ALCOBEX METALS LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) This appeal has been filed by the appellants against the impugned Order -in -Appeal dated 11.4.2002 vide which the Commissioner (Appeals) has allowed them modvat credit by reversing the Order -in -Original, but had upheld the imposition of penalty of Rs. 1 lakh on them under Rule 173Q of the Rules. The appellants availed modvat credit of Rs. 5,18,138 on the capital goods during the period 97 -98 and 98 -99. They also claimed depreciation of the said amount under Section 32 of the Income Tax Act in their Income Tax Returns filed for the relevant years. They thereby contravened the provisions of Rule 57R(8) of the Central Excise Rules which prohibits the taking of credit as well as depreciation of the credit amount, under Section 32 of the Income Tax Act. They were issued show cause notice for having wrongly taken modvat credit. The imposition of penalty was also proposed in that notice.

(2.) The adjudicating authority disallowed the credit by holding that by claiming depreciation of the modvat credit, the appellants could not take the credit. But the Commissioner (Appeals) reversed these findings of the adjudicating authority by following the ratio of the law laid down in Terna Shetkari Sahakari Sakhar Karkhana Ltd. v. CCE, Aurangabad, 2001 (46) RLT 1079 wherein it has been observed that modvat credit which was legally admissible to an assessee, could not be disallowed on the ground that he had claimed depreciation of the amount in his Income Tax Returns also.

(3.) The Commissioner (Appeals), however, had upheld penalty of Rs. 1 lakh on the appellants under Rule 1730 for contravention of Rule 57R(8) of the Rules. But in my view, the penalty could not be upheld by the Commissioner (Appeals) for the simple reason that the appellants had already filed revised Income Tax Returns wherein they had corrected the earlier mistake of claiming depreciation of the modvat amount. This fact is quite apparent from the perusal of the Order -in -Original of the adjudicating authority itself. Shri Kanungo, Managing Director of the appellants in his statement had also clearly stated that the appellants had already filed revised Income Tax Returns for the relevant years for correction of the mistake of taking the depreciation. The adjudicating authority has also so recorded in para 23 of the Order -in -original. That being so, the appellants could not be penalised for the contravention of Rule 57R of the Rules for having already given up their depreciation claim before the Income Tax authorities.