Transaction value for imported machinery must be tested first; depreciation-based valuation applies only when declared value is found unacceptable.

Section 14 of the Customs Act requires customs authorities first to test whether the declared transaction value of imported goods is acceptable; Rule 8 depreciation-based valuation may be used only after a finding that the declared value is not acceptable. The absence of comparable imports did not by itself justify automatic resort to Rule 8. On the facts, the wide divergence between declared and depreciated values for some machinery items cast doubt on their genuineness, so Rule 8 applied to those items; for the remaining items, the variation was not substantial enough to discredit the declared values, so the transaction value had to be accepted.

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Issues: Whether the declared transaction value of imported second-hand machinery was liable to be accepted, or whether valuation under Rule 8 of the Customs Valuation Rules, 1988 by the depreciation method was justified.

Analysis: Section 14 of the Customs Act, 1962 requires the customs authorities first to consider whether the declared transaction value is acceptable. The absence of international trade in the imported goods meant that comparable imports were not available, but that did not authorise an automatic resort to depreciation-based valuation. Rule 8 could be applied only after recording a finding that the transaction value was unacceptable. On the facts, the declared values for some items differed so widely from the depreciated values that their genuineness was doubtful, while for the remaining items the variation was not substantial enough to discredit the declared values.

Conclusion: The transaction value was to be accepted for Items 1, 3 and 4, while valuation by the depreciation method under Rule 8 was justified for Items 2, 5 and 6.

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