2006 (2) TMI 349 - AT - Central Excise

Summary

Issues:
1. Discrepancy in depreciation value of capital goods between the appellant and the revenue department.
2. Applicability of depreciation rates under the Companies Act versus Circulars issued by the Board for Central Excise valuation.
3. Imposition of penalty by the original authority and its subsequent setting aside by the Commissioner (Appeals).

Analysis:

Issue 1: Discrepancy in depreciation value of capital goods
The case revolves around the removal of old machinery from one manufacturing unit to another by the appellant, resulting in a dispute over the depreciation value of the capital goods. The appellant depreciated the value by 85.15% based on rates from the Companies Act, whereas the revenue department contended that the depreciation should be limited to 70%. This led to a demand for duty on the differential value, which was upheld by the original authority but with the penalty imposed, later set aside by the Commissioner (Appeals).

Issue 2: Applicability of depreciation rates
The key question in this case is whether the depreciation of the capital goods should be determined based on the rates specified under the Companies Act, as argued by the appellant, or as per the Circulars issued by the Board for Central Excise valuation, as claimed by the Revenue. The Circulars in question, specifically Circular No. 643/34/2002-CX and Circular No. 495/16/93-Cus.-VI, provide guidance on the depreciation of second-hand machinery. The Tribunal clarified that the Central Excise Circular adopted the relevant provisions of the Customs Circular for depreciation purposes, setting a maximum limit of 70% for depreciation.

Issue 3: Imposition and setting aside of penalty
While the penalty imposed by the original authority was set aside by the Commissioner (Appeals), the focus of the current appeal by the appellant is on the demand for duty based on the discrepancy in depreciation value. The Tribunal noted that if the appellant had paid the entire amount of the differential duty, the payment would be considered in order. Consequently, the appeal against the demand for duty was dismissed, affirming the limitation on depreciation value to 70% as prescribed by the Board.

In conclusion, the Tribunal upheld the demand for duty based on the depreciation value limitation of 70% set by the Board for Central Excise valuation, dismissing the appeal brought forth by the appellant.