2016 (12) TMI 1505 - AT - Customs

Valuation - Wartsila Reconditioned 18V32LN engine no. 21888 with Napier Trubocharger Reconditioned ABB alternator rated at 7600 KVA with AVR - rejection of declared value - rejection on the ground that the Chartered Engineer s certificate issued in the country of export was not acceptable owing to discrepancy with the year of manufacture on the plate affixed to the engine - Held that - the pre-shipment inspection report issued by Bureau Veritas was examined and it clearly states that the original manufacturing date of the engine is 10th October 1994 and that of the alternator is 17th October 1995 with the common base plate having been manufactured on the 2nd of April 1996. While Revenue has no issue in accepting the original manufacturing date of the alternator they do not accord the same credibility to the manufacturing date of the engine as certified in the certificate. Undoubtedly both the lower authorities are of the view that the certificate does not reflect the date on the plates affixed to the engine. Even if that were an acceptable proposition the enhancement of value should have been in accordance with the provisions in the Customs Valuation Rules and not by placing reliance on an expert appraiser as has been done by the original authority. Reliance was placed in the decision of the case of Essar Graphics (P) Ltd. v. Commissioner of Customs Chennai 1998 (8) TMI 250 - CEGAT MADRAS where it was held that rejection of value cannot be done merely relying on foreign Chartered Engineer s certificate Declared value to be accepted - appeal allowed - decided in favor of appellant.

Summary

The primary issue considered in this judgment is the valuation dispute concerning the import of a 'Wartsila Reconditioned 18V32LN engine' with associated components by M/S Modipon Fibres Co. The declared value of the imported goods was rejected by the customs authorities due to discrepancies in the year of manufacture as indicated on the engine's plate compared to the Chartered Engineer's certificate from the country of export. The Tribunal was tasked with determining whether the customs authorities were justified in enhancing the declared value and rejecting the refund claim made by the appellant.

The relevant legal framework includes the Customs Valuation Rules and the guidelines issued by the Central Board of Customs and Excise regarding the valuation of second-hand machinery. The Tribunal referenced several precedents, including decisions in Essar Graphics (P) Ltd. v. Commissioner of Customs, Chennai, and Coats Viyella India Ltd v. Collector of Customs, Chennai, which emphasize the importance of transaction value and the conditions under which it can be rejected.

The Tribunal's interpretation focused on whether the customs authorities adhered to the legal requirements for rejecting the transaction value. The Tribunal noted that the customs authorities relied heavily on the expert appraiser's opinion and the discrepancy in the year of manufacture without providing evidence of fraud or contemporaneous imports at higher values. The Tribunal emphasized that transaction value should not be discarded without clear evidence of conditions specified in the Customs Valuation Rules being met.

Key evidence included the pre-shipment inspection report by Bureau Veritas, which confirmed the manufacturing dates of the engine and alternator. The Tribunal found that the customs authorities accepted the alternator's manufacturing date but not the engine's, without sufficient justification. The Tribunal also considered the guidelines from the Central Board of Customs and Excise, which allow for the acceptance of local Chartered Engineer's certificates in the absence of proper Load Port Certificates.

The Tribunal applied the law to the facts by examining the circumstances under which the transaction value was rejected. It concluded that the customs authorities did not adequately justify their decision to enhance the declared value based on the discrepancy in the year of manufacture. The Tribunal highlighted that the enhancement should have been in accordance with the Customs Valuation Rules rather than relying solely on the expert appraiser's opinion.

In addressing competing arguments, the Tribunal considered the appellant's reliance on previous Tribunal decisions, which supported the acceptance of transaction value unless specific conditions for rejection were met. The Tribunal also reviewed the arguments presented by the customs authorities, which relied on different Tribunal decisions and Supreme Court judgments to justify the rejection of the transaction value.

The Tribunal's conclusions were clear: the customs authorities did not follow the proper legal framework for rejecting the transaction value, and the enhancement of the declared value was not justified. The Tribunal allowed the appeal, emphasizing the importance of adhering to the Customs Valuation Rules and respecting the transaction value unless there is substantial evidence to the contrary.

Significant holdings from the judgment include the Tribunal's emphasis on the primacy of transaction value under Section 14 of the Customs Act and the Customs Valuation Rules. The Tribunal reiterated that transaction value should not be discarded without evidence of fraud, contemporaneous imports at higher values, or other specified conditions. The Tribunal's final determination was to allow the appeal with consequential relief, effectively rejecting the customs authorities' enhancement of the declared value and their refusal to grant the refund claim.