2016 (9) TMI 1226 - AT - Customs

Demand of customs duty on capital goods imported - imposition of penalty - 100% EOU - tissue culture plants - capital goods originally imported duty-free for setting up of the unit. On account of failure to carry on the business, the factory had to be shut down and approach made to Development Commissioner in February 1997 for de-bonding of the unit - whether the appellant is entitled to depreciation on the capital goods on which he is required to pay customs duty now? Held that - The CBEC circular No. 43/98 dated 26th of June 1998 issued from file No. 314/19/98 allows depreciation for the capital goods other than computers and computer peripherals up to a maximum extent of 90% with the following stipulations for the units operating under EOU scheme for capital goods cleared in DTA. From a careful reading of the notification No. 53/97 customs dated 3rd of June 1997, it is seen that the capital goods at the time of clearance will be entitled to payment of customs duty on depredated value provided that the said unit has been allowed by the Development Commissioner to clear such goods in DTA. the unit commenced its production in the year 1994. The appellant has approached the Development Commissioner for de-bonding of the unit as early as 4th of February 1997. The adjudication order passed by the Commissioner originally, demanding customs duty on capital goods was passed in the year 1999. This order was received by the appellant only in the year 2011. As per the directions of the Tribunal in the 1st round of litigation, the Commissioner was directed to pass a de-novo order. Accordingly the impugned order came to be passed. Meanwhile the appellant has chosen to pay the duty, interest and penalty in the year 2011 in terms of Commissioner s order in the original proceedings and has since de-bonded the unit. Hence it is fair to take the view that the capital goods have been allowed to be cleared in DTA and hence depreciation upto 90% will be allowable to the appellant in calculating the duty payable on the capital goods. Requirement to pay customs duty - goods auctioned by department and assessee not in possession of the goods - Held that - The appellant s unit was registered as 100% EOU. The unit was started in 1994 and was in existence till 2011, i.e. till de-bonding of the unit. The customs duty as computed originally by the Commissioner was discharged by the appellant in 2011 and thereafter the capital goods were auctioned by the government. - appellant liable to pay the customs duty and cannot take shelter under the fact that the government has auctioned the goods. Customs duty payable on the capital goods need to be reworked after allowing 90% depreciation. Consequently the customs duty payable by the appellant will considerably come down as also the interest payable thereon - in view the facts and circumstances of the case and also the fact that the appellant could not carry on its business because of adverse turn of business circumstances, a lenient view taken and the penalty imposed is waived. Appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
- Calculation of customs duty on capital goods imported for a 100% EOU.
- Entitlement to depreciation while calculating duty on imported capital goods.
- Liability to pay customs duty after goods are auctioned by the government.

Analysis:

1. Calculation of Customs Duty on Capital Goods:
The appellant, a 100% EOU, imported capital goods for setting up their unit. The Commissioner demanded customs duty of about ?40 Lacs due to the appellant's failure to fulfill export obligations. The appellant contested this, arguing they should be entitled to depreciation while calculating duty on the imported capital goods. The Tribunal reviewed the case history, noting the closure of the unit and subsequent de-bonding. The relevant customs notifications and circulars were examined to determine the duty payable on the capital goods. The Tribunal found that the appellant should be allowed depreciation up to 90% on the capital goods, significantly reducing the duty payable. This decision was supported by case laws cited by the appellant.

2. Entitlement to Depreciation:
The appellant contended that they were entitled to depreciation on the imported capital goods, citing relevant case laws. The Tribunal analyzed the customs notifications and circulars to ascertain the eligibility for depreciation. It was observed that the unit had commenced production in 1994 and was de-bonded in 2011 after paying the duty, interest, and penalty. Considering the circumstances and the fact that the goods were allowed to be cleared in DTA, the Tribunal concluded that the appellant should be entitled to depreciation up to 90% while calculating the duty payable on the capital goods.

3. Liability to Pay Customs Duty After Auction:
The appellant argued that since the government auctioned the capital goods and they were no longer in possession, they should not be liable to pay customs duty. However, the Tribunal disagreed, stating that the appellant's unit was registered as a 100% EOU and the duty was paid before the goods were auctioned. The Tribunal held that the appellant remained liable to pay the customs duty, emphasizing that the auction of goods did not absolve them of their duty obligations.

In conclusion, the Tribunal allowed depreciation up to 90% on the imported capital goods, leading to a reduced duty payable by the appellant. The liability to pay customs duty persisted even after the auction of goods, as the duty had been discharged earlier. The penalty imposed by the Commissioner was waived due to the adverse business circumstances faced by the appellant. The appeal was disposed of in favor of the appellant, granting them the consequential relief.