2004 P T D 1041

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs B.P. INDUSTRIES (PVT.) LIMITED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-1350-K of 2002.

Customs Act (IV of 1969)---

----Ss.20, 30 & 104---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Central Board of Revenue's power to grant exemption from duty in exceptional circumstances---Date for determination of value and rate of import duty-Clearance of bonded goods for home-consumption---Import of milk powder---Undue delay by the Department for clearance of such goods due to sending the sample to HEJ Laboratory for test in spite of its already having been tested by the Ministry of Food and Agriculture---Importer had to pay duty Q 25% instead of-20%---Claim of refund---Validity---Required certificates from the Ministry of Food and Agriculture had been obtained and presented to the Customs Authorities---No -justification existed to refer the matter to HEJ Laboratory and then again to obtain certificate from the Ministry of Food and Agriculture---If the Customs Authorities doubted the first certificates of the Ministry of Food and Agriculture, they could have referred the matter back to the Ministry for reconfirmation without unnecessarily referring to HEJ Laboratory---Such action resulted in inordinate and avoidable delay in clearance of goods, with loss to the importers on account of higher rate of duty on the clearance of goods---.such was clear case of maladministration on the part of customs Federal Tax Ombudsman recommended that Central Board of Revenue should send for the complete record of the refund claim of the complainant, examine the, circumstances surrounding the inordinate and avoidable delay in completion of assessment and release of the goods and decide the refund claim within forty-five days.

M. Afzal Awan for the Complainants

Nawabzadi Aliya Khanji, Assistant Collector of Customs (Appraisement) for Respondent.

DECISION

Messrs B.P. Industries (Pvt.) Limited have stated in their complaint that they imported 50 M/tons Skimmed Milk Powder from Poland and filed in-bond bills of entry, dated 30-4-2002 arid 16-5-2.002. When they filed ex-bond bills of entry for home consumption, the Customs Authorities did not complete them on the ground that the goods were not fit for human consumption. They did not give their objection in writing. The complainants applied to the Collector of Customs (Appraisement) and the Member (Customs) for release of goods, but despite their best efforts they could not get the bills of entry completed As a result they had to pay additional duty, and taxes amounting to Rs.167,548 due to change in tariff in the Budget, announced 15-6-2002.

2. The complainants stated that they contested with the Customs Authorities that they were not acting in accordance with law because it was wrong to infer, without any evidence, that the Milk Powder imported by them was not fit for human consumption. They had complied with all the legal requirements laid down by the Ministry of Commerce and other Government agencies. All the documents required under the Import Policy Order and the Ministry of Food and Agriculture Certificate confirmed that the goods had been subjected to laboratory -examination and had been found free of pathogenic organism. The HEJ Research Laboratory, vide report, dated 1-6-2002, confirmed that the goods were fit for human consumption.

3. The complainants stated that they had requested the Member (Customs), vide letter, dated 12-6-2002, to allow release of the goods apprehending change in the duty structure. But the bill of entry was not allowed to be completed which clearly betrayed maladministration on the part of the Customs Authorities. One day after the announcement of the Budget, they came to know that the Customs Authorities had agreed to allow release of the Milk Powder. When they got the bill of entry completed and paid duty and taxes, the rate of 25 % was applied instead of 20%. They paid duty and taxes and filed refund claim on 12-8-2002 which has trot so far been allowed and even the processing of the claim has not started.

4. The, complainants argued that the HEJ Laboratory is one of the Government institutions of great repute. It gives its report on 1-6-2002. Had this report been accepted and goods released on 2-6-2002, these would have been no cause of complaint. They further argued that the act of the Collector of Customs not to release the goods was ultra vires as the importability of goods is decided by the Ministry of Commerce. The respondents had no evidence on the basis of which they could claim that the goods were not fit for human consumption. The complainants had got the goods tested and provided all the documentary evidence and the test reports from various Government functionaries were shown to the Customs Officials but all in vain. All these acts amount to maladministration as defined in the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. The complainants requested that order be given to allow refund of 5 % excess duty recovered from them for no fault of their company.

The Assistant Collector of Customs replied to the complainant that Pakistan Dairy Association had made a representation, dated 1-4-2002 allegating that a substantial quantity of adulterated and sub standard skimmed milk powder was being imported from East European countries. Pursuant to this representation, all consignments of skimmed milk powder were detained and representative sealed samples were sent to HEJ Laboratory to check fitness for human consumption. The Laboratory's test reports "revealed inconsistencies in inferences drawn from observations" arid different results were obtained. Under the Import Policy Order, the release of food/edible items was subject to confirmation of goods being `fit for human consumption, `balance shelf life', and `confirmation of manufacturing and expiry dates on the packages'. When the importers filed ex-bond bill entry for home consumption, the release of skimmed milk powder was tinder scrutiny /testing before release. After receipt of release instructions from the Ministry of Food, vide letter, dated 10-8-2002, the consignments were released. The time taken for confirmation of fitness for human consumption should not be treated as maladministration.

6. The Assistant Collector of Customs invited attention to the Complaint No. 809 of 2002 of Messrs Balagamwala Oil Mills (PVt.) Limited where the same question was raised and the Federal Tax Ombudsman had recommended to expedite the matter with the Ministry of Food and Agriculture and finalize the case within 15 days In this case after the clearance of goods @ 25 % the importer claimed refund of 5 % duty. The higher rate of duty was paid according to the prevailing tariff rate and the complainants were not entitled to refund.

7. The Assistant Collector has referred in his reply to the complaint to various documents enclosed as Annexures A,B,C,D,F and G but none of these Annexures has been received with the reply.

8. In the rejoinder to the respondent's reply, the counsel for the complainants stated that the allegation of the Pakistan Dairy Association did not prove that the milk imported by the complainants was sub-standard or adulterated When the sample was sent to HEJ Laboratory for test, it categorically-confirmed that milk imported by his client was fit for human consumption report was sufficient evidence that the milk imported by his client was fit for human consumption. If divergent test reports created doubts about the quality of milk powder, these should not be made basis for stopping milk power imported by his client. The reliance of the Customs Authorities on reports of other milk importers were clearly tantamount to maladministration.

9. He further stated that Ministry of Food had no jurisdiction to issue release instructions. the reference of the matter to the Ministry of Food by the Customs Authorities was itself an act of maladministration because they sought refuge under the Ministry's release instructions. The instructions of the Federal Tax Ombudsman in another case cited by the Department has no nexus with the release of the complainants' consignments. He further stated that the contention of the Customs Authorities that they could not allow refund due to restrictions imposed by law in section 104 of the Customs Act read with section 30 was not justified because the C.B.R. had the powers to issue special exemption order under section 20 of the Customs Act. He requested that the Customs Authorities be directed to allow the refund under section 20 of the Customs Act.

10. During the hearing of the complaint, Mr. M. Afzal Awan, Advocate, stated that the letter, dated 12-6-2002 addressed to the Member (Customs) was an SOS message as a change in the tariff rate was expected, but no action was taken despite the express mandatory provision under section 80 of the Customs Act that the assessment should be done without undue delay. He reiterated that certificates, dated 14-5-2002 and 17-5-2002 from the Ministry of Food and Agriculture had 'been issued after testing the samples of goods imported. These certificates were not accepted by the Customs and the ex-bond bills of entry were not completed. The Customs Authorities on- their own approached the HEJ Research Laboratory who, vide their report, dated 1-6-2002, confirmed that the goods were fit for human consumption. The Customs Authorities should have completed the bill of entry after receipt of the, certificates. The bills of entry were finalized on 17-8-2002 and the importers had to pay duty @ 25% instead of 20% causing loss to them. They wrote the Collector that they were paying higher duty under protest and requested for refund of extra duty of 5 %.

11. The Assistant Collector admitted that the Customs Authorities considered it necessary' to obtain the report from the HEJ Laboratory although the importers had already submitted the certificates of Ministry of Food and Agriculture. Due to divergence in the Laboratory's reports, their consignments were retested by the Ministry of Food and Agriculture and their certificate was accepted, the delay took place because of the allegations made by the Dairy Association. Under section 30 of the Customs Act, read with section 104, the rate of duty applicable was the one that was prevalent at the time of ex-bonding and in this case duty was charged a 25%.

12. The submissions made and the arguments put forward by both the sides have been examined. It is clearly established that the required certificates from the Ministry of Food and Agriculture had been obtained and presented to the Customs Authorities. There was no justification to refer the matter to HEJ Laboratory and then again to obtain certificate from the Ministry of Food and Agriculture. If the Customs Authorities doubted the first certificate of the Ministry of Food and Agriculture, they could have referred the matter back to the Ministry for re-confirmation without unnecessarily referring to HEJ. This resulted in inordinate and avoidable delay in clearance of goods, with loss to the importers on account of higher rate of duty on the clearance of goods. This is a clear case of maladministration on the part of the Customs.

13. It is recommended that C.B.R:

(i)send for the complete record of the refund claim of the Complainants;

(ii)examine the circumstances surrounding the inordinate and avoidable delay in completion of assessment and release of the goods;

(iii)decide the refund claim within forty-five days; and

(iv)compliance be reported within two months.

C.M.A./1004-A/FTOOrder accordingly.