Board-prescribed depreciation method governs excise valuation of used capital goods, while revenue neutrality fails without immediate full credit.

A Board-prescribed uniform depreciation method governs the valuation of used capital goods cleared to a sister unit under excise law, and that method prevails over Income-tax depreciation rates. The analysis notes that the show-cause computation did not follow the straight line method indicated in the later circular, so the valuation required reconsideration under the correct excise procedure. A plea of revenue neutrality was rejected because the sister unit could not take immediate full credit of the duty, making the arrangement inconsistent with a neutral revenue position. The demand therefore needed fresh computation under the applicable excise depreciation method, with a further opportunity of hearing.

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Issues: (i) Whether the depreciated value of capital goods cleared to a sister unit was to be computed under the Income-tax depreciation method or in accordance with the Board's circulars governing customs and excise valuation. (ii) Whether the assessee's plea of revenue neutrality could defeat the duty demand.

Issue (i): Whether the depreciated value of capital goods cleared to a sister unit was to be computed under the Income-tax depreciation method or in accordance with the Board's circulars governing customs and excise valuation.

Analysis: The circular issued by the Board prescribed a uniform method for working out depreciation for used capital goods, and that method was to be followed by all assessees under excise control. The use of Income-tax depreciation rates was not justified where a specific and uniform excise procedure existed. The calculation in the show-cause notice, however, was found not to have applied the straight line method indicated by the later Board circular, and therefore required reconsideration.

Conclusion: The Income-tax depreciation method was not applicable, and depreciation had to be computed in accordance with the Board's circulars.

Issue (ii): Whether the assessee's plea of revenue neutrality could defeat the duty demand.

Analysis: The plea was rejected because the sister unit was not entitled to immediate credit of the entire duty amount, but only partial credit in the first year. On that footing, non-payment of the additional duty would amount to impermissible financial accommodation rather than a neutral revenue position.

Conclusion: The plea of revenue neutrality was not accepted.

Final Conclusion: The demand could not be sustained on the basis adopted by the lower authority, but the matter required fresh computation under the correct excise depreciation method, with an opportunity of hearing to the respondents.

Ratio Decidendi: Where a specific Board-prescribed depreciation method governs valuation of used capital goods under excise law, that method prevails over Income-tax depreciation principles, and revenue neutrality fails where immediate and full credit to the recipient is not available.

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