Pre-deposit waiver denied in EOU debonding dispute over duty on indigenous capital goods under EPCG migration.

A CESTAT New Delhi bench considered whether an appellant seeking debonding from a 100% EOU into the EPCG route had a prima facie case for waiver of pre-deposit on duty demanded on indigenous capital goods. The Tribunal noted that the unit had achieved positive NFE and that the amended exemption framework allowed debonding under EPCG subject to that condition, but no Central Excise exemption notification specifically covered indigenous capital goods at debonding. On that basis, it formed a prima facie view that duty at the prevailing rate on depreciated value would apply and held that complete waiver was not justified. Full pre-deposit of duty was directed, while pre-deposit of interest was waived on compliance.

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Issues: Whether, on a prima facie view, the appellant was entitled to waiver of pre-deposit in a dispute concerning duty liability on indigenous capital goods cleared on debonding from a 100% EOU and migration to the zero duty EPCG scheme.

Analysis: The unit had procured capital goods duty-free as a 100% EOU and had achieved positive NFE. The relevant excise exemption notification, as amended, permitted debonding under the EPCG route if the positive NFE condition was satisfied, but it did not specify the rate of duty payable on indigenously procured capital goods at the time of debonding. The customs side contained a concessional notification for EPCG imports, but no corresponding Central Excise exemption notification under Section 5A(1) was available for such indigenous capital goods. In that background, the Tribunal formed a prima facie view that duty at the prevailing rate on the depreciated value would be payable and that the appellant had not made out a prima facie case for complete waiver.

Conclusion: The appellant was directed to make full pre-deposit of the duty demand, with waiver of pre-deposit of interest upon compliance, and the request for complete stay was rejected.

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