Background:
The Central Board of Indirect Taxes & Customs (“CBIC”) had received various representations from the trade regarding Circular No. 25/2015 – Customs dated October 15th, 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 Directorate General of Foreign Trade (“DGFT”), or by a chartered engineer empanelled by the Custom House where the DGFT approved PSIAs are not available.
DGFT vide O.M. No. 01/93/180/51/AM-16/PC II(B)/E-1500/176 dated September 3rd, 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 engineer. Therefore, CBIC vide Circular No. 07/2020 – Customs dated February 5th, 2020 has decided the procedure to be adopted for inspection/appraisement of second-hand machinery.
Clarification:
The summarized version of the guidelines are as follows –
(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/appraisement 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 November 19th, 1987 and dated January 4th, 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 Customs Valuation Rules, 2007 (“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.
Circular No. 25/2015 dated October 15th, 2015 has now been superseded with the issue of this circular.
Read more at: http://www.cbic.gov.in/resources/htdocs-cbec/customs/cs-circulars/cs-circulars-2020/Circular-No-07-2020.pdf