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Valuation of Second Hand Machinery - Customs - PUBLIC NOTICE No. 12/2020Extract OFFICE OF THE PRINCIPAL COMMISSIONER OF CUSTOMS (ACC-IMPORT) NEW CUSTOMS HOUSE NEAR IGI AIRPORT NEW DELHI-110037 C. No. VIII(12)Import/Tech./PN/06/2020/3200-12 Dated: 02.03.2020 PUBLIC NOTICE No. 12/2020 Sub: Valuation of Second Hand Machinery-reg. Attention of Trade is invited to Board's Circular No. 07/2020 dated 05.02.2020 (Annexure-I) which supersedes Circular No. 25/2015-Customs dated 15.10.2015 (Annexure-Il). Pursuant to Circular No. 25/2015-Customs dated 15.10.2015, Public Notice No. 08/2018 dated 15.03.2018 (Annexure-111) was issued by this Commissionerate. 2. Public Notice No. 08/2018 dated 15.03.2018 provides that Customs shall 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 Chartered Engineer empanelled by the Customs House where the DGFT approved PSIAs are not available. 3. Keeping in view, the shortage of Chartered Engineer available for valuation of second hand machinery /goods which are over and above PSIAs, notified by DGFT, Public Notice No. 09/2019 dated 20.03.2019 was issued by this Commissionerate inviting applications for empanelment of Chartered Engineers for examination/valuation of Second Hand machinery/goods in the jurisdiction of Commissioner of Customs, ACC (Import), New Customs House, New Delhi. The process of empanelment of Chartered Engineers is under way. 4. Now, in terms of the said Board Circular dated 05.02.2020 referred to above, the following procedure for inspection/appraisement of Second Hand Machinery shall be followed :- (i) Where used second hand machinery is sold for export to India and sale meets all of the requirements set out in Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, (CVR, 2007) the price paid or payable for the goods is to be used as the basis for determining the assessable value. (i) 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. (ii) In view of the nature of the 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. (iii) 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 apprised 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. (iv) 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 and used machinery, it is not possible to calculate assessable value based upon the cost of production. (v) 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. (vii) Given the nature of challenges in computing the value of second hand machinery under Rule 9 of the CVR, 2007 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, it is necessary to obtain inspection/ appraisement reports from qualified neutral parties. (viii) Inspection / Appraisement Reports issued by Chartered Engineers, or their equivalent, based in the country of sale of the second hand machinery shall be accepted. For the purposes of uniformity, the format in which inspection/appraisement reports shall be prepared by the Chartered Engineer is provided as 'Form A' enclosed herewith (Annexure-IV). 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 Commissionerate of the port of import. (ix) No importer, shall be required 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 this Commissionerate of the port of import for the respective class of goods, if so required. 5. 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 or sale. (b) The report of the overseas chartered engineer or equivalent should be as per Form A (Annexure - IV of this Public Notice). (c) In the event of the importer falling to procure an overseas report of inspection/appraisement of the goods, he may have the goods inspected by any one of the Chartered Engineers empanelled locally by this Commissionerate. (d) In cases where the report is to be prepared by the Chartered Engineers empanelled by this Commissionerate, the same shall be in the Form B (Annexure - V of this Public Notice). (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 date 19/11/1987 (Annexure-VI) and dated 04/01/1988 (Annexure-VII). 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 recondition 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 of CVR, 2007. 6. As mentioned in para 3 above, this office has already initiated process of empanelment of Chartered Engineer vide Public Notice No. 09/2019 dated 20.03.2019. The process of empanelment is underway and is being concluded expeditiously. Meanwhile, Valuation of Second 1--land Machinery will continue in the manner as prescribed in Public Notice No. 08/2018 dated 15.03.2018 issued by this Commissionerate. 7. Public Notice No. 08/2018 dated 15.03.2018 is modified to the extent discussed above. 8. All trade associations/members of Customs Brokers Association are requested to take note and publicize the contents of this Public Notice among their members/constituents. 9. For the departmental officers, this may be treated as Standing Order. 10. Difficulties, if any, may be brought to the notice of Additional Commissioner of Customs (Technical), ACC Import, New Customs House, New Delhi. This issues with the approval of the Principal Commissioner of Customs, ACC-Import. Encl:- Annexure-I to V Il (33 Pages) (Nagendra Yadav) Additional Commissioner of Customs (Technical) ACC (Import)
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