Customs Act (IV of 1969)‑‑‑‑

‑-‑‑S. 35‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 9‑‑‑Constitution of Pakistan (1973), Art. 37(d)‑‑‑General Clauses Act (X of 1897), S. 24‑A‑‑‑Import Export Procedure Order, 1998, para. 19.16‑‑‑Pakistan Custom Tariff, Hdg. 9904.0010‑‑‑S.R.O. 1147(I)/89‑‑‑Drawback of the export on imported goods‑‑‑Goods were re‑exported being defective with the permission of Central Board of Revenue and Ministry of Commerce‑‑ Same quality of goods were imported and duty was paid and Bank guarantee was also furnished‑‑‑Customs Authorities refused to refund the custom duty paid on the re‑exported defective consignments and Bank guarantees had also not been refunded and returned by the Customs Authorities being import of such goods on other port and due to non- furnishing of consumption certificate of such goods‑‑‑Validity‑‑‑Customs Authorities had accepted the position that the imported goods would be re‑exported with the approval of the Central Board of Revenue and Ministry of Commerce‑‑‑Complainants had submitted an Indemnity Bond that they shall import the same material of the same grade at the same port i.e. Port Muhammad Bin Qasim within 180 days from the date of re‑export‑‑‑Customs Authorities maintained that they should have imported replacement consignment free of duty under S.R.O. 540(I)/98 from the same port whereas the complainants imported the goods from Karachi Port and either did not claim or were not allowed exemption by the Appraisement Collectorate‑‑‑Complainants had not explained the circumstances under which they did not comply with the undertaking of importing replacement consignment from Port Muhammad Bin Qasim‑‑ Fact remained that the imported goods were re‑exported and replacement goods were also imported in the country through another Customs station‑‑‑Since the exemption from duty was not availed on import of replacement consignment, the duty charged and Bank guarantee ought to have been refunded and released‑‑‑No justification was available with the Customs Authorities to require the importer to furnish consumption certificate of goods, whose re‑export they themselves allowed, for release of Bank guarantee‑‑‑Complainants were entitled to duty drawback under S.35 of the Customs Act; 1969 in circumstances‑‑ Federal Tax Ombudsman recommended that Central Board of Revenue shall direct the Collector, Customs Port Muhammad Bin Qasim to repay seven eighth of the duty as drawback under S.35 of the Customs Act, 1969 and to release the Bank guarantee within 30 days.

Aziz A. Shaikh for the Complainant.

Jawed Iqbal, Assistant Collector of Customs, Port Qasim.

Abdul Majid, Principal Appraiser.

FINDINGS/DECISION

The complaint relates to the Customs Authorities' refusal to refund the duty and taxes paid on the consignment that was re‑exported with the permission of C.B.R. and the Ministry of Commerce. The complainants imported two consignments of raw material namely "Malt Extract" (61, 380 Kgs. in 198 plastic drums in each import) in 1998 which were released on payment of 10 % duty in cash and bank guarantee for 35% duty under S.R.O. 1147(I)/89, dated 27‑11‑1989. The goods (raw material) did not meet the standard requirement and the supplier returned the money with extra 5% C&F value in foreign exchange even before re‑export of the goods. C.B.R. allowed re‑export of the two consignments in original packing, unprocessed form, with the undertaking that the same quantity and same material and grade should be imported within 180 days of the re‑export of the rejected material. The complainants re‑exported the rejected consignment and re‑imported the same quantity, which too was released under the dispensation of 10% duty and bank guarantee.

2. The complainants stated that one year and a half have elapsed and despite reminders and personal visits, the Customs have neither refunded the duty and taxes, nor returned the bank guarantees; they have not even responded to the complainants' pleas. According, to the complainants, the Collector has acted contrary to the principles of justice and Article 37(d) of the Constitution by improperly and unjustly holding the property of the complainants. They claimed to be entitled to refund of Rs.181,000 paid on 24‑10‑1998 and 196,000 paid on 15‑12‑1998 and return of bank guarantees for Rs.962,150 and Rs.1,117,408. They prayed that the Customs Authorities be held responsible for mal administration and be directed to refund the duties to them and return the bank guarantees.

3. The Additional Collector of Customs, Port M.B. Qasim (PMBQ), replying to the complaint, stated that two consignments imported by the complainants were released under the S.R.O 1147(I)/89. They were required to furnish consumption certificates within 15 months which they failed to do and the bank guarantees submitted by them were liable to be encashed. They requested for re‑export of the goods in terms of para. 19.16 of the Import Export Procedure Order 1998. They furnished indemnity bond authorizing Collector of Customs, PMBQ, to encash the bank guarantees submitted earlier in case they failed to import the same raw material of the same value and quantity within 180 days at the same port.

4. The consignments were re‑exported but the respondent stated that "there is no law to exempt duty on goods which were found defective or exported in terms of para. 19.16 of Import Export Procedures Order, 1998. However, replacement consignments imported in lieu of defective consignments enjoy exemption of customs duty with certain conditions vide SRO 540(I)/98". With regards to the complainants claim that the three consignments imported through Karachi Custom House be treated as replacement of the re‑exported defective consignments, the respondent asserted that these consignments had no relationship with the defective ones for a number of reasons, namely they were not supplied free of cost, replacement factor was not mentioned on the bills of entry, there was difference of weight, consignments were not supplied free of cost as the complainants had already recovered value, duty, income‑tax and miscellaneous expenses. The main objection was that replacement consignments were not imported at PMBQ in terms of Indemnity Bond filed at the time of re -export. The respondent stated that the complainants "are free to claim exemption in terms of S.R.O. 540(I)/98 (presently under heading 9904.0010 of the Pakistan Customs Tariff) on import of replacement consignment subject to fulfilment of the conditions mentioned therein". The request of refund of duty paid in cash and release of bank guarantees did not merit consideration.

5. During the hearing of the complaint the complainants' Attorney stated that the re‑export of goods was allowed by the Customs under certain specific conditions and they had fulfilled all the conditions. After the goods were re‑exported, the same quality of goods were imported, duty etc. was paid and bank guarantee was also furnished. But the 10% customs duty paid on the re‑exported defective consignments and bank guarantees have not been refunded and returned by the Customs Authorities.

6. He added that throughout the last two years he had written several letters to the Customs Authorities and continuously approached them on personal level but no response or reply has been received. Under section 24(A) of the General Clauses Act, the power to make any order and give the directions should be exercised reasonably, fairly, justly and for the advancement of the purposes of the enactment under Article 37(D) of the Constitution 1973.

7. The Department's representative stated that the goods were re- exported by' he complainants under clause (vi) of paragraph 19.16 under Chapter I of Import and Export Procedure vide S.R.O. 800(I)/98. This provision allows re‑export of imported goods under certain conditions. But it did not allow refund of duty and taxes paid and return of guarantee deposited at the time of import. However, under S.R.O. 540(I)/98 the Government has exempted from payment of Customs duty on import of replacement of goods supplied under conditions specified in the S.R.O. The complainant received from the suppliers the value of the goods, 10% Customs duty and all other charges incurred at the time of import. The new consignments were not in replacement as claimed and were imported not from PMBQ Customs but from Karachi Custom House where duty was paid and exemption under S.R.O. 540(I)/98 was not claimed.

8. He added that the matter pertaining to the earlier consignments that were re‑exported was fully settled between, suppliers and the complainant and the financial cost was shared between the two parties. Having done that, the matter was settled and the new import consignments had no relationship with the settled case. The bank guarantees were available with the Customs to be encashed as the condition of submission of evidence of consumption had not been produced.

9. From the facts pertaining to this complaint discussed above it is evident that the Customs Authorities accept the position that the imported goods were re‑exported with the approval of the C.B.R. and Ministry of Commerce. The complainants had submitted an Indemnity Bono that they shall import the same material of the same grade at the same port i.e. PMBQ within 180 days from the date of re‑export. The Customs maintain that they should have imported replacement consignment free of duty under S.R.O. 540(I)/98 from the same port whereas the complainants imported the goods from the Karachi Port and either did not claim or were not allowed exemption by the Appraisement Collectorate. The complainants have not explained the circumstances under which they did not comply with the undertaking of importing replacement consignment from PMBQ. The fact remains that the imported goods were re-exported and replacement goods were also imported in the country through another Customs station. Since the exemption from duty was not availed on import of replacement consignment, the duty charged and bank guarantee ought to have been refunded and released. There is no justification for the Customs Authorities to require the importer to furnish consumption certificate of goods, whose, re‑export they themselves allowed, for release of bank guarantee.

10. In any case the complainants were entitled to duty drawback under section 35 of the Customs Act. It is recommended that C.B.R. direct the Collector Customs PMBQ to‑‑‑

(i) repay seven eighth of the duty as drawback under section 35 of the Customs. Act and to release the bank guarantee within 30 days; and

(ii) report compliance within 45 days.

C.M.A./477/FTO Order accordingly.