2008 (2) TMI 123 - AT - Customs

Partial fulfillment of export obligation - appellants have been permitted to debond the unit from EOU scheme, then question of demanding duty foregone on total goods used in the manufacture of export goods is not legally tenable - since the capital goods have been manifestly used in production of export products & export obligation is partially fulfilled, depreciation benefit is allowable duty has to be calculated on the depreciated value revenue appeal dismissed

Summary

Issues:
1. Benefit of depreciation on capital goods.
2. Calculation of duty on unfulfilled export obligation.
3. Imposition of penalty for non-fulfillment of export obligation.
4. Confiscation of goods due to export obligation failure.

Benefit of Depreciation on Capital Goods:
The appeal arose from a modification of an order by the Commissioner granting depreciation benefit and setting aside the penalty. The Commissioner directed the duty demand to be proportionate to the unfulfilled export obligation, limited to unutilized quantities in export production for goods other than capital goods. The Commissioner allowed depreciation on capital goods used in export production despite failure to meet the obligation. The Tribunal upheld the Commissioner's decision, citing the Natural Stone Exports case and the eligibility for depreciation when partial export obligation is fulfilled. The duty was to be calculated on the depreciated value of goods. The revenue's appeal was rejected.

Calculation of Duty on Unfulfilled Export Obligation:
The Commissioner analyzed the Notification condition and applied the Natural Stone Exports case ruling, allowing duty calculation on the depreciated value of goods. The Tribunal upheld this decision, emphasizing the eligibility for depreciation when partial export obligation is met. The revenue's argument against granting depreciation due to unfulfilled export obligation was dismissed.

Imposition of Penalty for Non-Fulfillment of Export Obligation:
The Commissioner noted the failure to fulfill the export obligation was beyond the appellants' control but imposed a penalty for violating notification and LOP conditions. The penalty amount was considered reasonable compared to the duty foregone. The Tribunal did not interfere with the penalty decision, as the goods were already in the warehouse under bond.

Confiscation of Goods Due to Export Obligation Failure:
As the goods were available in the warehouse under bond, the Tribunal found no reason for confiscation. The appellants were liable to pay the duty foregone, with interest at an appropriate rate. The Tribunal disposed of the cross objection in light of the findings regarding duty calculation and depreciation benefit.