Depreciation on de-bonded capital goods and collateral proof of export governed duty, while interest on confiscated goods was disallowed.

Depreciation had to be allowed when valuing used capital goods cleared by an EOU after cancellation of its Letter of Permission, so duty was sustainable only on the depreciated value and the excess demand failed. For goods cleared under bond for export, collateral evidence such as AR-4, RGI entry, bill of lading, shipping papers and banking correspondence was sufficient to establish export where original documents were unavailable, and the duty demand was not justified. The fine and penalty were reduced in view of the lower duty exposure and absence of clandestine diversion. No interest was payable on confiscated goods because liability arises only on redemption.

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Issues: (i) Whether depreciation was allowable while determining duty payable on capital goods cleared by an EOU after cancellation of its Letter of Permission; (ii) whether duty could be sustained on goods cleared under bond for export in the absence of original export documents, on the basis of collateral evidence; (iii) whether the quantum of fine and penalty required reduction; and (iv) whether interest was payable on confiscated goods.

Issue (i): Whether depreciation was allowable while determining duty payable on capital goods cleared by an EOU after cancellation of its Letter of Permission.

Analysis: The capital goods had been used in the EOU and, after cancellation of the Letter of Permission, the unit could not continue as an EOU. The duty liability on de-bonding had to be worked out on the depreciated value. The Board circulars recognised depreciation up to 90% on the straight-line method, and the absence of formal de-bonding permission did not justify denial of depreciation.

Conclusion: Depreciation was allowable and duty could be demanded only on the depreciated value; the excess demand was unsustainable and this issue was decided in favour of the assessee.

Issue (ii): Whether duty could be sustained on goods cleared under bond for export in the absence of original export documents, on the basis of collateral evidence.

Analysis: The remand required re-examination on collateral evidence because the original export papers were not available. The appellant produced the AR-4, RGI entry, bill of lading, shipping documents, and banking correspondence showing that the same goods were exported and linked to the relevant payment. Rejection solely because the original documents were unavailable was not proper.

Conclusion: The collateral evidence established export and the duty demand on the disputed export consignment was not justified; this issue was decided in favour of the assessee.

Issue (iii): Whether the quantum of fine and penalty required reduction.

Analysis: The earlier finding on liability had attained finality, but the revised duty exposure was much lower and there was no evidence of clandestine removal or domestic diversion. In that factual setting, the monetary consequences required moderation.

Conclusion: The fine and penalty were reduced to the amounts indicated by the Tribunal, and this issue was partly in favour of the assessee.

Issue (iv): Whether interest was payable on confiscated goods.

Analysis: Once goods stand confiscated, they vest in the Government, and duty or fine becomes payable only if redemption is exercised. In that situation, interest liability does not arise.

Conclusion: Interest was not payable and the demand for interest was unsustainable; this issue was decided in favour of the assessee.

Final Conclusion: The duty demand was sustained only to the limited extent of the depreciated capital goods valuation, while the export-related demand and interest demand were set aside, and the monetary sanctions were moderated accordingly.

Ratio Decidendi: Depreciation must be allowed in valuing de-bonded used capital goods where the governing circulars recognise such reduction, and no interest is payable on confiscated goods because liability arises only upon redemption.

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