Customs valuation by transaction value prevails unless material supports doubt about genuineness and sequential methods apply.

Transaction value remains the primary basis for customs valuation under Section 14(1) and the Customs Valuation Rules, and it cannot be displaced merely because the imported goods are used or by applying a depreciation formula. The residual method under Rule 8 is only a last resort after the proper officer has material and recorded reasons to doubt the genuineness or acceptability of the declared value. Bare assertions or assumptions are insufficient; the authority must first establish a lawful basis for moving sequentially through the alternative valuation rules.

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Issues: (i) Whether the declared transaction value of the imported used diesel engines could be rejected and replaced by a value arrived at on depreciation or best-judgment basis under the Customs Valuation Rules. (ii) Whether the department had material and reasons to doubt the genuineness of the transaction value so as to invoke the sequential valuation provisions.

Issue (i): Whether the declared transaction value of the imported used diesel engines could be rejected and replaced by a value arrived at on depreciation or best-judgment basis under the Customs Valuation Rules.

Analysis: Section 14(1) of the Customs Act, 1962 treats assessable value as the deemed value, but the valuation rules operate sequentially and transaction value is the primary method if it is genuine and acceptable. The residual method under Rule 8 is a last resort and does not displace the statutory preference for transaction value merely because the goods are used. Depreciation-based valuation is not automatic and depends on the facts, reasons recorded, and supporting material.

Conclusion: The declared transaction value could not be displaced on a mere depreciation formula in the facts of the case.

Issue (ii): Whether the department had material and reasons to doubt the genuineness of the transaction value so as to invoke the sequential valuation provisions.

Analysis: The authority must have reasonable grounds supported by material to suspect that the transaction value is not genuine or unacceptable before moving to Rules 5 to 8. A bare assertion that there is no international trade in such used goods is insufficient without enquiry or supporting evidence. In the present case, the show cause notice and the order proceeded on assumption and supposition, without recorded reasons or material showing why the declared value could not be accepted.

Conclusion: The department failed to establish a lawful basis for rejecting the transaction value and for resorting to the depreciation method.

Final Conclusion: The valuation adopted by the lower authority was unsustainable, and the assessee was entitled to acceptance of the declared value.

Ratio Decidendi: Under Section 14(1) of the Customs Act, 1962 read with the Customs Valuation Rules, transaction value is the normal basis of valuation unless the proper officer has reason, founded on material, to doubt its genuineness and to proceed sequentially to the alternative methods.

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