Valuation of imported goods under the Customs Act requires market value assessment prior to applying depreciation methods for duty calculations.

1. The appellant herein is a public sector undertaking of the State of Uttar Pradesh and has been undertaking construction projects not only within India but out of India as well.

2. For some contract, awarded to the appellant in Iraq, it had purchased certain equipments / machinery of foreign origin. After the project in Iraq was over, these machineries were sent to Nepal as the same was required for completion of another contract in Nepal. The contract in Nepal was over some time in the year 1990. Since this machinery was not required in Nepal, the appellant decided to import the same to India. For this purpose, Bill of Entry dated 16.02.1990, 28.02.1990, 22.03.1990, 11.04.1990, 16.04.1990 and 13.5.1990 were filed. In these bills of entries, the valuation was disclosed by the appellant by adopting a formula as under:
When the machinery was brought to Nepal after its use for about six years in Iraq, the valuation thereby was ascertained by employing a Chartered Engineer. The appellant, on the said value, applied the formula of depreciation for a period of three years for which it was used in Nepal. In this way, the value which was arrived at was declared as the value of these equipments.

3. The Department did not accept the aforesaid formula for arriving at the valuation of these machineries. As per the Department, since no sale was involved, the value of the machineries had to be fixed by applying depreciation method in terms of Circular No. 493/124/86 - CUS dated 19.11.87. This Circular provides for the rate of depreciation that has to be applied in the first year, second year, third year and onward etc. However, at the same time, it also mentions that the depreciation has to be subject to an overall limit of 70 per cent. By applying the circular on the purchase value of the machinery, 70 per cent depreciation was given and the value thus arrived at was treated as the value of the machinery for the purpose of import Bill.

4. This became the reason for the show cause notice dated 23.7.90 which was issued for recovery of short levy under S.28 of the Customs Act, 1962 , culminating into Order - in - Original passed by the adjudicating authority demanding duty for the sum of Rs.37,73,460/-. The appellant challenged the said order by filing the appeal before the Commissioner (Appeals), who, however, dismissed the appeal and passed orders dated 14.08.1992 confirming the aforesaid demand. Further appeal to Custom, Excise & Gold (Control) Appellate Tribunal (hereinafter referred to as 'CEGAT') yielded the same result as the CEGAT has also dismissed the appeal vide orders dated 28.05.2001 by observing as under:
"We have heard the rival submissions. We have also perused the case records. We note that in the instant case it is only transfer of the goods from Iraq to Nepal and Nepal to India. There was no sale, therefore, the question of determination of transaction value did not arise. Only course open to the department in the instant case was to take the original value and allow depreciating which authorities below have rightly done."

5. We find that S.14 of the Customs Act, 1962 deals with valuation of goods for the purposes of assessment. Sub-section (1) thereto, with which we are concerned in the present case, reads as under:
SECTION14. Valuation of goods for purposes of assessment. - (1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time