Help with depriciation calculation in customs

As per custom valuations of imported goods  rules 2007- the value of imported goods shall be the transaction value adjusted in accordance with provisions of rule 10 with Provided some other rules

adjustment & other rules not applicable in your case..

hence online bought value will  be applicable for custom valuations purposes.

 some remedials ..

Proper declaration by you needed- (1)The importer or his agent shall furnish -

               (a)  a declaration disclosing full and accurate details relating to the value of imported goods; and

               (b) any other statement, information or document including an invoice of the manufacturer or producer of the imported goods where the goods are imported from or through a person other than the manufacturer or producer, as considered necessary by the proper officer for determination of the value of imported goods under these rules.

rejection by proper officerRejection of declared value. —  (1) When the proper officer has reason to doubt the truth or accuracy of the value declared in relation to any imported goods, he may ask the importer of such goods to furnish further information including documents or other evidence and if, after receiving such further information, or in the absence of a response of such importer, the proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the transaction value of such imported goods cannot be determined under the provisions of sub-rule (1) of rule 3. 

 (2)  At the request of an importer, the proper officer, shall intimate the importer in writing the grounds for doubting the truth or accuracy of the value declared in relation to goods imported by such importer and provide a reasonable opportunity of being heard, before taking a final decision under sub-rule (1).

Explanation.-(1) For the removal of doubts, it is hereby declared that:–

(i) This rule by itself does not provide a method for determination of value, it provides a mechanism and procedure for rejection of declared value in cases where there is reasonable doubt that the declared value does not represent the transaction value; where the declared value is rejected, the value shall be determined by proceeding sequentially in accordance with rules 4 to 9.

(ii) The declared value shall be accepted where the proper officer is satisfied about the truth and accuracy of the declared value after the said enquiry in consultation with the importers.

(iii) The proper officer shall have the powers to raise doubts on the truth or accuracy of the declared value based on certain reasons which may include -

(a)   the significantly higher value at which identical or similar goods imported at or about the same time in comparable quantities in a comparable commercial transaction were assessed;

(b)  the sale involves an abnormal discount or abnormal reduction from the ordinary competitive price;

(c)    the sale involves special discounts limited to exclusive agents;

(d)   the misdeclaration of goods in parameters such as descripttion, quality, quantity, country of origin, year of manufacture or production;

(e)    the non declaration of parameters such as brand, grade, specifications that have relevance to value;

(f)    the fraudulent or manipulated documents.

Yes. even if you import the goods for free, then also you need to pay customs duty on the deprecitated value of goods,  This is as per Indian Customs rule.

Rates are given below

The depreciation shall be allowed in straight line method as specified below, namely:-

(i) for computer and computer peripherals:

for every quarter in the first year - @ 10%
for every quarter in the second year - @ 8%
for every quarter in the third year - @ 5%
for every quarter in the fourth and fifth year - @ 1%

(ii) for capital goods other than computer and computer peripherals:

for every quarter in the first year - @ 4%
for every quarter in the second year - @ 3%
for every quarter in the third year - @ 3%
for every quarter in the fourth and fifth year - @ 2.5 %
and thereafter for every quarter - @ 2%

Explanation.- (1) For the purpose of computing rate of depreciation for any part of a quarter, a full such quarter shall be taken into account;

 

Dear sirs,

Thanks for your replies. As per Shri Rama Krishan sir, the depriciation should be 

16% for first whole year (4 quarters * 4%)

12% for second yr

12% for third year 

10% for fourth year 

. Thus it comes to 50%. Plus I have to add this year's depriciation too (I guess i will need the exact date of MFG for the same).

My custom agent has sadvised me to at present pay the whole duty as per their calculation "under protest" which safeguards my rights to go for appeal. Shall I do the same? The machine is with customs for about 3 weeks now and i am really worried abt the period. Shall I follow the agent and later go for appeal.

Dear Kothari,

First of all Indian customs rules are very cumbersome, ideally you checked all aspects before import of consignment.  if so you should have obtained original prucahse price, SGS inspection for second hand goods for valuation  etc, which i belive in your case has not been done.

If customs duty involved is high, i will still suggest that you obtain orignal purchase price from foreign supplier( soft copy will do), thereafter get the goods valuated by Chartered Engineer approved by customs. then allow the depreciation as specified in customs rule, pay customs duty and clear the consignments.

With the second option suggested by customs agent , you will be able to clear the goods immdlty but then there are hell lot of documentation required for getting the refunds back from Dept. Also you need to provisionally assess the B/E and pay duty under protest, later with all supporting documents , you get the reassessment done availaing the benefit and apply for refund,  also comply unjust enrichment clause

Thanks to all who helped me with this.

Let me just state the current state of my case - 

1. I purcahsed a medical machine through ebay.com at 10,600 $, Second hand thing manufactured in 2008.

2. the same as submitted for custom clearance at this value only. customs disagreed and said that they will calculate the custom value by depriciation or deductive value method (as i understand it). 

3. by our invoice, the custom duty comes to ~ 98,000 Rs, By custom calculations its almost double at ~2,04,000 Rs.

I was just researching on the net and came to this website about custom valuations - https://www.eximguru.com/exim/indian-customs/customs-manual/customs-valuation.aspx Now the pickle in the whole story is whether we need tp consider the depriciated value at all or not. 

In my case, i have bought the machine in a competitive auction through a reputed website (www.ebay.com). The same machine with similar configuration is avaiable at other places for a similar price (+/- a few hundred dollars for bargaining sake). There is no relation between the seller and me and all the other valuation conditions are fullfilled. 

In such case, can the custom people directly jump to the deductive value method. The site clearly states that its a hierarchial order and hence if there is any doubt about the transaction value then the customs must follow the comparative value method in determining the price.  I have other auctions (some of them even live as i type) which substantiate the fact that there has not been any undervaluation.

Pls help.

What you says is correct. The customs valutation rule says the rules have to be used sequently .

There are seperate  process for valuation of second hand machinery. As a general practice for second hand valuation, customs accept either of the three, which ever is higher

1. Depreciated value fo goods by allowing depreciation rates are specified in customs rule

2. Valuation done by Charterred Engineer

3. Actual Invoice Value

The Import Export law allows you to import second hand machinery even at free of cost basis, but in that case also the customs duty has to be paid on depreciated value of goods.

According to me ,  if the customs dept is righly calcualtion the dreciated value, then you need to pay customs duty on depreciated value of goods .   Suggest you perosnally visit the Customs office and discuss in person with the Dy. Commissioner put up the facts and figures.

Dear RAma Krishnan sir,

Thanks for the reply. I am supposed to appear before the custom officer for a personal hearing sometime in the next week. They will intimate me when i have to go there.

the problem is most of this mess has been created by my custom house agent. he was supposed to guide me in this, but he himself is under the scanner with the customs people. the assistant commissioner has said that there will be action against him aslo on the basis of misdirection to me.

that is the reason i am researching on the net. can you pls give me some reference to your statement about

"There are seperate  process for valuation of second hand machinery. As a general practice for second hand valuation, customs accept either of the three, which ever is higher"

If this is the case, then i will directly plead with the assessing officer if they would consider the invoice value. if tehy refuse to do that and the higher value is considered, then i will have no choice but to accept their decision and pay the 2+ lakhs custom duty.

thanks once again.

Also suggest below, the main issue before customs coould be assertain the orignal manufacturing year, it can be done only when you submit them some proof of year of manufacturing.

1. Immdlty try to get original purchase Invoice from your supplier( this will be an evidence to prove the year of Mfg i.e. 2008)

2. make an excel sheet & caluacate the deprecication based on the depreciation rate  on  $10600 appx 5 yr depreciation is 50%. so customs duty will be applied on $5300. ( it will be close to Rs 91000 only)

Meet the customs officer with these two evidences, This may resolve your issue.

Sir, They do not have any problem with the yr of MFG of the machine. The problem is the value to be considered for customs calculations. 

The facts are as such- 

The machine was made in 2008. The price at time of MFG was 35,000 $. 

The machine was purchased by me in 2012 at 10,600$. - Custom duty according to this value 98,000 Rs.

The customs people want the depriciated value i.e. 20,300$  to be considered. - Custom duty according to this value about 2.04 lakhs.

What i wanted was the reference to the "Whichever is higher" statement, because then it will make my argument moot. I will have to pay the higher of the duty calculated in that case. 

I could not find a clause saying the "whichever is higher" on either the customs site or on eximgure.

thanks once again

Rule does not specify that its the practice of valuation of second hand machinery. 

IF the customs dispute year of manufactuirng as 2008 , righly calculate depreciation on orginal mfg price i.e USD 35000, then apply the right customs duty rate according to the HSN, then it is correct.

According to me as the duty is payable on USD17500 and it will be close to 2.04 Lac

thanks Rama Krishnan sir,

I will try to present my view before the Associate custom officer who is supposed to take a personal hearing. If he agrees regarding the fairness of the invoice value and the method by which the same was obtained (competitive bidding) and asks me to pay the custom duty on 10,600$ - will be best for me.

otherwise, as you say, i will pay the duty on the depriciated value according to their calculations. 

Just wanted a confirmation about this since incidentatlly my custom house agent is an idiot. 

OK fine.. 

hii sir,

Had a PH witht the customs people. They are telling me that over and above the custom duty of abt 2 lakhs, i will  have to pay a fine of 1.5 lakhs. the only other recourse is to prove that the 10,600$ value declared is true. 

I have prepared the following reply to their query (in attachement). Could you pls go therough the same and let me know. 

Why the transaction price and not a depreciated price should be taken for customs valuation in this case?

I wanted to import an AMO Signature Phaco System with 2 AMO Ellipse FX hand pieces from the US to India.             The same machine was available as a second hand / reconditioned machine on www.ebay.com vide auction no 2809276591 for USD 10600 and was purchased by me for the same price.

Sir, in my case, the customs valuation of the machine was done by the assessing officer by calculating the depreciation of the machine from the time of manufacture till the date of import. I was asked to pay the custom duty on the basis of the depreciated value along with a fine penalty for wrong declaration of the value of the machine.  

I wish to contest this on the following points –

(a) The transaction value of the machine declared by me was fair and correct.

(b) There was no discrepancy with regard to the specifications, markings, age or other details and hence the transaction value declared by me should be accepted.

(c) There is no relationship between me and the seller and also there has not been any illegal or undisclosed transaction between us.

(d) There was no warrant for considering the value of the goods on the date of manufacture when the matter before the assessing officer was appraisal of the second hand machinery.

(e) No basis has been laid by the assessing officer as to how the transaction value was not genuine.

(f) No contemporaneous imports have been cited by the assessing officer to reject the transaction value.

(g) I wish to also invoke the Rule 5 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. In support of the transaction value of the machine, I am attaching other multiple, simultaneous auctions on the internet which support the price of the machine (Annexures a-d).

I wish to contest the customs valuation on the basis of the following rulings-

1.      2000-ITS-5828-CESTAT-(ELT-125/1205)-INTERNATIONAL CONVEYORS LTD. -Versus- COMMISSIONER OF CUS., MUMBAI , dated 10-5-2000

I wish to rely on the Para 5 of the order, which reads as follows-

“5. The law as to valuation of imported goods is clear. The importance of the Valuation Rules is embodied in section 14 of the Customs Act, 1962. The transaction value is the basis of the assessment. If the department has reservations as to the acceptance of the transaction value as claimed, then these reservations grounds and logic have to be explained to the importers preferably in the form of show cause notice. The assessees' views have to be heard and then if it is found that the transaction value is not acceptable, then the valuation has to be adopted on the basis of sequential application of the said rules. The method given by the Board of taking the original value and then giving an annual depreciation could form the basis of the "best judgment method" as arisen in the residual rule but it cannot prevail over the predecessor rules in the absence of any discussion as to how the transaction value was not to be accepted. This is the specific view held by the Tribunal in para 5 of the cited judgment in the case of Shree Rajendra Mills Ltd. v. CC - 1997 (90) E.L.T. 68.

2.      PSM SPINNING MILLS VS COMMISSIONER OF CUSTOMS on 11 June, 2002 –

I wish to rely on the Para 10 of the order, which reads as follows-

“10. We have considered the submissions made by both sides and gone through the case records and the various case law cited by both the sides. We find that in this case, licence was issued by the DGFT for the importation of 18 numbers of Second hand Schlafhorst Autoconers of 1979, model 138 and the estimated value was Rs. 1,63,27,125/-. As against this, the appellants imported eight machines vide Bill of Entry No. 3076, dated 1-11-94 and the balance 10 machines vide Bill of Entry No. 3466, dated 9-2-95. Chartered Engineer has given a certificate showing the value of new machine as US D 48,500/-. The CIF value declared by the appellants was US D 28,750/-(CIF Bombay). The department assessed the goods by taking the value of the new machine as DM 3,30,000/- (Rs. 20,90,880/-) per machine for the first importation of 8 machines and Rs. 20,66,130/- for the subsequent importation of 10 machines, discarding the transaction value declared by the importers which was Rs. 9,07,062.5 per machine. The basis of the department in assessing the machine at the above price was the circular issued by the New Custom House, Bombay which enclosed a letter showing the manufacturer's price as DM 3,30,000/- (Rs. 20,90,880/-) per machine. It is argued that this letter was not made available to the appellants. The figures viz Rs. 20,90,880/- and Rs. 20,66,130/- were arrived at by allowing 70% depreciation. In this case, we do not find from the orders-in-appeal and the orders-in-original, under which Rule of the Customs Valuation Rules, the value has been assessed. No rule has been quoted in the orders. There is also no specific rejection of Rule 4 of the CVR, 1988 either. But it seems that the original authority has rejected the transaction value under Rule 4 and jumped into the residual method under Rule 8 of the CVR without having resort to Rules 5, 6 and 7 of the CVR 1988. There is not a whisper as to why the other intervening rules i.e. Rules 5 to 7 do not apply. We find that the transaction value of the imported goods shall be the price actually paid or payable for the goods imported and the normal principle for arriving at a price is to ascertain the transaction value in terms of Section 14(1) of the Customs Act, 1962. In this case, the value is mentioned in the licence issued by the DGFT. The appellants have also produced the Chartered Engineer's certificate showing the price of a new machine as US D 48,500/- (Rs. 15,30,175/- i.e. : Rs. 31.55 per USD). If 70% depreciation is allowed on this price mentioned by the Chartered Engineer, the price declared by the importers is much above the depreciated value. Discarding all these, the authorities below chose to fix the price by relying upon a Circular issued by the Special Intelligence Branch of the Custom House, Mumbai which enclosed a letter showing the price of the new machine, purported to have been issued by the manufacturer which are not authenticated. The authorities below have not attempted to place on record any contemporaneous imports when they chose to reject the transaction value. We find that the Hon'ble Apex Court in the case of Eicher Tractor Ltd. v. CC Mumbai reported in 2000 (122) E.L.T. 321 (S.C.) has laid down the law as to how the transaction value is to be determined and how the goods are to be assessed if the transaction value is discarded. In the said judgment the Hon'ble Supreme Court has categorically held that price list of the foreign supplier/manufacturer is not a proof of transaction value invariably and existence of the price list cannot be the sole reason to reject the transaction value. Further, this Bench of the Tribunal in the case of Sree Rajendra Mills Ltd. v. CC, Madras reported in 1997 (90) E.L.T. 68 has held that invoice value cannot be rejected merely because machinery imported is second hand and that for rejecting invoice value, basis has to be laid for such rejection. In the case of Madura Coats v. CCE, Maduraireported in 2000 (118) E.L.T. 418, it has been held that when a Chartered Engineer's certificate supporting the transaction value is produced, it cannot be rejected without either contemporaneous imports of like goods at higher value being shown or proof of transaction not being in normal course of international trade. We find that in the present case, the department has placed reliance on the Special Investigation Branch (SIB) of the New Custom House, Bombay, Circular No. 25/94 enclosing the copy of manufacturer's viz. Schlafhorst Co. giving the value of certain auto-coners model 138 in 1978/79 to discard the transaction value declared by the importers. The appellants have stated in the memorandum of appeal that the said circular enclosing the letter of the manufacturer's have not been made available to them at any stage of the proceedings and that the evidence has been obtained and used by the department at the back of the appellants which is against the principles of natural justice. We find force in the plea of the appellants in this regard. Further we find that the authorities below have not shown as to how they chose to rule out Rules 5 to 7 of the CVR before resorting to Rule 8 thereto. We observe that Section 14 of the Customs Act, 1962 has to be read along with Rule 4 of the CVR. Under the said Rules, only in case it is not possible to arrive at the transaction value, then other method of valuation provided by the said Rules has to be followed. Rule 3 sets out the method of valuation and Clause (i) of Rule 3 lays down that the value of the imported goods shall be transaction value and according to Clause (ii) of Rule 3, if the value cannot be determined under the provisions of Clause (i) above, the value shall be determined by proceeding sequentially through Rules 5 to 8. Rule 4(1) lays down the conditions for accepting the transaction value and the adjudicating authority has to categorically say whether the importers have satisfied or not satisfied the parameters set out under Rule 4(2) of the CVR. In the present case, when the transaction value has been rejected, the lower original authority was duty bound to spell out the reasons in categorical terms why he has rejected the transaction value and why he chose to resort to Rule 8 without sequentially ruling out Rules 5 to 7 of the CVR. He has not done this exercise. In view of what has been stated above we are of the considered opinion that the orders passed by the authorities below are not speaking orders. We, therefore, set aside the impugned orders as well as the attendant orders-in-original and allow the appeals by way of remand to the original authority. The original authority shall decide the issue afresh in accordance with law after providing the appellants with copy of the SIB Circular together with its enclosures on which the Revenue has placed reliance to reject the transaction value. The appellants shall be afforded effective opportunity of hearing to rebut the charge of the Revenue. Thus the appeals are allowed by way of remand.”

3.      EICHER TRACTORS LTD. vs COMMISSIONER OF CUSTOMS,   MUMBAI  - 2000 (122) ELT 321 (S.C.) –

Valuation (Customs) - “Transaction value” in Rule 4 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 is confined to the particular transaction (i.e. to the goods under assessment); otherwise subsequent Rules 5 to 8 which refer to other transactions and data would become redundant - It is only when ’the’ transaction value is rejected, then under Rule 3(ii) the value shall be determined by proceeding sequentially through Rules 5 to 8 - Conversely, if the transaction value can be determined under Rule 4(1) and does not fall under any of the exceptions in Rule 4(2), there is no question of determining the value under the subsequent Rules - Section 14 of Customs Act, 1962. [paras 13, 14]

4.      GAJRA BEVEL GEARS vs COLLECTOR OF CUSTOMS, BOMBAY - 2000 (115) ELT612 (S.C..) –

“We have heard learned Counsel for the appellant and we do not find any reason to interfere. Learned Counsel for the appellant relied upon the judgment of a learned single judge of the High Court at Calcutta in Debabrata Ghosh v. Assistant Collector of Customs [1993 (68) E.L.T. 551]. That was a case in which the auction price of a car bought in England was not accepted but the valuation was made by ascertaining the price of the car when new and then allowing depreciation. The learned judge found this impermissible on the facts of that case, as we would have done, because the price of a second-hand car such as that involved in that case could easily have been ascertained by reference to popular magazines and publications relating to cars in England. There are no popular publications that would indicate the prices of machines. Therefore, ascertaining the value of the second-hand machine imported by the appellants, when new, based on the certificate produced by the appellant itself, and scaling down that price by giving depreciation does not appear to be an arbitrary method of ascertaining its value.”

In my case, there are easily accessible and transparent auctions available on the internet to determine the fair valuation of the machine (annexure a-d). Hence the corollary of the ruling above would be applicable that in such a case, depreciation calculations would not take precedence over the transaction value.

Sir, I wish to appeal that in our case, the transaction value declared in the B/E filled with customs no 7868908 dated 6^th Sept 2012, is true and correct. With reference to the above rulings, the question of determining the customs valuation of the machine by applying depreciation does not arise.

Even if there is a doubt regarding the transaction valuation of the machine, I wish to bring to your notice that there are other multiple, simultaneous auctions available on the internet, in which the said machine is available at a similar price (Annexures a-d).  Rule 5 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 applies in such case and the transaction value as declared on the bill of entry is substantiated.

Dear Dr Swapnil,

Reply seems OK , you can also take reference of CBEC circulr no 4/2008 , clasue no 2(i), which says if the parameters of sec 14 are satisfied, then transaction value method can also be applied , provided the goods are not used abroad..

Afraidyour case has already taken a legal route.  Still suggest you personally meet Commissioner of Customs and explain your grievences and seek relief  and clerance of consingmentsrather than taking a legal route, which may take longer time . 

Alternatively seek  clearance of goods under provisional assessment and  proceed legally post clearance of goods.

Next time pl put things on forum before  imports , so that you are aware about the regulations and rules.

Feel sorry for your case....

Good Luck..

Circular No. 4 /2008-Customs

F. No. 467/34/2006-Cus.V

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise & Customs

New Delhi, 12^th February, 2008

To,

All Chief Commissioners of Customs,

All Chief Commissioners of Central Excise,

All Chief Commissioners of Customs & Central Excise,

All Directorate-Generals, Chief Departmental Representative,

All Commissioners of Customs,

All Commissioners of Central Excise, and

All Commissioners of Customs & Central Excise

Sir,

Subject: Valuation practice of second hand machinery to be adopted by all Custom Houses/ Customs Commissionerates-regarding/-

 It has been noticed that the Custom Houses / Customs Commissionerates have been adopting different assessment practices with regard to valuation of imported Second Hand Machinery / Capital Goods.  As this was resulting into diverse assessments the following guidelines are being issued so that assessments are done as far as possible on their basis.

2.         A careful analysis of the Tribunal decisions and an Apex Court judgement on the issue of valuation of second-hand machinery reveal the following views of the judiciary:

i)                    If other parameters of Section 14 of the Customs Act, 1962 are satisfied, the transaction value method of Rule 3 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 can also be applied to importation of second-hand machinery sold for export i.e. it was imported immediately after sale without any further usage abroad. 

ii)                  However if transaction value of Rule 3 is rejected, valuation of second-hand machinery can be done under Rule 9, on the basis of value of new machine, as certified by the Chartered Engineer, and scaled down by allowing depreciation commensurate with the period of usage.  Supreme Court judgement in the case of Gajra Bevel Gears [2000(115) ELT 612 (SC)] refers in this regard.

iii)                However, transaction value of Rule 3 cannot be rejected by ab initio application of Rule 9, inasmuch as one cannot, before rejecting transaction value of Rule 3 with sufficient evidences, straightaway arrive at a notional value under Rule 9.

3.         It may thus be seen from the judicial decisions that, before redetermination of value of second hand machinery under Rule 9, it is essential to reject the transaction value of Rule 3.  There would be no difficulty in rejection of transaction value in those cases where the assessing officer is able to assail the documents like Chartered Engineer’s Certificate, invoice, etc., as manipulated or fraudulently obtained.  Similarly, there will also be no difficulty in rejection of transaction value in cases where the assessing officer proves that certain basic particulars like descripttion, period of usage, extent of the re-conditioning, year of manufacture, model no., price when new, etc., are misdeclared either in the Chartered Engineer’s Certificate or in the invoice.   There will also be no difficulty in rejecting the transaction value in cases which are hit by the provisions to Sub-Rule (2) of Rule 3.  Difficulties may however be faced in situations other than those described above. 

4.         In this context, attention of the assessing officers is drawn to Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 which provides for rejection of declared value under certain circumstances.  Following views have emerged from various Tribunal decisions on the application of Rule 12:

i)                    Rule 12 empowers the Revenue not to determine the value of the imported goods on the basis of transaction value under Rule 3 (1) of the Valuation Rules.  The Tribunal decision in the case of Chandni International [2003 (153) ELT 312] refers.

ii)                  Rule 12 provides that when the proper officer has reason to doubt the truth or accuracy of the value declared, he may ask the importer to furnish further information or other evidence.  If he still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the transaction value of the goods cannot be accepted.  It is therefore required to determine whether the evidences constitute reasonable doubt for the assessing officer to doubt the value of the goods.  The Tribunal decision in the case of Sunny Enterprises [2004 (175) ELT 420] refers.

iii)                Rule 12 is a procedural provision, which is meant to act as an aid in determining as to whether Sub-Rule (1) or Sub-Rule (4) of Rule 3 would be applicable in a given case.  This deeming provision contained in Rule 12 has necessarily to be pressed into service at the very initial stage under the sequential scheme. It has no role after the scheme has worked out.  The Tribunal decision in the case of Venus Insulation Products Mfg. Co. [2002 (143) ELT 364] refers.

5.         Thus in respect of valuation of second hand machineries as well, the assessing officers may apply Rule 12 in appropriate cases.  As an illustration, if the declared value of a second hand machinery is found to be much below the value arrived at by the depreciation method on the basis of the certified price of the new machinery in the year of its manufacture, the assessing officer may have reason to doubt the truth or accuracy of the declared value, and ask the importer to furnish further information and explanation.  If he is satisfied, he may accept the declared value.  But, if he still has reasonable doubt about the truth or accuracy of the declared value, he can reject the declared value under Rule 12, and proceed to re-determine the value under Rule 9 by following the Board’s circular No. F.No. 493/124/86-Cus VI dated 19.11.87 in respect of the depreciation to be extended to such second hand machinery. 

6.         In fact, for other imported goods as well, the method for acceptance or rejection of declared value, and then re-determination of value in case the declared value is rejected, would be similar to that in the case of second hand machinery, as explained hereinabove.

7.         In cases where the declared value is rejected, and assessable value is re-determined, the assessing officer shall issue a detailed speaking order, giving the reasons for such rejection, by invoking the provisions of Rule 12 or Rule 3(2), as appropriate, and giving the reasons for re-determination of value under appropriate provision.

8.         Guidelines in respect of some other issues related to valuation of second hand machinery are as follows:

(a)        For valuation of second hand machinery / capital goods, the assessing officers must insist on importers submitting a certificate issued by an independent Chartered Engineer or any equivalent in the country of supply.  The certificate should indicate interalia:-

            i)          Price of new machinery as in the year of its manufacture,

            ii)         Current CIF value of new machinery if purchased now,

            iii)        Year of the manufacture of machinery,

            iv)        Sale price of the supplier,

            v)         Present condition of machinery,

vi)        Nature of reconditioning or repairs carried out, if any, and the cost (including the dismantling cost, if any) thereof,

            vii)       Expected life span.

(b)        There is no need to specify the agencies whose certificates alone, issued at the port of loading, would be accepted.  The number of such agencies should not be limited.

(c)        In the absence of proper Load Port Certificate, a local Chartered Engineer’s Certificate may be accepted. Each Custom House may consider issuing Public Notices giving names and addresses of Chartered Engineers, whom the trade can contact for issuance of CE Certificate. 

(d)       It is not essential to have the examination of the second hand machinery by a panel of officers, since in many Customs formations no machinery expert is posted.  The routine examination of second hand machinery being done by the Docks staff shall continue. 

9.         The aforesaid guidelines regarding valuation of second-hand Machinery as contained in foregoing paragraphs 3 to 8 shall be strictly followed.

10.       Any difficulty in the implementation of the foregoing guidelines may be brought to the notice of the Directorate General of Valuation, Mumbai with a copy to the Board. 

(M. K.  SINGH)

Director (International Customs)