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Cus - EOU - De-bonding - Depreciation on value of capital goods imported but not used fully for purpose of manufacture so as to discharge export obligation - Depreciation allowed: CESTAT

By TIOL News Service

NEW DELHI, JULY 24, 2014: THIS is a Revenue appeal. Revenue is on the point whether depreciation is admissible on the value of capital goods imported but not used fully for the purpose of manufacture so as to discharge export obligation. According to the Revenue, while respondent has target of one lakh pieces to export, it exported 300 pieces during the entire export period. Upon debonding of unit, the Adjudicating authority allowed depreciation on the value of capital goods imported and for the purpose of calculation of duty recoverable which was foregone on the above goods at the time of import, he applied a basis that was not acceptable to Revenue.

Revenue's plea is that duty was foregone at the time of import on capital goods since the respondent was situated in EOU and was allowed to import capital goods duty free. Other issue raised by Revenue is that if depreciation is admissible how that shall be calculated.

Respondent is absent. Tribunal proceeded to decide the matter on its own merit.

Notification No.95/93-Cus dated 2.3.1993 permits de-bonding of unit and levy of duty that was foregone on the depreciated value of capital goods which is covered by para 7 of the said notification. But Revenue disputes on the ground that there was no discharge of export obligation fully by appellant for which entire amount of duty foregone at the time of import of capital goods shall be recovered without any concession to be given reducing value of the capital goods allowing depreciation.

Tribunal held that Revenue's argument to deny depreciation does not appear to be reasonable for the reason that depreciation is admissible once there was export obligation discharged even partly irrespective of quantum of export made in the absence of any clause in the notification for disallowance against part discharge of export obligation. Respondent shall be entitled to depreciation.

Next question is on the quantum of depreciation. The DR invited attention to the Circular No.14/2004-Cus dated 13.2.2004. That circular says that in respect of clearance of capital goods by EOU/EHTP/STP units, depreciation at the rate of 20% per annum of the original value of computer and computer peripherals items and 10% depreciation per annum in case of other capital goods shall be admissible. Such mandate of circular provides basis to hold that rate of depreciation to be allowed shall be at prescribed percentage per annum of original value of the respective and type of capital goods imported duty free.

So the Tribunal remanded the matter to the adjudicating authority to calculate the quantum of depreciation admissible keeping in view the mandate of circular issued by Board.

(See 2014-TIOL-1322-CESTAT-DEL)


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