CESTAT, Chennai: Depriciation under Income Tax Act not applicable in existence of a uniform procedure laid down by the CBEC

CESTAT, Chennai: Depriciation under Income Tax Act not applicable in existence of a uniform procedure laid down by the CBEC

CCE, Madurai v. M/s. GGN Spinning Mills P. Ltd., decided on 18.01.2011

Relevant facts:

The respondents removed capital goods on which they had availed CENVAT credit to their sister unit. According to the rules in force at the material time, they were required to pay duty on the value of the capital goods. The respondents have calculated depreciated value applying depreciation at the rate of 25% as provided under the Income Tax Act. Boards Circular No. 643/34/2002-CX dated 1.7.2002 (Sl. No. 14 to the Table annexed to the circular) read with Circular F. No. 495/ 16/93-Cus. VI dated 26.5.1993 referred to therein provided a mechanism to calculate depreciation for these purposes. By applying Income Tax, the department argued, provisions the respondents have short-paid a duty amount of Rs.6,89,987/-. The original authority demanded this amount while the lower appellate authority had set it aside.

Question before the tribunal:

Whether the depreciation under the income tax can be used for custom and excise purposes?

Decision of the tribunal:

Upholding the demand for increased duty, the tribunal held as follows:

Para 4: “. I find that the Board has issued a circular clarifying how the depreciation is to be worked out for computing the value of used capital goods in this case and the circular is being uniformly followed by all assessees subject to excise control. There is no particular reason why the respondents herein have to be treated differently. The lower appellate authority has clearly erred in allowing depreciation as admissible under the Income Tax law when a uniform and unambiguous procedure has been laid down by the Central Board of Excise and Customs to be followed by all assessees subject to excise law.”