Related-party import valuation: declared value can be rejected and depreciation-based value applied for second-hand machinery.

Declared transaction value for second-hand capital goods imported in a related-party transaction may be rejected where the importer fails to show that the relationship did not influence price or to produce contemporaneous values of identical or similar goods under Rule 4(3). In the absence of such supporting evidence, valuation may move to Rule 8, and depreciation-based valuation of second-hand machinery is treated as a permissible and rational method. On the stated facts, the rejection of the declared value and adoption of the depreciated-value method were upheld.

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Issues: Whether the declared transaction value of second-hand capital goods imported in a related-party transaction could be rejected and the value determined under the depreciated-value method under Rule 8.

Analysis: The declared value in a related-party import is acceptable only if the circumstances of the sale show that the relationship did not influence the price, or if the importer demonstrates contemporaneous values of identical or similar goods as required by Rule 4(3). No such supporting evidence was produced. The lower authorities had recorded circumstances showing why the declared value could not be accepted, and the resort to Rule 8 was made only after Rule 4 was found inapplicable. The depreciation method for second-hand machinery was treated as a permissible and rational means of valuation under Rule 8 in the absence of a reliable transaction value.

Conclusion: The rejection of the declared value and adoption of the depreciation-based valuation under Rule 8 was upheld, against the assessee.

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