Customs, Excise and Gold Tribunal - Mumbai
Vadilal Dairy International Ltd. vs Collector Of Customs on 19 February, 1996
Equivalent citations: 1997(68)ECR462(TRI.-MUMBAI)
ORDER
U.L. Bhat, J. (President)
1. Appellant imported in 1994 six reconditioned used machines from West Germany for use in the Dairy Project of the appellant under four Bs/E. The import documents included certificates of Chartered Engineers of West Germany. The Assistant Collector did not accept the transaction value in regard to these six machines and determined the value by the depreciation method, relying on the long standing Custom House practice and certain letters of Ministry of Finance, Department of Revenue. The Collector (Appeals) sustained the order. Hence this appeal by the importer.
2. Ld. Counsel for the appellant submitted that neither the original authority nor the appellant authority applied their minds to the acceptability or otherwise of the transaction value of six machines but proceeded arbitrarily to determine the value under Rule 8 of the Customs Valuation Rules, 1988, feeling bound to do so by a misreading of the letters of the Ministry. Counsel further contended that the two authorities did not consider the question whether transaction value could be accepted in regard to any of the machines but merely acted on the basis of a practice. Ld. Counsel for the appellant further submitted that since there is no international trade in reconditioned used machines of the kind imported in this case, Sub-section 1 of Section 14 of the Act is not attracted and it is Sub-section 1A of Section 14 of the Act which is attracted. That being so, it is stated the authorities below should have considered the applicability of Rules 3 to 8 of the Valuation Rules sequentially. Since the transaction value is available and its genuineness is not questioned, the authorities were not justified in invoking Rule 8 of the Rules and going by the depreciation method. These contentions are rebutted on behalf of the Department. It is contended that the particulars regarding the cost of machines at the time of manufacture are furnished in the Chartered Engineer's certificates which have been accepted by the authorities but the values suggested in the Chartered Engineer's certificates could not be accepted since the certificates do not disclose the manner by which such value had been arrived at. In view of the original price available in the certificates and the admitted position that there is no international trade in such items, it is contended for the Department that transaction value could not be accepted and the value could be determined as per depreciation method.
3. We would like to clarify at the outset about the letters of Ministry which have been placed before us. They are dated 19.11.1987 and 4.1.1988. We do not understand these letters as laying down a rigid principle that in all cases second hand machinery imported must necessarily be valued adopting the depreciation method. The letters in fact only provide guidelines in regard to the depreciation to be allowed, wherever depreciation method is adopted. In every case, as pointed out in Collector of Customs v. Blue Star Industries , it is for the customs authorities to find out whether there is international trade in the particular kind of goods imported and the price of such goods sold or offered for sale for delivery at the relevant time. It is the admitted case that there is no international trade in the particular kind of goods imported in the present case. Therefore, the question of comparable imports and the prices involved in such imports would not arise. Nevertheless, going by the Rules which are to be understood in the light of Section 14 of the Act, the Customs Authorities must first apply their mind as to whether transaction value is acceptable. Only if this is found to be unacceptable the question of applying valuation Rules 5 to 8 sequentially would arise. In the facts of case, there is no dispute that if transaction value is not to be adopted, Rule 8 has to be invoked.
4. Show Cause Notice had been dispensed with in the present case. The reference in the order of the Assistant Collector to the personal hearing granted to the appellant argued for accepting the transaction value. In the circumstances, it was the duty of the Assistant Collector to consider whether the transaction values as declared were acceptable or not. If found unacceptable he could certainly have invoked Rule 8 of the Rules. The order of Assistant Collector does not disclose that he applied his mind to the acceptability of transaction value. So also in the case of Collector (Appeals). Both the authorities have proceeded on the assumption that they were bound to adopt the depreciation method. This was certainly erroneous.
5. We asked ld. Counsel for the appellant whether in these circumstances remand would be desirable. Ld. Counsel categorically stated remand is not desirable and requested that the Tribunal may arrive at a proper assessable value in the light of the materials on record.
6. The Ministry of Finance has issued guidelines as to how the depreciation method is to be worked out. The broad framework of the formula is that in each quarter of first year depreciation could be allowed at 4%, in each quarter of the second year depreciation could be allowed at 3% and in each of succeeding years depreciation could be allowed at 2% per quarter, however subject to the condition that the total depreciation allowed cannot exceed 70%. Depreciation method is certainly a reasonable method which has been accepted by the Tribunal in several cases, though in a given case, there could be deviation from the depreciation norms based on the condition of the particular item imported. The Ministry's letter also indicates that for calculating depreciation for any succeeding year the value to be taken is the depreciated value of the previous year. This also appears to be reasonable. Nevertheless as depreciation method also may not always reflect the correct value, the necessity of providing a further margin should always be considered.
7. The order passed by the Collector (Appeals) at page 3 gives a tabulated statement of the declared value and the revised value for each of the machines, arrived at on the basis of the depreciation method. It is seen that for machines shown as Items 2, 5 & 6 the difference between the declared value and the value arrived at on the basis of the depreciation method was over 100%, 200% and 300% respectively of the declared value. Though the lower authorities have not indicated it specifically, it appears to us that the difference between two sets of values is so vast that in the absence of any explanation on the part of the appellant the genuineness of the declared value could not be accepted. In these cases, it would be reasonable to determine the value under the Rule 8 of the Rules based on the depreciation method. In regard to the remaining items the difference in two sets of values much less. Having regard to the peculiar facts of the case, we are inclined to hold that the difference in values in regard to Items 1, 3 & 4 is not such as to throw any serious doubt on the genuineness of the transaction values. Therefore, in regard to items shown in Sl. No. 1, 3, & 4 in paragraph 8 of Collector's order, it would be reasonable to accept the transaction values.
8. In the result, we set aside the impugned order and direct the jurisdictional Assistant Collector to determine the duty leviable and the differential duty afresh on the basis of the above finding, namely, that the transaction value is to be accepted in regard to machines shown as Items 1, 3 & 4 in paragraph 8 of the order of the Collector (Appeals) and the value determined already on the basis of depreciation method for Items 2, 5 & 6 is to be accepted.
Dictated and pronounced in the open Court.