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Sunday, November 11, 2012

‘ Chiller’ is correctly classifiable under Customs tariff heading 8418


What is chiller
chiller is a machine that removes heat from a liquid via a vapor-compression or absorption refrigeration cycle. This liquid can then be circulated through a heat exchanger to cool air or equipment as required.
 Water chillers can be water-cooled, air-cooled, or evaporatively cooled. Used in air conditioning and inindustry. But chiller is not air conditioned system per se but is a part of air conditioned system.

YORK, YCIVR134a, as per product catalogue, are air cooled chillers and are designed for water or glycol cooling.The chiller consists of 2 or 3 screw compressors in anCorresponding number of separate refrigerant circuits, a single shell and tube DX evaporator, an air-cooled condenser, flash tanks, drain/feed valves, oil separators, and compressor mufflers. Oil separators utilize no moving parts and are rated for a 31.0 barg (450 psig) design working pressure. Oil cooling is accomplished by routing oil from the oil separator through several rows of tubes in the air cooled condenser.An integral liquid cooled, transistorized, PWM, Variable Speed Drive (VSD) is controlled by the chiller microprocessor control panel to start/stop, select compressors to run, and select compressor speed.The chiller is designed to operate in ambient temperatures of -18°C to 52°C (0°F to 125°).

Air Cooled Water Chillers – How They Work
Air cooled water chillers are vapour compression refrigeration systems. The main components of a vapour compression refrigeration system are the compressor, condenser, expansion valve & evaporator.
Vapour compression refrigeration systems have a refrigeration cycle. The cycle starts with a cool low pressure mixture of liquid &vapour refrigerant entering the chiller evaporator. Once inside the chiller evaporator it absorbs the heat from the relatively warm water or fluid that the fluid chiller is cooling. This transfer of heat boils the liquid refrigerant in the chillers evaporator and the super-heated vapour is pulled into the chillers compressor.
The chillers compressor compresses the refrigerant to a high temperature & pressure, high enough to allow the chillers condenser to give up its heat to the cooler ambient air. Within the chillers condenser, heat is transferred from the hot refrigerant to the relatively cool ambient air this reduction in the chillers refrigerant causes it to de-superheat and condense into a liquid, then further sub-cool before leaving the chiller condenser.
The high pressure liquid refrigerant then enters the chiller expansion valve causing a large pressure drop across the chillers refrigerant circuit. The pressure reduction causes a small portion of the refrigerant to boil off, or flash, this would be seen in the chillers site glass. The site glass indicates if the chiller is short of gas, if the chiller is short of refrigerant gas the flashing inside the chillers site glass will increase. The boiled off refrigerant helps cool the remaining refrigerant to the desired temperature before the mixture enters the chiller evaporator to start the cycle again.

9.Under General Rule of Interpretation (GRI) 1, Customs Tariff Act 1975, goods are to be classified according to the terms of the headings and any relative section or chapter notes, and provided the headings or notes do not require otherwise, according to GRIs 2 through 6.
Section XVI, Note 2, governs the classification of goods that are identifiable as parts of machines or apparatus of Chapter 84 or Chapter 85. Parts which are goods included in any of the headings of Chapters 84 and 85 are in all cases to be classified in their respective headings as per Note 2(a).
 Note4 to Section XVIare for classification of machines based on function which they perform: “Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cablesor by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function”.

 The chiller is mainly consisting of compressor (used to increase the pressure & temperature of the refrigerant vapour),evaporators (where cool liquid refrigerant absorbs heat from the chilled water circuit), expansive valve(used to maintain the pressure difference between the high pressure & low pressure sides of the chiller system)and condensers (where the refrigerant vapour is converted to liquid as it rejects heat).
This continuous usesof refrigeration cycle by chillerfor compression, evaporation and condensation of refrigerant is used to chill water. It does not perform any function other than chilling /refrigerating water.Thus Chiller is a refrigeration unit. Hence, as per note 4 to section XVI, chiller as functional unit has to be classified as refrigeration system of tariff heading 8418.

 Explanatory Notes to the H.S.N., as per page XVI-8415-1, 2007 edition, which say that Heading 8415 applies only to machines - (1) equipped with motor-driven fan or blower, (2) designed to change both the temperature (a heating or cooling element or both) and the humidity ( a humidifying or drying element or both) of air; and (3) for which the elements mentioned in (1) and (2) are presented together.
In the present case, the chiller does not comprise any motor driven fan or has any facility for changing the humidity which cannot be controlled/regulated by it. Hence, Chiller does not satisfy all three conditions to be called a machine falling under heading 8415. Thus Chiller is not an air-conditioning machine as per HSN explanatory notes to heading 8415.
 That  while an imported chiller ,is not an incomplete or unfinished air conditioning machine of heading 8415.But it is still a part of  air-conditioning system under that heading.

.Explanatory Notes to Section XVI, for classification of parts, as per page XVI-2, 2007 edition, is as under:-
Note 2(a) to Section XVI –
“2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and to Note 1 to Chapter 85, parts of machines (not being parts of the articles of heading 8484, 8544, 8545, 8546 or 8547) are to be classified according to the following rules :
(a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings”;

Exclusion to the heading (8415 ),as per page XVI-8415-3, 2007 edition, : “……(b) Non-reversible heat pump of heading 84.18 and chillers for air-conditioning machining (heading 84.18)”.
 The Explanatory notes to heading 8415 provides exclusion from this heading for Chillers for air-conditioning machines and same are classified into heading84.18

  Explanatory Notes toheading 8418, as per page XVI-8418-3, 2007 edition, states that:”…Apparatus of the foregoing kinds are classified in this heading if in the following forms:
1) Units comprising a compressor (with or without motor) and condenser mounted on a common base, whether or not complete with evaporator, or self-contained absorbing units ( These units are commonly fitted into domestic type refrigerator or other refrigerating cabinets.)Certain compression type machines, known as “liquid -cooling units”, combine on a common base ( with or without condensers) ,compressors and a heat exchanger containing an evaporator and tubing carrying the liquid to be cooled. These latter machines include those known as chillers, which are used in air-conditioning systems”.

Therefore, as per above explanatory notes, chillers are goodsand specifically covered under tariff heading 8418.

 That the language of the notes to heading 8415 reads for parts, as per page XVI-8415-3, 2007 edition, “If presented as separate elements, the components of air conditioning machines are classified in accordance with the provisions of Note (2) (a) to Section XVI (headings 84.14, 84.18, 84.19, 84.21, 84.79, etc.) whether or not they are designed for building into a self-contained unit.”
 But, because the chiller is also a goods included in heading 8418, it must be classified in that heading under the authority of Section XVI, Note 2(a).
      Thus, separately presented chillers for air-conditioning machines are classified under heading 8418 in accordance with note 2(a) to Section XVI and the language of the notes to heading 8415.



 We rely on following case laws where chiller is classified under tariff heading 8418:
i)Commissioner Of Customs Kochivs M/S Lakeshore Hospital & Research ... on 21 March, 2001,
ii)Indian Hotels Limited vs Commissioner Of Customs on 25 April, 2001
Customs, Excise and Gold Tribunal - Tamil Nadu( 2001 (134) ELT 451 Tri Chennai)
iii)COMMISSIONER OF CENTRAL EXCISE, DELHI V. CARRIER AIRCON LTD [2006] RD-SC 374 (5 July 2006)

Honourablethe Supreme Court ,held in case of Commissioner of Central Excise, Delhi v. Carrier Aircon ltd [2006] rd-sc 374 (5 july 2006) thattariff heading 84.15 covers air-conditioning machines which control and maintain temperature and humidity in closed places, the main function of air-conditioning system is to control temperature, which is not done by a chiller. The chillers in question shall fall under specific heading 84.18 of the Tariff Act. This view is supported by the explanatory notes of H.S.N. below heading 84.15.
Also,Chillers in the domestic and international trade parlance are known as refrigerating equipment. The trade identifies chillers as refrigerating machinery on the basis of its function of chilling water using refrigerating circuit. Even by testing it from the commercial parlance test as well the chillers would not be classifiable under Chapter Heading 84.15.

.Honourable Tribunal – Bangalore ,have upheld the classification of similar ''York refrigeration chiller, under 8418, after considering the HSN notes, Board's instruction Nos. 242/76/96/CX dated 3.9.96 and have ruled 0ut the classification under 8415 of the Customs Tariff, in case of Commissioner Of Customs Kochi vs M/S Lakeshore Hospital & Research ... on 21 March, 2001 . The Tribunal  statedthat:
“ After considering the material we find:
(a) there is no doubt about the item under import being 'liquid chillers' and that very low temperature could be achieved. Therefore the items to our mind are functionally designed to produce chilled water (liquid) by using a refrigeration circuit in it's construction and such chilled liquid, in turn was applied in an Industrial process, which could be a Central Air Conditioning System/Plant of a huge size or would be an end use as recorded by the learned Dy Commissioner, as follows:
".... The end uses known to the appellants for the said machine are for processing cooling, brine machine cooling, process cooling for injection Moulding Machine, CNC Machine cooling, Brine chilling, Chilling of chemical plant and cooling of rubber and allied products."
We also find, that the Commissioner (Appeals) has also come to a finding that:
"The liquid Chiller here is a machine on a common basis with water cooled condenser, compressor and a heat exchanger containing an evaporator and a tubing carrying the liquid to be cooled and the combined function of the machine is to cool the liquid water passing through the tube to the desired temperature which in turn can be used for other application including air-conditioning with the help of another independent machine viz. AHU. There is no dispute that the liquid chiller is used by the importer in this case for chilling the water to 8(SIC)C for the purpose of using various AHU installed in many locations of the multi-storey hospital. The brocure/manual and manufacturers clarifications makes it clear that these apparatus can be used for very low temperature brine applications also."
(b) We find that after considering all the case law on the subject, the Tribunal in the case of Carrier Aircon Ltd., Vs CCE, Delhi-III (2001(128)/EIT/485) have upheld the classification of similar 'liquid chillers' under 8418, after considering the HSN notes, Board's instruction Nos. 242/76/96/CX dated 3.9.96 and have ruled cut the classification under 8415 of the Central Excise Tariff.
(c) We find that the Central Excise Tariff and the Customs Tariff, is para-materia as far as headings 8415 and 8418 are concerned. Therefore, relying on this decision of the Tribunal in Carrier Aircon (2001 (128) EIT 485), we have no reasons to uphold the revenues appeal to classify the subject goods under import under 8415”.


 That Chiller is a refrigeration unit .It is a part of air-condition system but in nature of goods. Hence, as per note 4 to section XVI, chiller as functional unit is to be classified as refrigeration system of tariff heading 8418.That explanatory notes to Chapter 8415 covering air conditioning machines, states that the heading is restrictive.

Heading 8415.00 of the Tariff provides that air-conditioning machines must comprise a motor-driven fan and elements for changing temperature and humidity. It includes those machines in which the humidity cannot be separately regulated. Nevertheless, while a chiller, imported without fans, is not an incomplete or unfinished air conditioning machine of heading 8415, it is still a part under that heading. But, because the chiller is also a good included in heading 8418, it must be classified in that heading under the authority of Section XVI, Note 2(a).
Thus, separately presented chillers for air-conditioning machines are classified under heading 8418 in accordance with note 2(a) to Section XVI and the language of the notes to heading 8415.

The Explanatory notes to heading 8415 provides exclusion from this heading for Chillers for air-conditioning machines and same are classified into heading 84.18.Therefore, as per  explanatory notes to heading 8418, chillers are specifically covered under tariff heading 8418.
     The Chiller does not satisfy all three conditions to be called a machine falling under heading 8415. Thus Chiller is not an air-conditioning machine as per HSN explanatory notes to heading 8415..

Honourable Supreme Court held in case of Commissioner of Central Excise, Delhi v. Carrier Aircon ltd [2006] rd-sc 374 (5 july 2006) that the chillers in question shall fall under specific heading 84.18 of the Tariff Act. This view is supported by the explanatory notes of H.S.N. below heading 84.15. Similarly various Tribunals also classified chiller under heading 8418 of Customs Tariff.
                              Also, Chillers in the domestic and international trade parlance are known as refrigerating equipment and not as air-conditioning machine.
  Under the authority of GIR 1, chiller is provided for specific heading 8418 .It is classifiable in subheading 84181010.

Therefore, on application of General Rules for the Interpretation (GIR) of the First Schedule to Customs Tariff GIR-1 read with Chapter Note 2 (b) and Note 4  to Section XVI  , Chiller  falls  under Chapter heading 8418 . Also, as per GIR-6 read with   HSN Explanatory Note to tariff heading 8415 & 8418 ‘ Chiller’ is correctly classifiable under tariff heading 84181010.




Tuesday, October 23, 2012

Duty on the new iPad and the iPad mini is 16.854%


 The  new iPad  and the new iPad mini has just launched minutes ago. After a number  of rumours and speculations, here we witness the launch of two new iPad's by the most valuable company of the world. The iPad mini is a thinner and lighter version of its big 9.7 inch daddy. It weighs  around 310 g which is really lighter than the iPad 4 which weighs around 650 g depending whether it will support sim-card or be a Wi-FI version.


The iPad 4 has improved graphics and  CPU performance  while it retains the same lovely retina display. Also, with the new iPad 4 and iPad mini, we can bid goodbye to the earlier 30-pin connector of the iPad. The new iPad has a much improved camera for all those who like to take photos with their iPad.Both the models will ship with 16 GB, 32GB and 64GB  model variants with no external memory card slots. 


Although rumours about a smaller size variant of the iPad was circulating months ago, the launch of the iPad 4 has surprised many. The reason why Apple launched the iPad 4 now ,instead of its usual march timeline, is unexplained.Maybe the iPad was launched now so that it gained Apple  a headstart against its rivals namely google and microsoft who are preparing for launching some really exciting things for us in near time



 It will attract customs duty  of  16.854% in India

Source for tech specifications : Apple

Monday, October 01, 2012

Calculate Customs duty on Mobile phone ,iphone and ,smartphone

Calculate customs duty on mobile phone imported in to India. Customs Duty levied on mobile phone is 1% for CVD and another 1%  for NCCD. To calculate duty amount ,enter  cost in Indian Rupees after abatement of 35 %  in MRP price .
Duty Calaculator

Mobile Phone

Cost:
Enter Quantity:


Ravindra Kumar
Global Tax Guru

Wednesday, September 26, 2012

iPhone 5 attracts import duty @ 2% on MRP Price

iPhone 5 ,if  imported into India through Courier ,then, it will attract import  duty  @ 2% on MRP Price.
Ravindra Kumar
Global Tax Guru

Friday, September 21, 2012

import of GPS Tracker into India


Dear Dinesh
On merit, there is no reason for CUstoms to withhold teh shipment, especially with the NOC from WPC. Despite, this customs is not allowing import of these devices without license from DGFT. That is a time consuming affair and takes a few moths. For the current shipment, you should try and visit the New CUstoms House and seek an appointment with the Assistance Commissioner Customs, and :
1) show him the WPC NOC
2) Plead that GPS Receiver is freely importable undger OGL (Open General List) as per item cide 8526.90
3) That GPS enbaled I-phones, and other mobile phoines do not need any license from DGFT, even though they are also combo of GPS/GPRS.
4) That it is a small value shipment and a first time import and if he decided that DGFT license is a must, then you undertake that next import will only be against such license, and for this shipment he may pardon, or levy minimal fine & penalty. For shipment of USD 820, fine and penalty can be upto the value of the shipment invoice, unless the officer wants to take a lenient view.
All the best
Luv Jain

Allowing FDI in Multi-Brand Retail Trading. (Press Note No.5 (2012 Series)

Government of India
Ministry of Commerce & Industry
Department of Industrial Policy & Promotion
(FC-I Section)

Press Note No.5 (2012 Series)

Subject: Review of the policy on Foreign Direct Investment- allowing FDI in Multi-Brand Retail
Trading.

1.0 Present Position:
Foreign Direct Investment (FDI) is prohibited in retail trading, except in single-brand product
retail trading, in which FDI, up to 100%, is permitted, under the Government route, subject to
specified conditions.

2.0 Revised Position:
The Government of India has reviewed the extant policy on FDI and decided to permit FDI,
up to 51%, under the Government route, in Multi-Brand Retail Trading, subject to specified
conditions.

3.0 Accordingly, the following amendment is made in 'Circular 1of 2012- Consolidated FDI
Policy', issued on 10.04.2012, by the Department ofIndustrial Policy & Promotion:
3.1 Paragraph 6.1 - 'Prohibited Sectors', is substituted with the following:
"6.1 PROHIBITED SECTORS:
FDI is prohibited in:
(a) Lottery Business, including Government /private lottery, online lotteries, etc.
(b) Gambling and Betting, including casinos etc.
(c) Chit funds
(d) Nidhi company
(e) Trading in Transferable Development Rights (TDRs)
(f) Real Estate Business or Construction of Farm Houses
(g) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco
substitutes
(h) Activities / sectors not open to private sector investment e.g. Atomic Energy and Railway
Transport (other than Mass Rapid Transport Systems).
Foreign technology collaboration in any form, including licensing for franchise,
trademark, brand name, management contract, is also prohibited for Lottery Business and
Gambling and Betting activities."

Page 1 of4

3.2 A new paragraph as paragraph 6.2.16.5 is inserted below paragraph 6.2.16.4 as below:
6.2.16.5 Multi Brand Retail Trading I 51% I Government
(l) FDI in multi brand retail trading, in all products, will be permitted,
subject to the following conditions:
(i) Fresh agricultural produce, including fruits, vegetables, flowers,
grains, pulses, fresh poultry, fishery and meat products, may be
unbranded.
G) Minimum amount to be brought in, as FDI, by the foreign investor,
would be US $ 100 million.
(iii) At least 50% of total FDI brought in shall be invested in 'backend
infrastructure' within three years of the first tranche of FDI, where
'back-end infrastructure' will include capital expenditure on all
activities, excluding that on front-end units; for instance, back-end
infrastructure will include investment made towards processing,
manufacturing, distribution, design improvement, quality control,
packaging, logistics, storage, ware-house, agriculture market produce
infrastructure etc. Expenditure on land cost and rentals, if any, will
not be counted for purposes of back end infrastructure.
(iv) At least 30% of the value of procurement of manufactured! processed
products purchased shall be sourced from Indian 'small industries'
which have a total investment in plant & machinery not exceeding US
$ .1.00 million. This valuation refers to the value at the time of
installation, without providing for depreciation. Further, if at any point
in time, this valuation is exceeded, the industry shall not qualify as a
'small industry' for this purpose. This procurement requirement would
have to be met, in the first instance, as an average of five years' total
value of the manufactured! processed products purchased, beginning
1st April of the year during which the first tranche of FDI is received.
Thereafter, it would have to be met on an annual basis.
(v) Self-certification by the company, to ensure compliance of the
conditions at serial nos. (ii), (iii) and (iv) above, which could be crosschecked, as and when required. Accordingly, the investors shall
maintain accounts, duly certified by statutory auditors.
(vi) Retail sales outlets may be set up only in cities with a population of
more than 10 lakh as per 2011 Census and may also cover an area of
10 kms around the municipal/urban agglomeration limits of such
cities; retail locations will be restricted to conforming areas as per the
Master/Zonal Plans of the concerned cities and provision will be made
for requisite facilities such as transport connectivity and parking; In
States/ Union Territories not having cities with population of more
than 10 lakh as per 2011 Census, retail sales outlets may be set up in

Page 2 of4

(vii) Government will have the first right to procurement of agricultural
products.
the cities of their choice, preferably the largest city and may also cover
an area of 10 kms around the municipal/urban agglomeration limits of
such cities. The locations of such outlets will be restricted to
conforming areas, as per the Master/Zonal Plans of the concerned
cities and provision will be made for requisite facilities such as
transport connectivity and parking.
(viii) The above policy is an enabling policy only and the State
GovernmentslUnion Territories would be free to take their own
decisions in regard to implementation of the policy. Therefore, retail
sales outlets may be set up in those StateslUnion Territories which
have agreed, or agree in future, to allow FDI in MBRT under this
policy. The list of StateslUnion Territories which have conveyed their
agreement is annexed. Such agreement, in future, to permit
establishment of retail outlets under this policy, would be conveyed to
the Government of India through the Department of Industrial Policy
& Promotion and additions would be made to the annexed list
accordingly. The establishment of the retail sales outlets will be in
compliance of applicable StatelUnion Territory laws/ regulations, such
as the Shops and Establishments Act etc.
(ix) Retail trading, in any form, by means of e-commerce, would not be
permissible, for companies with FDI, engaged in the activity of multibrand retail trading.
(x) Applications would be processed in the Department of Industrial Policy
& Promotion, to determine whether the proposed investment satisfies
the notified guidelines, before being considered by the FIPB for
Government approval.
4.0 The above decision will take immediate effect.

Joint Secretary to Govt of India

D/o IPP File No.: 5/12//201O-FC-I dated: 20th September, 2012

Copy forwarded to:
1. Press Information Officer, Press Information Bureau- for giving wide publicity to the above
Press Note.
2. BE Section in the Department of Industrial Policy and Promotion- for uploading the Press
Note on DIPP's website.

Page 3 of4

ANNEXURE
LIST OF STATES/ UNION TERRITORIES AS MENTIONED IN
PARAGRAPH 6.2.16.5(l)(viii)
1. Andhra Pradesh
2. Assam
3. Delhi
4. Haryana
5. Jammu & Kashmir
6. Maharashtra
7. Manipur
8. Rajasthan
9. Uttarakhand
10. Daman & Diu and Dadra and Nagar Haveli (Union Territories)

Page 4 of4

(Source: :http://dipp.nic.in/English/acts_rules/Press_Notes/pn5_2012.pdf)

FDI is prohibited in



FDI is prohibited in:

(a) Lottery Business, including Government /private lottery, online lotteries, etc.
(b) Gambling and Betting, including casinos etc.
(c) Chit funds
(d) Nidhi company
(e) Trading in Transferable Development Rights (TDRs)
(f) Real Estate Business or Construction of Farm Houses
(g) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco
substitutes
(h) Activities / sectors not open to private sector investment e.g. Atomic Energy and Railway
Transport (other than Mass Rapid Transport Systems).

Foreign technology collaboration in any form, including licensing for franchise,
trademark, brand name, management contract, is also prohibited for Lottery Business and
Gambling and Betting activities."


Foreign Direct Investment in the Civil Aviation sector



Government of India
Ministry of Commerce & Industry
Department of Industrial Policy & Promotion
Press Note No.6 (2012 Series)
Subject: Review of the policy on Foreign Direct Investment in the Civil Aviation sector
1.0 Present Position:
1.1 Paragraph 6.2.9.3 of 'Circular 1 of 20 12-Consolidated FDI Policy', effective from April 10,
2012, relating to air transport services, presently reads as below:
6.2.9.3 Air Transport Services
(a) Air Transport Services would include Domestic Scheduled Passenger Airlines;
Non-Scheduled Air Transport Services, helicopter and seaplane services.
(b) No foreign airlines would be allowed to participate directly or indirectly in the
equity of an Air Transport Undertaking engaged in operating Scheduled and
Non-Scheduled Air Transport Services except Cargo airlines.
(c) Foreign airlines are allowed to participate in the equity of companies operating
Cargo airlines, helicopter and seaplane services.
(l) Scheduled Air Transport Service/ 49%FDI Automatic
Domestic Scheduled Passenger (100% for NRIs)
Airline
(2) Non-Scheduled Air Transport 74% FDI Automatic up to 49%
Service (100% for NRls)
Government route
beyond 49% and up to
74%
(3)Helicopter services/seaplane 100% Automatic
services requmng DGCA
approval
2.0 Revised Position:
2.1 The Government of India has reviewed the position in this regard and decided to permit
foreign airlines also to invest, in the capital of Indian companies, operating scheduled and nonscheduled air transport services, up to the limit of 49% of their paid-up capital.
2.2 Such investment would be subject to the following conditions:
(i) It would be made under the Government approval route.
(ii) The 49% limit will subsume FDI and FII investment.
(iii)The investments so made would need to comply with the relevant regulations of SEBI, such
as the Issue of Capital and Disclosure Requirements (ICDR) Regulations/ Substantial
Acquisition of Shares and Takeovers (SAST) Regulations, as well as other applicable rules
and regulations.(iv)A Scheduled Operator's Permit can be granted only to a company:
a) that is registered and has its principal place of business within India
b) the Chairman and at least two-thirds of the Directors of which are citizens of India
and
c) the substantial ownership and effective control of which is vested in Indian nationals
(v) All foreign nationals likely to be associated with Indian scheduled and non-scheduled air
transport services, as a result of such investment shall be cleared from security view point
before deployment; and
(vi)All technical equipment that might be imported into India as a result of such investment shall
require clearance from the relevant authority in the Ministry of Civil Aviation.
2.3 The above revised policy is not applicable to Air India.
3.0 Amendment to paragraph 6.2.9.3:
3.1 Accordingly, paragraph 6.2.9.3 of 'Circular 1 of 2012-Consolidated FDI Policy', effective
from April 10,2012, is amended, as below:
6.2.9.3 Air Transport Services
(1) Scheduled Air Transport Service/ 49%FDI Automatic
Domestic Scheduled Passenger (100% for NRIs)
Airline
(2) Non-Scheduled Air Transport 74% FDI Automatic up to 49%
Service (l00% for NRIs)
Government route
beyond 49% and up to
74%
(3)Helicopter services/seaplane 100% Automatic
services requmng DGCA
approval
6.2.9.3.1 Other conditions:
(a) Air Transport Services would include Domestic Scheduled Passenger Airlines;
Non-Scheduled Air Transport Services, helicopter and seaplane services.
(b) Foreign airlines are allowed to participate in the equity of companies operating
Cargo airlines, helicopter and seaplane services, as per the limits and entry
routes mentioned above.
(c) Foreign airlines are also, henceforth, allowed to invest, in the capital of Indian
companies, operating scheduled and non-scheduled air transport services, up to
the limit of 49% of their paid-up capital. Such investment would be subject to
the following conditions:(i) It would be made under the Government approval route.
(ii) The 49% limit will subsume FDI and FII investment.
(iii) The investments so made would need to comply with the relevant
regulations of SEBI, such as the Issue of Capital and Disclosure
Requirements (ICDR) Regulations/ Substantial Acquisition of Shares
and Takeovers (SAST) Regulations, as well as other applicable rules
and regulations.
(iv) A Scheduled Operator's Permit can be granted only to a company:
a) that is registered and has its principal place of business within
India;
b) the Chairman and at least two-thirds of the Directors of which
are citizens of India; and
c) the substantial ownership and effective control of which is
vested in Indian nationals.
(v) All foreign nationals likely to be associated with Indian scheduled and
non-scheduled air transport services, as a result of such investment
shall be cleared from security view point before deployment; and
(vi) All technical equipment that might be imported into India as a result of
such investment shall require clearance from the relevant authority in
the Ministry of Civil Aviation.
Note: The FDI limits/entry routes, mentioned at paragraph 6.2.9.3 (1) and
6.2.9.3 (2) above, are applicable in the situation where there is no
investment by foreign airlines.
(d) The policy mentioned at (c) above is not applicable to M/s Air India Limited.
4.0 The above decision will take immediate effect.
Joint Secretary to the
D/o IPP File No.: No. S/12/2008-FC.! dated: 20thSeptember, 2012
Copy forwarded to:
1. Press Information Officer, Press Information Bureau- for giving necessary publicity.
2. BE Section in the Department of Industrial Policy and Promotion- for uploading the Press
Note on DIPP's website.
( Source: http://dipp.nic.in/English/acts_rules/Press_Notes/pn6_2012.pdf)Foreign direct investment in Civil Aviation Sector

Policy on Foreign Investment (FI) in companies operating in the Broadcasting Sector


Government of India
Ministry of Commerce & Industry
Department of Industrial Policy & Promotion
Press Note No.7 (2012 Series)
Subject: Review of the policy on Foreign Investment (FI) in companies operating III the
Broadcasting Sector
1.0 Present Position:
1.1 As per extant policy, the foreign investment (FI) limits, in companies operating in the
Broadcasting Sector, are set out in paragraph 6.2.7 of 'Circular 1 of 2012 - Consolidated FDI
Policy', issued by the Department of Industrial Policy and Promotion (DIPP), on 10.04.2012.
2.0 Revised Position:
2.1 The Government of India has reviewed the position in this regard and decided to amend the
foreign investment limits, in companies engaged in providing broadcasting carriage services, in the
manner indicated below, subject to such terms and conditions, as may be specified by the Ministry of
Information and Broadcasting from time to time:
(1) Teleports (setting up up-linking HUBsffeleports); Direct to Home (DTH); Cable
Networks (MSOs operating at National or State or District level and undertaking
upgradation of networks towards digitalization and addressability):
Increase in the foreign investment (FI) limit from 49% to 74%, subject to:
(a) Foreign investment up to 49% being permitted under the automatic route; and
(b) Foreign investment beyond 49% and up to 74% being permitted under the Government
route.
(2) Mobile TV:
Permitting foreign investment (FI) up to 74%, subject to:
(a) Foreign investment up to 49% being permitted under the automatic route; and
(b) Foreign investment beyond 49% and up to 74% being permitted under the Government
route.
2.2 The foreign investment (FI) limit, in companies engaged in the aforestated activities of the
I&B sector, shall include, in addition to FDI, investment by Foreign Institutional Investors (FIls),
Non-Resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository
Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by
foreign entities.
2.3 The terms and conditions relating to security and other conditions, will separately be
incorporated in the sectoral guidelines of each broadcasting carriage service, as specified in
paragraph 3.0 below.3.0 Accordingly, paragraph 6.2.7 under 'Circular 1 of 2012-Consolidated FDI Policy' IS
substituted with the following:
SI. No. Sector/Activity 0/0 of FDI Entry Route
Cap/Equity
6.2.7 Broadcasting
6.2.7.1 Broadcasting Carriage Services
6.2.7.1.1 (1) Teleports (setting up of up- 74% Automatic up to 49%
linking HUBs/Teleports);
(2) Direct to Home (DTH); Government route beyond 49%
(3) Cable Networks (Multi System and up to 74%
operators (MSOs) operating at
National or State or District
level and undertaking
upgradation of networks
towards digitalization and
addressability);
(4) Mobile TV;
(5) Headend-in-the Sky
Broadcasting Service (HITS)
6.2.7.1.2 Cable Networks (Other MSOs not 49% Automatic
undertaking upgradation of networks
towards digitalization and
addressability and Local Cable
Operators (LCOs»
6.2.7.2 Broadcasting Content Services
6.2.7.2.1 Terrestrial Broadcasting FM (FM 26% Government
Radio), subject to such terms and
conditions, as specified from time to
time, by Ministry of Information &
Broadcasting, for grant of permission
for setting up of FM Radio stations
6.2.7.2.2 Up-linking of 'News & Current 26% Government
Affairs' TV Channels
6.2.7.2.3 Up-linking of Non-'News & 100% Government
Current Affairs' TV Channels/
Down-linking of TV Channels
6.2.7.3
FDI for Up-linking/Down-linking TV Channels will be subject to compliance with the
relevant Up-linking/Down-linking Policy notified by the Ministry of Information &
Broadcasting from time to time.
6.2.7.4
Foreign investment (FI) in companies engaged in all the aforestated services will be
subject to relevant regulations and such terms and conditions, as may be specified
from time to time, by the Ministry of Information and Broadcasting.
6.2.7.5 The foreign investment (FI) limit in companies engaged in the aforestated activities
shall include, in addition to FDI, investment by Foreign Institutional Investors (FIls),
Non-Resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs),American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and
convertible preference shares held by foreign entities.
6.2.7.6
Foreign investment in the aforestated broadcasting carriage services will be subject to
the following security conditions/terms:
Mandatory Requirement for Key Executives of the Company
(i) The majority of Directors on the Board of the Company shall be Indian
Citizens.
(ii) The Chief Executive Officer (CEO), Chief Officer In-charge of technical
network operations and Chief Security Officer should be resident Indian
Citizens.
Security Clearance of Personnel
(iii) The Company, all Directors on the Board of Directors and such key executives
like Managing Director / Chief Executive Officer, Chief Financial Officer
(CFO), Chief Security Officer (CSO), Chief Technical Officer (CTO), Chief
Operating Officer (COO), shareholders who individually hold 10% or more
paid-up capital in the company and any other category, as may be specified by
the Ministry of Information and Broadcasting from time to time, shall require
to be security cleared.
In case of the appointment of Directors on the Board of the Company and such
key executives like Managing Director / Chief Executive Officer, Chief
Financial Officer (CFO), Chief Security Officer (CSO), Chief Technical
Officer (CTO), Chief Operating Officer (COO), etc., as may be specified by
the Ministry of Information and Broadcasting from time to time, prior
permission of the Ministry of Information and Broadcasting shall have to be
obtained.
It shall be obligatory on the part of the company to also take prior permission
from the Ministry of Information and Broadcasting before effecting any
change in the Board of Directors.
(iv) The Company shall be required to obtain security clearance of all foreign
personnel likely to be deployed for more that 60 days in a year by way of
appointment, contract, and consultancy or in any other capacity for installation,
maintenance, operation or any other services prior to their deployment. The
security clearance shall be required to be obtained every two years.
Permission vis-a-vis Security Clearance
(v) The permission shall be subject to permission holder/licensee remaining
security cleared throughout the currency of permission. In case the security
clearance is withdrawn the permission granted is liable to be terminated
forthwith.
(vi)
In the event of security clearance of any of the persons associated with the
permission holder/licensee or foreign personnel is denied or withdrawn for any
reasons whatsoever, the permission holder/licensee will ensure that theconcerned person resigns or his services terminated forthwith after receiving
such directives from the Government, failing which the permission/license
granted shall be revoked and the company shall be disqualified to hold any
such Permission/license in future for a period or five years.
Infrastructure/Network/Software related requirement
(vii) The officers/officials of the licensee companies dealing with the lawful
interception of Services will be resident India citizens.
(viii) Details of infrastructure/network diagram (technical details of the network)
could be provided, on a need basis only, to equipment suppliers/manufactures
and the affiliate of the licensee company. Clearance from the licensor would be
required if such information is to be provided to anybody else.
(ix) The Company shall not transfer the subscribers' databases to any person/place
outside India unless permitted by relevant Law.
(x) The Company must provide traceable identity of their subscribers.
Monitoring, Inspection and Submission of Information
(xi) The Company should ensure that necessary provision (hardware/software) is
available in their equipment for doing the Lawful interception and monitoring
from a centralized location as an when required by Government.
(xii) The company, at its own costs, shall, on demand by the government or its
authorized representative, provide the necessary equipment, services and
facilities at designated place( s) for continuous monitoring or the broadcasting
service by or under supervision of the Government or its authorized
representative.
(xiii) The Government of India, Ministry of Information & Broadcasting or its
authorized representative shall have the right to inspect the broadcasting
facilities. No prior permission/intimation shall be required to exercise the right
of Government or its authorized representative to carry out the inspection. The
company will, if required by the Government its authorized representative,
provide necessary facilities for continuous monitoring for any particular aspect
of the company's activities and operations. Continuous monitoring, however,
will be confined only to security related aspects, including screening of
objectionable content.
(xiv) The inspection will ordinarily be carried out by the government of India,
Ministry of Information & Broadcasting or its authorized representative after
reasonable notice, except in circumstances where giving such a notice will
defeat the very purpose of the inspection.
(xv) The company shall submit such information with respect to its services as may
by required by the Government or its authorized representative, in the format as
may be required, from time to time.
(xvi) The permission holder/licensee shall be liable to furnish the Government of
India or its authorized representative or TRAI or its authorized representative,
such reports, accounts, estimates, returns or such other relevant information and
at such periodic intervals or such times as may be required.
(xvii) The service providers should familiarize/train designated officials or the
Government or officials of TRAI or its authorized representative(s) in respect
of relevant operations/features of their systems.National Security Conditions
(xviii) It shall be open to the licensor to restrict the Licensee Company from operating
in any sensitive area from the National Security angle. The Government of
India, Ministry of Information and Broadcasting shall have the right to
temporally suspend the permission of the permission holder/Licensee in public
interest or for national security for such period or periods as it may direct. The
company shall immediately comply with any directives issued in this regard
failing which the permission issued shall be revoked and the company
disqualified to hold any such permission in further for a period or five years.
(xix) The company shall not import or utilize any equipment, which are identified as
unlawful and/or render network security vulnerable.
Other conditions
(xx) Licensor reserves the right to modify these conditions or incorporate new
conditions considered necessary in the interest of national security and public
interest or for proper provision of broadcasting services.
(xxi) Licensee will ensure that broadcasting service installation carried out by it
should not become a safety hazard and is not in contravention of any statute,
rule or regulation and public policy.
Joint Secretary to the
4.0 The above decision will take immediate effect.
(A .alii'XAtsro:J)
ent of India
D/o IPP File No.: No. 5/5/2012-FC.I dated: 20
t
September, 2012
Copy forwarded to:
1. Press Information Officer, Press Information Bureau- for giving necessary publicity.
2. BE Section in the Department of Industrial Policy and Promotion- for uploading the Press
Note on DIPP 's website.

Policy on foreign investment in Power Exchanges ,Press Note No.8 (2012 Series)


Government of India
Ministry of Commerce & Industry
Department of Industrial Policy & Promotion

Press Note No.8 (2012 Series)

Subject: Policy on foreign investment in Power Exchanges

1.0 Present Position:

1.1 As per extant policy, FDI, up to 100%, under the automatic route, is permitted in the power
sector (except atomic energy). This includes generation, transmission and distribution of electricity,
as well as power trading, subject to the provisions of the Electricity Act, 2003.
1.2 Extant policy, however, does not provide any specific dispensation for foreign investment in
power exchanges.

2.0 Revised Position:
2.1 The Government of India has reviewed the position in this regard and decided to permit
foreign investment, up to 49%, in Power Exchanges, registered under the Central Electricity
Regulatory Commission (Power Market) Regulations, 2010, as below:
(i) Such foreign investment would be subject to an FDI limit of 26 per cent and an FII limit of
23 per cent of the paid-up capital;
(ii) FII investments would be permitted under the automatic route and FDI would be permitted
under the government approval route;
(iii) FII purchases shall be restricted to secondary market only;
(iv) No non-resident investor/ entity, including persons acting in concert, will hold more than 5%
of the equity in these companies; and
(v) The foreign investment would be in compliance with SEBI Regulations; other applicable
laws/ regulations; security and other conditionalities.

3.0 Insertion of new paragraph 6.2.26:

3.1 Accordingly, a new paragraph 6.2.26 is inserted under 'Circular 1 of 20 12-Consolidated FDI
Policy', effective from April 10, 2012, as below:
6.2.26 Power Exchanges
6.2.26.1 Power Exchanges registered 49% (FDI &FII) Government
under the Central Electricity (for FDI)
Regulatory Commission
(Power Market) Regulations,
2010
6.2.26.2 Other conditions:
(i) Such foreign investment would be subject to an FDI limit of 26 per cent and an
FII limit of 23 per cent of the paid-up capital;(ii) FIr investments would be permitted under the automatic route and FDI would be
permitted under the government approval route;
(iii) FIr purchases shall be restricted to secondary market only;
(iv) No non-resident investor/ entity, including persons acting in concert, will hold
more than 5% of the equity in these comp:Uies; and
(v) The foreign investment would be in compliance with SEBI Regulations; other
applicable laws/ regulations; security and other conditionalities.

4.0 The above decision will take immediate effect.

Joint Secretarx.te-th
D/o IPP File No.: No. 5/5/2012-FC.I dated: 20thSeptember, 2012
Copy forwarded to:
1. Press Information Officer, Press Information Bureau- for giving necessary publicity.
2. BE Section in the Department of Industrial Policy and Promotion- for uploading the Press
Note on DIPP's website.

The transaction cost in imports and exports in India is around 15 per cent of the cost of the goods


1.       Study on Trade Facilitation Gap Analysis for Border Clearance Procedures in India, undertaken on behalf of the Centre for WTO Studies, Indian Institute of Foreign Trade, New Delhi, and supported by Ministry of Commerce, Govt. of India,
Some estimates suggest that the transaction cost in imports and exports in India is around 15 per cent of the cost of the goods.

 If the time taken for clearance of import and export cargo can be brought down by 5 days from the present 10 days, there will be significant savings for the economy as a whole.

This is only to highlight the importance of Trade Facilitation to the economy. Further, competition in the international market place is getting more and more intense and unless India incrementally improves the efficiency in expediting the flow of goods at minimum time and cost, its competitiveness in international market would continue to be adversely affected

 That consignment of ACP clients would be considered as low risk and normally such import consignments of ACP clients will not be subjected to examination.

A more liberal view in respect of imports by those qualified under Accredited Client Programme (ACP) should be adopted.

Delay in the transportation of containers  to CFS  due to  monopoly of the Shipping Agents ,even , the Commissioner of Customs, Chennai had issued a public notice permitting the importers/CHAs to move the containers from the Terminal to the CFS but the Shipping Agents filed a writ petition against the  Public Notice and obtained a Stay Order from the Hon‟ble High Court.

 The system of stacking the containers, lack of adequate labour and equipment and the shortage of officers contribute to the delay in the examination
It is important to remember that today, the attempt is to create an environment of trade facilitation. There is a need for a shift in the focus from penal provisions to facilitation measures. This need not mean that violations of the law should be overlooked A more liberal view in respect of imports by those qualified under Accredited Client Programme (ACP) should be adopted”.

Thursday, August 30, 2012

phablet customs classification and rate of duty in India


Friday, August 24, 2012

Import invoice can be in Indian Rupees



1.Import contract may be concluded  in Indian Rupees. Where the contracts are in Indian Rupees, the related documents are also prepared in Indian Rupees and no  conversion is involved. Import invoice can be in Indian Rupees.Customs will not have any problem until there is a duty evasion on account of valuation.In another   words ,there should not be any change in Assessable Value of imported goods.  Contract are to be executed before import process begins This is practiced to minimize import risk  on  account of  currency fluctuation . Foreign remittance  are governed by RBI. You may contact your bank for payment related to imported  goods.Brief points are highlighted as ready reference.

                    2. Payment in Indian Rupee for Import: As per Regulation  5(2) of  Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 , payment  in Indian Rupee  for  import  into India , when the goods are shipped from Bangladesh, Islamic Republic of Iran,Myanmar, Pakistan and Sri Lanka but supplier is                              not a resident of these countries . Nepal is excluded from this sub rule of  Regulation.
                  
                   3. Alternatively, Payment for goods shipped from above Countries  may also be made into any permitted foreign Currency.

                   4. Payment for goods  shipped from other than above countries are to   be made in a currency appropriate to the country of shipment of goods.

Wednesday, August 22, 2012

labelling on wholesale package of imported food item is exempted as per 2,6.5 of Food Safety and Standards (Packaging and Labelling) Regulations, 2011 and also as per Honourable Madras High Court order

As per para 32 of Madras High Court  order  in case of M/S.Foodlever India Pvt. Ltd vs Senior Inspecting Officer ,dated 16 March, 2012, labelling is exempted for wholesale package as  per  para 2.6.5 of   Regulation  2011 of FSSAI. E


   Futher ,even if  there is label deficiency ,same can be rectified by sticking label on goods.

Relevant paras  of above said order are reproduced for  more clarity.


"19. The learned counsel appearing on behalf of the petitioner had also relied on the decision of the Central Excise and Sales Tax Tribunal, made in Commissioner of Cus.(Prev.), Kolkata Vs. Dipika Enterprise [2009(246) E.L.T. 407 (Tri.-Kolkata)], wherein it had been held that certain deficiencies in the labelling requirements can be rectified by putting the necessary information on the imported goods, by way of stickers.The goods concerned can be cleared after the removal of such defects."





" 32. It is also noted that, regulation 2.6.5 of the Regulations states that, in case of whole sale packages, the particulars regarding the list of ingredients, date of manufacture/packing, best before, expiry date, labelling of irradiated food and vegetarian logo/non-vegetarian logo, may not be specified. It is the specific case of the petitioner that the dark chocolates imported from Singapore are not meant for retail sale. Therefore, it has been contended that the goods imported by the petitioner, in wholesale packages, need not declare such particulars, contrary to the claims made by the respondents.


33. Further, from the adhoc guidelines issued by the Director of Food Safety and Standards Authority of India, Ministry of Health and Family Welfare, Government of India, dated 12.10.2011, it is seen that certain labelling deficiencies can be rectified, by providing the necessary information, by affixing a label containing the necessary information. Further, the communication, dated 20.5.2011, issued by the Senior Inspecting Officer, Food Safety and Standards Authority of India, Ministry of Health and Family Welfare, Government
of India, makes it clear that certain minor labeling defects may be rectified, in the custom s warehouse, under the supervision of the officers of the customs department, prior to the release of the consignments.

34. Further, from the decisions cited by the learned counsel appearing on behalf of the petitioner, it is seen that the goods in question could be released, after proper tests are conducted to find out if they are fit for human consumption. It had also been made clear that certain deficiencies in the labelling requirements, which are rectifiable in nature, could be removed by furnishing the necessary information, by way of stickers, as held by the Customs, Excise and Service Tax Appellate Tribunal. While so, it would not be appropriate for the
respondents to reject the request of the petitioner to take samples of the imported goods, to be sent for testing by the laboratories concerned.


35. No doubt the food items imported by the petitioner should not be released if they are found to be unfit for human consumption, or in case they are found to contain other ingredients, which are not declared in the label attached to the cover, wrapper or container, containing such items. As such, this Court is of the considered view that nothing has been shown on behalf of the respondents to substantiate their claims that the necessary information should be furnished, only in a printed format, on the cover, wrapper or container and not by way of a label stuck on them.

36.Further, the respondents have not been in a position to show that they have the power or authority to refuse the request of the petitioner, for taking the samples of the imported goods for the purpose of testing. As such, the impugned letter of the first respondent, dated 12.1.2012, is set aside. The respondents are directed to make the necessary arrangements for taking the samples of the goods in question, imported by the petitioner, and to send the samples for testing, by the authorized laboratories, within a period of seven days from the date of receipt of a copy of this order. On receipt of the report from the laboratory concerned, the goods shall be
released only if they are fit for human consumption, on the payment of the appropriate duty, as prescribed by law. Accordingly, the writ petition stands allowed. Consequently, connected miscellaneous petition is closed."

Monday, August 20, 2012

Valuation practice of second hand machinery under Customs Valuation


Circular No. 4 /2008-Customs

F. No. 467/34/2006-Cus.V
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs

New Delhi, 12th February, 2008

To,

All Chief Commissioners of Customs,
All Chief Commissioners of Central Excise,
All Chief Commissioners of Customs & Central Excise,
All Directorate-Generals, Chief Departmental Representative,
All Commissioners of Customs,
All Commissioners of Central Excise, and
All Commissioners of Customs & Central Excise

Sir,

Subject: Valuation practice of second hand machinery to be adopted by all Custom Houses/ Customs Commissionerates-regarding/-

         
 It has been noticed that the Custom Houses / Customs Commissionerates have been adopting different assessment practices with regard to valuation of imported Second Hand Machinery / Capital Goods.  As this was resulting into diverse assessments the following guidelines are being issued so that assessments are done as far as possible on their basis.

2.         A careful analysis of the Tribunal decisions and an Apex Court judgement on the issue of valuation of second-hand machinery reveal the following views of the judiciary:
i)                    If other parameters of Section 14 of the Customs Act, 1962 are satisfied, the transaction value method of Rule 3 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 can also be applied to importation of second-hand machinery sold for export i.e. it was imported immediately after sale without any further usage abroad. 
ii)                  However if transaction value of Rule 3 is rejected, valuation of second-hand machinery can be done under Rule 9, on the basis of value of new machine, as certified by the Chartered Engineer, and scaled down by allowing depreciation commensurate with the period of usage.  Supreme Court judgement in the case of Gajra Bevel Gears [2000(115) ELT 612 (SC)] refers in this regard.
iii)                However, transaction value of Rule 3 cannot be rejected by ab initio application of Rule 9, inasmuch as one cannot, before rejecting transaction value of Rule 3 with sufficient evidences, straightaway arrive at a notional value under Rule 9.

3.         It may thus be seen from the judicial decisions that, before redetermination of value of second hand machinery under Rule 9, it is essential to reject the transaction value of Rule 3.  There would be no difficulty in rejection of transaction value in those cases where the assessing officer is able to assail the documents like Chartered Engineer’s Certificate, invoice, etc., as manipulated or fraudulently obtained.  Similarly, there will also be no difficulty in rejection of transaction value in cases where the assessing officer proves that certain basic particulars like description, period of usage, extent of the re-conditioning, year of manufacture, model no., price when new, etc., are misdeclared either in the Chartered Engineer’s Certificate or in the invoice.   There will also be no difficulty in rejecting the transaction value in cases which are hit by the provisions to Sub-Rule (2) of Rule 3.  Difficulties may however be faced in situations other than those described above. 

4.         In this context, attention of the assessing officers is drawn to Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 which provides for rejection of declared value under certain circumstances.  Following views have emerged from various Tribunal decisions on the application of Rule 12:

i)                    Rule 12 empowers the Revenue not to determine the value of the imported goods on the basis of transaction value under Rule 3 (1) of the Valuation Rules.  The Tribunal decision in the case of Chandni International [2003 (153) ELT 312] refers.
ii)                  Rule 12 provides that when the proper officer has reason to doubt the truth or accuracy of the value declared, he may ask the importer to furnish further information or other evidence.  If he still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the transaction value of the goods cannot be accepted.  It is therefore required to determine whether the evidences constitute reasonable doubt for the assessing officer to doubt the value of the goods.  The Tribunal decision in the case of Sunny Enterprises [2004 (175) ELT 420] refers.
iii)                Rule 12 is a procedural provision, which is meant to act as an aid in determining as to whether Sub-Rule (1) or Sub-Rule (4) of Rule 3 would be applicable in a given case.  This deeming provision contained in Rule 12 has necessarily to be pressed into service at the very initial stage under the sequential scheme. It has no role after the scheme has worked out.  The Tribunal decision in the case of Venus Insulation Products Mfg. Co. [2002 (143) ELT 364] refers.

5.         Thus in respect of valuation of second hand machineries as well, the assessing officers may apply Rule 12 in appropriate cases.  As an illustration, if the declared value of a second hand machinery is found to be much below the value arrived at by the depreciation method on the basis of the certified price of the new machinery in the year of its manufacture, the assessing officer may have reason to doubt the truth or accuracy of the declared value, and ask the importer to furnish further information and explanation.  If he is satisfied, he may accept the declared value.  But, if he still has reasonable doubt about the truth or accuracy of the declared value, he can reject the declared value under Rule 12, and proceed to re-determine the value under Rule 9 by following the Board’s circular No. F.No. 493/124/86-Cus VI dated 19.11.87 in respect of the depreciation to be extended to such second hand machinery. 

6.         In fact, for other imported goods as well, the method for acceptance or rejection of declared value, and then re-determination of value in case the declared value is rejected, would be similar to that in the case of second hand machinery, as explained hereinabove.

7.         In cases where the declared value is rejected, and assessable value is re-determined, the assessing officer shall issue a detailed speaking order, giving the reasons for such rejection, by invoking the provisions of Rule 12 or Rule 3(2), as appropriate, and giving the reasons for re-determination of value under appropriate provision.

8.         Guidelines in respect of some other issues related to valuation of second hand machinery are as follows:

(a)        For valuation of second hand machinery / capital goods, the assessing officers must insist on importers submitting a certificate issued by an independent Chartered Engineer or any equivalent in the country of supply.  The certificate should indicate interalia:-
            i)          Price of new machinery as in the year of its manufacture,
            ii)         Current CIF value of new machinery if purchased now,
            iii)        Year of the manufacture of machinery,
            iv)        Sale price of the supplier,
            v)         Present condition of machinery,
vi)        Nature of reconditioning or repairs carried out, if any, and the cost (including the dismantling cost, if any) thereof,
            vii)       Expected life span.

(b)        There is no need to specify the agencies whose certificates alone, issued at the port of loading, would be accepted.  The number of such agencies should not be limited.

(c)        In the absence of proper Load Port Certificate, a local Chartered Engineer’s Certificate may be accepted. Each Custom House may consider issuing Public Notices giving names and addresses of Chartered Engineers, whom the trade can contact for issuance of CE Certificate. 

(d)       It is not essential to have the examination of the second hand machinery by a panel of officers, since in many Customs formations no machinery expert is posted.  The routine examination of second hand machinery being done by the Docks staff shall continue. 

9.         The aforesaid guidelines regarding valuation of second-hand Machinery as contained in foregoing paragraphs 3 to 8 shall be strictly followed.

10.       Any difficulty in the implementation of the foregoing guidelines may be brought to the notice of the Directorate General of Valuation, Mumbai with a copy to the Board. 
                                                                                                                                                                               
                                                                                              
(M. K.  SINGH)
Director (International Customs)

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