Depreciation on de-bonded capital goods accepted, with duty restricted to depreciated value under customs circular-based norms.

Capital goods imported duty-free for STPI export use and later de-bonded after prolonged use were held chargeable only on depreciated value, not on the original imported value. Although Notification No. 153/1993-Cus did not expressly state a depreciation formula, the customs scheme and CBEC circulars consistently recognised depreciation at the time of debonding, and the later Notification No. 52/2003-Cus confirmed that policy direction. The absence of an express depreciation clause in the earlier notification was not treated as a basis to deny depreciation where the goods had been lawfully used for the permitted purpose and debonding was approved. Duty recovery on the full original value was therefore set aside.

---

---

Issues: Whether depreciation was allowable on capital goods imported duty-free under Notification No. 153/1993-Cus when the goods were de-bonded and cleared after use, and whether duty could be recovered on the original imported value.

Analysis: The imported equipment was brought in for export of software under the STPI scheme and was used for several years before de-bonding. Notification No. 153/1993-Cus did not itself provide an express depreciation clause, but the customs regime and CBEC circulars had consistently recognised depreciation at the time of debonding of capital goods. The later Notification No. 52/2003-Cus specifically incorporated depreciation norms, showing the policy direction that duty on debonding must be worked out on depreciated value. The absence of an express depreciation provision in the earlier notification was held not to justify denial of depreciation where the goods had been used for the permitted purpose and debonding was duly approved. The applicable circular-based depreciation norms were therefore required to be applied.

Conclusion: Depreciation was held admissible and recovery of duty on the full original value was set aside. The appeals were allowed with consequential relief.

Ratio Decidendi: Where capital goods imported under an exemption notification are lawfully used for the permitted export purpose and are later de-bonded, duty is to be computed on the depreciated value in accordance with the applicable customs circulars and policy, even if the earlier notification does not expressly provide a depreciation clause.

---