SPECIALITY PRINTERS (PVT.) LTD. VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2003 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 213 (2002)

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 25 & 25‑B‑‑‑Inspection, Valuation and Assessment of Imported Goods Rules, 1996, R.8(2)(c)‑‑‑S.R.O. 1108(I)/94 dated 14‑11‑1996‑‑ C.G.O: No.5/96 dated 21‑3‑1996‑‑‑Customs House Circular No.32/69‑‑ Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Value of imported and exported goods‑‑‑Fixation of value for imports and exports‑‑‑C. R. F. price‑‑‑Price quoted in the Polymer scan magazine‑‑‑Review application against the recommendation of Federal Tax Ombudsman to finalize the refund claims on the basis of assessment, in accordance with the Inspection, Valuation and Assessment of Imported Goods Rules (PSI Rules) notified by the Central Board of Revenue vide S.R.O. 1108(I)/94 dated 14‑11‑1996, at the CRF prices quoted by the PSI Company and against the implementation of the valuation of goods under the notified Rules and the implementation of the Federal Export Promotion Board to accept the CRF prices or refer the value dispute to the Working Committee, adopted by Central Board of Revenue in C.G.O. No.5/96 mainly on the ground that PSI Rules notified under S.R.O. 1180(I)/94 were not binding on the customs to the extent of accepting the CRF and PSI companies, had no knowledge, no competence, and no authority to ascertain and report customs values etc.‑‑‑Validity‑‑‑Was unbelievable that the Revenue Division would take the stand that its own notified rules were not legally valid and the Collector's Authority prevailed upon the existing law and rules made thereunder‑Views expressed by the Collector and the Deputy Collector frankly, forthrightly and in blunt terms lent considerable credence to the general perception that the field officers of the Tax Department do not comply with the, provisions of laws, rules and regulation in force, and ignore the directives of the Revenue Department/Central Board of Revenue as a matter of routine‑‑‑Revenue Division seems not only allowing defiance of law but also providing it full support to the contention that valuation of plastic moulding compound was the exclusive domain of Collector‑‑‑Review application not only lacked in substance but aimed at justifying and supporting patent illegality and accordingly was rejected.

Shabbir Ahmad Project Manager.

Muhammad Irfan Sarfraz, Deputy Collector of Customs.

FINDINGS/DECISION

The Revenue Division has filed an application for review of the findings/decision in Complaint No.C‑1743/K of 2001 dated 6‑2‑2002 where it was recommended to finalize the refund claims on the oasis of assessment, in accordance with the Inspection, Valuation and Assessment of Imported Goods Rules (PSI Rules) notified by the C.B.R. vide S.R.O. 1108(I)/94, dated 14‑11‑1996, at the CRF prices quoted by the PSI Company. The review application is against the implementation of the valuation of goods under the notified Rules and the implementation of the Federal Export Promotion Board to accept the CRF prices or refer the value dispute to the Working Committee, adopted by C.B.R. in C.G.O. No.5/96.

2. The Additional Secretary, Revenue Division, requesting to re consider and review the recommendations on merits, has argued that the prices fixed by the Collector of Customs should be‑accepted without regard to the notified rules and Federal Government decision on the following grounds:‑‑

(i) The assessment of plastic moulding compound has always been made, even during the pre‑shipment inspection (PSI) regime, on the basis of prices quoted in the Polymer Scan Magazine, irrespective of the value declared by the importer or in the CRF. "No differential treatment is to be lawfully given to the complainants at this belated stage which would also involve gross deviation from the long standing practice".

(ii) Complainant has not furnished any concrete proof that formal claims were lodged on 24‑4‑1996, nor any acknowledgement or S2 number has been submitted. Without any proof of refund claims lodged in 1996, they are barred by time.

(iii) The procedure for reference of value disputes to the Working Committee was made obligatory vide C.G.O. No.5/96, dated 21‑3‑1996. The goods were cleared on 25‑2‑1996 and 21‑3‑1996, prior to the issue of the CGO. There was nothing on record to show any protest was lodged by the importer against assessment on "minimum agreed values" at the time of clearance. Without any protest, it was not mandatory for the department to refer the case to the Working Committee. The importers were not entitled for any refund.

3. The Additional Secretary stated that the complainants imported two consignments o: plastic moulding compounds, HDPE at the declared value $700/MT and LLDPE at $740/MT. They claimed assessment on CRF prices reported by the PSI Company at $ 714.7/MT and 5754.87/MT. The plastic moulding compounds of various grades were assessed at the minimum values, agreed with the Plastic Manufacturers Association, as quoted in the Polymer Scan Magazine. The assessment of HDPE and LLDPE was, therefore, made on the basis of minimum values S 780/MT and $840MT based on Polymer Scan. The assessments were made before the issue of C.G.O. 5/96 and C.B.R. letter communicating the recommendation of Federal Export Promotion Board. There was no proof that the importer lodged refund claim in 1996. He was afforded opportunity of hearing, the claims were found unjustified and inadmissible but the importers had lodged the subject complaint before the Federal Tax Ombudsman.

4. The Collector of Customs (Appraisement) submitted additional arguments that:

(i) The status of CRF prices was advisory and it became mandatory after issuance of C.G.O. 5/96.

(ii) Circular No.32/69 providing 30% reduction on the list price was not relevant.

(iii) The refund claims were submitted in the Group (office of Assistant Collector). As per rules they should have been submitted in the central registry.

(iv) Scan values were still applied, even after introduction of GATT Code of Valuation.

5. During the hearing of the application the Deputy Collector rat Customs stated that whatever the mode of assessment or whatever the valuation system in practice at any point in time, the Scan Magazine prices alone have always been the basis of assessment. He was asked but aid not produce copy of the C.B.R.'s order under which departure from inspection, value and assessment of Imported Goods Rules, 1994 was allowed. He asserted that even when the old section 25 of the Act was operative, or when the Valuation Manual was issued under section 25B of the Act; during the application of valuation data base (VDB), during, the currency of PSI Rules, and even now with the introduction of transaction value system when no price list was issued, reliance has always and entirely been placed on the values given in the weekly Scan Magazine.

6. He vehemently argued that:

(i) The PSI Rules notified under S.R.O: 1108(I)/94 were not binding on the customs to the extent of accepting the CRF.

(ii) PSI companies and no knowledge, no competence, and no authority to ascertain and report customs values.

(iii) They had no customs experience and no professionals to report customs values. The Customs Authorities never accepted the values reported by the PSI companies.

(iv) The Working Committee, under the proviso to clause (c) of sub rule (2) of rule 8 of the PSI Rules notified in 1994 actually came on ground only with the advent of C.G.O. 5/96. The complaint that the dispute was not referred to the Working Committee was therefore, nothing but an afterthought.

(v) The superior Courts had given several rulings that no agency outside the Customs Department could be given the authority to determine the assessable values of the imported goods.

(vi) The system of prescribing minimum assessable values was in vogue/operation for a long time, at least for the last 10 years.

(vii) All imports of the items published in the Scan Magazine were assessed in accordance with the Scan‑based weekly circulars issued by the Collector and no imports were assessed at the CRF prices.

(viii) There was no element of quantity/value discount or value reduction (as envisaged in the Circular 32/69).

(ix) Seven refunds claim filed by the complainants were received in the Inward Register of the Assistant Collector's office which should have been filed in the central registry of the Custom House. The department had only the entry of receipt of seven refund claims on 25‑4‑1996 but the claims were not traceable.

(x) He admitted that in the reply to the complaint at the original stage, the reference to the application of section 25B of Customs Act was not correct.

(xi) While the original refund claims were not available with the department, action was initiated on the letters of the complainant received on 17‑2‑2001, hearing was conducted on 17‑4‑2001 and 25‑5‑2001 but the decision was not recorded on the file as the matter had been reported to the Federal Tax Ombudsman in‑the form of complaint.

Messrs, Specialty Printers, the complainants, strongly contested the legality of Scan prices and urged that in the presence of the PSI rules, the customs had no legal authority to arbitrarily apply Scan prices, the action was totally devoid of law and they were entitled to assessment of their imports at the CRF prices. They made the following submissions on the Review Application (copy supplied by the Assistant Collector of Customs Group III):‑‑

(i) Under sub‑rule 8(2)(c) of the PSI Rules, the customs was to accept the values reported by PSI companies.

(ii) The aforesaid sub‑rule provided that in case the customs viewed that the entries in the CRF or in the bill of entries were not correct the bill of entry should be referred to the designated committee for resolution of dispute.

(iii) Federal Export Promotion Board (FEPB) decided in its meeting on 29‑1‑1996 that henceforth the values reported in CRF issued by the PSI. Company would be accepted. Where the customs had evidence of values higher that of the CRF, the cases would be placed before the Working Committee of the Collectorate for examination and decision.

(iv) According to Custom House Circular No32/69, in the absence of evidence of actual imports reduction upto 30% over list price should be allowed.

(v) The Scan price had no legal authenticity. When the Customs Authorities applied higher prices for HDPE and LLDPE, they did not provide to the importers positive or irrefutable price evidence.

(vi) Application of Scan prices as minimum prices, not supported by evidence of invoice of actual imports, was violation of PSI Rules, 1994, (and section 25 of the Customs Act). If the customs had reliable evidence of value, they would not have relied upon the so‑called minimum assessable values.

(vii) Under the Customs law, the authorities had two options; either to accept the CRF price reported by the PSI company, or if they had higher value evidence, to confront the importer with the evidence before applying higher value.

(viii) Even if the Committee had come into being on 21‑3‑1996, it happened immediately after the goods were cleared on 25‑2‑1996 and 4‑3‑1996.

(ix) The designated committee did actually exist before the clearance of goods and customs had opened two Files Nos. SI/MISC/UT/245/96‑III‑PSI and SI/MISC/UT/313/96‑III PSI for reference of the cases to the Working Committee. But the Customs officials did not present the cases before the Committee.

8. The ground of the review application, the additional supportive arguments and submissions made by the Deputy Collector of Custom have been stated at considerable length in paragraphs 2 to 5. It is important to mention at the outset, that none of these arguments was advanced by the Revenue Division or the Department (Collector of Customs) in reply to the Complaint No.C‑1743‑K of 2001. The respondent had then stated that (i) the assessment of goods was made under section 25B of the Customs Act (ii) the Federal Export Promotion yard's decision was merely advisory in nature, and (iii) due to a procedural lapse the valuation case was not referred to the Working committee. The legal points now raised in the review application were cat advanced in the reply to the complaint.

9. The Revenue Division/C.B.R. have claimed that the PSI Rules framed by them vide S.R.O. 1108(I)/94 had no legal validity for assessment on import of plastic moulding compound and only the Collector had the sole authority to determine the assessable values. The Collector has asserted that C.R.F. prices were advisory and became mandatory only after issuing of C.G.O. 5/96. In other words, the Rules notified by the C.B.R. had no legal validity and assumed legality under the umbrella of a general order. The Deputy Collec4or has not only nullified the PSI Rules but has struck at the very roots of the Customs law with the argument that various principles of valuation of goods under the old section 25 of the Customs Act (based on Brussles Definition of Value i.e. BDV), section 25B of the Customs Act, the Value Data Base (replacing the Valuation Manual for a brief period), and the GATT Code of Valuation now enacted under section 25 of the Act, neither had any legal validity nor were ever applied for the valuation of plastic moulding compound. The supreme authority to determine the value of the plastic moulding compound, on the basis of the Scan Magazine, rested only With the Collector. The price list issued by the Collector was and remains the only basis for assessment of duty and taxes in disregard of all Customs laws.

10. It is unbelievable that the Revenue Division would take the stand that its own notified rules were not legally valid and the Collector's Authority prevailed upon the existing laws and rules made thereunder. The views expressed by the Collector and the Deputy Collector frankly, forthrightly and in blunt terms lend considerable credence to the general perception that the field officers of the Tax Department do not comply with the provisions of laws, rules and regulation in force, and ignore the directives of the Revenue Department/C.B.R. as a matter of routine. In this particular case, the Revenue Division seems not only allowing defiance of law but also providing it full support to the contention that valuation of plastic moulding compound is the exclusive domain of the Collector. The review application not only lacks in substance but aims at justifying and supporting patent illegality and is accordingly rejected.

C.M.A./512/FTOApplication rejected.