Pre-deposit upheld where duty arose from breach of export obligations, and depreciation on imported capital goods was not allowed.

Pre-deposit of duty and penalty was maintained because the demand arose from admitted non-fulfilment of export obligations and breach of exemption conditions, not from debonding of the unit. The applicant's request to treat the demand as premature and to reduce the deposit by allowing depreciation on imported capital goods was rejected, as the closure of the unit and continuing default supported the existing demand. The Tribunal also held that the cited authorities on debonding and depreciation did not govern the dispute, and even on the depreciation basis argued by the applicant, the estimated customs duty still justified the amount already ordered for deposit. No depreciation was available for excise duty.

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Issues: Whether the earlier stay order requiring pre-deposit of duty and penalty should be modified by allowing depreciation on the imported capital goods and by treating the duty demand as premature for want of debonding.

Analysis: The applicant sought reduction of the pre-deposit on the premise that the unit had not been debonded and that duty could arise only on debonding or ex-bond clearance. The decisive factor, however, was the admitted and continuing failure to fulfil the export obligation, the closure of the unit since October 2001, and the consequential breach of the conditions of the exemption notifications governing both imported and indigenous goods. On that basis, the demand was held to arise from non-fulfilment of export obligations and not from debonding. The earlier view that the cited authorities on debonding and depreciation did not govern the present dispute was maintained. Even on the later cited view permitting depreciation, the estimated depreciated customs duty still supported the amount already directed for deposit, while no depreciation was available for excise duty.

Conclusion: The request for modification was rejected and the pre-deposit direction was upheld against the assessee.

Final Conclusion: The Tribunal maintained the pre-deposit requirement, granted no further relief on depreciation, and left the appeal to proceed subject to compliance with the ordered deposit.

Ratio Decidendi: Where duty demand arises from admitted non-fulfilment of export obligations and breach of exemption conditions, rather than from debonding, depreciation on imported capital goods is not available as a matter of right for reducing the pre-deposit.

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