ORDER
Jeet Ram Kait, Member (T)
1. Both these appeals arising out of two separate impugned orders involve common question of law and facts and hence they are taken up together for disposal as per law.
2. The facts in brief in these appeals are that the appellants are in possession of EPCG Licence No. P/CG/213367 for import of 18 Nos. of Autoners described as Second hand Schlafhorst autoconers of 1979 model 138 GKW – P consisting of 50 spindles, 1 splicer carriage for 10 spindles, uster C-3 yarn clearers 6 inches traverse, 5 degree 57 minutes cone, electronic yarn length measuring device SA 123 with compulsory spares/accessories and implements. The value of the licence was for Rs. 1,63,27,125/-. Against the said licence they had imported 8 Nos. of Schlafhorst autoconers, 138 model GKW-P of 50 spindles each cf 1979 make valued at Rs. 72,56,500/- GIF, for which they filed Bill of Entry No. 3076, dt. 1-11-94 (GM/Item 2879/10, dated 31-10-94) for clearance of the goods for home consumption and 10 numbers of the same machinery vide BE No. 3466, dated 9-2-95 (316/27, dated 6-2-95). The residual value left in the licence as found by the original authority was Rs. 19,007/- (US $ 6310.84). The goods have already been cleared by the importers.
3. The report of the Appraising officer inter alia stated that the description, quantity and other specifications/operational features, were as per the Chartered Engineer’s Certificate, invoice, packing list and copy of the catalogue and the autoconers were reported to be equipped with 1 splicer for 10 spindles, uster C3 yarn clearer, electrical yarn length measuring device etc. The plate marks found embossed indicated the details of the manufacturer, model/type and the serial number etc. which also tallied with the machine’s details given in the Chartered Engineer’s Certificate. The year of manufacture was reported to be 1979 as per embossed marks found on the machines. The machines were not reconditioned and parts and accessories were reported to be standard and essential and the normal expected residual life, subject to normal maintenance procedures being followed residual life was also declared to be 20 years.
4. Importers have sought for clearance of the goods in terms of Notification No. 160/92-Cus. at concessional rate of duty and they submitted EPCG Licence No. P/CG/2133667, dated 16-11-94. However, the licence was left with value of US $ 6310.84 out of the total value of US D 517500 as they have already cleared a consignment of autoconers for value of US D 511189.16 vide Bill of Entry No. 3076, dated 1-11-94. As per the Chartered Engineer’s certificate the value of the new machinery of 1979 model was US D 48,500/- per machine whereas the manufacturer’s letter attached with the SIB Circular of Bombay Customs, gave the value as DM 3,30,0007- per set which was far above the value declared by the importers. The CIF value was ” declared as US $ 28750/- (Rs. 9,07,062.50). However, the department taking the value as DM 3,30,000/- and after allowing depreciation of 70% has determined the value of each machine at Rs. 20,90,880/- in the case of import in 1994 and at Rs. 20,50,000 per machine in the case of the latter import of 10 machines in 1995. The appellants had submitted before the authorities that since the department had loaded the value of 8 machines imported earlier in 1994 the licence is not sufficient to import the remaining 10 autoconers and they pleaded for allowing the import at a concessional rate of duty of 15% read with Notification 160/92.
5. The original authority after considering the submissions made by the appellants determined the value @ Rs. 20,90,880 (FOB) per machine in the case of import of 8 machines covered by BE No. 3076, dated 1-11-94 and at Rs. 20/66,130 (FOB) per machine by holding that the benefit of the licence is admissible only for residual value subject to fulfilment of the licence conditions of LUT/Bank Guarantee under the EPCG Scheme.
6. Aggrieved by the above orders of the original authority, the appellants, went in appeal before the Commissioner (Appeals) and the Commissioner (Appeals) vide Order-in-Appeal No. 306/95 BCH, dated 12-5-98 and Order-in-Appeal No. 111/98 APC (VL. Sea), dated 21-5-09 (sic) upheld the orders-in-original passed by the original, authority by holding that the value adopted in the orders-in-original is quite reasonable and it follows the accepted norms of valuation for second hand machinery after giving permissible depreciation.
7. Aggrieved by the Orders-in-Appeal, the appellants have come in appeal before us on the following grounds in these appeals :
(a) The transaction value of each autoconer declared by the appellants 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 them should have been accepted. (c) The authorities below have not brought in any evidence to show that the transaction value declared by the appellant was not true value in the absence of evidence of any relationship between the buyers and the sellers and also in the absence of any illegal or undisclosed transaction between them. (d) There was no warrant for considering the value of the goods on the date of manufacture when the matter before him was appraisal of the second hand machinery. (e) No basis has been laid by the authorities below as to how the transaction value was not genuine. (f) No contemporaneous imports have been cited by the authorities below. (g) The DGFT had issued licence for the value of Rs 1,63,27,125/-only after having satisfied of the genuineness of the value of the machinery imported.
8. The learned Counsel appearing for the appellants argued the matter on the above lines and submitted that there was no material on record which would indicate any complicity on the part of the appellants to reduce the liability of the Customs duty by making wrongful disclosure of the age or value of the second hand machinery and what was declared by the appellants was correct. She has also submitted that the department was wrong in rejecting the transaction value declared by the appellants in the absence of any contemporaneous imports where the value declared is more. The learned Counsel therefore, sought for setting aside the impugned orders and allowing the appeals with consequential relief. In support of their plea the appellants also pressed into service the judgment of the Hon’ble Supreme Court in the case of Eicher Tractors Ltd. v. CC, Mumbai reported in 2000 (122) E.L.T. 321 (S.C.) wherein the Hon’ble Apex Court has laid down the law regarding valuation of second hand machinery imported. The appellants also invited our attention to the decision of this Bench of the Tribunal in the case of Sree Rajendra Mills Ltd. v. CC, Madras reported in 1997 (90) E.L.T. 68, wherein it was held that transaction value cannot be rejected without assigning the basis for such rejection.
9. Shri GS Menon, learned SDK appearing for the Revenue defended the impugned orders and submitted in the present case, the appellants have misdeclared the value of the machinery and therefore, the department has correctly proceeded to assessee the value by giving 70% depreciation, taking into consideration the value of the machine given in the manufacturer’s letter attached with SIB Circular. Further the lower appellate authority has dealt with each point raised by the appellants and his order is well reasoned and should be sustained and he sought for the dismissal of the appeals.
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, Madurai reported 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.
