Depreciation up to duty payment date and no penalty for uncontrollable export default.

Depreciation under an exemption-based duty regime was held allowable up to the date duty is actually paid, not merely up to the date of debonding, so duty had to be recomputed on that basis. Where export obligations were not fulfilled because of circumstances beyond the assessee's control and without mala fides, confiscation, redemption fine and penalty were found unwarranted and were set aside. The matter was remanded only for recomputation of duty after allowing depreciation up to the payment date.

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Issues: (i) Whether depreciation on imported goods, while computing duty, was to be allowed up to the date of payment of duty or only up to the date of debonding. (ii) Whether confiscation, redemption fine and penalty were leviable when export obligations were not fulfilled because of circumstances beyond the control of the assessee.

Issue (i): Whether depreciation on imported goods, while computing duty, was to be allowed up to the date of payment of duty or only up to the date of debonding.

Analysis: The applicable notification-based depreciation was held to be governed by the line of decisions which allowed reduction in value till the date on which duty is actually paid. The earlier decision relied upon by the Revenue concerned fixation of duty on debonding and did not govern the distinct question of depreciation. On that footing, the Tribunal followed its earlier view that depreciation must continue up to the date of payment of duty.

Conclusion: Depreciation was held admissible up to the date of payment of duty, not merely up to the date of debonding, in favour of the assessee.

Issue (ii): Whether confiscation, redemption fine and penalty were leviable when export obligations were not fulfilled because of circumstances beyond the control of the assessee.

Analysis: The default was found to be non-deliberate and attributable to circumstances such as closure of the unit and other uncontrollable events. The Tribunal treated such failure as falling within the principle that penal consequences should not follow where performance becomes impossible for reasons not attributable to any intentional misuse or mala fides. Decisions invoked by the Revenue were distinguished as cases involving deliberate misuse of the notification framework.

Conclusion: Confiscation, redemption fine and penalty were set aside in favour of the assessee.

Final Conclusion: The matter was sent back to the original authority only for recomputation of duty after granting depreciation up to the date of payment, while the penal and confiscatory demands were annulled.

Ratio Decidendi: Where duty liability under an exemption regime depends on depreciated value, depreciation is to be allowed up to the date of payment of duty; and where export default is caused by circumstances beyond the assessee's control without mala fides, confiscation and penalty are not warranted.

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