Judgment:
1. This appeal has been filed against the order of Collector of Customs (Appeals), Cochin. Under the impugned order the learned lower authority has denied the appellants' plea for allowing further depreciation for arriving at the assessable value over and above what has been allowed by the lower authority. In para 7 of the order, the learned lower authority has observed as under :- On going through the facts and circumstances of the case, I find that there is no disputes that the car was registered in July, 1984 and it was shipped to India in August, 1992. The original authority has correctly granted 46% depreciation for the period July, 1984 to June, 1988. As regards the additional depreciation. I am not able to agree with the contention of the appellant that the car is entitled to 70% depreciation for the mere fact that the car is more than 8 years old. On the other hand the depreciation for the period in excess of 4 years has to be determined on the basis of its actual condition. I find that the original authority who inspected the car has merely stated that "considering the condition of the car I allow a further depreciation of Rs. 40,000/-". The appellants has also not brought out any facts to show that the car was in such a poor condition that it requires any further depreciation. Under these circumstances, I hold that the depreciation extended to the car is adequate to take care of the condition of the car.
2. The learned Consultant for the appellant Shri Varkey has pleaded that in certain other cases, depreciation on a graded reduced scale has been allowed and has prayed that the similar method be adopted for valuation as for the second hand machinery. He has pleaded that in the present case, the value of the car has been fixed based on the condition of the car as ascertained by the original authority. On a query from the Bench, he has clarified that the car is no longer available and the same has been taken delivery of by the appellants. He has no other evidence to show that the car of similar model, of the same age was priced lower in the international market.
3. The learned SDR for the Department has pleaded that as it is, for arriving at the value of the second-hand cars, a slab system of depreciation is followed by the Customs authorities for valuation purposes and this depreciation on a reducing scale is provided for a period of 4 years and therefore, the price is fixed taking into consideration the condition of the car. He has pleaded, this is what has been precisely done in the present case. His plea is that no case has been made out for any reduction in the value.
4. At this stage, the learned Consultant has produced before us instructions issued by Vadodara Collectorate for the purpose of valuation of secondhand cars. This Circular is reproduced below for convenience of reference :- Depreciation to be allowed for used motor vehicles imported into India -Instructions The question of prescribing a fixed scale of depreciation to be allowed for valuation of imported second-hand motor vehicles has been under consideration of the Board. This was considered necessary so as to avoid disputes in the valuation of imported second-hand motor vehicles and subsequent delays in their clearance.
2. As per the existing Instructions, the scale of depreciation for old and used cars is as under :- If the motor vehicle is more than 4 years old, depreciation is allowed on merit after inspection of the motor vehicles, subject to a maximum limit of 70%.
3. In order to avoid possible disputes on the depreciation allowed on motor vehicles which are more than 4 years old, it has been decided by the Board that the scale of depreciation on used motor vehicles henceforth will be on the same basis as for the imported second-hand machinery. As such, the scale of depreciation for valuation of imported second-hand motor vehicles will be as under :- (iv) for every quarter during the 4th year 2% and thereafter subject to an overall limit of 70%.
4. The above Instructions may be brought to the notice of all Assessing Officers. The Instructions will apply from 26th May, 1993 and would apply to all pending assessments.
This circular is dated after passing of the order of the learned lower authority. The learned Consultant has pleaded that the Department has accepted that depreciation like in the case of second-hand machinery could be allowed on a sliding scale up to a limit of 70% and, therefore, the appellants on that basis should have been allowed for the depreciation.
5. We have considered the pleas made by both sides. We observe in terms of Section 14 of the Customs Act read with Valuation Rules, the value of the imported goods has to be fixed. In the case of the second-hand cars which have been in the possession of the appellants, it is possible that such value cannot be straight away fixed and various parameters, one of them being the condition of the car have to be considered before fixing the value. There are also international bulletins which are issued indicating the price of the secondhand cars.
As a practical measure, the Department has worked out a method of arriving at the value of the second-hand cars by giving a depreciation on a sliding scale for different period of usage. As pointed out by the learned SDR, the period of depreciation on this sliding scale earlier prescribed was upto 4 years and the depreciation has all along been allowed by the Department for arriving at the assessable value based on this sliding scale of depreciation. The total depreciation upto the fourth year comes to 46%. Thereafter, in respect of cars which are over 4 years old, the price was fixed taking into consideration the condition of the car and further depreciation based on that was being allowed. The purpose of this exercise is to ensure that the value arrived at is as near as possible to the price as is envisaged in terms of Section 14 of the Customs Act, 1962. We find the circular has been issued on 15th June, 1993 by the Vadodara Collectorate, and which we presume would have been issued on Boards' instructions, wherein we find the sliding scale of depreciation has been provided for fixing of the value of the car subject to an overall limit of 70% depreciation.
6. The plea of the learned Consultant is that without going into the condition of the car in terms of this instruction, the value has to be fixed giving the depreciation based on the scale provided in this circular for the years of usage even beyond the fourth year upto an overall limit of 70%. He has pleaded that if this basis has been accepted, the appellants should also be given the benefit of this basis. We find in fairness, the appellants plea requires consideration.
As it is, two different units of second-hand machinery may not be identical, but for purpose of Section 14, a method has to be evolved to ensure that the price as adopted is as near to what is envisaged under Section 14 of the Customs Act. If the Department is adopting a particular method in other cases and which is acceptable for the purpose of fixing of the value under Section 14, there is no reason why the same method could not be applied in the case of the appellants.
While fixing the value, no doubt the authorities will consider various other related factors also so that the price fixed in as per Section 14 of Customs Act, 1962.
7. In the facts of this case, we, therefore, observe that the appellant's case requires a second look in terms of the circular produced before us and the value of the car, thereafter, should be re-fixed taking into consideration this circular as well as our observations above. In the above view, we set aside the order of the lower authority and remand the matter to the lower authority, for de novo consideration after giving the appellant's an opportunity, of hearing.