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2016 (9) TMI 361 - AAR - CustomsProcurement and import of technical equipment on lease - classification - Chapter 85 of First Schedule of the Customs Tariff Act 1975 - Chapter 90 of First Schedule of the Customs Tariff Act 1975 - Whether the applicant is eligible to claim the exemption under Notification No. 27/2002-Cus dated 01.03.2002 as amended by Notification No. 27/2008-Cus dated 01.03.2008 under the category of temporary import of leased goods? - Held that - the benefit of Notification No. 27/2002-Cus dated 01.03.2002 as amended by Notification No. 27/2008-Cus dated 01.03.2008 can be extended provided all the conditions satisfied as mentioned in the notification - the applicant satisfying all the conditions and is eligible to claim the exemption under Notification No. 27/2002-Cus dated 01.03.2002 as amended by Notification No. 27/2008- Cus dated 01.03.2008 under the category of temporary import of leased goods. Valuation - declared value - book value - depreciated value - Held that - It is clearly mentioned in CBEC Circular No. 25/2015-Cus that value declared by the importer has to be examined with report of Chartered Engineer as also with the depreciated value arrived in terms of said CBEC Circular dated 19.11.1987. In case there are significant differences from such comparison proper officer of Customs will seek explanation from the importer for justification of declared value. If proper officer is not satisfied with said justification of the importer he may proceed to determine the value under Rule 9 ibid.
Issues Involved:
1. Eligibility for exemption under Notification No. 27/2002-Cus as amended by Notification No. 27/2008-Cus. 2. Basis for Customs Valuation of imported Broadcasting Equipment, including: - Chartered Engineer’s Certificate. - Book value in the books of accounts of BS/foreign suppliers. - Depreciated value of the equipment. Detailed Analysis: Issue 1: Eligibility for Exemption under Notification No. 27/2002-Cus as Amended by Notification No. 27/2008-Cus The applicant, M/s First Concept Production Services Private Limited, seeks to claim an exemption under Notification No. 27/2002-Cus dated 01.03.2002, as amended by Notification No. 27/2008-Cus dated 01.03.2008, for the temporary import of leased goods. The conditions for this exemption include: - The goods must be taken on lease. - The importer must declare that the goods are imported temporarily for executing a contract. - The goods must be re-exported within three months from the date of import or within an extended period not exceeding 18 months with the appropriate permission. - The importer must pay differential duty if an extension is granted. - The importer must undertake to re-export the goods within the stipulated period and produce the goods for identification before re-export. The applicant asserts compliance with all these conditions, and the revenue has no objections. The Authority agrees that the applicant is eligible for the exemption under the said notifications. Issue 2: Basis for Customs Valuation of Imported Broadcasting Equipment Chartered Engineer’s Certificate The applicant proposes to use a Chartered Engineer’s Certificate to justify the value declared at the time of import. This certificate will include details such as the description of the equipment, price of the new equipment at the time of manufacture, current C.I.F. value, and period of usage. The applicant argues that this should be the basis for Customs Valuation under Rule 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, which allows for valuation using reasonable means when other rules are not applicable. Book Value in the Books of Accounts of BS/Foreign Suppliers As an alternative, the applicant suggests that the book value shown in the books of accounts of BS and third-party vendors, supported by a Chartered Accountant’s Certificate, can be used for Customs Valuation. This method is proposed if the Chartered Engineer’s Certificate is not accepted. Depreciated Value of the Equipment The applicant further submits that the depreciated value of the Broadcasting Equipment can be used for Customs Valuation. They refer to Circular No. 4/2008 dated 12.02.2008, which allows for valuation based on the value of new machinery, scaled down by depreciation. The applicant argues that higher depreciation should be allowed due to technological changes, and the depreciation policy should not be capped at 70%. Revenue’s Submission The revenue points out that the valuation of second-hand machinery should follow the guidelines in CBEC Circular No. 25/2015-Cus dated 15.10.2015, which supersedes the earlier circular. This circular prescribes a detailed method for valuing second-hand machinery, including the use of Chartered Engineer’s reports and comparing declared values with depreciated values. Authority’s Observation The Authority observes that the valuation must be under Rule 9 of the Customs Valuation Rules, 2007, using reasonable means consistent with the rules. CBEC Circular No. 25/2015-Cus outlines the guidelines for valuing second-hand machinery, including: - Accompaniment of an inspection/appraisement report by an overseas chartered engineer or equivalent. - Comparison of declared values with depreciated values as per Circular No. 493/124/86-Cus VI dated 19.11.1987. - Seeking explanations from the importer if there are significant differences. The Authority concludes that the value stated in the Chartered Engineer’s Certificate will be one of the bases for Customs Valuation, along with the guidelines in CBEC Circular No. 25/2015-Cus. Conclusion: A. The applicant is eligible to claim the exemption under Notification No. 27/2002-Cus as amended by Notification No. 27/2008-Cus for the temporary import of leased goods. B, C, and D. The value stated in the Chartered Engineer’s Certificate will be one of the bases for Customs Valuation. The valuation of the second-hand Broadcasting Equipment will also follow the guidelines in CBEC Circular No. 25/2015-Cus.
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