2016 (2) TMI 360

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....having been issued with Letter of Permission dated 5 th February 1991 to set up a 100% Export Oriented Unit by Development Commissioner, SEEPZ, for manufacture of "cotton carded and combed yarn", commenced commercial production on 2 nd May 1995. The unit was granted permission in January 2003 to opt out as an Export Oriented Unit for operation under Export Promotion Capital Goods Scheme. The rubric of both schemes are to be found in the Foreign Trade Policy notified from time to time under the Foreign Trade (Development & Regulation) Act, 1992 with the duty exemptions and concessions being extended through notifications issued under Customs Act, 1962 and Central Excise Act, 1944. Export Oriented Units are entitled to import and procure loca....

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....ct, 1962 respectively. For removal of other goods received in the unit by availing the benefit of exemption, the relevant notifications provide for the manner of payment of duties. 5. The respondent, before conversion, computed and discharged its liability on capital goods, valued at Rs. 13,65,15,680/- after availing depreciation at 10% in accordance with circular no 29/2003-Cus dated 3rd April 2003, by payment of duty of Rs. 68,25,784/- on 26th July 2003. Thereafter, on the ground of being eligible for depreciation of Rs. 20,54,13,516, refund of Rs. 15,20,754/- paid in excess was sought. While the original authority rejected the claim by holding the first computation to be proper and in accordance with the extant circular of Central Board....

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....tion does not provide specifically for the same, prior to 2003, most of the notifications issued under the Customs Act, did not provide for depreciation norms when the capital goods were allowed de-bonding." 8. This line of argument does not impress. To start with, Revenue is in appeal against the higher rates of depreciation allowed to the unit by the first appellate authority when the original authority had acknowledged the eligibility to depreciation uniformly at ten per cent per annum. Further, though operations would continue with the very same capital goods at the original plant, the debonding of the unit takes it out of the ambit of the scheme in a manner that is not dissimilar to that of taking capital goods out of a functioning E....

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....not at the rates prescribed in the notification of 2003 needs consideration. 11. The dispute is one of valuation i.e., the extent to which the original value should be reduced in acknowledgement of the use to which capital goods have been put for export of goods. The goods are not transferred to another entity and thus there is no transaction value. The residuary method of valuation cannot but take into account the time element in relation to goods that do not get integrated into the final product. Therefore, depreciation does not require to be incorporated in a statute or statutory instrument for it to be extended when converting from or exiting from Export Oriented Unit. As long as a logical method of depreciation is adopted, the valuati....