2008 (2) TMI 134 - AT - Customs

Non-fulfillment of export obligation - Comm.. (A) is not justified in holding that depreciated value is to be applied only up to the date of in principle de-bonding - contention of assessees that the depreciated value is to be taken into account upto the date of clearance of the goods & further, that, if the depreciated value is applicable upto the date of clearance, no duty would be payable, is acceptable - demand on capital goods set aside - duty on unused raw material with interest is upheld

Summary

Issues:
1. Duty liability on capital goods and raw materials under Exim Policy and Customs Act.
2. Calculation of depreciated value for duty payment.
3. Penalty imposition on the assessee company and its director.

Analysis:

Issue 1: Duty liability on capital goods and raw materials under Exim Policy and Customs Act
The case involved the assessee company being granted permission to establish a new undertaking for manufacturing certain goods subject to fulfilling conditions. Allegations were made regarding non-compliance with Exim Policy and bond conditions, leading to a demand for customs duty, penalty, and confiscation. The Tribunal remanded the case for re-determination of demand and penalty, emphasizing the liability to duty on capital goods. The Commissioner's order required payment of duty on depreciated value of capital goods until the date of in-principle de-bonding. The assessee contended that duty should only be payable until the date of clearance, challenging the Commissioner's decision. However, the Tribunal held that duty demand on capital goods should be set aside, while duty on unused raw materials was upheld.

Issue 2: Calculation of depreciated value for duty payment
The Commissioner relied on relevant notifications and circulars to determine the period for computing depreciated value of capital goods. The Commissioner considered the date of in-principle de-bonding as the endpoint for depreciation calculation. However, the Tribunal found that circulars in force at the relevant time indicated that depreciation should extend until the date of payment of duty. The Tribunal held that depreciated value should be computed from the date of commercial production to the date of clearance on payment of duty, leading to setting aside the duty demand on capital goods.

Issue 3: Penalty imposition on the assessee company and its director
The Revenue appealed against the dropping of penal action on the assessee company and its director. The Tribunal analyzed the ingredients of Section 114A for penalty imposition, requiring non-levy or short-levy of duty due to collusion, wilful misstatement, or suppression of facts. As the Revenue failed to establish these elements against the assessee company, penalty imposition was deemed unjustified. Consequently, the Tribunal partly allowed the appeal by setting aside duty demand on capital goods, upholding demand on unused raw material, and rejecting the Revenue's appeal for penalty imposition.

This comprehensive analysis highlights the key legal aspects and decisions made in the judgment by the Appellate Tribunal CESTAT, Mumbai, providing clarity on duty liabilities, depreciation calculations, and penalty imposition in the case.