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M/s L & T Infocity Ltd. Versus The Commissioner C&C. E, Hyderabad

2016 (10) TMI 74 - CESTAT HYDERABAD

100% EOU - STP unit - Refund claim - denial of depreciation on the equipments used in the export of software after de-bonding of warehouse - recovery of duty on full value of the equipment - STP units - permission to import duty free infrastructural facility equipments vide notification No. 153/93-Cus dated 13-08-1993 - 100% EOU Bonded Warehouse - is the Department justified in demanding duty on the original value of the equipment, without allowing depreciation on the ground that said Notificati .....

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ods imported by appellant in 2006, when cleared to DTA five years thence, in 2011, can be denied depreciation from originally imported value. The CBEC have issued a number of circulars clarifying the grant of deprecation on debonding of capital goods from EOU/EPZ/EHTP/STP units. Boards circular No.305/52/85-FTP dated 15-04-21987 prescribed the method for calculating the depreciation on capital goods permitted to be taken outside the units and the overall limit of depreciation was fixed at 70%. S .....

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for the Respondent ORDER [Order per: Madhu Mohan Damodhar,] 1.1 The issue involved in this appeal is denial of depreciation on the equipments used in the export of software after de-bonding of warehouse and recovery of duty on full value of the equipment. 1.2 Appellant was permitted to set up an infrastructure facility for STP units under the STPI Scheme. Under notification No. 153/93-Cus dated 13-08-1993, the appellants were permitted to import duty free infrastructural facility equipments wor .....

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, by STPI vide their NOC letter dated 15-03-2011. 1.4 However on de-bonding, the department insisted for payment of duty on the original value of the equipment, without allowing depreciation on the ground that said Notification No. 153/93-Cus does not have any specific provision for allowing Depreciation . 1.5 Department vide a letter dated 21-01-2011 informed the appellants to pay full duty . Accordingly, appellants paid full customs duty of ₹ 1,90,29,233/- under protest. 2. Aggrieved, th .....

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Shri K.Vijay Kumar contended that when all conditions of Notification 153/1993-Cus had been fulfilled, denial of depreciation on the sole ground that the benefit was available only to STPI units as the appellant had only provided infrastructure, is erroneous. Ld. counsel further submitted that it is not the case of revenue that the goods were not put to use for the intended purpose of export of software. There has been no breach of the Notification. Even in cases where the STPI unit has kept th .....

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rishna Prasad, reiterated the correctness of impugned orders. 6. Heard both sides and have gone through the facts of the case. 7. For better understanding of the issue, it would be useful to reproduce the relevant portions of the Notification No.153/1993-Cus dated 13-08-1993 and of Notification No.52/2003-cus dated 31-03-2003; NOTIFICATION No.153/1993, dated August, 13, 1993 In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Go .....

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f 1975) and the additional duty if any leviable thereon under Section 3 of the second mentioned Act subject to the following conditions, namely :- (i) The importer has been granted the necessary permission to import the said goods by the Inter-Ministerial Standing Committee for Hundred Percent Export Oriented Units in the Electronics Hardware Technology Parks (EHTP) and Software Technology Parks (STP) appointed by the notification of the Government of India in the Ministry of Industry, Departmen .....

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t without the approval of Assistant Collector of Customs; and (c) to use the said goods only for the purposes of export of software. (v) The importer shall produce a certificate to the Assistant Collector of Customs from the concerned Chief Executive of the Software Technology Parks Society set up by the Government of India, Department of Electronics, to the effect that the said imported goods are to be installed or used in the unit and that the importer of such goods has been authorised by the .....

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the said goods as are not proved to the satisfaction of the Assistant Collector to have been used for the purposes for which the said goods were allowed to be imported. (vii) The Collector of Customs, may subject to such conditions as may be prescribed by him, allow a unit to re-export the said goods subject to the necessary permission being granted by the Chief Executive of the Software Technology Park. (viii) The procedure as may be prescribed by the Collector of Customs is followed by such u .....

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rs conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962) (hereinafter referred to as the said Customs Act), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts,- (a) all goods as specified in the Annexure I to this notification, when imported or procured from a Public Warehouse or a Private Warehouse appointed or licensed, as the case may be, under section 57 or section 58 of the said Customs Act or from internat .....

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Software Technology Park (STP) unit, or a unit in Software Technology Park Complex under the export-oriented scheme (hereinafter referred to as the unit); or (iii) manufacture and development of electronics hardware or electronics hardware and software in an integrated manner for export by an Electronic Hardware Technology Park (EHTP) unit or a unit in Electronic Hardware Technology Park Complex under the export-oriented scheme (hereinafter referred to as the unit); or (b) - from the whole of th .....

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or job-work or service in Customs bond and subject to such other condition as may be specified by the Deputy Commissioner of Customs or Assistant Commissioner of Customs or Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be, (hereinafter referred as the said officer) in this behalf; (3) The unit executes a bond in such form and for such sum and with such authority, as may be specified by the said officer, binding himself, (a) to bring the said .....

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subject to such conditions and limitations as he may deem fit to impose under the circumstances of the case for the proper safeguard of revenue interest and also subject to such permission of the Development Commissioner, wherever it is specially required under the Export and Import Policy, allow the unit to clear any of the said goods for being taken outside the unit, to any other place in India in accordance with the Export and Import Policy: Provided that - (a) such clearance of capital good .....

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unit or where such goods have been received after such commencement, from the date such goods have come into use for commercial production to the date of payment of duty; 11. Nothing contained in this notification shall apply to the?11. goods imported by a service sector export-oriented undertaking as specified in clause (a) in the opening paragraph, who does not directly export services out of India. Explanation - For the purposes of this notification,- (i) Board of Approval means the authorit .....

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appointed by the Government of India in the Ministry of Industry (Department of Industrial Development) vide notification No. S.O. 117(E), dated the 22nd February, 1993; (viii) - (ix) Software Technology Park (STP) unit means a unit established under and in accordance with Scheme notified by the Government of India in the Ministry of Commerce and Industry vide notification No. 4(RE-95)/92-95, dated 30th April, 1995 and approved by the Inter-Ministerial Standing Committee; 8. By the appellants ow .....

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mentioned in the notification and, certainly there is no provision for depreciation on such removals, unlike the subsequent Notification 52/2003-Cus. Nonetheless, it must be kept in mind that the 1993 notification was one the early steps taken by the Government to provide suitable conditions for the then nascent growth of software technology in the country. Notifications issued subsequently, like 52/2003-Cus did take cognizance of the early obsolescence of capital goods related to software techn .....

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prescribed the method for calculating the depreciation on capital goods permitted to be taken outside the units and the overall limit of depreciation was fixed at 70%. Subsequently, CBEC vide F.No.314/19/94-FTT Part-VI dated 11-04-1997, had provided for accelerated rate of depreciation for the computers in view of their rapid obsolescence, keeping the overall limit at 70%. This scale was not found adequate and vide CBECs F. No.314/19/94-FTT dated 21-04-1998(circular No.27/98-Cus) an even higher .....

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otification No.71/2000-cus and 40/2000 CE both dated 22-05-2000 Salient features of the changes were conveyed vide CBEC circular No.49/2000-cus dated 12-05-2000. Para 17 of the circular which dealt with the depreciation norms for capital goods at the time of debonding, is reproduced as under: Depreciation norms for capital goods 17. As per para 9.35 of HOP, at the time of debonding, depreciation upto 90% is allowed in respect of capital goods. The maximum limit (i.e.90%) is achieved over a perio .....

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er peripherals upto the limit of 90%, and for the capital goods other than the computers upto a limit of 75%. Circular 27/98-Cus, dated 21.4.98 was subsequently modified by circular No. 43/98-Cus dated 26.6.98 in order to provide depreciation to capital goods other than computer and computer peripherals upto a limit of 90%. To implement the changes made in the HOP, it has been decided to allow a further accelerated depreciation for computer and computer peripherals as under: For every quarter in .....

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e arriving at this conclusion, we also follow the decision of the Tribunal on identical issue in Kumar Housing Corporation Ltd Vs CCE Pune-III[2014(308)ELT-741(Tri-Mum)] 5.2 The appellant has been approved as a 100% EOU in? the STP Scheme by the Govt. of India and the appellant has procured the capital goods both indigenously without payment of duty and as well as imported under the provisions of Notification No. 153/93 and 22/2003. After using the capital goods for some time, the appellant soug .....

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Act, did not provide for depreciation norms when the capital goods were allowed de-bonding. However, the C.B.E. & C. issued Circulars right from 1994 onwards allowing depreciation on capital goods at the time of de-bonding. For instance vide Circular No. 314/19/94-FTF, dated 2-9-1994, the rate of depreciation on capital goods at the time of de-bonding of entities working under 100% EOU scheme was prescribed at the rate of 5% per quarter in the first two years and 4% per quarter for the next .....

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erated depreciation was allowed. Later on these depreciation rates were incorporated in the notification itself and Notification No. 52/2003, dated 31-3-2003 provides for depreciation norms in para 4 of the Notification itself for capital goods other than computer and computer peripherals and computer and computer peripherals separately. The upper limit of depreciation is 100%. Similarly, Notification No. 22/2003-C.E., dated 31-3-2003 provides for depreciation on capital goods procured independe .....

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