to address these aspects.