Depreciation-based valuation for removed capital goods upheld, with differential duty and interest sustained but penalty waived.

Removal of used capital goods to a sister concern attracted differential duty on a depreciation-based valuation using the written down value method, consistent with Board circulars and the settled view followed by the Tribunal and Madras High Court. The duty confirmation was upheld because allowing clearance without appropriate duty adjustment would be inconsistent with the credit scheme. Interest was also sustained. Penalty was waived on the facts and circumstances, reflecting a lenient approach despite confirmation of the underlying duty liability.

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Issues: Whether differential duty was payable on capital goods removed to a sister concern by adopting depreciation on the written down value method and whether penalty was sustainable.

Analysis: The removal of used capital goods was examined in the light of the Board's circulars and the settled position that depreciation-based valuation is applicable for determining the duty liability on such removals. The Tribunal followed the Madras High Court decision and the Larger Bench view that allowing removal of capital goods without appropriate duty adjustment would be inconsistent with the scheme of credit. The adjudication confirming differential duty was therefore upheld. On penalty, the Tribunal took a lenient view on the facts and circumstances of the case.

Conclusion: Differential duty and interest were sustained, but penalty was waived.

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