Debonding of an Export Oriented Unit: duty applies on depreciated value of capital goods, and penalty was not sustainable.

On debonding of a 100% Export Oriented Unit, duty on imported capital goods was recoverable at the applicable rate on the depreciated value, and payment on that basis was treated as proper; the Revenue's demand for full duty saved was rejected. Penalty was also not sustainable because proceedings had been closed by the Development Commissioner and no specific penalty provision was invoked on the facts. The impugned order was set aside and consequential relief followed.

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Issues: (i) Whether duty was payable on the imported capital goods at the time of debonding on the basis of depreciated value; (ii) whether penalties were imposable on the appellants.

Issue (i): Duty liability on debonding of a 100% Export Oriented Unit was examined in the light of the fact that the unit had been found running, the Development Commissioner had permitted debonding, and the appellant had already paid duty on the depreciated value of the capital goods. The Tribunal also noted that the applicable view was that duty was recoverable at the rates prevailing at the time of debonding on depreciated value.

Conclusion: The duty paid on depreciated value at the time of debonding was held to be proper, and the Revenue's demand for the full duty saved was rejected.

Issue (ii): The question of penalty was examined with reference to the closure of proceedings by the Development Commissioner and the absence of a specific provision invoked for penalty in the facts of the case.

Conclusion: No penalty was held imposable on the appellants.

Final Conclusion: The impugned order was set aside and the appeals succeeded with consequential relief.

Ratio Decidendi: On debonding of a 100% Export Oriented Unit, duty on imported capital goods is recoverable at the applicable rates on depreciated value, and penalty cannot be sustained in the absence of a specific enabling provision and a surviving basis for penal action.

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