Government of India Ministry of Finance Department of Revenue Central
Board of Indirect Taxes & Customs ******
Circular No.
07/2020-Customs
North Block. New Delhi Dated the 05th February, 2020
To, All Principal Chief Commissioners/Chief Commissioners of Customs,
Principal Directors General/Directors General of Customs, Principal
Commissioners/Commissioner of Customs.
Madam/Sir,
Subject:
Valuation of second hand machinery -regarding Representations have been
received from the trade regarding
Circular No. 25/2015 —Customs dated 15th
October, 2015 on valuation of second hand machinery. For this purpose, the
circular requires customs to rely upon inspection report either issued at the
port of loading by overseas Chartered Engineer or issued upon import by a
pre-shipment inspection agency (PSIA) notified by DGFT, or by a chartered
engineer empanelled by the Custom House where the DGFT approved PSIAs are not
available.
2. It has been represented that the PSIAs empanelled by DGFT
are insufficient in number leading to delay in clearances. It has also been
informed that PSIAs empanelled by DGFT are not qualified for appraising second
hand machinery.
3. In this regard, DGFT vide O.M. No.
01/93/180/51/AM-16/PC II(B)/E-1500/176 dated 3rd September 2019, has clarified
that PSIAs are meant only for certifying that consignments of metal scrap are
free of radio-active agents and explosives. The PSIAs are not required to be
qualified as engineers. Also, ascertaining the age of a second hand machine is
an engineering exercise and can be performed only by a qualified Thus.
certifying the age of machines is beyond the jurisdiction of PSIAs.
4.
After due consideration of clarification from DGFT and representations made by
trade. Board has decided that henceforth for inspection/appraisement of second
hand machinery, the following procedure shall be followed:
4.1 Where used
second hand machinery is sold for export to India and the sale meets all of the
requirements set out in Customs Valuation (Determination of Value of Imported
Goods) Rules 2007, the price paid or payable for the goods is to be used as the
basis for determining the assessable value.
4.2 However, it is frequently
the case that as part of an arrangement. separate from the contract of sale, the
second hand machineries are reconditioned, refurbished, modernized, or otherwise
improved prior to their importation into India. In such situations, there is a
change in the condition of the goods brought about prior to their importation.
Similarly, other costs such pre-shipment inspection, dismantling and crating
charges may be incurred by the buyer after the sale of the goods. Costs of all
such elements need to be determined for the purpose of arriving at the value
under section 14 of the Customs Act. Thus, there may be instances where the
requirements of Rule 3 of the Valuation Rules are not met, in which case, the
value for imposition of duty must be determined under one of the subsequent
methods of valuation applied in sequential order.
4.3 In view of the
nature of goods, there may be certain difficulties in applying Rule 4 or 5 of
the CVR. 2007. These difficulties arise from the fact that the goods being
valued are used second hand machinery, and it may be difficult to find data
relating to sales of such goods to India, which could be considered identical or
similar and meet all the requirements of Rule 4 and 5 of the CVR, 2007.
4.4 Similarly, application of Rule 7 of CVR, 2007 where under goods being
appraised are valued on the basis of subsequent sales of identical or similar
goods in India, may also not be possible because the goods being appraised are
imported for use rather than for resale. The difficulty of finding such sales of
goods which could be considered identical or similar to the goods being
appraised, may preclude the application of this method.
4.5 Under Rule 8
of the CVR, 2007, goods are valued using the computed value method which is
based, among other things on the cost of production of the goods being appraised
plus an amount for profit and general expenses. However, since used capital
goods are not manufactured as such, viz, as old and used machinery, it is not
possible to calculate assessable value based upon the cost of production.
4.6 It follows that in cases where used capital goods cannot be appraised
under Rule 3, and where there may be difficulty in applying Rules 4 to 8 of the
CVR, 2007, the proper officer may be required to apply the residual method under
Rule 9 so as to factor condition, depreciation, refurbishment. charges of
disassembly & packing and any expenses incurred by way of pre-shipment
inspection agency charges etc.
4.7 Given the nature of challenges in
computing the value of second hand machinery under Rule 9, and the need to
ensure that the approach applied reflects commercial reality and results in a
value which is fair, and is arrived through uniform processes by all Custom
Houses, it is felt that it is necessary to obtain inspection/appraisement
reports from qualified neutral parties.
4.8 For this purpose, the Board
has decided that Inspection/Appraisement Reports issued by Chartered Engineers,
or their equivalent, based in the country of sale of the second hand machinery
shall be accepted by all Custom Houses. For the purposes of uniformity,the
format in which inspection/appraisement reports shall be prepared by the
Chartered Engineer is annexed to this circular. In the event that an importer
does not produce an inspection/appraisement report in the prescribed format from
the country of sale, he shall be free to engage the services of any Chartered
Engineer from those empanelled by the Custom House of the port of import.
4.9 No Custom House shall require any importer to have an
inspection/appraisement report of second hand machinery from a particular
Chartered Engineer. The importer shall be free to select any chartered engineer,
empanelled by the Custom House for the respective class of goods. if so
required.
5. All the Custom Houses are also hereby advised to empanel
Chartered Engineers as per the requirements provided in this Circular
immediately for the purpose of valuation of second hand machinery. The
applicants must possess qualification for appraisement/inspection of second hand
machinery and certified as such by the Institute of Chartered
5.1 It is
also clarified that upon the empanelment of Chartered Engineers by the Custom
Houses. the practice of accepting certification from PSIAs for valuation of
second hand machinery shall be discontinued. Those Customs Houses who already
have empanelled Chartered Engineers for the valuation of second hand machinery
may continue with those empanelled engineers as per the terms of the empanelment
unless requirements dictate otherwise.
5.2 It is also clarified that
PSIAs who have the requisite qualifications for being empanelled as a Chartered
Engineer for valuation of second hand machinery may make an application to the
respective Customs House for consideration of empanelment.
6. To sum up, the following guidelines shall be followed:
(a) All
imports of second hand machinery/used capital goods shall be ordinarily
accompanied by an inspection/appraisement report issued by an overseas Chartered
Engineer or equivalent, prepared upon examination of the goods at the place of
sale.
(b) The report of the overseas chartered engineer or equivalent
should be as per the Form A annexed to this circular.
(c) In the event of
the importer failing to procure an overseas report of inspection/appraisernent
of the goods, he may have the goods inspected by any one of the Chartered
Engineers empanelled locally by the respective Custom Houses.
(d) In
cases where the report is to be prepared by the Chartered Engineers empanelled
by Custom Houses, the same shall be in the Form B annexed to this circular.
(e) The value declared by the importer shall be examined with respect to the
report of the Chartered Engineer. Similarly, the declared value shall be
examined with respect to the depreciated value of the goods determined in terms
of the circular No. 493/124/86-Cus VI dated 19/11/1987 and dated 4/1/1988. If
such comparison does not create any doubt regarding the declared value of the
goods, the same may be appraised under rule 3 of the CVR, 2007. If there are
significant differences arising from such comparison, Rule 12 of the CVR, 2007
requires that the proper officer shall seek an explanation from the importer
justifying the declared value. The proper officer may then evaluate the evidence
put forth by the importer and after giving due consideration to factors such as
depreciation, refurbishment or reconditioning (if any), and condition of the
goods, determine whether the declared transaction value conforms to Rule 3 of
CVR, 2007. Otherwise, the proper officer may proceed to determine the value of
the goods, sequentially, in terms of rule 4 to 9.
7.
Circular No. 25/2015
dated 15th October, 2015 stands superseded with the issue of this circular.
8. Clarification, if any, may be sought from the Board.
9. Hindi
version follows.
F. No. 467/34/2006-Cus.V
Yours faithfully, (Mandeep Sungha) Joint
Commissioner (Customs)
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