2014 (8) TMI 45 - AT - Customs

100% EOU - debonding - levy of duty on depreciated value - Whether depreciation is admissible on the value of capital goods imported but not used fully for the purpose of manufacture so as to discharge export obligation - Notification No.95/93-Cus dated 2.3.1993 - Held that - Revenue s argument to deny depreciation does not appear to be reasonable for the reason that depreciation is admissible once there was export obligation discharged even partly irrespective of quantum of export made in absence of any clause in the notification for disallowance against partly discharge of export obligation. Therefore there shall be allowance of depreciation on the capital goods imported to calculate the value thereof for the purpose of recovery of duty foregone. Respondent shall be entitled to depreciation. Qauntum of depreciation - Held that - Circular No.14/2004-Cus dated 13.2.2004 says that in respect of clearance of capital goods by EOU/EHTP/STP units, depreciation at the rate of 20% per annum of the original value of computer and computer peripherals items and 10% depreciation per annum in case of other capital goods shall be admissible. Such mandate of circular provides basis to hold that rate of depreciation to be allowed shall be at prescribed percentage per annum of original value of the respective and type of capital goods imported duty free. This calls for set aside of the impugned order and matter remanded to the adjudicating authority to calculate the quantum of depreciation admissible keeping in view the mandate of circular issued by Board - Decided partly in favour of Revenue.

Summary

Issues:
1. Admissibility of depreciation on capital goods imported but not fully used for export obligation.
2. Calculation of depreciation on capital goods.
3. Interpretation of Notification No.95/93-Cus regarding duty recovery on depreciated value of capital goods.
4. Quantum of depreciation calculation based on Circular No.14/2004-Cus.

Analysis:
The judgment revolves around the question of whether depreciation is permissible on capital goods imported but not entirely utilized for meeting export obligations. The Revenue argued that duty foregone on the imported capital goods should be recovered in full due to the respondent's failure to fully discharge the export obligation. However, the Tribunal disagreed, stating that depreciation is allowable once any amount of export obligation is fulfilled, regardless of the quantity exported. The absence of a clause in the notification disallowing depreciation for partial fulfillment supports this view. Hence, the respondent is entitled to depreciation on the imported capital goods.

Regarding the calculation of depreciation, the Tribunal referred to Circular No.14/2004-Cus, which specifies the rates of depreciation for different types of capital goods cleared by EOU/EHTP/STP units. The circular mandates a depreciation rate of 20% per annum for computer and computer peripherals, and 10% per annum for other capital goods. Accordingly, the impugned order was set aside, and the matter was remanded to the adjudicating authority to calculate the admissible depreciation based on the prescribed percentages of the original value of the respective capital goods.

Furthermore, the interpretation of Notification No.95/93-Cus was crucial in determining the duty recovery on the depreciated value of capital goods. The notification allows for debonding of units and the levy of duty foregone on the depreciated value of capital goods. While the Revenue contended for full duty recovery, the Tribunal held that depreciation should be factored into the calculation of duty foregone, as long as any export obligation was discharged. The notification did not explicitly prohibit depreciation in case of partial export obligation fulfillment.

In conclusion, the appeal was allowed, and the matter was remanded to the adjudicating authority for the calculation of depreciation on the imported capital goods in accordance with the rates specified in Circular No.14/2004-Cus, ensuring that the depreciation is considered in the recovery of duty foregone as per Notification No.95/93-Cus.