Debonding of EOU duty valuation follows the licence-expiry date and applicable depreciation; Revenue's computation challenge failed.

On debonding of an EOU, customs duty on unutilised raw materials, consumables and capital goods is to be re-quantified with reference to the date of expiry of the warehousing licence, with depreciation on capital goods applied at the rate prevailing on that date. The unit had completed the export obligation and earned positive net foreign exchange in both block periods, and the Tribunal noted that the exemption notification did not require any different valuation method from that adopted by the Commissioner. A Revenue objection confined to the manner of computing depreciation and duty, without demonstrating any legal infirmity, was rejected and the reworked duty demand was left undisturbed.

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Issues: Whether, on debonding of the unit, customs duty on raw materials and capital goods was to be quantified by taking the date of expiry of the warehousing licence as the relevant date, and whether the Revenue could object to the manner in which depreciation and duty were worked out.

Analysis: The record showed that the unit had achieved the export obligation and had also earned positive net foreign exchange in both block periods. The earlier remand directions required re-quantification of duty on the basis of raw materials and consumables lying in stock on the date of expiry of the warehousing licence and, for capital goods, after allowing depreciation at the rate prevalent on that date. The Tribunal noted that the unit continued to function as an EOU beyond 31.12.2002 and that the exemption notification did not call for a different method of valuation from the one adopted by the Commissioner. The Revenue's challenge to the computation of depreciation and duty therefore did not disclose any infirmity in the impugned order.

Conclusion: The Revenue's objection to the duty re-quantification was rejected and the appeal failed.

Final Conclusion: The duty demand as reworked by the Commissioner was left undisturbed and the Revenue's appeal stood dismissed.

Ratio Decidendi: On debonding of an EOU, duty on unutilized raw materials and capital goods is to be determined with reference to the debonding stage and the applicable depreciation principle, and a challenge that merely disputes the computation without showing legal error is not sustainable.

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