NARAYAN KRISHNA SPINNERS LTD. Vs. CCE

JUDGEMENT

(1.) The appellants had availed Modvat credits totalling to Rs. 83,489/ -, on capital goods during the years 1995 -96 and 1996 -97, after filing declarations under Rule 57T of the Central Excise Rules, 1944, wherein they had declared that they would not claim depreciation on the value of the goods under Section 32 of the Income Tax Act. But, on verification of records, it appeared to the Central Excise authorities that the appellants had claimed depreciation under the Income Tax Act on the total value of the capital goods including the element of duty paid thereon. Therefore a show -cause notice dated 6.7.98 was issued to the party directing them to show cause why the extended period of limitation under Rule 57U(2) should not invoked to disallow the above credit to them as also why penalties should not be imposed on them under Rule 57U(6) and Rule 173Q(1)(bb) of the Central Excise Rules, 1944. The original authority confirmed the demand of Rs. 83,489/ - against the assessee under Rule 57U(3) and imposed on them a penalty of equal amount under Rules 57U(6) and 173Q(1)(bb). The first appellate authority affirmed the decision of the lower authority. Hence the present appeal.

(2.) Heard both sides. Ld. Consultant for the appellants submitted that they had withdrawn the depreciation claim under the Income Tax Act and accordingly the IT assessing authority revised the assessments for the assessment years 1995 -96, 1996 -97 and 1997 -98 under Section 154 of the Income Tax Act. Ld. Consultant filed copies of these revised assessment orders. In the circumstances, Consultant contended, it could not be held that the appellants had availed the above Modvat credit illegally or irregularly with intent to evade payment of duty and therefore there was no justification for imposing any penalty on them. Ld. Consultant relied on the following decisions of the Tribunal:

(3.) On a perusal of the revised IT assessment orders filed by the Consultant, I find that the total depreciation of value equivalent to Modvat credit allowed to be withdrawn is Rs. 42,863/ - only, the break -up of which is as under: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Assessment Year Depreciation - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1995 -96 Rs. 11,112/ - 1996 -97 Rs. 18,209/ - 1997 -98 Rs. 13,542/ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Total Rs. 42,863/ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - There is no evidence, on record, of withdrawal of depreciation claim as regards the amount of Rs. 83,489 - Rs. 42,863 = Rs. 40,626/ -. Hence it has to be held that capital goods credit to the extent of Rs. 40,626/ - has been irregularly taken. However, the question whether any part of the credit of Rs. 83,489/ - was taken irregularly has not been debated before me. The contentious issue in this case is whether the penalty imposed on the appellants by the lower authorities is sustainable or not.