M/s. Ridge Innovations Pvt. Ltd. vs Commissioner Of Central Excise, Nashik

This appeal is directed against order in original No 18/CEX/2005 dated 31.05.2005 of Commissioner Central Excise, Nashik. By the impugned order, the Commissioner has held as follows:

"I disallow modvat of Rs 26,75,587/- and Rs 1,14,67,428/-availed on the capital goods to the assessee and order recovery of the same under Rule 57 U (2) of the Central Excise Rules, 1944 read with section 11 A (1) of the Central Excise Act, 1944.

I impose penalty of Rs 26,75,587/- and Rs 1,14,67,428/- under rule 173 Q (bb) of Central Excise Rules, 1944 on the assessee.

The assessee is also liable for payment of interest at applicable rate under Section 11 AB of Central Excise Act, 1944 on the amount confirmed. The Assistant Commissioner, Central Excise & Customs, Nashik-II Division is directed to work out the interest amount and recover the same along with duty and penalty."

2.1 Appellant had been proceeded against by a Show Cause Notice dated 31.08.1999 for irregular availment of Rs.1,14,67,428 as MODVAT credit on capital goods against which they have claimed depreciation on the invoice value under Section 32 of Income Tax Act.

2.2 This show cause notice was followed by a further demand for Rs. 26,75,587 on 03.09.1999.

2.2 Both the show cause notices were disposed of by Order-in-Original no. 36 & 37/CEX/2000 dated 25th October 2000. These orders were challenged before the Tribunal in appeal no. E/277-278/2001-Mum. Tribunal after consideration of the matter remanded the matter back to adjudicating authority by its Order No A/1042-1043/WZB/2004/C-I dated 11.06.2004 for de novo adjudication.

2.3 Pursuant to this remand, matter has been re-adjudicated by Commissioner by the impugned order. Aggrieved by the impugned order appellants have preferred this appeal.

2.4 The application for substitution of the name of the appellant as 'M/s Ridge Innovations Pvt Ltd' from that of M/s Datar Switchgear Ltd was allowed vide Miscellaneous Order No. M/85473-85474/2019.

3.1 We have heard Shri Praveer Shetty, Advocate for the Appellant and Shri Karan Adik, Special Counsel for the Revenue.

3.2 Learned Counsel for appellant submitted that they have filed written submissions in the matter which should be taken on record for decision in the matter. In the written submissions filed on 09.08.2021, appellant counsel has submitted as follows:

Ø  That non consideration of material facts (statement of Mr Adke and the Chartered Accountants Certificate), non furnishing of reasons and coming to conclusion of contravention of a Rule 57 R (5) not even cited in the impugned Show Cause Notice vitiate the impugned Order for violation of fundamental rules of natural justice.

Ø  The show cause notice and the order are premised upon different provisions of law besides the show cause notice itself being premised upon a Rule which did not even exist during the period for which the contravention is alleged. The Central Excise Law has to be construed strictly and any interpretation of ambiguity must be in favour of the Assessee.

Ø  Hon'ble Calcutta High Court has in the case of Smt Renuka Prasad [2014 SCC Online Cal 8878] held that unless the amended Act is expresses to apply retrospectively ordinarily, it would be deemed to apply prospectively.

Ø  Order of tribunal remanding the matter is not complied with.

In further written submissions filed by the Appellant Counsel on 16.08.2021, following was submitted:

Ø  On basis of the computation made the appellants did not had any intention of taking any benefit not intended under law towards taxation (Income Tax or Excise). The impugned order disregards this ex facie computation and does not even discuss the same although the facts were on record.

Ø  Show Cause Notice alleged contravention of Rule 57 R (8) for the Financial Year 1995, 1996 & 1997 while the said Rule came into existence only in March 1997. The impugned order proceeds on the basis of Rule 57 R (5) which is not even mentioned in the Show Cause Notice.

3.3 The learned special counsel appear for revenue submits that the issue involved in the matter is no longer res-integra and is covered in the favour of revenue by following orders:

Ø  Gujarat  Alkalies  &  Chemicals  Ltd  [2010-TIOL-1812-CESTAT-AHM]

Ø  Surya Alumex [2021-TIOL-319-CESTAT-DEL]

4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments.

4.2 While remanding the matter tribunal has observed as follows:

"3. We have heard both sides. The Commissioner has relied upon the statement of Shri Dattatraya Pandharna Adke, Senior Accounts Manager of the Assessee, wherein he has admitted that they have claimed modvat credit on capital goods as well as depreciation on that part of the value of the said capital goods which represents the amount of Central Excise duty paid on such capital goods. The appellants draw our attention to the further portion of Mr Adke's statement wherein he has stated that the modvat amount is credited to Profit and Loss Account as Income and depreciation is charged on capital assets on written down value basis which means that modvat amount is treated as income and depreciation amount is credited as expenditure and that this practice completely neutralize the effect of depreciation on account of modvat. They also draw our attention to certificate dated 27.04.1998 of their Chartered Accountant certifying that they have not claimed depreciation on modvat amount during the relevant period and this Chartered Accountant's certificate was before the Commissioner and the Commissioner does not appear to have considered the statement of Mr Adke in its entirety and also the Chartered Accountant's certificate. In these circumstances the plea of the appellants for remand is justified. We therefore set aside the impugned orders and remand the case to the jurisdictional Commissioner for fresh decision after taking into account the statement of Mr Adke in its entirety as well as the Chartered Accountant's certificate. Fresh order shall be passed after extending a reasonable opportunity to the appellants of being heard in their defence."

4.3 Matter was remanded by the tribunal to Commissioner with specific direction for consideration of the statement of Mr. Adke in entirety and the Certificate of the Chartered Accountant. Commissioner has in the impugned order observed as follows:

"I have gone through the statement of Shri Adke, Accounts Officer and balance sheet for the year 1994-95 to 1996-97 and profit and loss account for the year 1994-95 to 1996-97 as directed by CESTAT in their order No A/1042-1043/WZB/04/C-I dtd 11.6.2004. It is true that assessee has availed the cenvat credit as well as depreciation on the capital goods. However, the modvat amount is credited to profit and loss account as income and depreciation is charged on capital assets on written down value basis which means that modvat amount is treated as income and depreciation amount is credited as expenditure and that this accounting practice completely neutralize the effect of depreciation on account of modvat. I do not agree with the assessee's view as per modvat Rule 57 R (5) assessee is not entitle for any credit on the capital goods if depreciation of the same is claimed by the assessee under the provisions of Section 32 of Income Tax Act, 1961. Hence modvat credit availed on capital goods amounting to Rs 1,14,67,428/- and Rs 26,75,587/-is not admissible to them as per provisions of Rule 57 R (5) of Central Excise Rules, 1944.

I find that the above rules clearly specify that no credit shall be allowed if the manufacturer claims depreciation under section of Income Tax Act, 1961, in respect of that part of the value of capital goods which represents the amount of specified duty on such capital goods. Further I also find that the assessee has also declared in their declaration filed from time to time under Rule 57 T of the Central Excise Rules, that they will not claim depreciation on that part of the value of capital goods, in view of the above facts I find that contraventions against the assessee are proved."

4.4 From the observations made in the impugned order we are of the view that the directions of the CESTAT while remanding the matter has been complied with. Commissioner has considered the statement of Shri Adke and has arrived at his findings.

4.5 Commissioner has also recorded in the impugned order about the personal hearing afforded by him to the appellant on 04.01.2005, which was attended by Shri R B Datar, Chairman and Managing Director of the Company, Shri J S Tambe, Store Executive and Shri Umapathy D. Commissioner records that during the hearing the Chairman made his submissions in the matter on that date. No further submissions were made by the appellant till the date of impugned order, i.e. four months from the date of hearing. As stated by Justice V Krishna Iyer, in case of Ramjee [1977 SCC (2) 256] , "..Natural justice. is no unruly horse, no lurking land mine, nor a judicial cure-all. If fairness is shown by the decision-maker to the man proceeded against, the form, features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. 'Unnatural expansion of natural justice, without reference to the administrative realities and other factors of a given case, can be exasperating. We can neither be finical nor fanatical but should be flexible yet firm in this jurisdiction. No man shall be hit below the belt that is the conscience of the matter." Since Commissioner has afforded the opportunity of hearing and waited for four months for any further submissions to be made by the appellants in the matter we do not see any merits in the submissions made by the appellant in respect of violation of principle of natural justice and reject the plea advanced in this respect.

4.6 Appellant have challenged the impugned order with regards to quoting of Rule 57 R (8) in the Show Cause Notice which as per them was incorporated only with effect from March, 1997 for the issues pertaining to the period 1995, 1996 & 1997, and Commissioner confirming the demand against them by referring to Rule 57 R (5). The Rule 57 R (5) as it was introduced by notification No 4/94-CX (NT) dated 01.03.1994, reads as under:

"No credit of the specified duty paid on the capital goods shall (5) be allowed, if such manufacturer claims depreciation under section 32 of the Income-tax Act, 1961 (43 of 1961) on that part of value of capital goods which represents the amount of specified duty paid on such capital goods."

This rule was amended by notification no 14/96-CX (NT) dated 23.071996 to read as follows:

"(5) No credit of the specified duty paid on the capital goods shall be allowed, if such manufacturer claims depreciation under section 32 of the Income Tax Act, 1961 (43 of 1961), or as revenue expenditure under any other section of the said Income Tax Act, in respect of that part of the value of capital goods which represents the amount of specified duty on such capital goods."

Rule 57 R (8) as incorporated by Notification No 6/97-CX (NT) dated 01.03.1997 reads as follows:

"(8) No credit of the specified duty paid on the capital goods shall be allowed, if the manufacturer, claims depreciation under section 32 of the Income-tax Act, 1961 (43 of 1961), or as revenue expenditure under any other provisions of the said Income-tax Act, in respect of that part of the value of capital goods which represents the amount of specified duty on such capital goods."

From the plain reading of the said Rules, it is noted that Rule 57 R (8) as per the notification No 6/97-CX (NT) was pari materia with the Rule 57 R (5) as it existed earlier. Since both the Rules were in pari materia it is not the case for the retrospective operation as claimed by the appellant, but at the best can be said to quoting of wrong sub-rule number in the Show Cause Notice. In such a situation the decision of Hon'ble Calcutta High Court referred by the appellant counsel would not be applicable. Hon'ble Supreme Court has in case of N B Sanjana [1978 (2) ELT J 399 (SC)] laid down the law as follows:

"14.We are not inclined to accept the contention of Dr. Syed Mohammad that the expression 'levy' in Rule 10 means actual collection of some amount. The charging provision Section 3 (1) specifically says "There shall be levied and collected in such a manner as may be prescribed the duty of excise......". It is to be noted that sub-section (1) uses both the expressions "levied and collected" and that clearly shows that the expression "levy" has not been used in the Act or the Rules as meaning actual collection. Dr. Syed Mohammad is, no doubt, well founded in his contention that if the appellants have power to issue notice either under Rule 10-A or Rule 9 (2) the fact that the notice refers specifically to a particular rule, which may not be applicable, will not make the notice invalid on that ground as has been held by this Court in J.K. Steel Ltd. v. Union of India, (1969) 2 SCR 418 (AIR 1970 SC 1173) :

"If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under different power does not vitiate the exercise of the power in question. This is a well settled proposition of law. In this connection reference may usefully be made to the decisions of this court in B. Balakotaiah v. Union of India, (1958) SCR 1052 = (AIR 1958 SC 232) ; and Afzal Ullah v. State of U.P., (1964) 4 SCR 1991 - (AIR 1964 SC 264).""

Hon'ble Madras High Court has in case of Carbonink Products [1992 (61) ELT 19 (Mad)] held as follows:

"5. Sec. 11A of the Act was introduced by Act 25 of 1978 and came into force with effect from 17-11-1980. On and from that date, Rule 10 of the Central Excise Rules went out of the Statute Book. Therefore, the reference to Rule 10 of the Rules in the show cause notice, dated 26-11-1980 is clearly a mistake. But in the final order dated 6-6-1981, the 2nd respondent has referred to Sec. 11A of the Act as having replaced Rule 10 of the Rules. Therefore, the mere quoting of a wrong provision of law in the show cause notice will not vitiate or invalidate the proceedings."

In view of the above referred decisions of Hon'ble Supreme Court we do not find any merits in the submissions made by the counsel for appellants in this respect.

4.7 Undisputedly and as admitted by Shri Adke, in his statement stated that they have claimed the depreciation on the invoice value of the capital goods. To quote from the statement of Shri Adke,-

"I am working as Executive (Stores) in M/s Datar Switchgear Ltd., H-108, MIDC Au..bad since ... I am looking after all the Central Excise matters of our company. I am familiar with Central Excise Law and procedure particularly pertaining to availment of modvat credit on inputs and capital goods. Our company procures inputs required for manufacture of our final products viz Earth Leakage Circuit Breaker, Miniature Circuit Breaker etc. We also procure plant and machinery for manufacture of final product and also avail modvat credit in respect of capital goods. We file declaration as per the provisions of Rule 57T and Rule 57Q from time to time. I give answer to your questions as under:

Q1. You had filed declaration/ intimation from time to time for declaring Capital Goods to be procured and Capital Goods received buy your factory? In the declaration/ intimations you had declared that you will not claim the depreciation under Section 32 of the Income Tax Act, 1961, on that part of value of the said capital goods which represent the amount of specified duty paid on such capital goods. Is it true?

Ans: Yes, it is true that we have declared that we will not claim depreciation on capital goods, which represents the amount of specified duty paid on capital goods.

Q 2. As per the provisions of Rule 57, to avail modvat credit on capital goods it is mandatory that you are not eligible to claim depreciation under Income Tax Act, 1961. Whether you agree with this fact?

Ans: Yes.

Q 3. Whether you have claimed any depreciation under Section 32 of the Income Tax Act 1961 on that part of value of the said capital goods which represents the amount of specified duty paid on such capital goods?

Ans: Yes we have claimed depreciations asked in the question.

Q 4. As you have claimed depreciation on modvat credit on capital goods, you are required to reverse the same as the provisions of Rule 57 Q as you are not entitled to avail modvat and depreciation facility simultaneously.

Ans: The modvat amount is credited to Profit and Loss account as income and depreciation is charged to capital assets on written down value basis. It means that modvat amount is treated as Income and depreciation amt is treated as expenditure. This procedure completely neutralizes the effect of depreciation on account of modvat as a simple accounting contra entry. Hence the question of reversing modvat credit does not arise.

Q 5. You have claimed modvat credit as well as depreciation on capital goods. This you have wrongly availed modvat credit on capital goods which has resulted in contravention of provisions of Rule 57 R of Central Excise Rules, 44. What you have to say in the matter?

Ans: As we have claimed modvat credit as income and depreciation as expenditure, the practice completely neutralizes the effect of depreciation on account of modvat-as a simple accounting contra entry. Hence we have not contravened the provisions of Rule 57 R of Central Excise Rules, 1944.

Q 6. In addition to above, whether you want to add anything more?

Ans: We have nothing to add more in the matter."

4.8 From the facts as stated above and available from the records of appellant, it cannot be disputed that appellant have claimed depreciation of the value of the capital goods which represent the specified duty paid by them on these capital goods and have also claimed the modvat credit of the same. From the plain reading of the Rule 57 R (5) as it existed from 1994 onwards, it is clear that the pre requisite for claiming the modvat credit of the specified duty paid on capital goods, appellants should have not claimed the depreciation of that part of the value of the capital goods which represented the specified duty. Having claimed the depreciation under Section 32 of the Income Tax Act, 1962 of the value representing the specified duty, appellants are not allowed the modvat credit of that amount. Appellants have sought to justify their action by taking recourse to the accounting practice. When the rules clearly provide that amount claimed as modvat credit should not be part of the value on which depreciation is claimed appellants are barred. It is settled principle in law that when statue provides a manner for doing some things then that is the only manner in which it is to be done and all other manner of doing the same barred. In case of Mahavir Prasad [(1999) 8 SCC 266] Hon'ble Supreme Court stated-

"It is a well settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner."

4.9 While reading through the statement and the arguments advanced on this aspect we are reminded of the observations made by Justice O Chinappa Reddy in case of McDowell [1985 SCC (3) 230]

"The march of the law against tax avoidance schemes continued and came a significant departure from the West- minister and the Fisher Executor. principle. In W.I.. Ramsay v. Inland Revenue Commissioners (1982) AB 300, the House of Lords had to consider a scheme of tax avoidance which consisted of a series or a combination of transactions each of which was individually genuine but the result of all of which was an avoidance of tax. Lord Wilberforce, with great force, observed, "Given that a document or transaction is genuine, the court cannot go behind it to some supposed underlying substance. This is the well-known principle of Inland Revenue Commissioners v. Duke of Westminister. This is a cardinal principle but it must not be overstated or overextended. While obliging the court to accept documents or transactions, found to be genuine, as such, it does not compel the court to look at a document or a transaction in blinkers, isolated from any context to which it properly belongs. If it can be seen that a document or transaction was intended to have effect as part of a nexus or series of transactions, or as an ingredient of a wider transaction intended as a whole, there is nothing in the doctrine to prevent it being so regarded: to do so is not to prefer form to sub stance, or substance to form. It is the task of the court to ascertain the legal nature of any transaction to which it is sought to attach a tax or a tax consequence and if that emerges from a series or combination of transactions, intended to operate as such, it is that series or combination which may be regarded. For this there is authority in the law relating to income tax and capital gains tax: See Chinn v. Hochstrasser [1981] A.C. 533 and Inland Revenue Com missioners v. Plummer [1980] A.C. 896." "For the commissioners considering a particular case it is wrong and an unnecessary self limitation, to regard themselves as precluded by their own finding that documents or transactions are not "shams", from considering what, as evidenced by the documents themselves or by the manifested intentions of the parties, the relevant transaction is. They are not, under the Westminister doctrine or any other authority, bound to consider individually each separate step in a composite transaction intended to be carried through as a whole."

Later again he observed, ".....For the taxpayers it was said that to accept the revenue's wide contention involved a rejection of accepted and established canons and that, if so general an attack upon schemes for tax avoidance as the revenue suggest is to be validated, that is a matter for Parliament. The function of the courts is to apply strictly and correctly the legislation which Parliament has enacted: if the taxpayer escapes the charge, it is for Parliament, if it disapproves of the result, to close the gap. General principles against tax avoidance are, it was claimed, for Parliament to lay down. We were referred, at our request, in this connection to the various enactments by which Parliament has from time to time tried to counter tax avoidance by some general prescription. The most extensive of these is Income and Corporation Taxes Act 1970, sections 460 et seq. We were referred also to well known sections in Australia and New Zealand (Australia, Income Tax Assessment Act 1936 -51, section 260, New Zealand, Income Tax Act 1976, section 99, replacing earlier legislation). Further it was pointed out that the capital gains tax legislation (starting with the Finance Act 1965) does not contain any provision corresponding to section 460. The intention should be deduced therefore, it was said, to leave capital gains tax to be dealt with by "hole and plug" methods: that such schemes as the present could be so dealt with has been confirmed by later legislation as to "value shifting": Capital Gains Tax Act 1979, section 25 et seq. These arguments merit serious consideration. In substance they appealed to Barwick C.J. in the recent case of Federal Commissioner of Taxation v. Westraders Pty. Ltd. [1980] 30 A.L.R. 353, 354-355, " "I have a full respect for the principles which have been stated but I do not consider that they should exclude the approach for which the Crown contends. That does not introduce a new principle: it would be to apply to new and sophisticated legal devices the undoubted power and duty of the courts to determine their nature in law and to relate them to existing legislation. While the techniques of tax avoidance progress and are technically improved, the courts are not obliged to stand still. Such immobility must result either in loss of tax, to the prejudice of other taxpayers or to Parliamentary congestion or (most likely) to both. To force the courts to adopt, in relation to closely integrated situations, a step by step, dissecting, approach which the parties themselves may have negated, would be a denial rather than an affirmation of the true judicial process. In each case the facts must be established, and a legal analysis made: legislation cannot be required or even be desirable to enable the courts to arrive at a conclusion which corresponds with the parties' own intentions."

4.10 In view of the above discussions we cannot agree with the accounting maze that appellants have tried to create for justifying their wrong.

4.11 Ahmedabad bench has in case of Gujarat Alkalies and Chemicals Ltd held as follows:

"6. During the relevant period Rule 57R provided that no credit of the specified duty paid on the capital goods shall be allowed, if the manufacturer claims depreciation under Section 32 of the Income Tax Act or as Revenue explained under any other Section of the Income Tax Act in respect of that part of the value of the capital goods which represents amount of specified duty of such capital goods.

The rule is very clear. Once a manufacturer claims depreciation which treats the expenditure towards specified duty as Revenue explained, he cannot avail the same as Cenvat Credit. However, the learned advocate relied upon several decisions of the Tribunal and submitted that where the benefit of depreciation under Section 32 of the Income Tax Act for calculating the income tax has not been enjoyed, there can be no bar to the claiming of Modvat Credit.

In Terna Shetkari Sahakari Sakhar Karkhana Ltd. Vs. CCE reported in 2001 (138) ELT 1225 (Tri. Mum.), the Tribunal as follows:

"6. We do not find it possible for us to say that Modvat credit under Rule 57Q should be disallowed in a case simply because the manufacturer claimed depreciation on the value of the capital goods representing that amount of duty. It appears to us that the object behind Rule 57R is to ensure that the manufacturer does not get benefit both of the capital goods Modvat credit and of the depreciation provision of the Income Tax. He has to avail of either one or the other. The amendment made by the Finance Act, 1988 to Section 43(1) of the Income Tax Act to actual cost illustrates this point. By the amendment explanation 9 has been added below Section 43(1) providing that the actual cost of asset acquired on or after 1-3-1994 included the amount of additional duty of customs or Central Excise duty in respect of which claim of credit has been made and allowed under the Central Excise Rules. This provision appears to us to be a mirror image of sub-rule (5) of Rule 57R on the implication that claim for credit should not only have been made but should have been allowed. The position that claim for depreciation should have been permitted, appears to us to implicit in Rule 5 of Rule 57R. We would otherwise be left in a situation where a manufacturer is left with neither benefit. This could for example, happen in a situation where income tax disallowed the claim for depreciation on the capital assets for reason unconnected with the Modvat Credit, in that event the claim for depreciation of the entire cost of the capital assets which will include element of duty would not be available. It would then happen that the manufacturer merely because he had made a claim for depreciation would be debarred from taking Modvat Credit. In addition, the Commissioners view that the filing of a revised return is not permissible ignores the Provision 139(5) of the Income Tax Act, 1961. He ought to have considered this provision of the Act and satisfied himself by looking at the relevant income tax returns and other documents whether the claim merited consideration. We are of the view that he should at least do so. While doing so he may also consider the claim that the accounting practice followed by it, effectively washes out claim for depreciation under the Income Tax Act. The counsel for the appellant says that he will make submissions in these aspects supported by necessary evidence within two months from the receipt of this order. The Commissioner shall pass orders in accordance with law."

The learned advocate relied on this paragraph to submit that what is required as per law is that the benefit of depreciation should have been enjoyed by the appellant. He submitted that in the first two years the appellants were assessed to income tax under Section 115JA which provides for minimum alternative tax even though the company had suffered losses. It is his submission that while imposing minimum alternative tax, the depreciation claimed is not taken into account for calculating book profits. According to him this amounts to non availment of depreciation and therefore the decision of the Tribunal above would squarely applied in this case. In this regard, it would be pertinent to reproduce the relevant portion of the assessment order for the assessment year 1997-98 in respect of depreciation.

"13. Claim for depreciation:

The Assessee Company had claimed depreciation of Rs.69,18,30,093/- in computation of income filed along with return of income which was based on W.D.V. as per return of income filed for previous year by the assessee. During the assessment the assessee company has re-submitted the claim of depreciation of Rs.70,47,52,374/- based on opening WDV as on 01.04.1996 and also addition/deduction made during the F.Y. 1996-97. After verification of addition/deduction made during the year and also allowing depreciation of Rs.1,49,02,364/- @ 25% on interest of Rs.5,96,09,456/- paid for Phospharic Acid and depreciation @12.50% of Rs.1,25,87,914/- on interest of Rs.10,07,03,312/- paid for Hydrogen Peroxide, the claim of depreciation is allowed totaling to Rs.73,22,42,652/-."

Further, when we go through the assessment order it is seen that there are several cases where the assessing officer has clearly disallowed certain claims. Some of the examples are disallowances under Rule 6(D), disallowance under Section 37(2A) disallowance under Rule 6(B), disallowance of portion of guest house expenses etc. Even though income tax was levied under Section 115JA, the assessment order discussed all the issues in detail and worked out the profit and finally in the last paragraph it was observed as follows:

"The Income Assessed u/s. 143(3) of the I.T. Act, is Rs.7,80,82,400/-. The income declared under the provisions of MAT u/s. 115 JA of the I.T. Act is Rs.17,61,57,554/- which is more than income assessed u/s. 143(3) of the I.T. Act. Therefore the total income is assessed at Rs.17,61,57,554/-. Issue demand notice and challan, charged interest as per the provision of the I.T. Act."

The last paragraph reproduced above clearly shows that the income was assessed under Section 143(3) of the I.T. Act as well as under Section 115 JA of the I.T. Act.

In fact the Commissioner in para 4.2 has reproduced the relevant portions of the assessment orders in respect of assessment years 1996-97, 1998-99 and 1999-2000 which show very clearly that in all the years the claim for depreciation made by the appellants was allowed. Therefore in the case of the appellant in this case, not only the appellants claimed depreciation, but the same was also allowed. Therefore, the decision of the Tribunal in para 6 reproduced above would not help the appellants. The case of Pasari Spinning Mills Ltd. Vs. CCE reported in 2002 (141) ELT 172 (Tri. Bang.) would also not be help since in that case it was held that when revised Income Tax Return is filed the same has to be considered along with statutory returns filed earlier and it has to be examined whether depreciation claimed was in fact availed. It is not the case of the appellant here that a revised return was filed. Even in that case the matter was remanded with a direction to the Commissioner to examine the revised return under Income Tax Act. Similarly, the decision of the Tribunal in the case of Terna Shetkari SSK Vs. CCE reported in 2003 (159) ELT 777 (Tri. Mum.) would also not be of help in view of the fact that in that case the assessee had proved that depreciation was not claimed by showing the returns and the assessment orders. In that case the appellants had also produced evidence to show that in the return filed no depreciation was claimed and no revised return was filed. Similar was the situation in the case of Maharashtra Electrosmelt Ltd. reported in 2008 (224) ELT 391 (Tri. Mum.) where also, the assessee has filed a revised return where depreciation was not claimed. In the case of Sri Vishnu Shankar Mill Ltd. Vs. CCE reported in 2007 (208) ELT 194, the income tax authorities had detected Cenvat Credit value of goods for calculating taxable income and certify assessment order was produced. On this basis the Tribunal held that there was no simultaneous availment. The decision of the Tribunal in Abhishek Synthetic Pvt. Ltd. reported in 2005 (182) ELT 339 (Tri. Bang.) also does not help since in that case also even though appellants took credit simultaneously, the assessee took remedial action on realizing the mistake and filed a revised Income Tax Return. In the case of Ennar Spinning Mills reported in (2009-TIOL-814-CESTAT-MAD) also, it was taken note of by the Tribunal that even though initially there was simultaneous availment of Modvat Credit and depreciation, since revised return was filed in the subsequent year, it cannot be said that assessee availed both benefits simultaneously. However, in this case, the learned advocate relied upon the discussion in para 1 wherein the Tribunal had observed as under:

"On appeal by the assessee, the Commissioner (Appeals) set aside the denial of credit and imposition of penalty after holding that although credit had been availed and depreciation had been claimed, in the Income Tax Return filed in the subsequent year, they have deducted the duty amounts in question which would mean that the depreciation though initially claimed, had not been availed and hence it is not a case of double benefit to the assessees."

It was his submission that this is reproduction of facts and according to this, the assessee in that case had reversed the depreciation claimed in the previous year and it was not a case of revised return. Therefore it was his submission that the decision of the Tribunal in that case would be squarely applicable to the case of the appellants in view of the fact that appellants also reversed the depreciation in the subsequent year. Further, since appellants had not claimed Cenvat Credit earlier at all, it cannot be said that they had availed double benefit. We are not impressed with his argument. What the learned advocate has relied upon is reproduction of facts but not the finding. The findings of the Tribunal contained in para 2 is very clear and the Tribunal had observed that a revised return was filed in the subsequent year. Therefore we do not think this decision would help the appellants.

Another submission that was made is that in any event depreciation was not claimed in the years in which Modvat Credit was claimed. According to him depreciation was claimed in the years 1997-98, 1998-99 and 1999-2000 whereas Modvat credit was claimed only in the years 2000-2001 and 2001-2002. In the years when modvat was claimed, the amount of modvat was excluded from the value of the plant in the books of account so that no depreciation can be taken in future also. We are not convinced that this is the correct proportion as per law. The learned advocate relied upon the Tribunal decisions which we will consider. In Suprajit Engineering Ltd. Vs. CCE reported in 2007 (212) ELT 394 (Tri. Bang.) = (2007-TIOL-180-CESTAT-BANG), the Tribunal had observed in para 6 and 6.1 as follows:

"6. We have gone through the records of the case carefully. We reproduce the relevant provisions of Cenvat Credit Rules below:

Rule 4. Conditions for allowing Cenvat credit:-

4(2)(a): The Cenvat credit in respect of capital goods received in a factory at any point of time in a given financial year shall be taken only for an amount not exceeding fifty percent of the duty paid on such capital goods in the same financial year:

Provided that the Cenvat credit in respect of capital goods shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year if the said capital goods are cleared as such in the same financial year.

(b) The balance of Cenvat credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer if the capital goods, other than components, spares and accessories [ refractories and refractory materials, moulds and dies] and goods falling under heading No.68.02 and subheading No.6801.10 of the First Schedule to the Tariff Act are in the possession and use of the manufacturer of final products in such subsequent years.

4(4): The Cenvat credit in respect of capital goods shall not be allowed in respect of that part of the value of capital goods which represents the amount of duty on such capital goods, which the manufacturer claims as depreciation under Section 32 of the Income Tax Act, 1961 (43 of 1961).

6.1 A careful reading of Rule 4 reveals that in respect of Capital Goods received in a factory at any point of time in a given financial year, only 50% of the duty paid can be taken as Cenvat credit. In the present cases, the appellants had taken only 50% of the duty paid on capital goods in the first year. On this point, there is no dispute. That means, in respect of the balance 50% of the duty on capital goods, as per rule, the appellant had not taken Cenvat credit in the first financial year. There is nothing in the rules, which debars the appellant from availing depreciation on the balance 50% of the duty, which is not availed as Cenvat credit. As regards the second year, as per Rule 4(2)(b), the appellants availed the Cenvat credit. Cenvat Rule 4(4) makes it clear that Cenvat credit shall not be allowed in respect of that part of the value of capital goods which represents the amount of duty on such capital goods which the manufacturer claims as depreciation under Section 32 of the Income Tax Act. Even though it appears that in the first year, the appellants had violated the rule, actually they have not violated the rules for the simple reason that they had availed depreciation only in respect of that portion of duty on which they had not taken Cenvat credit. In these circumstances, we are of the view that there is no violation of the provisions of Cenvat Credit Rules. Hence, the impugned orders are not sustainable. We allow the appeals with consequential relief, after setting aside the impugned Orders-in-Appeal."

We do not think that this decision can be applied to the present case. In this case the appellant claimed full depreciation which was allowed by the Income Tax Authorities in the year in which the plant and machinery was purchased/installed. Once full depreciation was claimed, the appellant is barred from availing Modvat credit. The decision in Roots Cast Pvt. Ltd. Vs. CCE reported in 2007 (216) ELT 448 (Tri. Chennai) = (2007-TIOL-1128-CESTAT-MAD) relied upon the decision of the Tribunal in the case of Suprajit Engineering Ltd. which we have already discussed above. In any case Hon'ble Karnataka High Court on an appeal filed against the decision of the Tribunal in Suprajit Engineering Ltd. case allowed the appeal filed by the Revenue. The Hon'ble High Court observed that the Tribunal committed a serious error in not considering sub-rule (4) of Rule 4 of Cenvat Credit Rules."

4.12 In similar set of facts Delhi bench has vide its order in case of Surya Alumex relied upon by the Special counsel held as follows:

"5. After hearing both the parties and perusing the record, it is observed and held as follows: Following are the admitted facts

(i) that the appellant had purchased various capital goods during the year 2013-14 and 2014-15.

(ii) The appellant claimed the depreciation on entire invoice value including the excise duty as well.

(iii) 100% CENVAT Credit on these capital goods has also been availed on 31.7.2014.

The rectification of alleged availment has been made in the balance sheet for the 2015-16.

It is also observed that when the appellant was subsequently asked about the said adjustment to have been made in the balance sheet for the year 2015-16 and 14-15, the appellant did not respond nor submitted any revised balance sheet for the aforesaid period. In absence thereof, it actually remained unclear as to whether the double benefit claimed by the appellant i.e. 100% availment of Cenvat Credit on the capital goods purchased in the year 2013-14 and 2014-15 and also claiming depreciation thereupon has actually been surrendered by the appellant o not. In fact Rule 4(4) of CENVAT Credit Rules, 2004 do not permit CENVAT Credit in respect of part of value of capital which represents duty of amount on such capital goods or which the manufacturer or producer of output service claims as depreciation under section 32 of the Income Tax Act.

In view of the above facts and admission of the appellant, there is definite violation of said Rule by the appellant. The adjustment in the balance sheet of 2015-16 cannot be considered as reversion of the depreciation claimed in the balance sheet of the year 2013-14 and 2014-15. Accordingly, I do not find any infirmity in the findings of the Commissioner (Appeals) where it has been held that the adjudicating authority has grossly erred in interpreting the provisions of Rule 4(4) of CENVAT Credit Rules, 2004. Once the full depreciation was claimed, the respondent could not claim availment of cenvat credit on capital goods. Corrective measures taken by the appellant but in subsequent financial year definitely does not make good irregular availment of CENVAT Credit during the previous year. No doubt the objective /idea of the Rule 4(4) of CENVAT Credit Rules, 2004 is to prevent the double benefit but as already discussed above, the appellant has failed to produce any evidence that double benefit which admittedly was claimed by him, as to actually been reversed for the relevant financial year."

4.13 Since the appellants have taken the inadmissible credit, the demand of interest in respect of the inadmissible credit is justified in terms of provisions of. It is now settled law that interest under Finance Act, 1994 is statutory liability put on the person who has unduly withheld the amounts due to government. In case of Pratibha Processors [1996 (88) ELT 12 (SC)] Hon'ble Apex Court has laid down:

"13. In fiscal Statutes, the import of the words - "tax", "interest", "penalty", etc. are well known. They are different concepts. Tax is the amount payable as a result of the charging provision. It is a compulsory exaction of money by a public authority for public purposes, the payment of which is enforce by law. Penalty is ordinarily levied on an assessee for some contumacious conduct or for a deliberate violation of the provisions of the particular statute. Interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable. The levy of interest is geared to actual amount of tax withheld and the extent of the delay in paying the tax on the due date. Essentially, it is compensatory and different from penalty - which is penal in character."

4.14 Further when we hold that appellants by way of making misdeclaration have availed of the modvat credit which was not admissible to them the penalty imposed on them is justified. In case of Prudential Spinner Ltd [2011 (267) ELT 291 (SC)], Hon'ble Apex Court held-

"2. A show cause notice was issued by the appellant herein in which it was stated that the assessee had cleared the finished goods either on less payment of duty or without payment of duty for certain invoices and thus violated the provisions of the Central Excise Rules read with Section 11A of the Central Excise Act. In the show cause notice, it was specifically stated that in view of the aforesaid short payment or non-payment, penalty equal to the duty payable should be paid by the assessee as provided under Section 11AC of the Central Excise Act. The extended period of limitation was also invoked by the department. By referring to proviso to Section 11A of Central Excise Act, a reply to the show cause notice was filed. The Commissioner considered the allegation against the respondent as also the reply submitted by him and on appreciation thereof, came to a finding that the charge of evasion of duty through mis-statement, suppression and fraud was proved justifying the application of extended period of five years as provided in Section 11A of the Central Excise Act, 1944. It was also held that in equal quantity of excisable goods were removed by the assessee without payment of duty. Finally, by exercising the powers under Section 11AC, penalty was also imposed to the extent of equal amount of the duty which is 100% penalty.

Being aggrieved by the aforesaid order passed by the Commissioner of Customs and Central Excise, an appeal was filed before the Tribunal. Before the Tribunal, only one issue was raised by the respondent, which was with regard to the quantum of penalty under Section 11AC of the Central Excise Rules. No other issue was raised and, therefore, we are not required to go into any other aspect of the matter except for deciding as to whether or not the quantum of penalty imposed by the Tribunal is justified or not in the facts and circumstances of the present case. In this connection, we may appropriately refer to the decision of the Division Bench of this Court in Union of India v. Rajasthan Spinning and Weaving Mills and Commissioner of Customs and Central Excise v. Lanco Industries Ltd. reported in 2009 (13) SCC 448 = 2009 (238) E.L.T. 3 (S.C.). In the said judgment, scope and ambit of Section 11-AC was considered and decided by this Court.

The learned counsel appearing for the appellant relies on the said judgment in order of substantiate his submission that the Tribunal was not justified in reducing the quantum of penalty to only Rs. 1 lakh in view of the mandatory provisions of Section 11AC of the Central Excise Act. Learned counsel appearing for the respondent, however, submits that there was only a delay of one or two days in making payment of duty with reference to the clearance of goods and that duty was paid even prior to issuance of the show cause notice and, therefore, the Tribunal was justified in reducing the quantum of penalty to Rs. 1 lakh. We have taken notice of the aforesaid submission also. However, reference is made to the decision of Rajasthan Spinning and Weaving Mills (Supra). We find in the said case also, a similar submission was made contending, inter alia, that there was no warrant for levy of penalty since the assessee had deposited balance amount of excise duty that was short paid at the first instance and that too even before the show cause notice was issued. Tribunal upheld the said contention in the said case which was set aside by this Court in the decision of Rajasthan Spinning and Weaving Mills (Supra). Since the submission here is of identical nature, the aforesaid submission is only to be rejected in view of the findings recorded by this Court that once the section is held to be applicable in a case, the authority concerned would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. On consideration of the factual position, we also hold that, in the present case, the Tribunal was not justified in reducing the quantum of penalty as penalty under the provision of the Act must be imposed equal to the duty determined under sub-section (2) of Section 11A. We also make it clear that in the present case applicability of any other provision except for substantive provision of sub-section (2) of Section 11A and substantive provision of Section 11AC was pleaded. Nor any effort was made to substantiate or prove a case of applicability of any of the provisos therein and not even such a case was pleaded."

5.1 In view of discussions as above we find no merits in the appeal and dismiss the same.

(Order pronounced in the open court on 23.09.2021)