Transaction value for second hand machinery cannot be displaced without reliable contemporaneous evidence of undervaluation and comparable imports.

Declared transaction value for imported second hand machinery cannot be rejected on the basis of remote, non-contemporaneous or otherwise unreliable comparisons unless the department produces cogent evidence of undervaluation. Here, the imports were supported by purchase documents, letter of credit, pre-shipment inspection and a Chartered Engineer's certificate, while the department relied mainly on another party's decade-old imports, an in-house expert report and indicative component prices, none of which established make, model, condition, year of manufacture or residual life with dependable certainty. In the absence of contemporaneous higher-priced imports or any valid ground to displace the invoice price, resort to the residual valuation rule was not justified and the demand, confiscation, redemption fine and penalty were set aside.

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Issues: Whether the declared transaction value of the imported second hand machinery could be rejected and re-determined on the basis of indirect comparisons and whether the consequent demand, confiscation and penalty were sustainable.

Analysis: The imported plant was second hand machinery imported on an as-is-where-is basis, supported by purchase documents, letter of credit, pre-shipment inspection certificate and a Chartered Engineer's certificate. The valuation adopted by the department rested mainly on imports of another party made about a decade earlier, without reliable evidence of make, model, condition, year of manufacture or residual life of the comparable machinery. Such material was not contemporaneous and did not satisfy the requirements for rejecting the declared price. The department also relied on an in-house expert report and indicative prices for components, but these did not constitute dependable evidence of undervaluation. In the absence of cogent evidence of contemporaneous higher-priced imports or any circumstance attracting rejection of transaction value, the invoice price could not be displaced and valuation could not be pushed to the residual rule.

Conclusion: The declared transaction value was held to be acceptable, the reassessment under the residual valuation method was unsustainable, and the demand of duty, confiscation of goods, redemption fine and penalty were set aside.

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