2018 (12) TMI 619 - AT - Customs

EOU Scheme - development of software for export to outside India - depreciation on removal of capital goods - Held that - N/N. 140/91-Cus., dated 22.10.1991 exempts specified goods, when imported into India by the software development unit, for the purpose of development of software etc. The central excise duty exemption has also been provided under Notification No.1/95, dated 4.1.1995 for domestically procured capital goods for use in development of software for the purpose of export. The duty exemption provided in the said notifications is subject to certain conditions. It is an admitted fact on record that during the course of visit by the Central Excise officers to the unit of the appellant, the registered premises was in possession of some other entity and not with the appellant. Thus, it is evident that as per the condition of the notification as well as the terms of the bond, the appellants had not fulfilled the conditions of use of capital goods/equipment for development of software, meant for export - confirmation of duty/interest demand by the authorities below cannot be faulted with. Depreciation on removal of capital goods from the factory - Held that - The submissions of the appellants regarding value of depreciated capital goods have not been considered and the duty demand has been confirmed in entirety - the matter should be remanded to the learned Commissioner (Appeals) for examination of such worksheet and other documents for computation of the duty liability afresh. Appeal allowed by way of remand.

Summary

Issues:
Appeal against order passed by Commissioner of Central Excise, Mumbai-I regarding duty exemption for software development under EOU scheme. Compliance with export obligations under specific notifications. Confiscation of goods, duty demands, and penalties imposed. Dispute over fulfillment of conditions for duty exemption. Claim for depreciation on capital goods.

Analysis:

Issue 1: Compliance with export obligations under specific notifications
The case involved the appellant, a software development unit, granted a Letter of Permission for development of software under the EOU scheme. The appellant procured capital goods/equipment without duty payment under Notification Nos.140/91-Cus., dated 22.10.1991, and 1/95-C.E., dated 4.1.1995. The central issue was the alleged non-compliance with conditions for availing duty exemption as Central Excise officers found discrepancies during an inspection. The department initiated proceedings for duty demand and penalties based on the findings. The Commissioner (Appeals) upheld the demands, contending that the export obligations were not met by the appellant as required by the notifications.

Issue 2: Claim for depreciation on capital goods
The appellant argued that duty demands should have been confirmed on the depreciated value of capital goods as per the notification dated 22.10.1991. The Revenue, however, opposed this claim, stating that the appellant failed to provide documentary evidence supporting the depreciation claim. The Commissioner (Appeals) acknowledged receipt of a worksheet showing the depreciated value of capital goods but did not consider it in the final decision. The Tribunal found merit in the appellant's submission and remanded the matter to the Commissioner (Appeals) for a fresh examination of the worksheet and other relevant documents for the computation of duty liability. The Tribunal also directed the consideration of Notification No.67/95-Cus. (N.T.), dated 1.11.1995, for possible extension of benefits to the appellant concerning interest payment on the duty amount.

Conclusion:
The Tribunal upheld the denial of duty exemption benefits under the relevant notifications due to non-compliance with export obligations. However, it remanded the matter for the computation of duty liability on the depreciated value of capital goods and further examination of the entitlement to benefits under Notification No.67/95-Cus. (N.T.), dated 1.11.1995, regarding interest payment and penalty imposition. The appeals were disposed of accordingly, with the decision pronounced in court on 10.12.2018.