Messrs SPECIALITY PRINTERS (PVT.) LTD., KARACHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2002 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 2580 (2002)

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.25‑B‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Inspection, Valuation and Assessment of Imported Goods Rules, 1994 [S.R.O. No.1108(I)/94, dated 14‑11‑1994], R.8(2)(c)‑‑‑C.B.R. Letter C. No.2(2)S(Va1)/96, dated 14‑3‑1996‑‑‑Fixation of value for imports and exports‑‑‑Clean report of finding (CRF)‑‑‑Pre‑shipment inspection (PSI) ‑‑‑Refund‑‑ Assessment of value of goods under S.25‑B of the Customs Act, 1969 ignoring the clean report of finding (CRF) issued by the pre‑shipment inspection (PSI) company‑‑‑Validity‑‑‑Dispute about the customs values was not referred to the dispute resolution forum prescribed by the Central Board of Revenue and the Federal Export Promotion Board (FEPB)‑‑‑Refund applications were not processed and the complainant was denied the opportunity to examine and contest the evidence of higher values, and the claims were pending finalization since 1996 and this was a case of maladministration‑‑‑When a dispute resolution mechanism was in place, Department's action to ignore the same and introduce a higher price without even informing the importer of its basis was highly arbitrary and against all norms of administration of tax laws‑‑‑If there were instances of higher values, the evidence was not disclosed to the importer nor was he given the opportunity to rebut the same which, he had now done by identifying numerous cases where declared and CRF/assessable values were in the same range as those of the complainant‑‑‑Complainant was in fact denied the opportunity to present his case and rebut the evidence of enhanced value at the time of assessment and the refund claims had not been decided for more than five years which reflected adversely on the administration of the Department‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue to direct the Collector of Customs (Appraisement) to finalize the refund claims on the basis of assessment at the CRF price quoted by the PSI Company and accepted by the importer and ensure payment of the excess amount to the complainant within two weeks.

PTCL 1985 CL 100 ref.

Shabbir Ahmad, Project Manager.

Muhammad Irfan Sarfraz, Assistant Collector of Customs (Appraisement).

FINDINGS/DECISION

The complaint has been filed against the Customs Department assessment of two consignments of Plastic Molding Compound imported it 1996 on prices higher than the CRF prices reported by the Pre‑Shipment Inspection (PSI). Company, and not deciding the long pending claims for refund of excess customs duty and taxes. The PSI Company was required to inspect the goods before shipment, examine its price, and issue a Clean Report of Finding (CRF) for assessment of customs duty and taxes in accordance with the Inspection, Valuation ad Assessment of Imported Goods Rules, 1994, notified vide SRO No.1108 (I)/94 dated 14‑11‑1994. The Customs Department was required to accept the CRF for payment of duty and taxes. However, the Appraisement Collectorate assessed the goods under section 25‑B of the Customs Act ignoring the CRF issued by the PSI Company.

2. The Federal Export Promotion Board (FEPB) had specially ordered on 29‑1‑1996 that CRF values would be accepted by the Customs Department for assessment of goods. Where Customs Authorities had evidence of values higher than the CRF prices, ,they would be placed before the Working Committee of the Collectorate, comprising representatives of PSI Companies, the Customs Department, trade bodies and the concerned importers, for examination and decision.

3. The complainant imported two consignments of HDPE at invoice price of $700/PMT, and LLDPE at invoice price of $740/PMT, at CRF prices $714.07/PMT and $754.87/PMT respectively. The Customs Authorities, ignoring and setting aside all rules and regulations and FEPB orders, enhanced the values to $780/PMT and $840/PMT being the minimum fixed prices under section 25‑B of the Customs Act. The assessment at the higher prices was wrong and unjustified because, if the customs had some CRF evidence of higher prices of identical items, they were supposed to refer the cases either to the PSI Co. for re‑consideration or to the Working Committee as decided by the FEPB. The Customs forced the complainant to pay duty at prices fixed under section 25‑B. However, he filed claims of refund on 24‑4‑1996. Since then the complainant has made about 40 visits to the Assistant Collector of Customs (Appraisement Group‑III) and also complained to the Collector of Customs (Appraisement) but to no avail. He requested that Customs Authorities be directed to refund the amounts unduly charged from him in excess without any evidence of higher price.

4. The complainant's representative invited reference to the High Court ruling about disclosure of evidence:

"Disclosure of evidence. ‑‑‑Enhancement of value of the goods without disclosing any material is against the principle of natural justice and demanding of duty on such higher values is not sustainable in law. (PTCL 1985 CL.100)";

and stated that the evidence of higher values was not provided at the time of import and the Customs also did not send the bills of entry to the Working Committee because they had no evidence of higher values. The Customs should have given opportunity to the importer to explain in detail that CRF was acceptable but this was denied to him.

5. The Collector of Customs replied to the complaint that the complainant imported a consignment of Plastic Molding Compound HPDE from Taiwan whose assessment was finalized at $780/PMT on the basis of the then prevalent prices. The importer had filed claim for refund, he was accorded hearing, the matter was scrutinized, material evidence of the period December, 1995 to February 1996 was retrieved from the computer, and it was found that many assessments had .been made at values higher than the value of $780/PMT. The Department had ample material evidence to justify the assessment and this case was sub judice.

6. The Collector stated that Rule 8(2)(c) of the pre‑shipment inspection rules, issued vide. SRO 1108(I)/94 dated 14‑11‑1994, provided that where the value of goods determined under section 25‑B of the Act was higher than the values of goods specified under CRF, the duty should be levied at the higher value. Where the Customs was of the view at the CRF or the declared value was not correct, the bill of entry should be referred to the designated committee for resolution of the dispute. The contention that the Customs Department was to accept the price reported in the CRF by PSI Co. was not true and had no legal force.

7. He added that the decision taken in the meeting of FEPB was merely advisory and the law could not be neglected or ignored. For resolution of valuation disputes, CBR had prescribed the procedure in the third para. of Letter C.No. 2(2)S(Val)/96 dated 14‑3‑1996 that where Customs Authorities had evidence of values higher than those reported in the CRFs the cases would be placed before Working Committee for examination and decision. "The contention that case was not referred to Working Committee may be termed as a procedural lapse". Had it been referred to the Committee, the assessment would have been made at even a higher value prevailing as per available evidence.

8. With regards to the refund claims, he stated his claims were processed in the (Appraisement) Group and hearing was granted before finalizing the issue. The contents of the file revealed that during the hearing before the Adjudicating Officer, the complainant had stressed to decide the issue in the light of an order‑in‑appeal dated 8‑6‑1990 where the direction was given to provide to the importer the material evidence on the basis of which the value had been enhanced. The Collector referred to the material evidence in this case was the photocopy of a 30‑page printout enclosed with his reply with the remarks that "it was found that many assessments were made even more than the assessed value in this case(US $780/MT)". Therefore, the department had ample material evidence to justify the assessment made in this case. He concluded that "it stands established that the assessment made was correct and no refund is admissible to the complainant. Hence the complaint may be rejected not being supported by facts and law".

9. During hearing of the complaint the Department's representative admitted that the matter was not referred to the Working Committee but, referring to the printout of the imports during the relevant period, he stated that amongst the imports of Plastic Molding Compound from Saudi Arabia (and not Taiwan), the highest assessable value was $1040/PMT and the lowest was $720/PMT. On the basis of these statistics, he argued, the assessable value of HDPE and LLDPE were at par with the assessments made at that time and should, therefore, be accepted..

10. The complainant's representative stated in his rejoinder that the prevailing price of HDPE, according to the PSI Rules, meant the price prevailing in the country of export at the time of pre‑shipment inspection and identified 95 instances, from the Customs same printout, where the prevailing price was $700/PMT. He added that the Customs had opened two files for HDPE and LLDPE but they did not refer the cases to the Working Committee. The FEPB order circulated by the CBR was mandatory and not advisory and the only option available to the Customs was to refer the cases to the Committee. He also denied that hearing was conducted on 17‑4‑2001 and 25‑5‑2001 and stated he was merely disposed of by a verbal promise to finalize the refund claims which was not kept.

11. From the above discussion it is clear that the dispute about the customs values of the two consignments was not referred to the dispute resolution forum prescribed by the CBR and the FEPB. The refund applications were not processed and the complainant was denied the opportunity to examine and contest the evidence of higher values, and the claims are pending finalization since 1996. Clearly this is a case of maladministration. When a dispute resolution mechanism was in place, Department's action to ignore it and introduce a higher price without even informing

the importer of its basis was highly arbitrary and against all norms of administration of tax laws. If there were instances of higher values, the evidence was not disclosed to the importer nor was he given the opportunity to rebut the same which he has now done with reference to the aforesaid printout by identifying numerous cases where declared and CRF/assessable values were in the same range as those of the complainant.

12. It is established that the complainant was denied the opportunity to represent his case and rebut the evidence of enhanced value at the time of assessment and the refund claims have not been decided for more than five years which reflects adversely on the administration of the Department. It is .recommended that CBR direct the Collector of the Customs (Appraisement)‑‑

(i) to finalize the refund claims on the basis of assessment at the CRF price quoted by the PSI Company and accepted by the importer;

(ii) ensure payment of the excess amountto the complainant within two weeks; and

(iii) report compliance within four weeks.

C.M.A./M.A.K./373/FTO

Order accordingly.