2012 (11) TMI 82 - AT - Customs

Undervaluation import of old and used machinery enhancement of value Held that - the depreciated value as certified by Chartered Engineer, U.K. is only 7.25% of the invoice value in 1970, whereas he certified that the residual life of the machine is more than 15 years subject to proper maintenance and procedure being followed and also that the spares presented were either new or in good enough condition to represent 80% of the normal life expectancy and that the technology involved equivalent was consistent with present day practice which has not radically changed. It does not make any economic sense to import a machine which has only 7.25% as residual value as declared by importer. It is to be noted that the invoice produced is not of any manufacturer or any person who was actually using machine earlier and is of a scrap dealer in U.K. Reliance upon the report of Chartered Engineer - held that - The first two are of facts and the third is an opinion. So there is no infirmity in accepting the facts and rejecting the opinion. Old and used machinery is inherently prone to undervaluation - In fact from the Government of India has amended the import policy to the effect that old and machinery having residual value less than 80% of the original value is not allowed for import. Adjudicating authority has followed the valuation method prescribed by Board for arriving at reasonable price and at the time of assessment the respondent accepted the price suggested by Revenue - Decided in favor of revenue.

Summary

Issues:
1. Proper valuation of imported old and used machinery.
2. Application of Customs Valuation Rules.
3. Acceptance of Chartered Engineer's certificate for valuation.

Issue 1: Proper valuation of imported old and used machinery:
The case involved the import of old machinery, specifically a continuous strip casting line comprising a machine furnace. The Respondents declared a value of GBP 35,450, equivalent to Rs. 26,95,972.50, based on an invoice and a certificate from a Chartered Engineer. The Revenue disputed this value and enhanced it to Rs. 1,09,59,752.40, citing reasons such as the nature of the supplier, the condition of the machinery, and comparison with the original value in 1970. The adjudicating authority justified the enhanced value based on the quality of components, technology, and residual life of the machinery. The Respondents appealed, arguing that the value was reasonable and no misdeclaration occurred.

Issue 2: Application of Customs Valuation Rules:
The Commissioner (Appeals) considered the application of Customs Valuation Rules, particularly Rule 8, in determining the value of the imported machinery. The Respondents contended that the Revenue should have accepted the Chartered Engineer's certificate in full, including the date of manufacture and depreciated value. The Commissioner highlighted precedents where valuation of second-hand machinery under Rule 8 required ruling out transaction value first. The Respondents emphasized that the Chartered Engineer's certificate should have been either accepted or rejected in its entirety, without selective acceptance.

Issue 3: Acceptance of Chartered Engineer's certificate for valuation:
The case revolved around the acceptance of the Chartered Engineer's certificate provided by the foreign supplier. The Commissioner (Appeals) stressed the importance of not disregarding the certificate, especially when its genuineness was not in doubt. The Respondents argued that the Revenue failed to prove any extra remittance beyond the transacted value. The Tribunal upheld the appeal filed by the Revenue, emphasizing the need to consider the residual value, maintenance, and technology involved in assessing the true value of the imported machinery, ultimately overturning the decision of the Commissioner (Appeals) and upholding the adjudication order.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, New Delhi highlights the complexities involved in determining the proper valuation of imported old and used machinery, the application of Customs Valuation Rules, and the significance of accepting or rejecting the Chartered Engineer's certificate in its entirety for accurate valuation purposes.