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2016 (10) TMI 74 - AT - Customs100% EOU - STP unit - Refund claim - denial of depreciation on the equipments used in the export of software after de-bonding of warehouse - recovery of duty on full value of the equipment - STP units - permission to import duty free infrastructural facility equipments vide notification No. 153/93-Cus dated 13-08-1993 - 100% EOU Bonded Warehouse - is the Department justified in demanding duty on the original value of the equipment, without allowing depreciation on the ground that said Notification No. 153/93-Cus does not have any specific provision for allowing Depreciation? - Held that - the decision in the case of Kumar Housing Corporation Ltd Vs CCE Pune-III 2014 (12) TMI 895 - CESTAT MUMBAI relied upon. Notifications 52/2003-Cus did take cognizance of the early obsolescence of capital goods related to software technology and in fact, extended depreciation at attractive terms. But just because No.153/21993 Cus is bereft of such a provision, it would not mean that capital goods imported by appellant in 2006, when cleared to DTA five years thence, in 2011, can be denied depreciation from originally imported value. The CBEC have issued a number of circulars clarifying the grant of deprecation on debonding of capital goods from EOU/EPZ/EHTP/STP units. Boards circular No.305/52/85-FTP dated 15-04-21987 prescribed the method for calculating the depreciation on capital goods permitted to be taken outside the units and the overall limit of depreciation was fixed at 70%. Subsequently the rates were revised. Appellant eligible for the depreciation as prescribed by the CBEC Circular applicable at the time of debonding - refund claim allowed - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Denial of depreciation on equipment used in the export of software after de-bonding of warehouse. 2. Recovery of duty on the full value of the equipment without allowing depreciation. Issue-Wise Detailed Analysis: 1. Denial of Depreciation on Equipment: The appellants were permitted to set up an infrastructure facility for STP units under the STPI Scheme and imported duty-free infrastructural facility equipment worth ?19.90 Crores under Notification No. 153/93-Cus dated 13-08-1993. The imported goods were used for nearly five years for the intended purpose before being allowed to de-bond in 2011. Upon de-bonding, the department insisted on the payment of duty on the original value of the equipment without allowing depreciation, citing that Notification No. 153/93-Cus does not have any specific provision for allowing depreciation. The appellants argued that denial of depreciation on the sole ground that the benefit was available only to STPI units is erroneous. They contended that the notification provides exemption for the goods and not to the class of importers. The appellants cited CBEC circular No. 29/2003 dated 03-04-2003 and the case of Iflex Solutions Ltd Vs Commissioner of Customs [2005(184)ELT259(Tri-Mum)], where depreciation was extended even for goods not in working condition. 2. Recovery of Duty on Full Value: The department informed the appellants to pay full duty, and accordingly, the appellants paid ?1,90,29,233/- under protest. Aggrieved by this, the appellants filed an appeal to the Commissioner (Appeals), which was dismissed. They also filed a refund claim of ?1,01,69,425/- on the ground that depreciation was not allowed at the time of debonding their capital goods, which was also rejected by the original authority and the lower appellate authority. Tribunal’s Analysis and Judgment: The Tribunal reviewed the relevant portions of Notification No. 153/1993-Cus and Notification No. 52/2003-Cus. It noted that while Notification No. 153/1993-Cus did not provide for depreciation, subsequent notifications like 52/2003-Cus recognized the early obsolescence of capital goods related to software technology and extended depreciation at attractive terms. The Tribunal emphasized that just because Notification No. 153/1993-Cus lacked a provision for depreciation, it does not mean that capital goods imported in 2006 and cleared to DTA in 2011 can be denied depreciation from the originally imported value. The Tribunal cited various CBEC circulars that clarified the grant of depreciation on debonding of capital goods from EOU/EPZ/EHTP/STP units. These circulars provided methods for calculating depreciation and set limits, which were liberalized over time. The Tribunal concluded that the appellant would definitely be eligible for the depreciation as prescribed by the CBEC Circular applicable at the time of debonding. The Tribunal also referenced the decision in Kumar Housing Corporation Ltd Vs CCE Pune-III [2014(308)ELT-741(Tri-Mum)], which supported the allowance of depreciation on capital goods at the time of debonding, even if the notification under which the goods were imported did not specifically provide for it. Conclusion: The Tribunal set aside the Order-in-Appeal dated 13-06-2011 and the Order-in-Appeal dated 28-12-2011. The appeals C/2641/2011 and C/734/2012 were allowed with consequential reliefs as per law. The Tribunal remanded the matter to the adjudicating authority for fresh consideration to determine the quantum of duty payable by the appellant at the time of debonding, taking into account the appellant's entitlement to depreciation on the capital goods sought to be debonded. Final Pronouncement: The judgment was pronounced on 07/09/2016 in open court, allowing the appeals and setting aside the impugned orders.
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