ORDER
V.K. Ashtana, Member (T)
1. The short point to be decided in this appeal is whether the impugned Order-in-Original No. 131/97, dated 22-8-1997, has correctly applied Rule 8 of Customs Valuation Rules after discarding the transaction value contained in the invoice submitted along with bill of entry for import of second-hand 5 colour specified offset printing machine. The impugned order discards the transaction value of Australian Dollars 47,000 on the grounds that the Chartered Engineer’s certificate supporting the invoice value is not reliable, as it shows year of manufacture as 1972 instead of 1973, as ascertained by Deptt. from German manufacturer.
2. Learned SDR, Shri Victor Thiagaraj argues that as age of machine has direct nexus to its fair value, therefore the said error in the said certificate is sufficient grounds to reject the invoice (transaction) value. This is further supported by fact, so presses ld. SDR, that as per ITC policy AM 82-87, Para 25, where value is over Rs. 1 crore, a certificate from designated authority (Appendix XI-A of Hand book) is necessary, and is not obtained by appellants. There is also no documentary evidence available on negotiations for the invoice price as it was agreed during a personal visit of Shri S. Shetty, M.D. to Australia. Learned SDR also cited final order of Tribunal in case of Karuna Color Lab and orders in Order No. 1176/97, dated 9-5-1997 1997 (95) E.L.T. 352 (Tribunal) as also Rakesh Press -1995 (77) E.L.T. 699 wherein the methodology of depreciated value under Rule 3 ibid is upheld.
3. Earlier, learned Advocate based his case on the following grounds :-
(a) no evidence is led to prove fraud or any illegal extra payments made by importer to foreign exporter;
(b) Year 1972 in Chartered Engineer’s certificate is a minor error, but the certificate carries same model, make, Sr. No. etc of the machine imported, hence it cannot be brushed aside.
(c) In view of (a) & (b) above, the transaction value under Rule 4 of Customs Valuations Rules ibid cannot be discarded as none of the conditions specified therein are attracted in this case. Therefore, department cannot go to Rule 8 at all.
(d) As per transaction value the value is Rs. 12,21,513/- whereas this erroneous application of Rule 8 allows Deptt. to wrongly fix the Assessment value as Rs. 1,15,10,745/-. The difference is too mammoth.
(e) no designated Chartered Engineer’s certificate has been obtained, because their declared Transaction Value was much less than Rs. 1 crore and at the time of import they were not aware that department would allege it to be more than Rs. 1 crore; and
(f) while transactions value is accepted for other 2 items imported together with this one, only transaction value of this is disputed.
(g) Learned Advocates cites 1992 (58) E.L.T. 137 (Tribunal) and submits that this is final law as in appeal to Supreme Court in 1993 (67) E.L.T. 209 (S.C.), deptt. did not raise issue of valuation.
(h) He also cites 1998 (100) E.L.T. 126 (Tribunal) in case of Chem Crown (I) Ltd.
(i) He further cites the case laws of Debabrata Ghosh in 1993 (68) E.L.T. 551 (Cal.) wherein it has been clearly laid down that Revenue cannot discard Rules 4 to 7 and straightway go to Rule 8 ibid for valuation of second-hand machinery, as Section 14 makes no distinction between new or old/used goods.
4. Learned SDR further submits that as per 1990 (45) E.L.T. 586 (Tribunal), rate of exchange is as per date of presentation of Bill of Entry and not date of manufacture etc. as contended by learned Advocate earlier.
5. He distinguishes cases cited by learned Advocate on grounds that they concern value of new goods and cites case law of Macneill & Magor Ltd., relied upon in impugned order.
6. Learned Advocate rebuts that this case law is of prior to introduction of new section/valuation rules in 1988, hence not relevant and is also not for second hand machines.
7. We have carefully, considered the arguments on both sides, as well as the records of the case. We find that the transaction as contained in this invoice cannot be discarded in the manner adopted in the impugned Order-in-Original for the following reasons :-
(a) In 1992 (58) E.L.T. 131 (Tribunal), it has been held that a transaction value cannot be discarded without pointing out circumstances set in Rule 4(2) or 4(3);
(b) In the case of Chem Crown (I) Ltd. as reported in 1998 (100) E.L.T. 126 (Tribunal), it has once again been held that the transaction value cannot be routinely discarded except on clear evidence that invoice is not genuine and that something else has passed clandestinely from importer to foreign supplier. However, no such evidence is on record in this case;
(c) On a plain reading of Section 14 as well as Rules 3 & 4 of Customs Valuation Rules, we find that there is no specific exclusion to the effect that a transaction value of second-hand machinery is not acceptable particularly because no exactly comparable imports can be found or exist. Therefore, the concept of Transaction Value in Rules 3 & 4 are clearly applicable to second-hand goods also. For the same reason, ld. SDR’s contention that cases cited by ld. Advocate stand distinguished being for new goods is not acceptable.
(d) The facts of this case do not show that any of the conditions as specified in Sub-rules (a) to (d) of Rule 4(2) are attracted in this case to allow discarding of the transaction value. These read as under :-
“(2) The transaction value of imported goods under Sub-rule (1) shall be accepted :
Provided that –
(a) there are no restrictions as to the disposition or use of the goods by the buyer other than restrictions which - (i) are imposed or required by law or by the public authorities in India; or (ii) limit the geographical area in which the goods may be resold; or (iii) do not substantially affect the value of the goods; (b) the sale or price is not subject to some condition or consideration for which a value cannot be determined in respect of the goods being valued; (c) no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the provisions of Rule 9 of these rules; and (d) the buyer and seller are not related, or where the buyer and seller are related, that transaction value is acceptable for customs purposes under ' the provisions of Sub-rule (3) below".
The only ground for discarding the transaction value in the impugned order is that Chartered Engineer’s certificate gives wrong date of manufacture. This ground is clearly not covered by any of the above situations.
(e) That this being so, jacking-up the declared value of Rs. 12,21,513/- to a computed best judgment value (under Rule 8) of Rs. 1,15,10,745/- is neither legally correct not equitable;
(f) that the case law of Macneill & Magor cited in impugned order and relied upon by ld. SDR is of pre-1988 vintage, when these Rules were not in existence and is, therefore, irrelevant after their commencement;
(g) that merely because the Chartered Engineer’s certificate errs on date (year) of manufacture, this by itself does not render the invoice fraudulent. It has been argued that age of the machine has nexus to its value. We have no quarrel with this as a principle of valuation under Rule 8. But since this is not a reason prescribed under Rule 4 to reject the transaction value, therefore, it cannot be legally held that wrong age in such a certificate, ipso facto, vitiates the invoice value. The negotiated price was arrived at after the MD Shri Shetty, physically saw the machine on as in where is basis in Australia. Therefore, it cannot be said that the Chartered Engineer Certificate was the only basis for arriving at the negotiated transaction value. As a prudent and shrewd business man he made all necessary enquiries before asking them to supply at Australian Dollars 47,000/-. This is the normal inference available in the face of no evidence to the contrary led by the Department.
(h) that the need for a designated engineering agency’s certificate for goods valued over Rs. 1 crore under Para 25 of ITC policy has no relevance to valuation under Section 14 of Customs Act and the Customs Valuation Rules, the two being different statutes.
(i) Learned SDR has cited Final Order No. 1176/97, dated 9-5-1997 of this Tribunal 1997 (95) E.L.T. 352 (Tri.). We have perused the same. Therein the invoice value of the second-hand machinery was discarded on two grounds :
(a) there was no negotiating documents available to support the invoice price
(b) the Chartered Engineer’s certificate on valuation was also not acceptable.
Yet, the very same Chartered Engineer’s certificate has been accepted for the purpose of the age of the machine. With great respect, we cannot subscribe to a position where the machine’s age and description in a Chartered Engineer’s certificate is accepted as correct, but both the valuation thereof in that certificate and that in the invoice (supportive of each other) are summarily rejected. This goes against the very argument of ld. SDR that there is a nexus between age and value. The said order thereafter, goes on to base the valuation on value of imports of similar machines minus depreciation. In the present case, the impugned order clearly holds that no such comparative price is available. On this count also, the said order needs to be distinguished and cannot be relied upon by us;
(j) in Order No. 1947/96, dated 9-10-1996, in this very case, wherein this Tribunal had remanded the matter to ld. Commissioner for de novo consideration, it has been observed as under on Page 5 :
“If all second-hand machineries are to be assessed based on the depreciation method then the valuation rules would lose their validity. Before resorting to the depreciation method, the applicability of methods as set out under Rules 4 to 7 have to be rules out…”.
This is exactly the position we have also taken in this issue;
(k) Ld. SDR has cited case laws of Rakesh Press. We find that this very Bench of the Tribunal in Order No. 1203/98, dated 23-6-1998 in the case of Rugmini Ram Raghav Spinners in appeal No. C/V-23/98 1998 (103) E.L.T. 366 (Tri.) have elaborately considered the valuation of second-hand machinery under Section 14 of the Customs Valuation Rules. While doing so the case law of Rakesh Press on such imports was distinguished, following Preto Industries – 1996 (81) E.L.T. 506. Reliance therein was placed on case of Shree Rajendra Mills in 1997 (71) ECR 215 (Tribunal) wherein Hon’ble South Zonal Bench had rejected valuation of second-hand machinery on basis of value of new goods minus 70% of depreciation. Further, in para 10 of this Order No. 1203/98, it is concluded as under :-
“We find that in view of aforesaid discussion, the law has now evolved on valuation of second hand machinery imported as follows :-
(i) That second-hand imported machinery valuation is normally to be done on the basis of Section 14 read with Rule 4 i.e. being secondhand machinery ipso facto, does not mean .that the transaction value under Rule 4 ibid is to be discarded per se; and
(ii) That further 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 values being shown or proof of the transaction not being in normal course of international trade etc.”
Again, findings in Para 13 thereof as under are also relevant to this case and is reproduced below :-
“We find that unless Rule 4 is clearly held as not applicable due to either fraud etc. or contemporaneous imports at higher prices, we cannot proceed to apply any other subsequent Rule, let alone jump staightaway to Rule 8, merely because the manufacturer’s price for original goods is available. Section 14 read with Rule 4 recognises the primacy of transaction value, whether it be new goods or second-hand machines. What is material is that the transaction be successfully challenged with strong evidence either on contemporaneous imports of like goods or that the transaction is tainted by fraud or that the price is influenced by abnormal considerations/relationships.”
8. Applying the said principles of law to the facts in this case, we find that the impugned order has not rejected the invoice value in terms of Rule 4 and as narrated above. Instead it is discarded merely because the foreign Chartered Engineer’s certificate only errs in recording the year of manufacture as 1972 instead of 1973. In the case covered by Order No. 1203/98, a similar Chartered Engineer’s certificate was rejected because it did not specify basis of valuation adopted. Such a basis would have spelt out the age of the machine also. Therefore, we find that the ratio of that decision is also applicable to this case. We respectfully, apply the same and conclude that the declared transaction value needs to be accepted in law.
9. In view of the aforesaid discussions and findings, we set aside the impugned order and the appeal is allowed with consequential relief, if any.