LAKSHMI MACHINE WORKS Vs. CCE

JUDGEMENT

(1.) THIS appeal filed by M/s. Lakshmi Machine Works Ltd., the appellants herein is directed against the Order -in -Original No. 16/2002 dated 22.3.2002 passed by the Commissioner of Central Excise, Coimbatore, whereby the Commissioner has disallowed Modvat Credit of Rs. 1,62,69,109 (Rupees One crore sixty two lakhs sixty nine thousand one hundred and nine) and ordered recovery of the same under Rule 57U (3) of the CE Rules, 1944 read with Section 38A of the CE Act, 1944. He has also ordered appropriation of the equivalent amount towards the above duty liability as he has noted that the assessee has already debited the amount vide PLA RG23A Part II and RG23 C Part II. He has also imposed penalty of Rs. 10,00,000 (Rupees ten lakhs) under Rule 173Q of the Rules ibid read with Section 38A of the CE Act, 1944, apart from another penalty of Rs. 19,09,367 under Rules 57U(6) and 173Q of the Rules ibid read with Section 38A of the Act ibid. He has also ordered recovery of appropriate interest on the said credit of Rs. 19,09,367 which has been availed after introduction of Rule 57U(3), in terms of Rule 57U(8) of the Rules ibid read with Section 38A of the Act ibid. He has dropped proceedings initiated for recovery of Modvat Credit of Rs. 63,60,318 and another sum of Rs. 79,98,719.

(2.) BRIEF facts of the case are that the appellants are engaged in the manufacture of textile machinery and accessories falling under chapter heading 8445 and 8448 of the CETA, 1985. It was alleged that the appellants have contravened the provisions of Rule 57R(8) of erstwhile CE Rules, 1944 inasmuch as they had availed credit under Rule 57Q and also claimed depreciation under Section 32 of the Income Tax Act, 1961 or wrote off as Revenue expenditure that part of the value of the capital goods which represented the amount of specified duty on such capital goods. They were availing Modvat Credit under Rule 57Q of the CE Rules, 1944 on various capital goods and were filing necessary declarations in terms of Rule 57T. It was also alleged that the assessee also leased out two machines to M/s IPBM who availed credit of Rs. 30,26,874 and the lessor viz. appellants claimed depreciation including the duty element in that case also in contravention of Rule 57R. The details of such wrong credit availed according to the department has been worked out at Rs. 1,68,27,044, as detailed on page 2 of the impugned order. It was in these circumstances that show cause notices were issued which culminated in the order of adjudication which is challenged in this appeal. Shri G. Suresh, Chartered Accountant appeared for the appellants that the allegation is that the appellants have availed double benefits viz. depreciation under Section 32 of the Income Tax and Modvat Credit on capital goods under Rule 57Q. He has invited our attention to the synopsis submitted by the appellants in the Court on 3.11.2004. It is stated therein that correct depreciation was allowed by the Income Tax Department on the value of fixed assets after subtracting the modvat credit amount in the revised assessment order dated 27/31 January 2000 and this factual position has been accepted and confirmed by the Commissioner in para 15 of the impugned order. The relevant portion reads as under:

(3.) HEARD Shri C. Mani, learned JDR who reiterated the department's view. He submitted that in the present case, appellants took the Modvat Credit as well the benefit under Income Tax Act initially and the issue of double benefit was not detected by the assessees themselves and on being pointed by the IA Section of the Department, the assessee paid the wrongly availed credit.