CESTAT Chennai: Declared Value of Used Machinery Cannot Be Rejected Solely on Local Chartered Engineer’s Certificate

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the declared transaction value of imported second-hand machinery cannot be rejected and re-determined solely on the basis of a local Chartered Engineer’s certificate, in the absence of valid reasons to discard the load port certificate.

Allowing the appeal filed by M/s. Abirami Weaving Mills, the Bench comprising Judicial Member P. Dinesha and Technical Member Vasa Seshagiri Rao set aside the order of the Commissioner (Appeals), Tiruchirappalli, and ruled that the enhancement of value lacked legal justification.

Background

The appellant had imported 20 units of used Picanol GTM AS rapier looms from Indonesia, declaring a unit price of USD 4,000 and a total invoice value of USD 80,000. The machinery, manufactured in Belgium in 1993, was imported in used condition.

The Department rejected the declared value on the ground that the importer had not initially furnished a complete load port Chartered Engineer’s certificate containing details such as price of new machinery, condition, repairs, and lifespan. The goods were consequently assessed based on a local Chartered Engineer’s report, which enhanced the value to USD 7,500 per unit. This enhancement was upheld by the adjudicating authority and later by the Commissioner (Appeals).

Appellant’s Case

The appellant argued that a load port Chartered Engineer’s certificate dated 28.09.2015 had in fact been obtained prior to import and contained material particulars relevant for valuation. It was contended that:

• Under Section 14 of the Customs Act, transaction value must be accepted where buyer and seller are unrelated and price is the sole consideration.
• There was no allegation of relationship or additional consideration.
• The local Chartered Engineer’s report lacked technical basis and did not justify enhancement.

Tribunal’s Findings

The Tribunal noted that:

• The load port Chartered Engineer’s certificate was available on record but was ignored primarily due to absence of certain details like year of manufacture.
• Both the load port and local certificates agreed on key aspects, including the nature of goods as used machinery and their non-reconditioned condition.
• The only omission in the load port certificate was the year of manufacture, while it still contained crucial details such as original value and condition.

Importantly, the Tribunal observed that as per the Board’s circular, reliance on a local Chartered Engineer’s certificate arises only when the load port certificate is absent or unreliable. In this case, no valid reason was recorded to reject the load port certificate.

Key Ruling

The Bench held that:

• Minor omissions in a load port certificate cannot justify rejection of transaction value.
• Redetermination based solely on a local Chartered Engineer’s certificate is not sustainable in law.
• Authorities must first discredit the load port certificate with valid reasons before resorting to alternative valuation methods.

The Tribunal emphasized that a minor deficiency that does not affect the nature or identity of goods cannot be treated as fatal to valuation.

Outcome

Holding that the enhancement of value lacked legal basis, the Tribunal set aside the impugned order and allowed the appeal.

Case Title: M/s. Abirami Weaving Mills v. Commissioner of Customs
Case No.: Customs Appeal No. 40225 of 2017
Decision Date: 25.03.2026