ORDER
V.K. Ashtana, Member (T)
1. This is an appeal against Order-in-Original No. 134/97-CAU, dated 9-9-1997 by Commissioner of Customs, wherein the declared value of 4 second hand machines (Autoconers) supported by a Chartered Engineer’s Certificate from the country of export, has been rejected and they are re-valued under Rule 8 of Customs Valuation Rules on the basis of the price of similar new machines by their German manufacturer with 70% depreciation on usage etc. A differential duty of Rs. 12,41,985/- has been confirmed, but no fine or penalty imposed.
2. The importer has also produced two more certificates from local experts on values declared – one from a chartered engineer and the other from an engineering college faculty. They argue that as their declared transaction value has neither been rejected on basis of contemporaneous imports of like goods nor on relationship or fraud, therefore, Rule 4 and not Rule 8 ibid should be applied.
3. Heard learned Advocate Shri V. Ramanujam for appellants. Reiterating grounds of appeal, he cited the following decisions :-
(i) 1996 (88) E.L.T. 77 (Tribunal) (Tribunal) Indo-Swiss
(ii) 1996 (82) E.L.T. 3 (S.C.) CC v. Nippon Bearings
(iii) 1997 (96) E.L.T. 121 (Tribunal) Continental Constructions
(iv) 1997 (71) ECR 215 (Tribunal) Rajendra Mills
(v) 1996 (84) E.L.T. 116 (Tribunal) Damehra Steels & Forgings.
4. Heard learned S.D.R. Shri R. Victor Thyagaraj. He stressed that learned Commissioner correctly held that as no detailed basis for valuation was given by foreign Chartered Engineer, hence it was not acceptable. On the contrary manufacturer’s price was ascertained and an equitable 70% depreciation given under Rule 8 to arrive at a fair value. He cited in support following :-
(a) Case of Rakesh Press – 1995 (77) E.L.T. 699 (Tribunal)
(b) Case of Pragati Press as reported in 1994 (72) E.L.T. 620 (Tribunal)
(c) Case of Muddeereswara as reported in 1989 (39) E.L.T. 630 and
(d) Case of Tara Art Printer as reported in 1985 (20) E.L.T. 358 (Tribunal)
5. At this point learned Advocate rose to rebutt that in Petro Industries 1996 (81) E.L.T. 506 the decision of Rakesh Press on such imports was distinguished.
6. We have carefully considered the arguments on both sides and records of the case. We find that in the case of Damehra Steels & Forgings [1996 (84) E.L.T. 116] Hon’ble Special Bench by a 3 Member decision had clearly held that a certificate by Chartered Engineer on value of second hand machinery cannot be rejected without proving contemporaneous import to the contrary of a like kind of goods. This has been upheld by Hon’ble Supreme Court as they dismissed Revenue’s SLP as reported in 1996 (82) E.L.T. A-101. This is now good law.
7. In a similar vein, Hon’ble Tribunal in 1996 (67) E.L.T. 319 in the case of Indo Swiss Time Ltd., has held that even for second hand machinery imports, Invoice Price cannot be rejected on mere suspicion.
8. In the case of CC v. Nippon Bearings reported in 1997 (69) ECR 255 (S.C.), Hon’ble Tribunal laid down the decision that if invoice value to be disputed, then Department should show contemporaneous imports. However, in this case facts covered import of bearings and not second hand machinery.
9. However, in the case of Shree Rajendra Mills Ltd. as reported 1997 (71) ECR 215 (Tribunal) this very Tribunal (SRB) have clearly laid down that valuation of second hand machinery be accepted under Section 14 read with Rule 4, unless investigation showed that the transaction was not a normal transaction. The valuation on the basis of value of new goods and 70% depreciation has been rejected. This is on all fours with present facts.
10. We find that in view of aforesaid discussions, 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 second hand 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.
11. On the other hand, the case laws cited by learned SDR are much older than the ones discussed above and so stand superceded in time. Also the decision in Rakesh Press 1995 (77) E.L.T. 699 (Tribunal) has been distinguished in Preto Industries (cited supra).
12. Applying this settled law to the present facts, we find that the impugned Order-in-Original needs to be set aside because :-
(i) No instance of contemporaneous imports of like goods has been cited therein, nor it is alleged that fraud is involved in the transaction;
(ii) The transaction value of the invoice, duly supported by Chartered Engineer’s Certificates (foreign & local), stands rejected merely on these certificates not having details of basis of valuation; and
(iii) that after rejecting the transaction value under Rule 4 wrongly on this basis, the order straight-away proceeds to Rule 8, without even a word on why the other intervening rules do not apply.
13. 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 straightaway 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. It cannot be held to be tainted merely because the price of original (new) goods ascertained from the manufacturer at that time was much higher. It may raise suspicion, but that is not good enough to discard the invoice value. This is because, the subject transaction is between independent buyer and seller for second-hand goods, as specified, i.e., on “as is” C&F Madras basis, and therefore unless Rule 4 is held inapplicable as discussed above, such a transaction value cannot be rejected in favour of notional value arrived at under Rule 8 from new goods in country of manufacture even if a handsome depreciation of 70% is given. In other words, law does not allow rejection of transaction value under Rule 4 by ab initio application of Rule 8; that would be putting the cart before the horse. The principle involved is that the ‘actual’ cannot be super-ceded by the ‘deemed’, unless the ‘actual’ is first rejected in terms of Section 14 read with Rule 4 ibid.
14. In view of the above discussions, the demand for duty in the impugned Order-in-Original does not survive and the said order is liable to be set aside. We order accordingly, and thus the appeal succeeds with consequential relief, if any.