Circular No. 25 /2015
15th October 2015
F. No. 467/34/2006-Cus.V
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
All Principal Chief Commissioners
All Chief Commissioners of Customs,
All Chief Commissioners of Customs & Central Excise,
All Directorate-Generals, Chief Departmental Representative,
All Principal Commissioners of Customs,
All Principal Commissioners of Customs & Central Excise
All Commissioners of Customs
All Commissioners of Customs & Central & Excise
Sir,
Subject: Valuation of second hand machinery –regarding
The Board has received representations from other
Ministries, trade bodies and traders
regarding issues arising from the interpretation of Board's
circular no. 4/2008 - Cus dated 12th
February 2008. The circular requires that field formations
rely upon a chartered engineer's inspection
report while valuing imports of second hand machinery and
that inspection/appraisement reports
issued at the port of loading should be accepted. The circular
also states that there is no need to
specify the agencies whose certificates alone would be
accepted. It has been ascertained from
field formations that the present practice in this regard is
that if an importer produces a chartered
engineer's appraisement report issued at the load port, with
the ingredients indicated in para 8 (a) of
the circular 4/2008-Cus, the same is being accepted by
Custom Houses. Also, appraisement /
inspection reports prepared by pre-shipment inspection
agencies in India, which have been notified
by DGFT, are also being accepted by the Custom Houses.
However, if the report produced by the
importer does not contain information mandated in the
circular 4/2008-Cus dated 12th
February 2008, the
importer is advised to select any chartered engineer, empaneled by the Custom
House, for inspection / appraisement of
the second hand machinery. In this regard, consultations have also been held
with DGFT, DIPP, Trade Associations (Oil, FICCI, ASSOCHAM, BCHAA and others)
2. After due consideration of the suggestions and concerns
put forth the Board has decided to
issue the following guidelines for valuation of imports of
second hand machinery:
3. 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. 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.
5. 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
6. 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.
7. 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.
8. 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
9. 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 I appraisement reports from
qualified neutral parties.
10. For this purpose, the Board has decided that Inspection
I 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 inspection
agencies notified as per HBoP 2015-20. In case the agencies
notified in the HBoP not being at the
port of import, the importers will be free to select any
Chartered Engineer from those empaneled by
the Custom House of the port of import.
11. No Custom House shall require any importer to have an
inspection I appraisement report of
second hand machinery from a particular Chartered Engineer.
The importer shall be free to select
any chartered engineer, empaneled by the Custom House for
the respective class of goods, if so
required.
12. To sum up, the following guidelines shall be followed:
a). All imports of second hand machinery I used capital
goods shall be ordinarily
accompanied by an inspection I 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 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 I
appraisement of the goods, he may have the goods inspected
by any one of the
agencies in India, as are notified by the DGFT under
Appendix 2G of the HBoP 2015-
20 and Aayat Niryat Forms to FTP 2015-20, as amended from
time to time (para 2.59
of Handbook of Procedures 2015-20 refers).
d). At customs stations where agencies notified by DGFT are
not present, importers
may continue to avail of the services of locally empaneled
chartered engineers.
e). In cases where the report is to be prepared by the
agencies in India notified by
DGFT or the chartered engineers empaneled by Custom Houses
the same shall be
in the Form B annexed to this circular.
f). 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 va,ue 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.
13. This circular supersedes circular 4/2008-Cus dated 12th
February 2008.
14. Any difficulty in the implementation of the foregoing
guidelines may be brought to the notice
of the Board.
Yoursiaithfully,
(S. Kumar)
Commissioner (Cus & EP)
Phone: 011-2309 2080
Fax: 011-2309 4432
Form B
(Refer Pare 12(e) of Circular No. 25/2015 dated 15th
October 2015
[On the letter Head of the Chartered Engineer/firm if
inspection report is issued in India]
I, (name of chartered engineer) hereby certify that I have
carried out an inspection of
the used machinery covered jnder invoice no dated issued by
(name of co)as per the details below:-
l/We have visually inspected the second hand
machinery/capital goods and certify the following:
(i) Place of Inspection
(ii) Date of Inspection
(iii) Duration of inspection (in hours)
Details of Importer:
(i) Name:
(ii) Address:
(iii) Importer Exporter Code No
Details of the goods:
i. Name of Manufacturer of the machine ( with
address/country/tel/website,
if available; in case of multiple machines or a plant,
details may be provided in a separate
sheet)
ii. Year of the manufacture of machinery:
iii. Serial no. I ID No. or the manufacturer's plate affixed
on the machine:
(please also enclose a photograph)
iv. Description of Machine
v. Whether original invoice relating to the machine is
available?
vi. If yes, value currency Date of Invoice (please enclose
copy)
vii. If no, please estimate the original sale price of the
machinery:
viii. Present condition of machinery and expected lifespan:
(In case the goods being inspected are second hand spares of
capital goods, it should be
certified whether "such spares have at least 80%
residual life of original spare")
Refer: Para 2.31 of the Foreign Trade Policy 2015-20
(Please attach close up photographs of the machinery;
multiple photographs may be
taken, if necessary.)
ix. Has any reconditioning or repairs been carried out
immediately preceding this inspection:
YES/No
x. If yes, have these been carried out at the expense of the
seller or by the purchaser or a
third party?
xi. Are there invoices to indicate the cost thereof: YES/NO
(please enclose relevant invoices)
xii. If No, then estimated cost thereof
xiii. Please briefly describe the nature of repairs and/or
refurbishment:
xiv. Were any charges incurred by the purchaser, for
dismantling, packing and transporting
the machinery to the port of export? If yes, please indicate
the charges
xv. Any catalogues I documentation of the machine are
available? If yes, please provide the
details and copies.
(e) The following means/aids/technical reference material
have been used for inspecting the
goods:
(i)
(ii)
(iii)
I/We hereby declare that the particulars and statements made
in this certificate are true and correct..
Date Signature
Seal of th e
Inspecting
Agency
Name of the Inspecting
Person/Inspector
Desig nation
Address (office)
E Mail Address
Phone Number
Instructions:
1. This certificate shall be presented before Indian Customs
(by the importer of the second hand
machine(s)) as a part of the import declaration under
Customs Act, 1962 , which is a legal
declaration
2. The Chartered Engineer must enclose a copy of the
certificate issued by the Institute of
Chartered Engineers which qualifies him to perform such
appraisement/inspection
3. Please attach a copy of the relevant notification of DGFT
which notifies the firm for Preshipment
Inspection in India (where applicable) Or,
4. Please attach copy of Customs House letter authorising
you I your firm as an empanelled
chartered engineer.
Form A
(Refer Para 12(b) of Circular No. 25/2015 dated 15th
October 2015)
[On the letter head of the Chartered Engineer/Firm or
an equivalent entity in the country of sale]
I, (name of chartered engineer) hereby certify that I have
carried out an inspection of
the used machinery covered under invoice no dated issued by
(name of company/firm) as per the details below:-
lA/Ve have visually inspected the second hand
machinery/capital goods and certify the following:
(a) (i) Country of Inspection
(ii) Place of Inspection
(iii) Date of Inspection
(iv) Duration of inspection (in hours)
(b) Details of seller:
(i) Name:
(ii) Address:
(iii) Telephone No.
(iv) E-mail
(v) Status: Actual user or dealer
(c) Details of Importer:
(i) Name:
(ii) Address:
(iii) Importer Exporter Code No.
(d) Details of the goods
i. Name of Manufacturer of the machine (with
address/country/tel/website,
if available; in case of multiple machines or a plant,
details may be provided in a separate
sheet)
ii. Year of the manufacture of machinery:
iii. Serial no. I ID No. or the manufacturer's plate affixed
on the machine:
(please also enclose a photograph)
iv. Description of Machine
v. Whether origina invoice of the machine is available?
vi. If yes, value currency Date of Invoice (please enclose
copy)
vii. If no, please estimate the original sale price of the
machinery,:
viii. Present condition of machinery and expected lifespan:
(In case the goods being inspected are second hand spares of
capital goods, it should be
certified whether "such spares have at least 80%
residual life of original spare")
Refer: Para 2.31 of the Foreign Trade Policy 2015-20
(Please attach close up photographs of the machinery;
multiple photographs may be
taken, if necessary.)
ix. Has any reconditioning or repairs been carried out
immediately preceding this inspection:
YES/No
x. If yes, have these been carried out at the expense of the
seller or by the purchaser or a
third party?
xi. Are there invoices to indicate the cost thereof: YES/NO
(please enclose relevant invoices)
xii. If No, then estimated cost thereof
xiii. Please briefly describe the nature of repairs and/or
refurbishment:
xiv. Are there any charges incurred I to be incurred by the
purchaser, for dismantling, packing
and transporting the machinery to the port of export? If
yes, pi indicate the
charges
xv. Any catalogues I documentation of the machine are
available? If yes, please provide the
details and copies.
(e) The following means/aids/technical reference material
have been used for inspecting the
goods:
(i).
(iii).
I/We hereby declare that the particulars and statements made
in this certificate are true and correct.
Date Signature
Name of the Inspecting
Person/Inspector
Designation
Seal of th e
Inspecting
Agency
Address (office).
E Mail Address_
Phone Number
Instructions:
1. This certificate shall be presented before Indian Customs
(by the importer of the second hand
machine(s)) as a part of the import declaration under
Customs Act, 1962 , which is a legal
declaration
2. The Chartered Engineer I Chartered Valuer I Qualified
Expert must enclose a copy of the
certificate issued by a national body which qualifies him to
perform such appraisement/inspection
3. The photograph of the Chartered Engineer I Chartered
Valuer I Qualified Expert shall be affixed
to this report
