Depreciation for EOU debonding runs from capital goods entering manufacturing process, not later revenue-assumed date.

For debonding of a 100% Export Oriented Unit, depreciation was to be computed from the date the capital goods were put into the manufacturing process, not from the later date claimed by the Revenue. The notification linked depreciation to the start of commercial production, while the Board's circular clarified that the relevant date is when capital goods enter the manufacturing process in the EOU. On the facts noted in the statutory records, production had commenced on 29-3-1996, and the quantity produced was not treated as determinative. The circular was applied in favour of the assessee.

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Issues: Whether, for debonding of a 100% Export Oriented Unit, depreciation was to be computed from 29-3-1996 or from 19-7-1996, having regard to the notification and the Board's circular.

Analysis: The dispute turned on whether the unit's activity from 29-3-1996 was only trial production or amounted to commercial production. The notification provided that depreciation would be admissible from the date commercial production starts, while the Board's circular clarified that depreciation would be counted from the date the capital goods are put into the manufacturing process in the EOU. The unit had entered production in the statutory records and the capital goods were found to have been put into manufacturing process on 29-3-1996. The circular was treated as binding and supportive of the assessee's position, and the Revenue's reliance on quantity produced was not accepted as determinative.

Conclusion: The date relevant for depreciation was held to be 29-3-1996, and not 19-7-1996, in favour of the assessee.

Final Conclusion: The assessee succeeded on the sole substantive question, with the duty demand and penalty consequence not surviving on the date of depreciation adopted by the authorities.

Ratio Decidendi: Where a Board circular clarifying the relevant notification treats depreciation as running from the date capital goods are put into the manufacturing process, that clarification governs the computation and is binding on the departmental authorities.

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