Depreciation on EOU capital goods allowed despite partial export obligation, with duty on debonding to be recomputed under the circular.

Depreciation is allowable on duty-free capital goods imported by an EOU on debonding even where export obligation has been only partly discharged, because the governing notification contains no express bar on depreciation in that situation. The quantum of depreciation must then be computed under the Board circular prescribing 20% per annum for computers and computer peripherals and 10% per annum for other capital goods. The order was set aside for fresh computation and the duty recoverable was directed to be recomputed accordingly.

---

---

Issues: (i) Whether depreciation was admissible on capital goods imported duty-free by an EOU unit when export obligation had been discharged only partly; (ii) what rate and manner of depreciation were to be applied for computing the duty recoverable on debonding.

Issue (i): Whether depreciation was admissible on capital goods imported duty-free by an EOU unit when export obligation had been discharged only partly.

Analysis: Notification No. 95/93-Cus provided for debonding and recovery of duty foregone on the depreciated value of capital goods. The absence of full discharge of export obligation did not, by itself, create a clause barring depreciation where the notification did not contain such a prohibition. Depreciation was therefore held to be available even when the export obligation was met only partly.

Conclusion: Depreciation was admissible, and this issue was decided against Revenue.

Issue (ii): What rate and manner of depreciation were to be applied for computing the duty recoverable on debonding.

Analysis: The Board circular prescribed 20% per annum of the original value for computers and computer peripherals, and 10% per annum for other capital goods. This circular was treated as the governing basis for quantifying admissible depreciation on the imported capital goods.

Conclusion: The matter required recalculation of depreciation in accordance with the circular, and the adjudicating authority was directed to recompute the duty accordingly.

Final Conclusion: The appeal succeeded to the extent that the order was set aside for fresh computation of depreciation, while the substantive entitlement to depreciation was affirmed.

Ratio Decidendi: In the absence of an express prohibition in the governing notification, depreciation is allowable on duty-free capital goods on debonding even where export obligation has been only partly discharged, and the quantum must be computed in accordance with the prescribed Board circular.

---