Customs, Excise and Gold Tribunal - Bangalore
Pasari Spinning Mills Ltd. vs Commissioner Of C. Ex., Bangalore on 18 January, 2002
Equivalent citations: 2002(141)ELT172(TRI-BANG)
ORDER S.S. Sekhon, Member (T)
1. The appellant has taken Modvat credit on capital goods and the same was denied as it was learnt that they had also claimed depreciations on the value of capital goods under the Income Tax Returns filed by them. This was considered to be not permissible under the terms of provisions of Rule 57R(5).
2. We have heard both sides and considered the submissions and find:
(a) It was contended by the learned Chartered Accountant that the appellants had immediately taken steps to file a revised return to the Income Tax Authorities and this revised return was accepted by the Income Tax Authorities on 19-12-98. In these revised returns they did not claim any depreciation on the concerned goods under the Income Tax Act.
(b) The learned Commissioner has found that on verification of the Income Tax Returns filed by the assessee for the assessment year 1996-97 (PYE 31-3-96) it was observed that in respect of capital goods for which credit was availed during the year 1994-95, the depreciation was claimed and this was evident from the depreciation statements enclosed to the returns under the Income Tax Act for the assessment year (1996-97). The said income tax returns had been duly assessed by the income tax department oh 28-11-97. As regards the claim of the appellant that they had filed a revised income tax return, the findings of the Commissioner is as follows.
"It has also been contended that the assessee had filed a revised return before the Income Tax Authorities on 31-3-98 and that the revised return had been assessed on 19-12-98. Submission of a revised return and its assessment does not in any way regularise the credit wrongly taken. The Provisions of Rule 57R(5) clearly provides that no credit can be taken on capital goods, if a manufacturer claims depreciation under the Income Tax Act on that part of the value of the goods which represent the duty on said goods. Hence, credit taken in violation of the said provision is liable to be reversed and the submission of a revised Income Tax return years after, the credit was wrongly taken does not confer any benefit on the assessee for taking Modvat credit which they were not eligible."
(c) The learned Commissioner has not accepted the explanation offered by the assessee that the lapse occurred since the accounts were attended to by the head office located in Bangalore while the factory is located at Nanjungud and the problem was due to lack of communication between the factory and the head office. He found this explanation not to merit consideration and was least convincing and held that in Taxation, matters cannot be left at the mercy of the type of communication distortations if any, that exist between factory and its head office. Finding provisions of Rule 57R(5) as it existed then to be very clear, he held the plea of the assessee of ignorance attributable to lack of communication to comply with the provisions and failure not to be acceptable. As the assessee at no stage till the detection of the case found the lapse and made good the credit wrongly taken. He held this conduct to prove, that no precautions were taken by the assessee to ensure that double benefit of Modvat and Income Tax Depreciation was not taken. He also found no merit in the plea of the assessee that they had been incurring losses and no benefit had accrued to them by claiming depreciation and the credit. He held that profitability or otherwise is not a consideration under the Central Excise Act. He also rejected the claim made at the personal hearing that the credit to be reversed should be limited only to the amount of depreciation claimed by finding no merits of such a claim. A stringent penalty under Rules 57(U)(6) read with Rule 173Q an interest under Rule 57(U)(8) was determined.
(d) We find substance in the reliance of the decision of this Tribunal in the case of Terna Shetkari Sahakari Sakhar Karkhana Ltd. v. CCE, Aurangabad - [2001 (138) E.L.T. 1225 (T) = 2001 (98) ECR 490 (T)] by the appellants, especially the findings in para 6 of the reported decision. Respectfully following this decision of the Tribunal, we would also set aside this order and remand the matter back to the original authority, with directions that the Commissioner ought to have considered the provisions of Section 139(5) of the Income Tax Act, 1961 as regards Revised Returns and satisfied himself by looking at the actual and income tax returns and other documents whether any depreciation claimed was in fact availed as accepted in these statutory documents returns provided under the Income Tax Act.
(e) Since we set aside the order, for re-determination of the facts regarding status of the revised returns as claimed to have been filed in this case, we find no reason to uphold the order of the penalty and interest as arrived at by the learned Commissioner. The penalty and interest could only be determined once it is established that the alleged 'double benefit' i.e. of Modvat credit and income tax depreciation has actually been availed by the said assessee.
3. In view of our findings we set aside the order and allow the ap peal as remand.