- (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. 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 16-2-1990, 28-2-1990, 22-3-1990, 11-4-1990, 16-4-1990 and 13-5-1990 were filed. In these bills of entries, the valuation was disclosed by the Appellant by adopting a formula as under:
(2.) 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 19-11-1987. 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.;