2018 (6) TMI 5 - AT - Central Excise

Depreciation on machinery removed to sister unit - Valuation - proof of possession of property - appellant claims that the duty has to be assessed by considering the depreciation on such machinery - Held that - The impugned machineries were removed without obtaining permission and in violation of the terms and conditions of the notification. The goods were not in the custody or possession of the appellant as on the date of exit order dated 12.2.2004 or even on the date of visit of the officers on 5.1.2001. In such case, the appellant cannot claim the depreciation of the goods which they do not have possession or custody - appeal dismissed - decided against appellant.

Issues:
1. Duty demand on capital goods removed from premises to sister unit without payment.
2. Applicability of depreciation on machineries for duty assessment.
3. Violation of notification terms by removing capital goods.
4. Possession and custody of machineries for claiming depreciation.

Analysis:
1. The appellants, holders of a private bonded warehouse license, received duty-free capital goods in 1993 under Notification No. 123/1981. Upon finding that the goods were removed to a sister unit without duty payment, a duty demand of ?1,74,436/- was raised, along with penalties and confiscation. The original authority confirmed the duty and penalties, which were partially upheld by the Commissioner (Appeals). The Tribunal, in 2007, set aside the demand, remanding the matter for readjudication following Circular No. 21/95-Cus. The subsequent denovo Order-in-Original confirmed the duty and penalties, leading to the current appeal.

2. The appellant argued for duty assessment based on the depreciated value of the machineries, citing inability to fulfill export obligations due to machine condition. However, authorities rejected this, stating lack of evidence on proper usage. The appellant's plea for reduced duty based on depreciation was dismissed by the Tribunal, emphasizing the removal of goods without permission and violation of notification terms. The possession and usage of machineries were crucial factors in assessing duty, precluding the consideration of depreciation.

3. The argument centered on the illicit removal of capital goods, violating notification conditions and necessitating duty payment. The appellant's failure to use the machineries and their absence in their possession were highlighted to counter the claim for depreciation-based duty reduction. The removal of goods without permission and non-compliance with notification terms formed the basis for upholding the duty demand and penalties.

4. The possession and custody of machineries were pivotal in determining duty assessment, with the appellant's lack of control over the goods negating their claim for depreciation. The Tribunal upheld the impugned order, dismissing the appeal and reinforcing the importance of compliance with notification conditions and possession of goods for duty assessment purposes. The duty demand and penalties were sustained, emphasizing adherence to legal requirements in handling capital goods.

Conclusion:
The Tribunal upheld the duty demand and penalties imposed on the appellants for the illicit removal of capital goods to a sister unit, emphasizing the necessity of compliance with notification terms and possession of goods for duty assessment. The appeal was dismissed, affirming the original authority's decision and underscoring the importance of adhering to legal obligations in dealing with duty-free capital goods.

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