2014 (3) TMI 383 - AT - Customs

Valuation of goods - Enhancement of declared FOB value - Chartered Engineer s certificate - Held that - assessing officer has adopted the value declared by the appellant importer on the basis of the Chartered Engineer s certificate with some minor modifications. The Board s circulars prescribes arriving at the value on depreciation method based on the value of the new machinery - value of second-hand machine on the basis of Chartered Engineer s certificate and scaling down the price of the machine by giving depreciation is not an arbitrary method for ascertaining the value. However, whichever method the Revenue wants to adopt, there has to be consistency. If the Revenue wants to adopt depreciation method, the same should be followed uniformly in respect of all the parts/components consisting of the machinery. They cannot pick and choose depreciation method in respect of some parts and adopt the Chartered Engineer s assessed value in respect of some other parts/components merely because the assessed value is higher the one arrived at following the depreciation method. As the popular saying goes one cannot have the cake and eat it too . Rule 8(2)(ii) specifically prohibits a system which provides for the acceptance for customs purposes of the highest of the two alternative values - Therefore, we are of the view either the Department has to accept the declared value of the machinery as certified by the Chartered Engineer (subject to minor modifications, if any required) or follow the depreciation method, by applying the same uniformly and consistently in respect of all the parts/components/sub-assemblies of the machinery under import and decide which of those two values they want to adopt Matter remanded back - Decided in favour of assessee.

Summary

Issues:
1. Valuation of imported second-hand construction machinery based on chartered engineer's certificate.
2. Dispute regarding valuation method between the appellant and the Revenue.
3. Application of Customs Valuation Rules, 1988 and relevant circulars.
4. Consistency in valuation method for all parts/components of the machinery.

Issue 1: Valuation of Imported Machinery
The appellant imported second-hand construction machinery and declared its value based on a chartered engineer's certificate from Indonesia. The Revenue directed the valuation to be done by SGS India Ltd., resulting in a minor difference in the assessed value. The Asst. Commissioner accepted the declared value and finalized the bills of entry, leading to a refund of the revenue deposit.

Issue 2: Dispute Over Valuation Method
The Revenue contested the valuation, arguing that as the transaction was between related parties, valuation under Customs Valuation Rules, 1988, Rule 4 was not applicable. The Revenue advocated for valuation under residual Rule 8, using the replacement/reproduction cost new as the basis and applying depreciation. The lower appellate authority upheld the Revenue's contention, leading to the appeal.

Issue 3: Application of Customs Valuation Rules
The appellant argued that the valuation by the chartered engineer and SGS India was consistent, and the Revenue's method of adopting two valuation methods was impermissible under Rule 8(2) of the Customs Valuation Rules, 1988. They relied on legal precedents to support their argument against adopting two yardsticks for valuation.

Issue 4: Consistency in Valuation Method
The Tribunal emphasized the need for consistency in the valuation method adopted by the Revenue. They highlighted that the Revenue cannot selectively apply depreciation method to some parts/components while accepting the assessed value for others. The Tribunal cited legal precedents to support the prohibition against accepting the highest of two alternative values and the requirement for uniform application of valuation methods.

Conclusion
The Tribunal set aside the impugned order and remanded the matter for fresh consideration by the original adjudicating authority. They directed the authority to either accept the declared value or uniformly apply the depreciation method to all parts/components of the machinery for valuation. The Tribunal stressed the importance of providing the appellants with a reasonable opportunity to be heard and mandated a timely resolution of the matter within one month. Ultimately, the appeal was allowed by way of remand.