JUDGMENT: MR. SARFRAZ AHMAD KHAN, MEMBER (TECHNICAL).-(l). This judgment disposes of two appeals mentioned in the title since both involve common issues on law and facts, (i) Appeal No. 1685/LB/2003 was filed by Assistant Collector of Customs Sambrial against order in original No. 76/2003, dated 23.09.2003 passed by Collector of Customs, Sales Tax & Central Excise (Adjudication), Lahore whereunder 10 old and used boilers imported by the respondent against Bills of Entry No. 3528, dated 17.06.2003, 123 dated 15.07.2003 and 101 dated 12.07.2003 were allowed release on payment of fine equal to 25% of the ascertained value. For assessment purposes he ordered the concerned customs authorities to determine the value keeping in view the evidential bills of entry under section 25 of Customs Act, 1969 (Rs. 20/kg instead of Rs. 42/kg, as originally assessed by the appellant department). Grievance of the appellant was against order for assessing the goods at the value of Rs. 20/kg instead of Rs. 42/kg. (ii) Appeal No. 1686/LB/2003 was filed by the same appellant against order in original No. 75/2003, dated 23.09.2003 passed by the same adjudicating officer whereunder 03 old and used boilers imported by the respondent against Bill of Entry No. 83 and 84 both dated 10.07.2003 were allowed release in the same manner as done vide aforementioned impugned order in original No. 76/2003, dated 23.09.2003. Grievance of the appellant was against order for assessing the goods at the value of Rs. 20/kg instead of Rs. 42/kg.
2. On the lst date of hearing fixed on 08.12.2003, before the appeal could be admitted, the respondents entered appearance voluntarily on their own through Mian Abdul Ghaffar, Advocate and contended that since long the appellant had been assessing identical boilers at the value of Rs. 20/kg while in the case of appellant discrimination has been caused by ordering the assessm ent of the respondents' consignment at the value of Rs. 42/kg. Following interim order was passed on 08.12.2003:- "The main cause of grievance from the appellant was that the adjudicating officer ordered the appellant (then respondent) to reassess the consignment of old/used boilers at the rate of Rs. 20 per kilo, as done previously in a number of cases, while the appellant had assessed the consignment of the respondent at the rate of Rs. 42 per kilo. The leamed S. D. R. And the Inspector accompanying him insisted that condition of the boilers imported by the respondent was better than the condition of the boilers released earlier at the value of Rs. 20 per kilo.
The learned counsel for the respondent drew our attention to the expert opinion of DESCON and DDFC, both of whom had reported that the use of boilers in question would be hazardous to human life, which, according to the leamed counsel, meant that the condition was not very good.
According to the learned counsel, boilers of 1987 model had been assessed recently by Sambrial Dry Port at the rate of Rs. 20 per kilo vide Bill of Entry No. 2275, dated 12.04.2003 while the boilers imported by the respondent were of 1974 and 1975 models. According to the leamed counsel, this was the case of discrimination that the respondent's consignment was assessed at the unit value of double than the assessable value so far adopted by Sambrial Dry Port in the case of identical boilers.
Before the appeal is admitted, Collector of Customs, Sambrial is directed to produce the specific reasons for assessing boilers of 1974- 75 models at the rate of Rs. 42 per kilo while so far all old/used boilers at Sambrial Dry Port had been assessed maximum at to the unit value of Rs. 20 per kilo including the boilers of 1987 model. An officer well versed with the facts of the case shall appear before the Tribunal on 15.12.2003 alongwith relevant records.".
3. Collector of Customs, Sambrial submitted his response vide his memo dated 13.12.2003 through the leamed SDR which is reproduced for ease of reference:- "1. Under invoicing in old and used machinery was rempant at the Sambrial Dryport. To forestall this phenomenon a Public Notice No. 03/2003, dated 05.05.2003 (copy enclosed at Annex-A) was issued which contained the direction to assess second hand machinery as per procedure given in Chapter-XII para 41 of CGO 12 of 2002, dated 15.06.2002. Closed and past transactions were not interfered because these had been made under the long established/prevalent practices.
2. It is brought to the kind notice of Honorable Tribunal that the valuation of these boilers have not been made, by resorting to the concept of "Rs. Per kg" rather enforcing the aforementioned provision as is evident from the examination reports endorsed on the bills of entry. Moreover, the question of "Being hazardous of human life" pertains to the Import Policy and it has nothing to do with the value of the goods.
3. While assessing second hand machinery it has been kept in view that the value of second hand machinery should not be less than the value of scrap which is quite natural. There is no element of discrimination as the boilers have been imported by the same party. Valuation has just been rationalized in accordance with relevant law and rules.
Keeping in view the above it is respectfully prayed that valuation of these boilers, made by the Collectorate may very kindly be upheld.".
4. The Appraiser accompanying the leamed SDR was asked to specify as to under which of the three options given in Chapter XII, para 41 of CGO 12/2002, dated 15.06.2002 the boilers of the respondent had been assessed. The Appraiser stated that the appellant department neither possessed original price of the machinery and nor price of latest model of the machinery.
Therefore, according to him, 3rd option given in the said instruction was followed by making assessm ent on the basis of physical condition of the machinery. He was asked as to who had assessed the consignment in question and whether the assessing officer was an expert machinery appraiser. The Appraiser informed that the assessment was done by Mr. Adnan Cheema, Appraiser who was not an expert machinery appraiser. He was asked to indicate as to who had assessed earlier consignments referred to by the leamed counsel for the respondent at the value of Rs.
20/kg. He informed that those were assessed by the said Adnan Cheema and Qazi Afzal, none of whom was an expert/qualified machinery appraiser. The leamed SDR explained that the assessm ent had been done in pursuance to Public Notice No. 3/2003, dated 05.05.2003 issued by Collector of Customs Dryport, Sambrial to curb under invoicing of the second hand machinery which was hitherto taking place due to non-compliance of the prescribed instruction in the form of Chapter-XII para 41 of CGO 12/2002, dated 15.06.2002. He was asked to justify that in absence of original value of the machinery or of the latest model of the said machinery and also in absence of an expert/qualified machinery appraiser, the reliance merely on the physical condition on the report of a non expert Appraiser would involve arbitrariness and if it was not so, then why the earlier consignments released at the value of Rs. 20/kg were not re-opened, if those were assessed in violation of the official instructions, and as to why action was not taken against the same Appraisers who had been assessing the earlier consignments at the rate of Rs. 20/kg.
5. The leamed SDR insisted that value was done on the basis of physical condition of the machinery in question and in compliance with the Public Notice No. 3/2003, dated 05.05.2003 issued by Collector of Customs, Sambrial. According to him, iron and steel re-meltable scrap had been released vide Bill of Entry No. 53412, dated 20.10.2003 at the unit value of USS 550 Mt, which would be equal to Rs. 31/kg and thus the value of Rs. 20/kg would be even less than the value of re-meltable scrap.
6. The leamed counsel for the respondent insisted that 55 consignments of old and used boilers had been released from Sambrial Dryport and Lahore Dryport between September 1999 to April 2002 on the value ranging between Rs. 2.71/kg to Rs. 20/kg.
According to him, highest value adopted by Lahore Dryport was Rs. 15/kg in the case of Bill of Entry No. 1776, dated 11.09.1999 but assessed on 18.08.2003 while highest value adopted by Sambrial Dryport was Rs. 20/kg in the case of Bill of Entry No. 2775, dated 12.04.2003. According to him, no evidence whatsoever, was available with the appellant to show assessment of identical old/used boilers at the unit value of more than Rs. 20/kg. According to him, the case was referred to the adjudicating officer on the request of the respondent. The learned counsel for the respondent stated that the respondent was willing to pay duty/taxes at the value of USS 550/MT to that extent of the weight which was of the re-meltable scrap in the boiler.
7. We have heard contentions of both the sides and perused the appeal file available before us.
Admittedly, no consignment of old/used second hand boilers has been assessed at Sambrial Dryport at the value higher than Rs. 20/- per kg prior to assessment of the respondent's consignment @ Rs. 42/- per kilo. The justification offered by the Collector of Customs, Sambrial vide his memo dated 13.12.2003 (quoted under para-3 above) was that in order to curb under invoicing in the assessm ent of the imported old/second hand machinery, he decided to get the instructions of Central Board of Revenue, issued for the purpose of valuation/assessment of second hand/used machinery, in the form of Chapter-XII para 41 of CGO 12 of 2002, dated 15.06.2002, implemented. For ease of reference para 41 of CGO 12 of 2002, dated 15.06.2002 is re-produced as under:- "41. Valuation of second hand machinery.-The assessable value of second hand machinery shall be determined in accordance with the following principles, namely:- If the original price of such machinery is available then the original price will be depreciated by 7.15% per each year of the age of such machinery, reaching a maximum depreciation of 50% of the original price in seven years to arrive at the F.O.B, value.
If the original price is not available, and if the price of the latest model of such machinery is available, then, the price of the latest model will be depreciated by 10% per each year for the first three years and 5% per each year for the remaining four years, of the age of the second-hand machinery reaching a maximum depreciation 50% in value of the latest model to arrive at the F.O.B, value of the second-hand machinery.
In other words, a seven-year-old machine will get the maximum concession of 50% free of its original price from the price of its latest model in case the original price is not available.
If both the original price and the price of the latest model are available, then, the higher FOB value will be taken for assessm ent.
If both these prices are not available then FOB value will be appraised on the basis of the following factors, namely:-
(a) Type of machinery,
(b) Condition of machinery,
(c) Country of origin/manufacture, and
(d) Evidence of value of new, re-cbnditioned and old.
(e) Machinery, available with the customs authorities;
(i) if, such machinery is reconditioned, then 10% of the FOB value determined on the basis of the above principles will be added to arrive at the FOB value for assessment; and
(ii) assessable value shall consist of the FOB value, as determined in accordance with the principles mentioned above plus freight, insurance, commission (if any) and 1% landing charges.
Conditions:
(i) The importer will provide information regarding the year of manufacture, country of origin, make and model number of the machinery and its original price.
(ii) No depreciation shall be allowed for age above 7 years from the year of manufacture of such machinery.
Explanation: 'Original price' means the normal selling price of the manufacturer of such machinery when it was originally manufactured.".
8. A perusal of the above instructions revealed that assessable value of the second hand machinery was to be determined in accordance with the following principles:-
(i) Original price (normal selling price of the manufactures of such machinery when it was originally manufactured), if available, the same shall be depreciated by 7.15% per year but the depreciation shall not exceed 50% of the original price in 7 years to arrive at the FOB value.
(ii) In case the original price was not available, then the price of the latest model of such machinery, if available, to be depreciated by 10% per each year for the first 3 years and 5% per year for the remaining 4 years and the maximum depreciation not to exceed 50% to arrive at the value of the second hand machinery.
(iii) If both the original price and the price of the latest model were not available, then value was to be appraised on the basis of type of machinery, condition of machinery, country of origin/manufacture and evidence of value of new/reconditioned and old machinery available with the customs authorities by following the formula as mentioned under clause (e) of the aforementioned instruction.
9. Admittedly, the original price of the machinery and value of latest model of the machinery was not available with the appellant. Re-course was made to the third option and here also, only one factor -"condition of machinery"- was kept in mind and the judge to determine the condition of machinery was an appraiser of custom who was not technically qualified as machinery appraiser.
A perusal of the examination reports recorded on the reverse of the bills of entry, at Sambrial Dryport, produced by the leamed counsel of the respondent during hearing regarding used/second hand boilers imported by different importers over a period of time indicated "old and used" boilers and then other particulars like origin, model/type, year of manufacture and pressure etc., were mentioned in those examination reports. The examination reports recorded on different bills of entry described "old and used" boilers alongwith other aforementioned particulars but how this condition of "old and used" was distinguishable from the consignments of the respondents with the consignments of "old and used" boilers assessed earlier at the unit price of Rs. 20/- per kilo as against the assessed value of Rs. 42/- per kilo, in the case of respondent is not evident from any examination report and other documents produced before us by the appellant. Two letters, one each from Descon Engineering Ltd., and DDFC who were consulted by the appellant as experts, were available on the appeal file and both had reported that the boilers in question were old and used and had also reported that the use of boilers in question would be hazardous to human life, which according to the learned counsel reflected the physical condition of these boilers but strangely enough the learned Collector of Customs, Sambrial Dryport interpreted the said remark of the experts to be relating to import policy and having nothing to do with the valuation of the goods. Being hazardous to human life certainly refers to the quality/ condition of the goods which would definitely have its repercussions in determination of the value.
10. It is evident from the aforementioned discussions and perusal of the record that despite the claim of valuation of the consignments on the basis of para 41 of CGO 12 of 2002 dated 15.06.2002, it was an arbitrary determination of value by the concerned appraisers of customs, which was being insisted up to the level of Collector of Customs without any basis and the appellant side failed to justify enhancement of the assessed value from Rs. 20/- per kilo, as done earlier in a number of consignments, to Rs. 42/- per kilo, as done in the case of the respondent, for the purpose of distinguishing as to specifically what were the differences in the physical condition of the respondent's consignments as compared to the earlier consignments assessed at Rs. 20/- per kilo.
The appellant side failed to justify as to how boilers of 1987 model were assessed at the value of Rs.
20/- per kilo vide bill of entry 2275 dated 12.04.2003 by Sambrial Dryport Customs while boilers of 1974 and 1975 model were being assessed at the value of Rs. 42/- per kilo. In view of these facts, we do not find any justification in interfering with the order of the leamed Collector of Customs, Central Excise and Sales Tax (Adjudication), Lahore with regard to the valuation aspect and hence both the appeals are dismissed in limine, being without any merits.
11. Both the appeals stand disposed of as above.