Debonding of indigenous capital goods: nil-duty clearance fails absent a specific Central Excise exemption

Indigenous capital goods procured by a 100% EOU without duty under the then applicable excise exemption could not be cleared on debonding at nil duty merely by relying on the Foreign Trade Policy or the EPCG scheme. In the absence of any specific exemption notification under Central Excise law covering such debonded capital goods, duty remained payable. The liability was computed on the depreciated value, and the exemption claim failed because no applicable notification supported nil-duty clearance.

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Issues: Whether indigenous capital goods procured by a 100% Export Oriented Unit without payment of duty could be cleared on debonding at nil duty under the Export Promotion Capital Goods scheme in the absence of any specific exemption notification under the Central Excise law.

Analysis: The capital goods were admittedly procured indigenously under Notification No. 22/2003-C.E. when the unit functioned as a 100% EOU. At the time of debonding, the unit sought to rely on the Foreign Trade Policy and the EPCG route, but the record showed that no specific exemption notification under the Central Excise law covered such indigenous capital goods on debonding. The duty liability was worked out on the depreciated value, and the exemption claim was not supported by any applicable notification.

Conclusion: The duty demand on the indigenous capital goods cleared on debonding was upheld, and the claim for nil duty was rejected.

Final Conclusion: The appeal failed because, in the absence of a specific excise exemption, the duty liability on the indigenous capital goods cleared at debonding remained payable.

Ratio Decidendi: Where no specific exemption notification under the Central Excise law covers indigenous capital goods cleared on debonding, duty is payable on the depreciated value notwithstanding reliance on the Foreign Trade Policy or the EPCG scheme.

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