Messrs ANM TRADING CO., KARACHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2004 P T D 100
[Federal Tax Ombudsman]
Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman
Messrs ANM TRADING CO., KARACHI
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No.C-401-K of 2003, decided on /01/.
th
July, 2003. (a) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)----
----S.9---Customs Act (IV of 1969), S.25(10)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Objection was that since the complaint was about assessment/valuation of an imported consignment in respect of which an order was passed after proper hearing, its cognizance was beyond the purview of Federal Tax Ombudsman in terms of S.9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Validity---Such contention was misconceived, based on lack of understanding the problems of the importers, misconception about the unbridled powers of Customs Officials to determine the customs values at will, and a disdainful attitude towards the public complaints---Objection, held; was based on invalid grounds and was unacceptable.
(b) Customs Act (IV of 1969)-----
----Ss.25(10) & 81(2)(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Valuation of imported and exported goods---Import of rubber conveyer belt---Provisional assessment---Final assessment after expiry of prescribed period of one year---Value of goods was based on an inquiry made by the Commercial Counselor of Pakistan in the country of origin and had not been obtained from the manufacturers/exporters but from a local trader which could not be applied to determine the value of export goods---Validity---Collector of Customs should disregard the advice of Valuation Department and re examine the valuation aspect on the basis of evidence of imports of identical/similar goods, from the same country of origin, of the same specifications and usage---Complainant/importer should have been afforded opportunity to furnish evidence in support of declared value and then to take an impartial decision---Assessment of goods in warehouse was not completed and bill of entry was not returned---Matter needed careful examination by the Collector of Customs and in case it was established that the assessment had been completed after two years, the importers would also be entitled to remission of penal surcharge-- Federal Tax Ombudsman recommended that Central Board of Revenue to direct the Collector of Customs to finalize the assessment of the first part of the consignment comprising four bales on the basis of the declared value; set aside the assessment order issued by the Deputy Collector of Customs and direct the Collector of Customs to re-examine the valuation aspect of the conveyer belts and decide the valuation within one month.
Muhammad Aziz, Proprietor.
Ch. Muhammad Rafiq, Consultant.
Zia-ul-Hassan for the Complainant.
Nur Muhammad, Advisor.
Ashhad Jawwad, Deputy Collector of Customs (Appraisement).
FINDINGS/DECISION
The complaint has been filed against the maladministration of the Customs Department arising out of the inordinate delay in finalizing the provisional assessment and allegedly illegal valuation of goods. The complainants have stated that they imported a consignment of Rubber Conveyer Belts of assorted sizes in 11 bales and filed into-bond bill of entry dated 7-3-2001 at the declared value of $ 10,005.56. When they filed the first ex-bond bill of entry on 9-4-2001 for release of part consignment, the Appraisement Collectorate did not accept the declared value and did not produce any lawful basis to enhance it. The part consignment was released on declared value under section 81 of the Customs Act. The Collectorate made efforts to collect material evidence of prices of goods from the country of export but they did not find any legal basis to challenge the transaction value. They received an advice dated 30-4-2002 from the Valuation Department, based on the report from the Commercial Counselor, Embassy of Pakistan in Korea, determining the value of consignment at $43,760.26.
2. The complainants stated that the provisional assessment was completed on 20-4-2001 and the final Assessment Order was issued on 24-3-2003, after the lapse of one year 11 months and four days. Final assessment should have been completed within a period of one year in terms of section 81(2) of the Customs Act. Since the final assessment was finalized after the expiry of prescribed period of one year, the provisional assessment attained finality in terms of section 81(4). The final assessment communicated through the assessment order dated 24-3-2003 was barred by time and the provisional assessment on the basis of the declared transaction value of the entire consignment had become final. They stated that in, support of the declared value they had produced the documentary evidences of selling price of the same goods to another company and asserted that their declared price, even if put to test under deductive method, would prove fair and correct.
3. The complainants stated that the value of goods relied upon by the Valuation Department was based on an inquiry made by the Commercial Counselor of Pakistan in South Korea. The prices had not been obtained from the manufacturers/exporters but from a local trader which could not be applied to determine the value of export goods. Authenticated price list was not obtained to show identical or similar goods exported to Pakistan. Further, section 25 of the Customs Act prescribed down the procedure for determination of value where transaction value was not accepted by the Customs and the methods of valuation have been spelled out udder subsection (10) of section 25. These methods should have been applied to ascertain the customs value.
4. The complainants stated that the Customs Authorities failed to take into consideration some vital aspects pertaining to the attributes and constituents of the, product having bearing on its value. The principal factors which have direct impact on the value of conveyer belts were the composite material used in the manufacture of the product, the number of layers, the type of coatings and the material of inner cord used. In this case the valuation advice has been merely based on the information provided by a trader in Korea. The vast difference in the export price and the local sale prices was well known and, therefore, the local (Korean) price should not be placed at par with the export price: The valuation invoices produced by the Valuation Department for imports of conveyer belts by Pakistan. Steel etc. did not relate to their goods. There was no comparison between the two sets of goods due to variation in specifications, sizes, usage, manufacture and country of origin.
5. The complainants thus argued that (i) the provisional assessment on the declared value attained the finality at the expiry of one year, (ii) when the Valuation Department checked the declared value on the work back-method, they found it correct, (iii) Valuation advice was issued on 30-4-2002 without affording them the opportunity of hearing; (iv) the valuation advice was not based on evidence of actual transactions; and (v) the same goods were being valued and cleared at Rs.45,000 per ton in Lahore. They requested that the assessment order dated 24-3-2003 be set aside, the declared value being the transaction value of the goods be accepted, and the penal surcharge of the warehoused goods on account of delay occasioned by the Customs Authorities in finalizing the transaction value be condoned and any other relief deemed fit may be granted.
6. The Deputy Collector of 'Customs, responding to the complaint, raised the objection that since the complaint was about the assessment/valuation, of an imported consignment, it was beyond the purview of the Federal Tax Ombudsman in terms of section 9(2)(b) of the Establishment of the Federal Tax Ombudsman Ordinance, 2000. He stated that the complaint was regarding an assessment/valuation issue in respect of which on order has been passed after proper hearing and a legal .remedy in the form of appeal was available to the complainants. He proposed that the subject complaint be disposed of accordingly (i.e. dismissed for lack of jurisdiction).
7. The Deputy Collector did not reply to the allegations about the delay in the finalization of provisional assessment and serious objections raised against the basis of valuation relied upon. He only sent a copy of the Assessment Order dated 24-3-2003, in which he has described the specifications of the imported Rubber Conveyer Belts, quantities and the declared values, and stated Commercial Counselor reported the ascertained prices on the basis of which the provisional assessment was finalized and the assessment of balance warehoused goods on the ex-bond bill of entry dated 5-5-2001 has also been made. The Department did not, consider it desirable to furnish replies and comments on the substantive arguments advanced in the complaint but, dismissively, only sent a copy of the Assessment Order dated 24-3-2003. This is a highly objectionable manner to deal with a serious complaint.
8. The respondents should appreciate the simple fact that the issue of an assessment order does not absolve them from the obligation of justifying their decision and, from the responsibility of replying to the allegations against the validity of the value of goods determined by them. This office has taken cognizance of the analytical and cogent arguments advanced by the complainants on the issues of not finalizing the provisional assessment and arbitrarily determining the values of goods on the basis of domestic prices of the goods in disregard to the norms and principles of valuation of goods exported from one country to another. The contention that the matter was not within the jurisdiction of this office is misconceived, based on lack of understanding the problems of the importers, misconception about the unbridled powers of customs officials to determine the customs values at will, and a disdainful attitude towards the public complaints. It is based on invalid grounds and therefore, unacceptable.
9. The Advocate representing the complainants stated during the hearing of the complaint that firstly the provisional assessment of four bales of conveyers belts should be considered final because the Customs Authorities did not finalize it within the statutory time-frame. With regard to the remaining seven bales, he stated that the ex-bond bill of entry was filed on 5-5-2001 but it has not been returned to the complainants or their customs agent. He argued that declared value for these bales should also be accepted for assessment.
10. He stated that the Customs Authorities have not taken into account the export prices of goods from the manufacturer/exporters, they have not taken into account the prices of identical or similar imports in Pakistan and the certificate of the Embassy was not based on relevant figures. The basis of valuation was not disclosed to the importers and the evidence not showed to them. The complainants visited the Valuation Department but their' view-point was never heard. If the Valuation Department did not furnish the evidence to the Appraisement Group, it was not the responsibility of the importers to whom the basis of valuation should have been disclosed.
11. The consultant stated that the customs value being applied at the Lahore Dry Port, the value determined on work-back method, and the prices of supplies made by them, could be checked up to confirm that the declared value was the fair value of goods. If the prices were compared with the prices of identical or similar goods, it would be found that the declared value was correct transaction value. The learned Consultant argued that the declared value was the genuine transaction value and it should be accepted for assessment in respect of four bales already cleared and the remaining seven bales still in bond.
12. The Deputy Collector of Customs replied that the Department made investigation and obtained advice of the Valuation Department which confirmed their doubts about the declared values. If only the value of raw materials was taken into account, it would be found that the declared values were less than the raw material cost. The Appraisement group had also taken into account the current value of comparable imports and found that declared value was much less than the values of goods cleared by the Department.
13. The submissions made and arguments put. forward by both the sides have been discussed in the foregoing paragraphs at considerable length. It has been brought out that the customs officials did not accept the transaction value and determined the customs value on the basis of domestic price, of goods in the export country communicated by the Pakistan Embassy. In this process both the Valuation and Appraisement officials disregarded the principles of valuation set out in section 25 of the Customs Act and the procedures prescribed under the Customs Rules.
14. The complainants have argued that (i) the value relied upon was the domestic price of goods; (ii) the prices were not obtained from the manufacturers/exporters of the exporting country; (iii) the values of identical or similar goods in Pakistan were not examined; (iv) the attributes and the constituents of the product having bearing on the value were not taken into account; (v) the specifications, sizes, usage, manufacture and country of origin were not compared; and (vi) the sale price of the imported goods in Pakistan were also not taken into account. The basis on which the price was determined was also not disclosed to the importer and opportunity was not afforded to them to rebut the same and put forward their own evidence and arguments.
15. The Department's response to a comprehensive set of arguments is merely cursory. It decided the value on the basis of the prices communicated to the Valuation Department by the Pakistan Embassy in South Korea. This is a. clear case of action contrary to law, rules and regulations, arbitrary, unreasonable, unjust and based on irrelevant grounds. It is a clear case of maladministration as defined under section 2 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000.
16.. There are two parts of this complaint; one relating to the four bales provisionally assessed on 20-4-2001 and final assessment made vide order dated 24-3-2003. Since the assessment was not finalized within the statutory period of one year under subsection (2) of section 81 of the Customs Act, the provisional assessment, at the declared value, has become final as provided under subsection (4) of section 81. With regard to the second part of the consignment still in the bond, the ex bond bill of entry was filed on 5-5-2001. The assessment was made on 17-7-2002 but the bill of entry was not returned to the importers. According to the assessment order dated 24-3-2003; the assessment of these goods has also been made on the prices ascertained from the Embassy.
17. The Collector of Customs should disregard the advice of the Valuation Department and re-examine the valuation aspect on the basis of the evidence of imports of identical/similar goods, from the same country of origin, of the same specifications and usage etc. and the points mentioned in paragraph 14 above. He should afford opportunity to the complainants to furnish evidence in support of the declared value and take an impartial decision. The complainants have argued that the assessment of goods in the warehouse was not completed and the bill on entry was not returned to them. This matter needs be carefully examined by the Collector of Customs and in. case, it is established that the assessment has been completed after two years, the importers would also be entitled to remission of penal surcharge.
18. It is recommended that C.B.R. to:---
(i)direct the Collector of Customs to finalize the assessment of the first part of the consignment comprising four bales on the basis of the declared value:
(ii)set aside the assessment order dated 24-3-2003 issued by the Deputy Collector of Customs and direct the Collector of Customs to re-examine the valuation aspect of the conveyer belts and decide the valuation within one month;
(iii)waive the penal surcharge on the warehoused goods and the importers be given the opportunity to clear their goods within forty-five days;
(iv)compliance be reported within two months.
C.M.A./888/FTOOrder accordingly.