CESTAT Chennai Backs Load-Port CE Certificate Over Local CE Report, Restores Declared Import Value

The Chennai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside Customs authorities' enhancement of the value of imported second-hand machinery after finding that the enhancement was based on a local Chartered Engineer's certificate that did not disclose the basis for the revised valuation.

A bench of Judicial Member Ajayan T.V. and Technical Member Vasa Seshagiri Rao observed that Customs authorities had discarded the load-port Chartered Engineer's certificate relied upon by the importer and adopted the valuation contained in a local Chartered Engineer's certificate without sufficient justification.

"Customs authorities have merely transposed the local CE Certificate for that of the load CE Certificate which tantamount to mere substitution of the opinion of one expert for that of another, without any sufficient independent basis for its adoption. It is also pertinent that the customs authorities have not impugned the load port certificate as not genuine or as one obtained by fraud. We are therefore of the considered opinion that such rejection of the load port CE Certificate in favour of the one issued by the local CE Certificate cannot sustain and the consequent rejection of transaction value and enhancement of the same as carried out in the assessment of the Bill of entry No. 7868851 dated 31.12.2014 is untenable and is liable to be set aside." the bench observed.

The appeal was filed by Shri Hari Enterprises against an order of the Commissioner of Customs & Central Excise (Appeals-II), Tiruchirappalli, which had upheld the assessment of six used Fuji Printer Processors imported under a Bill of Entry dated December 31, 2014. The importer had declared the value of the goods at JPY 640,000.

Customs authorities considered the declared value to be very low and enhanced it to JPY 36,00,000. The importer challenged the enhancement, contending that it had furnished import documents including the invoice, packing list, bill of lading and a load-port Chartered Engineer's certificate.

The importer also paid duty under protest and, through a letter dated January 27, 2015, objected to the enhancement. It stated that the Chartered Engineer in the country of supply had certified the invoice value as fair and reasonable and that the certificate complied with Board Circular No. 4/2008-Customs dated February 12, 2008. The importer further requested issuance of a speaking order and reserved its right to challenge the assessment.

The Tribunal noted that no speaking order was issued despite the specific request made by the importer.

"In such circumstances, we deprecate the non-issuance of a speaking order by the Assistant Commissioner despite the appellant's specific request and find it even more appalling that the Appellate Authority has not chosen to controvert the specific contentions."

The bench observed that the Department had not alleged that the importer and foreign supplier were related persons. It also found no evidence that the importer had paid any amount beyond the declared transaction value. Further, there was no allegation that any of the circumstances under the Customs Valuation Rules, 2007 for rejecting the transaction value were present.

"There must be some reasonable basis for arriving at the belief that the transaction value is unacceptable, which belief should not only be supported by cogent evidence, but also be clearly communicated by way of a reasoned order.", it noted. 

Examining both the load-port and local Chartered Engineer's certificates, the Tribunal found that the local certificate stated that the value had been assessed at JPY 36,00,000 based on local market enquiries and the condition of the machines. However, it did not disclose details of those enquiries or explain how the revised value had been arrived at.

The Tribunal also noted that the local Chartered Engineer's certificate only recorded a visual inspection of the machines. In contrast, the load-port Chartered Engineer's certificate contained assessment and technical details and stated that the machines were in working condition.

"Thus, in the absence of any reference to any technical manual or additional information based on which value of the machines have been reassessed by the local chartered Engineer, we find no justifiable reason emanating that would warrant the load port CE certificate to be discarded."

The bench further noted that Customs authorities had not challenged the genuineness of the load-port certificate or alleged that it had been obtained by fraud.

Referring to Board Circular No. 4/2008-Cus. dated February 12, 2008, the tribunal observed that the circular contemplated acceptance of a local Chartered Engineer's certificate only in the absence of a proper load-port certificate, indicating the primacy accorded to the latter.

Allowing the appeal, the Tribunal held that the value declared by the importer was liable to be accepted.

"The declared value (transaction value) is liable to be accepted in terms of Section 14 of the Customs Act for assessment of the goods for duty of Customs, there being no misdeclaration on the part of the appellants."

The Tribunal accordingly set aside the order of the Commissioner (Appeals) and allowed the appeal with consequential relief.

For Appellant: Advocate B. Satish Sundar, 

For Respondent: N. Satyanarayana, Authorised Representative