2014 (1) TMI 427 - AT - Customs

Duty demand - Import of capital goods and consumables under Notification No. 126/94-Cus., dated 3-6-1994 - Procurement of similar items domestically under Notification No. 136/94-C.E., dated 10-11-1994 - Debonding of gods - Held that - where the goods were permitted to be taken outside by the Development Commissioner on debonding, the duty has to be charged on the depreciated value inasmuch as the goods have been imported under Notification No. 126/94. In case of non-fulfilment of export obligation and in case where debonding were permitted by the Development Commissioner, the duty liability has to be computed on the depreciated value as is clear from the above Notification - Notification Nos. 52/2003 and 22/2003 have no application whatso-ever (in respect of goods imported/procured indigenously prior to the date of issue of these notifications) and (duty liability will have to be determined) under the provisions of Notifications under which the goods were imported/procured indigenously and wherever the units were allowed to be debonded, depreciation should be granted in terms of Board s Circular No. 43/98-Cus., dated 26-6-1998. Appellant is liable to pay duty only on the depreciated value of the capital goods - both the Development Commissioner and the Joint DGFT have permitted the appellant to clear the capital goods under EPCG scheme. Therefore, the rate of duty that can be charged on the goods being debonded would be the rate applicable to the capital goods under EPCG scheme at the time of debonding - no duty liability would accrue in regard to raw materials, consumables etc. imported/indigenously procured which have been consumed for the production of cut flowers, as the goods have been used for the intended purpose - Matter remanded back for duty computation - Decided in favour of assessee.

Issues Involved:
1. Applicability of Notifications No. 126/94-Cus. and 136/94-C.E. versus Notifications No. 52/2003-Cus. and 22/2003-C.E.
2. Calculation of duty on depreciated value versus proportionate basis.
3. Approval for debonding and clearance under EPCG scheme.
4. Confiscation and penalty imposition.

Issue-wise Detailed Analysis:

1. Applicability of Notifications No. 126/94-Cus. and 136/94-C.E. versus Notifications No. 52/2003-Cus. and 22/2003-C.E.:
The appellant argued that the goods were imported and procured under Notifications No. 126/94-Cus. and 136/94-C.E. and thus, Notifications No. 52/2003-Cus. and 22/2003-C.E. should not apply for duty computation. The Tribunal agreed, stating, "Notification Nos. 52/2003 and 22/2003 have no application whatso-ever (in respect of goods imported/procured indigenously prior to the date of issue of these notifications)." The duty liability should be determined under the provisions of the original notifications under which the goods were imported/procured.

2. Calculation of Duty on Depreciated Value versus Proportionate Basis:
The appellant contended that duty should be computed on the depreciated value as per Notification No. 126/94-Cus., which allows for depreciation from the date of commercial production or the date the goods came into use until the date of payment of duty. The Tribunal supported this view, citing multiple precedents, including Solitaire Machine Tools Pvt. Ltd., which stated, "the imported goods are eligible for depreciation as provided for in the Notification." The Tribunal concluded that duty should be charged on the depreciated value of the capital goods.

3. Approval for Debonding and Clearance under EPCG Scheme:
The appellant received in-principle approval for debonding and an EPCG licence from the Development Commissioner and Joint DGFT, respectively. The Tribunal noted, "both the Development Commissioner and the Joint DGFT have permitted the appellant to clear the capital goods under EPCG scheme." Therefore, the applicable rate of duty should be the rate under the EPCG scheme at the time of debonding.

4. Confiscation and Penalty Imposition:
The original order included demands for customs duty, central excise duty, interest, and penalties, along with the confiscation of goods. The Tribunal, however, set aside the impugned order, stating that the appellant is liable to pay duty only on the depreciated value of the capital goods and that no duty liability would accrue on raw materials and consumables used for the intended purpose. The case was remanded for re-computation of duty liability, allowing the appellant to submit supporting documents and be heard before finalizing the matter.

Conclusion:
The appeal was allowed by way of remand, directing the adjudicating authority to re-compute the duty liability based on the depreciated value of the capital goods and the applicable EPCG scheme rate, and to exclude duty on consumed raw materials and consumables.

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