CHARTERED ENGINEER’S CERTIFICATE

[Mr. M. GOVINDARAJAN]

A Chartered Engineer’s Certificate from an independent inspection is a mandatory requirement in order to import used or refurbished machinery in India by the Customs. The Chartered Engineer or company is required to be authorized by Indian Director General of Foreign Trade (DGFT) to provide Chartered Engineer’s certificate. The Chartered Engineer certificate must provide the following details:

• Working condition of the equipment;
• Present market value of the equipment;
• Country of origin;
• Year of manufacture;
• Approximate value in year of manufacture;
• Residual life of the equipment;
• Packing list including spare parts.

Some issues arised in Chartered Engineer’s certificates are discussed in this article.

In ‘K.M. Udyog V. Commissioner of Central Excise, Amritsar’ – 2013 (5) TMI 297 - CESTAT NEW DELHI it was held that there is no scope to disagree with the observation of Chartered Engineer who has categorically remarked that 90% of the goods imported were serviceable material and recoverable from the plates imported by the appellant. Balance material 10% was found to be re-reollable after cutting from the plates to make that serviceable.   The Tribunal held that it is unsafe to discard a technical report on the subject on the fiction of debatable entry in the tariff.   The appellant has not declared thickness or size of the goods in the Bill of Entry. Bill of Entry only says ‘re-rollable plates’. Therefore there cannot be any divergent view from the technical view relied by the Revenue who has occasion to physically inspect the goods for his opinion.

In ‘Jindal Nickel & Alloys Limited V. Commissioner of Central Excise, Delhi’ – 2012 (10) TMI 377 - CESTAT, NEW DELHI the appellant had brought on record a Chartered Engineer’s Certificate dated 01.07.2008 in a clandestine removal case in support of their claims of maximum capacity of manufacture, in which the Chartered Engineer after visiting the factory and after examining the equipments installed in the factory, had certified that the annual production capacity of M/s Jindal on single shift basis was 1963.200 MT per annum. The appellant during the course of adjudication proceedings had offered the said Chartered Engineer for examination by the Commissioner but there is no finding by the Commissioner on this officer.   The Tribunal gave liberty to the Commissioner to examine the said Chartered Engineer during the remand proceedings to confirm the production capacity of M/s Jindal.

In ‘Saravana Alloys Steels Private Limited V. Commissioner of Central Excise, - Bangalore – II’ – 2011 (2) TMI 1211 - CESTAT, BANGALORE the Adjudicating Authority relied on the expert opinion that 1200 units of power is required for the production of one tones of CTD bars.   The assessee has engaged on qualified Engineer to determine the same parameter. According to his study the power consumption varied from 1510 to 1870 units for one tone of CTD bars in the plant.   The Tribunal found that the Commissioner has not given any reason in the impugned orders for reject the technical opinion furnished by a competent expert though at the instance of the assessee. The Tribunal further held that on perusal of the two opinions it did not find a valid reason to prefer one to the other. However it was eminently possible for the Adjudicating authority to ascertain as to which of the opinion could be safely relied in the proceedings.

In ‘Alriyaz Implex V. Commissioner of Customs, Chennai’ – 2011 (1) TMI 481 - CESTAT, BANGALORE the Tribunal found that the Chartered Engineer has given the certificate which reads – ‘being imported items and sold through selected/exclusive retail outlets in our country prices for such items vary considerably from shop to shop which therefore poses difficulties in determining current local market prices on a very accurate or specific scale as warranted for this exercise.   It can be seen from the said certificate that after coming to such a conclusion he seems to have visited two shops and came to the conclusion that the value of the goods has to be decided based upon the following observation-

“Hence, a fair and judicious valuation has been done, based on personal visits undertaken by the undersigned to a couple of most reputed and exclusive retail sale shops dealing with such products in Cochin city, M/s Alphonsa and M/s Goodwill situated at convent junction and thereby ascertaining landed prices applicable to same or almost similar brands involved in their regular business towards arriving at very reasonable and judicious valuation of items covered in this assessment”.

In view of the above the Tribunal held that this kind of valuation of the impugned goods is incorrect and improper appreciation of the valuation rules. The Chartered Engineer’s certificate seeking valuation of some durable goods seems to be without any legal basis. Since the issues involved in these case is valuation and requires contemporary price issues to be considered, the tribunal set aside the impugned orders and remanded the matter back to the Adjudicating Authority.

In ‘Commissioner of Customs, New Delhi V. Krishna Engineering Industries’ – 2012 (11) TMI 82 - CESTAT, NEW DELHI the depreciated value as certified by Chartered Engineer, UK 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 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% of residual value as declared by the imported. The invoice produced is not by the manufacturer or any person who was actually using machines earlier and is of a scrap dealer in UK. These are circumstances which can cause genuine doubt about the value declared.   In such a situation when the Revenue inquired about the correctness of the value the Respondent agreed to increase the value to Rs.1,09,59,752/- and the respondents took clearance of the machine at the increased value. Considering these facts that the adjudicating authority has followed the valuation method prescribed by Board for arriving at reasonable price.

In ‘Anand Impex V. Commissioner of Customs (Sea Port – Imports), Chennai’ – 2012 (4) TMI 68 - MADRAS HIGH COURT the petitioners had imported second hand Digital Multifunction Print and Copying Machines, imported under the various Bills of Entry. The Department was of the view that the said imported machine would be classified as ‘Hazardous waste’ as per the Hazardous Waste (Management, Handling and Transbounding Movement), Rules, 2008. The High Court held that the machines did not fall under the category of ‘hazardous waste’.   The High Court noted that in the report of Chartered Engineer, relating to the goods already inspected, the Digital Multifunction Print and Copying machines, imported by the petitioner have been found to have a residual life of minimum five years, provided proper attention is bestowed towards prompt and periodic maintenance and servicing of the machines.   The High Court directed the Department to release the goods in question which has already been inspected by the authorized Chartered Engineer, on payment of appropriate customs duty subject to adjudication process to be conducted, as per the relevant provisions of law.

In ‘Shivam International V. Commissioner of Customs, Chennai’ – 2011 (6) TMI 75 - CESTAT, CHENNAI the Department based on the Chartered Engineer’s report according to which 85% of the computers imported are directly usable and15% of the same are non functional going by the random sample examination undertaken by him.   In fact he did not examine all the packages.   He also opined that if the reusable computers have to be refurbished and if non functional computers have to be made re-usable it will result in heavy amount of e-waste management.

The Tribunal held that the Chartered Engineer who was called to examine the consignment by the DRI officials, the Chartered Engineer concerned is not one of the notified authorities under the Environment Protection Act, 1986 or under the rules made there under or under the circulars issued in the context of the same. The authorities below have labored hard to use the Chartered Engineer’s Certificate and the apprehension expressed there under to treat the consignments on hazardous waste under the relevant rules but such an exercise done by them cannot be approved as no competent authority has examined and held the consignment to be falling in the hazardous waste. The Tribunal held that the impugned goods cannot be considered as hazardous waste and set aside the impugned orders.

In ‘Bhola Plastic Industries Private Limited V. Commissioner of Central Excise, Delhi – I’ – 2011 (3) TMI 406 - CESTAT, NEW DELHI the appellant sought leave to produce additional evidence before the Tribunal, one, the certificate issued by Chartered Engineer and another issued by Sales Director.   It is undisputed fact that the same Chartered Engineer has issued one certificate earlier and had already produced by the appellant in the course of the proceedings before the Commissioner. The appellant did not disclose justification for further certificate as evidence in this matter.

Discussions to this article

[Naveed S]

Very interesting and thoughtful topic.... Boards Circular No.4/2008-Customs dated 12.02.2008 issued vide F.No. 467/34/2006-Cus.V  regading Valuation practice of second hand machinery to be adopted by all Custom Houses/ Customs Commissionerates may also be referred by the departmental officers as well as by the Chartered Engineers issuing such Certificates.