Chartered Engineering Services

We at CompuBee Technologies Pvt. Ltd. have been offering Chartered Engineering services to our clients for various purposes and in this blog post, we are going to describe various aspect of this chartered engineering service.

Let us understand one by one each term and in this context

• Chartered Engineer

A Chartered Engineer is a professionally registered engineer who has demonstrated a high level of competence and commitment in their specific field of engineering. The title “Chartered Engineer” is a mark of professional recognition and signifies that an individual has met certain standards of education, training, experience, and ethical conduct set by a recognized professional engineering institution. The Institution of Engineers (India) (IEI) is a major professional body that grants the title of “Chartered Engineer (India).”

Key aspects of a Chartered Engineer:

• Competence: Chartered Engineers possess the necessary knowledge, understanding, and skills to solve complex engineering problems effectively and ethically.
• Experience: They have typically gained significant practical experience in their field, taking on responsible roles and demonstrating their ability to apply engineering principles in real-world scenarios.
• Professionalism: They adhere to a code of professional conduct and ethics, recognizing their obligations to society, the profession, and the environment.
• Continuing Professional Development (CPD): Chartered Engineers are committed to ongoing learning and development to stay updated with the latest advancements and maintain their competence throughout their careers.
• Recognition: The Chartered Engineer status is often recognized nationally and sometimes internationally, enhancing career opportunities and providing greater credibility with employers, clients, and the public.

• Valuation of Imported Used Plant and Machinery Items at JNPA and Sahar ACC

As a chartered engineer, we are on panel of Jawaharlal Nehru Customs House (JNCH) a controlling customs commissionerate at Jawaharlal Nehru Port Authrity the biggest port in India controlling about 40% of India’s sea trade. Valuation of imported used plant and machinery items at Jawaharlal Nehru Port Trust (JNPT) and Air Cargo Complex (ACC), Sahar, Mumbai is governed by the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, under the Customs Act, 1962. The primary method of valuation is the transaction value – the price actually paid or payable for the goods when sold for export to India. However, for used plant and machinery, several specific considerations and guidelines come into play.

1. Transaction Value as the Basis:

• If the sale of the used machinery meets all the requirements of the Customs Valuation Rules, 2007 (e.g., the price is the sole consideration, and the buyer and seller are not related, or the relationship did not influence the price), then the price paid or payable is the primary basis for valuation.
• This price includes costs and services such as commissions, brokerage, engineering, design work, royalties, license fees, and transportation to the place of importation (JNPT or Sahar ACC).

2. Role of Chartered Engineer’s Report:

• Generally, imports of second-hand machinery / used capital goods should be accompanied by an inspection / appraisement report issued by an overseas Chartered Engineer or equivalent, prepared at the place of sale. This report typically includes:
  • Price of new machinery in the year of manufacture.
  • Current CIF value of new machinery if purchased now.
  • Year of manufacture of the machinery.
  • Sale price of the supplier.
  • Present condition of the machinery.
  • Nature and cost of any reconditioning or repairs.
  • If an overseas report is not available, the importer can obtain a report from a Chartered Engineer empanelled by the Custom House at JNPT or Sahar ACC.
  • No Custom House can mandate a specific Chartered Engineer. The importer has the freedom to choose from the empanelled list.

3. Examination of Declared Value:

• The Customs authorities at JNPT / Sahar ACC will compare the value declared by the importer with:
  • The report of the Chartered Engineer.
  • The depreciated value of the goods determined based on past circulars (Circular No. 493/124/86-Cus VI dated 19/11/1987 and dated 4/1/1988). These circulars historically provided guidelines on depreciation for used machinery (though current practices might refer to broader valuation principles).
• If the comparison does not raise doubts about the declared value, it may be accepted under Rule 3 (transaction value) of the Customs Valuation Rules, 2007.
• If there are significant differences, the Customs officer will seek an explanation from the importer justifying the declared value (Rule 12 of CVR, 2007). The officer will then evaluate the evidence, considering factors like depreciation, refurbishment, and the condition of the goods.

4. Alternative Valuation Methods:

• • • If the transaction value is rejected (because the requirements of Rule 3 are not met), the Customs authorities will proceed sequentially through other valuation methods outlined in the Customs Valuation Rules, 2007:
      • Rule 4: Transaction value of identical goods.
      • Rule 5: Transaction value of similar goods.
      • Rule 6: Deductive value (based on the resale price in India).
      • Rule 7: Computed value (based on the cost of production, profit, etc. – often difficult for used machinery).
      • Rule 8: Residual method (applied when other methods cannot be used).

5. Depreciation Considerations:

• • • While there isn’t a fixed “depreciation rate” prescribed in the Customs Valuation Rules, depreciation is a crucial factor in assessing the reasonableness of the declared value of used machinery.
    • The Chartered Engineer’s report plays a vital role in assessing the condition and remaining useful life of the machinery, implicitly considering depreciation.
    • Historically, Customs has referred to circulars outlining maximum allowable depreciation (e.g., a CESTAT Kolkata case in 2023 referred to a 70% maximum depreciation based on older circulars). However, the current emphasis is on determining the fair transaction value based on the prevailing condition and market realities.

6. Additional Costs:

• • • Any costs incurred on the machinery before importation, such as modernization, refurbishment, dismantling, and packing, must be included in the assessable value.

• EPCG Licenses

• SION (Standard Input Output Norms) for import / export

• Machinery Installation Certificates

• Plant Capacity Utilization Certificates

• Balance Life of equipment

• Impairment of Plant and Machinery Items

A Chartered Engineer Certificate for Impairment of Plant and Machinery Items is a professional document issued by a Chartered Engineer that confirms the status of plant and machinery with respect to impairment. It serves to assess whether the carrying value of assets, such as machinery or equipment, has decreased due to damage, obsolescence, or other issues that affect its useful life or value.

Here’s a breakdown of what this certificate typically involves:

1. Purpose of the Certificate:

• • • Verification of Impairment: The certificate verifies whether plant and machinery have suffered impairment, meaning their carrying value exceeds their recoverable value.
    • Compliance with Standards: The certificate ensures that the assessment complies with accounting standards such as the International Financial Reporting Standards (IFRS) or local accounting standards (e.g., UK GAAP), which may require impairment testing for assets.
    • Impact on Financial Statements: This document can be used for financial reporting purposes, indicating whether the company needs to adjust the value of its assets in its financial statements.

2. Process of Impairment Evaluation:

• • • Inspection and Evaluation: The Chartered Engineer will conduct a detailed inspection of the plant and machinery items. This may involve looking at:
      • Physical damage or deterioration.
      • Reduced operational efficiency.
      • Technological obsolescence.
      • Any other factors that could cause the equipment to have a reduced value.
    • Impairment Testing: The engineer will test whether the recoverable amount of the machinery is lower than its carrying amount. This includes reviewing the market value or cost of replacement and comparing it to the current book value of the asset.
    • Technical Assessment: The engineer will assess the functional state of the machinery, including its ability to perform as expected in operational conditions.

3. What is Included in the Certificate:

• • • Details of the Engineer: The name, qualifications, and professional registration of the Chartered Engineer issuing the certificate.
    • Description of the Equipment: A detailed list of the plant and machinery items being assessed, including identification numbers, models, and operational details.
    • Assessment Findings: An explanation of the impairment, including the reasons for the decrease in value (e.g., damage, obsolescence, wear and tear).
    • Valuation of the Impairment: A determination of the machinery’s current value compared to its original cost or book value, including any depreciation.
    • Recommendation: The engineer may include recommendations regarding whether the machinery should be repaired, replaced, or disposed of, based on the severity of the impairment.
    • Conclusion: A final statement certifying that the evaluation was carried out professionally, and that the impairment assessment is accurate.

4. Why You Need the Certificate:

• • • Financial Reporting: The certificate can be used in the preparation of financial statements, as businesses may need to adjust the value of their assets due to impairment.
    • Insurance Claims: In cases of damage, the certificate can be used to support insurance claims or claims for compensation for the loss in value.
    • Operational Decisions: The certificate can guide management on whether to repair or replace the equipment or continue using it in its impaired state.

5. Legal and Compliance Considerations:

• • • Compliance with Accounting Standards: Many jurisdictions require businesses to perform impairment testing for certain assets. The Chartered Engineer’s certificate ensures compliance with these accounting requirements.
    • Expertise and Credibility: Since the certificate is issued by a Chartered Engineer, it provides credibility and expert validation of the impairment process, which is essential for auditors, stakeholders, and legal matters.

• Componentization Of Assets

A Chartered Engineer Certificate for Componentization of Assets is a formal document issued by a Chartered Engineer to verify and certify that an asset has been appropriately broken down into its components. The componentization of assets is typically done when a large, complex asset is made up of multiple components with different useful lives, depreciation rates, or maintenance schedules.

Here’s an overview of the process and what a Chartered Engineer Certificate for Componentization of Assets would typically include:

1. Purpose of the Certificate:

The certificate verifies that the asset has been correctly broken down into its individual components and confirms that the useful lives and depreciation methods for each component are appropriate. This is crucial for accurate financial reporting and asset management.

2. What is Componentization?

• • • Componentization is the process of dividing a single asset into various parts or components, each of which has a different useful life and depreciation rate.
    • It is often applied to large, complex assets such as buildings, machinery, or infrastructure, where certain parts need to be replaced or depreciated separately due to different wear and tear patterns.

3. Why Componentize Assets?

• • • Accurate Depreciation: By componentizing an asset, businesses can apply different depreciation rates to the various components based on their actual useful lives.
    • Improved Maintenance Planning: It helps identify components that require replacement or repair at different intervals.
    • Financial Reporting: Accurate asset breakdown ensures better compliance with accounting standards (like IFRS or local GAAP), which may require separate depreciation for different components of an asset.

4. What is Included in the Chartered Engineer Certificate?

The certificate issued by a Chartered Engineer will typically contain the following elements:

a. Engineer’s Details:

• • • Name, qualifications, and professional registration of the Chartered Engineer.
    • Membership with relevant professional bodies (e.g., IET, IMechE, ICE).

b. Asset Details:

• • • Description of the asset being componentized (e.g., a building, machinery, or equipment).
    • Location and other identifying details of the asset.

c. Component Breakdown:

• • • A list of the components that make up the asset, detailing each individual part (e.g., engine, gearbox, electrical system, etc.).
    • For each component, the following information is typically provided:
      • Description of the component.
      • Estimated useful life.
      • Depreciation method (e.g., straight-line, diminishing balance).
      • Depreciation rate.

d. Evaluation of Useful Life:

• • • The Chartered Engineer will assess and justify the useful life for each component based on the manufacturer’s specifications, industry standards, or historical data.
    • Explanation of how the useful life for each component was determined.

e. Depreciation Schedule:

• • • A depreciation schedule for each component, specifying the depreciation rate and method.

f. Conclusions and Compliance:

• • • A statement confirming that the componentization process is in line with applicable accounting standards (e.g., IFRS, GAAP).
    • Assurance that the breakdown and depreciation rates are reasonable and appropriately applied.

g. Recommendations (if applicable):

• • • Any recommendations regarding maintenance, replacement, or future assessments of components based on the componentization findings.

6. Why is this Certificate Important?

• • • Financial Reporting Compliance: It ensures compliance with accounting standards like IFRS, which may require separate depreciation of asset components.
    • More Accurate Asset Valuation: By separating components, businesses can better track the value of individual parts of large assets.
    • Efficient Maintenance Management: Componentization allows for more precise scheduling of maintenance, repair, or replacement of specific parts, enhancing operational efficiency.
    • Tax and Depreciation Benefits: Correct componentization allows businesses to claim more accurate depreciation deductions, potentially benefiting their tax liabilities.

7. When Would You Need This Certificate?

• • • When a business needs to split a large asset (e.g., machinery, building, vehicle) into components for better depreciation tracking.
    • For financial audits or to meet regulatory requirements that mandate the componentization of significant assets.
    • In preparation for the sale or transfer of assets where individual components may be valued separately.

• Moving Assets out of SEZ areas or for GST Purposes

A Chartered Engineer Certificate for Moving Assets out of SEZ Areas or for GST Purposes is an official document issued by a Chartered Engineer that certifies the transfer or movement of assets from a Special Economic Zone (SEZ) to a non-SEZ area. The certificate is particularly important for compliance with Goods and Services Tax (GST) regulations, SEZ regulations, and other legal requirements related to the movement of goods, machinery, or assets.

This certificate helps ensure that businesses moving assets out of an SEZ comply with GST laws, accounting standards, and SEZ-specific regulations, which may involve tax exemptions, documentation, or other procedures.

Key Aspects of the Certificate:

1. Purpose of the Certificate:

• • • Compliance with GST Laws: When assets are moved out of an SEZ, GST law may require the declaration of the movement, especially regarding tax exemptions, duties, or liabilities.
    • SEZ Regulation Compliance: Certain conditions and rules govern asset movements within and out of SEZs, and the certificate ensures compliance with these regulations.
    • Documentation for Audits and Inspections: The certificate provides necessary documentation for audits, tax filings, or inspections to ensure the correct handling of goods under GST and SEZ provisions.

2. Content of the Chartered Engineer Certificate:

A typical Chartered Engineer certificate for moving assets out of an SEZ for GST purposes will include the following sections:

• • • Engineer’s Details:
      • Full name, qualifications, registration details, and membership with a relevant professional body (e.g., IMechE, IET, etc.).
      • Contact details and signature of the Chartered Engineer.
    • Asset Details:
      • Description of the asset(s) being moved (e.g., machinery, equipment, or materials), including unique identifiers like serial numbers, model numbers, and values.
      • Asset quantity and type.
    • Details of SEZ and Non-SEZ Locations:
      • SEZ name and location from which assets are being moved.
      • Non-SEZ destination, including the address or location to which the assets are being transferred.
    • Purpose of Asset Movement:
      • Reason for moving assets out of the SEZ (e.g., business expansion, maintenance, sale, relocation, etc.).
    • GST Compliance:
      • Confirmation of GST applicability, including whether any exemptions are applicable under GST provisions for the SEZ.
      • Details on whether any tax or duties are payable on the movement of assets and if any documentation (invoices, bills of entry, etc.) has been correctly prepared for GST filing.
    • Movement Date:
      • The date or period during which the assets were or will be moved.
    • Declaration and Confirmation:
      • A declaration stating that the engineer has reviewed the movement of assets and confirms compliance with GST and SEZ regulations.
      • Signature of the Chartered Engineer certifying the movement and compliance.

Why is This Certificate Needed?:

• • • Compliance with GST Regulations: SEZ units are often exempt from GST on goods or services, but when assets are moved out of the SEZ, there may be tax implications. This certificate helps ensure that GST requirements are met.
    • Audits and Tax Filings: This certificate serves as proof of compliance during GST audits or tax filings. It can help prevent penalties for non-compliance.
    • Regulatory Requirements: Movement of assets out of SEZ may involve adhering to specific SEZ regulations regarding approvals, documentation, and tax treatment. This certificate ensures that these regulations are followed.
    • Asset Management: It also provides a formal record of the asset movement, ensuring proper tracking of company assets as they are transferred between different locations.

When is the Certificate Required?

• • • When assets are moved from an SEZ to a non-SEZ location and GST exemptions or taxes are involved.
    • During an audit or inspection of GST filings or SEZ regulations compliance.
    • When transferring assets for purposes like maintenance, business expansion, relocation, or sale.

• SCOMET Certificates

A Chartered Engineer Certificate for SCOMET (Special Chemicals, Organisms, Materials, Equipment, and Technologies) is a formal document issued by a Chartered Engineer to certify that certain goods or materials, which do NOT fall under the SCOMET list regulated by the Directorate General of Foreign Trade (DGFT), comply with India’s export control regulations. This certification is required for exporting sensitive or dual-use items that may have military or other strategic applications.

Purpose of the Chartered Engineer Certificate for SCOMET:

The SCOMET list contains items that are considered sensitive due to their potential use in military applications or strategic technologies. The purpose of the Chartered Engineer Certificate for SCOMET is to verify that these items meet the necessary technical and regulatory requirements before they are exported. The certificate ensures that the export complies with India’s Foreign Trade Policy and SCOMET regulations.

Key Elements of the Chartered Engineer Certificate for SCOMET:

1. Engineer’s Details:

• • • Full name, professional qualifications, registration number, and membership details of the Chartered Engineer.
    • Contact information of the Chartered Engineer issuing the certificate.

2. Exporter and Consignee Details:

• • • Exporter: Name, address, and details of the exporter.
    • Consignee: Name and address of the end-user or consignee receiving the goods.

3. Description of the Goods:

• • • Detailed description of the goods/materials being exported, including model numbers, serial numbers, quantity, and technical specifications.
    • Any specific items that fall under the SCOMET list need to be clearly identified and referenced.

4. Purpose and End-Use of Export:

• • • Clear description of the purpose for which the goods are being exported (e.g., industrial use, research, etc.).
    • End-use declaration: A statement confirming that the goods will be used for non-military, peaceful purposes as per the export control guidelines.

5. SCOMET Compliance:

• • • A confirmation that the goods/materials listed for export are part of the SCOMET list and have been reviewed for compliance with India’s export control regulations.
    • Declaration that the goods are not intended for use in any activities that may violate India’s SCOMET export control policies.
    • The certificate should also confirm that the exporter has not violated any international trade obligations or agreements that India is a part of (e.g., Missile Technology Control Regime (MTCR), Wassenaar Arrangement, etc.).

6. Non-Re-exportation Declaration:

• • • A statement confirming that the goods will not be re-exported to restricted countries or entities as per India’s export control laws.
    • Declaration that the goods will not be used for the development or production of weapons of mass destruction or other prohibited activities.

7. Engineer’s Declaration and Signature:

• • • A declaration by the Chartered Engineer that the certification has been issued based on a technical evaluation of the goods and that all details provided are accurate and in compliance with the SCOMET regulations.
    • Signature of the Chartered Engineer.

Why is This Certificate Important?

1. 1. 1. Compliance with Export Control Laws: The SCOMET certification ensures that sensitive goods are exported in compliance with India’s export control regulations.
      2. Preventing Misuse of Sensitive Goods: The certification helps prevent sensitive goods from being diverted for military or other prohibited uses.
      3. Required by Authorities: This certificate is often required by the Directorate General of Foreign Trade (DGFT), customs authorities, and import/export authorities to ensure that the export of controlled goods is conducted legally.
      4. International Obligations: India’s participation in international treaties and export control regimes like the MTCR and Wassenaar Arrangement necessitates the certification of sensitive goods being exported.

When is This Certificate Needed?

• • • When exporting items that are listed under the SCOMET list as per India’s Foreign Trade Policy.
    • During customs clearance and when seeking approval from DGFT for export of sensitive materials.
    • To ensure compliance with international export control regimes.
    • As part of the documentation required for audits, inspections, or compliance verification related to export control laws.

• Certificate for export of plant and machinery items.

A Chartered Engineer Certificate for the Export of Plant and Machinery Items is a formal document issued by a Chartered Engineer, which certifies that the plant and machinery items being exported comply with applicable technical specifications, standards, and regulations. This certificate is typically required for customs clearance, regulatory compliance, and to meet export control requirements.

Such a certificate assures that the plant and machinery being exported are in good condition, meet the necessary technical standards, and adhere to all the rules governing the export process. It is commonly required by authorities like DGFT (Directorate General of Foreign Trade), Customs, and other export control bodies to confirm the legitimacy and compliance of the goods.

Key Aspects of the Chartered Engineer Certificate for Export of Plant and Machinery Items:

1. Engineer’s Details:

• • • Full name and professional qualifications of the Chartered Engineer.
    • Registration number with a professional body (e.g., the Institution of Engineers).
    • Contact information of the Chartered Engineer issuing the certificate.

2. Exporter’s Details:

• • • Full name and address of the exporter (company or individual).
    • Export License Number (if applicable).
    • Contact information of the exporting company.

3. Description of the Plant and Machinery Items:

• • • Detailed Description of each item (type of plant, machinery, or equipment being exported).
    • Model Numbers, Serial Numbers, and Identification Marks: Unique identifiers for the machinery.
    • Quantity: The number of units being exported.
    • Technical Specifications: Detailed technical details (e.g., capacity, specifications, configuration, and other features).
    • HS Code: Harmonized System code used for customs classification.

4. Destination and End-User Information:

• • • End-User: Name and address of the recipient or buyer of the machinery.
    • End-Use Declaration: Description of the intended use of the machinery by the recipient (e.g., for industrial, manufacturing, research purposes).
    • Destination Country: Country where the machinery is being exported.

5. Confirmation of Compliance:

• • • The certificate should confirm that the plant and machinery comply with relevant export regulations, safety standards, and quality norms.
    • Customs Compliance: Declaration that all required export documentation has been completed as per India’s Foreign Trade Policy and other applicable laws.

6. Declaration of the Engineer:

• • • A statement from the Chartered Engineer confirming that they have reviewed the technical specifications of the machinery and that the export complies with the required regulations.
    • Declaration that the machinery meets the necessary standards for international trade and that it will not be used for any unlawful or prohibited purpose.

7. Signature and Stamping of the Chartered Engineer:

• • • The document must be signed and stamped by the Chartered Engineer to verify the accuracy and legitimacy of the certificate.Why is This Certificate Important?

1. 1. 1. Regulatory Compliance: This certificate ensures that the plant and machinery meet the necessary legal and technical requirements for export.
      2. Customs Clearance: It is often required by customs authorities to clear the goods for export and to verify that the exported items comply with both local and international trade regulations.
      3. Quality Assurance: The certificate confirms that the plant and machinery conform to relevant safety, quality, and performance standards.
      4. Export Control: The certificate assures authorities that the exported goods will not be used for unlawful or prohibited purposes.

When is This Certificate Needed?

• • • For export of plant and machinery that needs to comply with technical specifications and regulatory requirements.
    • For customs clearance and to meet export documentation requirements.
    • For machinery going to countries with specific import regulations that require certification from a professional engineer.
    • For compliance with international trade standards or agreements governing the export of equipment and machinery.