Customs valuation of second-hand machinery rejects export market retail price and applies depreciation from year of manufacture.

For customs valuation of second-hand imported machines, the domestic retail list price in the country of export could not be adopted because the valuation rules barred reliance on that market price. The assessable value had to be refixed on the basis of the manufacturer's invoices for comparable models, with depreciation applied from the accepted year of manufacture, which was taken as 1989. Confiscation was sustained because the declared value was found unreliable, but the redemption fine was reduced in each case and the penalty was partly reduced in one appeal while being confirmed in the other.

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Issues: (i) Whether the retail list price in the country of export could be adopted for customs valuation of the second-hand machines in view of Rule 8(2)(iii) of the Customs Valuation Rules; and what basis should be used for refixation of value. (ii) Whether confiscation, redemption fine and penalty could be sustained, and to what extent relief was warranted.

Issue (i): Whether the retail list price in the country of export could be adopted for customs valuation of the second-hand machines in view of Rule 8(2)(iii) of the Customs Valuation Rules; and what basis should be used for refixation of value.

Analysis: The faxed retail price from the exporter's domestic market could not be used as the basis of valuation because the rule barred adoption of the domestic market price of the country of export. The only reliable material available was the manufacturer's invoices showing the prices of the relevant models in 1990 and 1992, along with the chartered engineer's certificate as to the year of manufacture. The year of manufacture was taken as 1989, and depreciation was directed to be applied from that year to arrive at assessable value.

Conclusion: The valuation was to be refixed on the basis of the manufacturer's invoices with depreciation from 1989, and the faxed Singapore retail price was rejected as a valuation basis.

Issue (ii): Whether confiscation, redemption fine and penalty could be sustained, and to what extent relief was warranted.

Analysis: Since the declared value in the chartered engineer's certificate was found unreliable and the assessable value required reworking, confiscation was upheld. At the same time, the circumstances justified reduction of the monetary consequences. The redemption fine was reduced in each case, and the penalty was reduced in one appeal while being confirmed in the other.

Conclusion: Confiscation was sustained, but the redemption fine was reduced to Rs. 1,00,000 in each case and the penalty was partly reduced as directed.

Final Conclusion: The appeals succeeded only to the limited extent of reduction in redemption fine and, in one case, penalty, while the confiscation and the reassessed valuation principle were maintained.

Ratio Decidendi: For customs valuation of second-hand imported goods, the domestic retail price in the country of export cannot be adopted where the valuation rules prohibit it, and the assessable value must be determined from reliable evidence of the goods' price with appropriate depreciation.

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