Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 25 & 33‑‑‑Customs Rules, 2001, Chap. IX, (Rr. 107 to 125)‑‑ Valuation Rules, 2001 R. 116‑‑‑Finance Act (IV of 1999)‑‑‑S.R.O. 1375(I)/99, dated 28‑12‑1999 effective from 1‑1‑2000‑‑‑S.R.O. 1369(I)/99, dated 24‑12‑1999‑‑‑S.R.O. 450(I)/2001, dated 18‑6‑2001‑‑ General Agreement on Tariff & Trade (GATT)‑‑‑Brussels Definition of Value‑‑‑Morocco Convention‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Value of imported and exported goods‑‑‑Transaction value acceptable in case of related parties‑‑‑Import of new brand vehicle from Japan in CKD conditions‑‑ Claim of refund of customs duty paid under mistake of law for differential amount of duty paid on the basis of value‑slip element of 2.5 % additional value as loading on FOB value‑‑‑Department contended that discount to the extent of 64 % of the listed price was being extended to the complainant/assessee by the foreign suppliers which confirms the fact that buyer/seller relationship between the two did influence the price of items imported and being related parties the declared value did not constitute the transaction value for customs purposes‑‑‑Application of value slip‑‑‑Justification‑‑‑Validity‑‑‑Crux of the matter was whether R.116 of the Valuation Rules, 2001 had been properly applied or not‑‑ First requirement of the rule, in order to deviate from the declared value conforming to the provisions of S.25 of the Customs Act, 1969 was that "the buyer and seller are related"; second requirement was the examination of circumstances surrounding the sale‑‑‑Rule also required that the transaction value shall be accepted as the customs value of imported goods provided that the relationship did not influence the price‑‑‑Where the appropriate officer had no doubts about the acceptability of the price, it might be accepted without requesting further information from the importer, for example, the appropriate officer may have previously examined the relationship, or he may already have detailed information concerning the buyer and the seller and he may already be satisfied from such examination or information that the relationship did not influence the price‑‑‑Appropriate officer having followed the considered view as envisaged in R. 116 of the Valuation Rules, 2001, the alleged maladministration was not proved‑‑ No intervention was called .for and investigation was closed by the Federal Tax Ombudsman.

1994 CLC 994; 1994 CLC 1612 and PLD 1998 SC 64 ref.

Aziz Sheikh of the Complainant.

Ashhad Jawwad, D.C. (Customs) for Respondent.

DECISION/FINDINGS

Maladministration is alleged in the instant complaint on the part of respondents for failure to dispose of on merit the complainant's established claims during June, 2002 or refund of customs duty paid under mistake of law for the differential amount of duty paid on the basis of value‑slip element of 2.5 % additional value as loading on FOB value of New Brand Vehicle imported from Japan in CKD conditions. Abnormal delay, incompetence, inefficiency, ineptitude; inattention and neglect are alleged in the discharge of duties and responsibilities by respondents.

2. The facts briefly are that the complainant is a public limited company incorporated under Companies Ordinance, 1984 and is the subsidiary of Japanese Company engaged in the import, assembly, progressive manufacture and sales of Hino brand vehicles in Pakistan. They were obliged to load 2.5 % additional value as loading to the declared value on all imports or determination of customs value of goods affected through its Japanese principles.

3. It remained a constant practice in setting out the basis of valuation. According to the complainant the practice was not supported with provisions of section 25 of Customs Act, 1969 because neither specific mention of "Value slip" appears in the said provision nor in the Rule made thereunder It is submitted on behalf of the complainant that presumably the definition of value per annexure‑I to the Convention on the Valuation of goods for customs purposes commonly known as "Brussels Definition of Value" under the principles of General Agreement On Tariff and Trade (GATT) has always been misread and misapplied via provisions of section 25 of the Act by respondents ontransactions effected between related parties.

4. A new system of valuation was implemented pursuant to "Morocco Convention". Section 25 of the Act was accordingly substituted by Finance Act 1999 (assented on 29‑6‑1999 but enforced vide S.R.O. 1375(I)/99 effective 1‑1‑2000). Rules were also framed thereunder known as "Valuation Rules 2001", Chapter‑IX, Rules 107 to 125 of the Customs Rule 2001, "prescribed method of valuation". According to complainant sub‑chapter III, Rule 116 addresses the issue of acceptance of transactional value in case of related parties (as in case of complainant). Rule 116 is reproduced hereunder:‑‑

"116. Transaction value acceptable in case of related parties.‑‑‑Where the buyer and seller 'are related, circumstances surrounding the sale shall be examined and the transaction value shall be accepted as the customs value of imported goods provided that the relationship did not influence the price. Where the appropriate officer has no doubts about the acceptability of the price, it may be accepted without requesting further information from the importer. For example, the appropriate officer may have previously examined the relationship, or he may already have detailed information concerning the buyer and the seller and may already be satisfied from such examination or information that the relationship did not influence the price."

5. It is submitted that under the cited system of valuation the complainant was not obliged to add value‑slip elements and assessments of duty and taxes should have been made by respondents on the basis of transactional value as per substituted provisions ax section 25 of the Act. The complainant submit that they established claims, during June, 2002 on the aforesaid view of the said provisions of law and rules made thereunder for refund of customs duty paid under mistake of law for the differential amount of duty paid on the basis of value‑slip element of 2.5% on F.O.B. value.

6. Complainant made frequent personal follow up efforts and also made written requests to the respondents for disposition of claims as back as August, 2002, April, 2003 and May, 2003. Complainant also approached Member Customs‑C.B.R. vide letters, dated 7 May, 2003 but failed to elicit any response; hence this complaint.

7. It is submitted on behalf of the complainant that compulsion on complainant to add 2.5% value‑slip element was without any support of law and in conflict with the concept of Transactional Value envisaged under sections 25 and 30 of Customs Act, 1969 read with Rule 16 sub chapter‑III of S.R.O. 1375(I)/99, dated 28‑12‑1999 read with S.R.O. 1369(I)/99, dated 24‑12‑1999 rescinded by S.R.O. 350(I)/2001, dated 18‑6‑2001. As such a declaration given by complainant at import stage should have been accepted unless proved otherwise by respondents with the documentary evidence contrary to the declared value placed before assessing authority and to the effect that the relationship has influenced the imported price to justify addition of 2.5 % per value‑slip earlier granted.

8. Complainant claims that the restrictions proposed under primary method of valuation (Rules 113 through 115) were neither violated nor any violation was alleged by the respondent at any stage. The appropriate Assessing Officers were in possession of sufficient information and have already satisfied themselves that the relationship between buyer and seller has never influenced the price actually paid or payable to the seller (principal). Therefore, taxes collected by adding value‑slip element was neither just and proper nor supported with authority of law and jurisdiction. No instance had been found by respondent through their own monitoring system either to dispute the transactional value declared by the complainant. The duty and taxes paid by complainant under mistake of law, therefore, becomes refundable as a matter of right.

9. Relying upon the decisions of Supreme Court of Pakistan reported as 1994 CLC 994; 1994 CLC 1612 and PLD 1998 SC 64 and PLD 1998 SC 64 holding that the claim can be made within 3 years computable from the date on which the mistake was discovered in the circumstances, the complainant submitted that limitation period of six months prescribed under section 33 of the Act shall not apply since duty was paid under a mistake of law and compulsion. It was further submitted that no reference/appeal/revision or other proceedings in any judicial/quasi‑judicial forum was pending in connection with the instant grievance except representation before respondent No. 1.

10. The respondents have taken a preliminary objection to the admission of instant complaint on the ground that it has been filed against the application of valuation advice/value‑slip No.3 of 1998, dated 10‑3‑1998, issued by the Valuation Department, which is being implemented by the Department for valuation of CKD Hino vehicles since 1998. The complainant has been paying taxes in accordance with the aforesaid valuation advice without protest ever since the issuance of the said‑advice. As such, the matter purely relates to valuation and assessment of the imported goods, which does not fall within the jurisdiction of the Hon'ble Forum of Federal Tax Ombudsman by virtue of the provisions of section 9(2)(b) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000.

11. Regarding merits of the allegations it is submitted by respondents that loading of 2.5% on declared value of imported CKD Hino Trucks and buses has been determined by the Valuation Department, after thorough deliberation, keeping in view, the relationship which exists between the complainant and foreign suppliers i.e. Messrs Toyota Tsusho Corporation, Japan. It is pointed out that in case of import of spare parts a discount to the extent of 64 % of the listed price is being extended to the complainants by the said‑foreign suppliers, which confirms the fact that the buyer/seller relationship between the two does influence the price of items imported by the complainant. As such, being related parties, the declared value does not constitute the transaction value for customs purposes, in terms of section 25 of the Customs Act, 1969. The application of value‑slip is, therefore, justified.

12. The term "Brussels definition of value" as well as the provisions of section 25 of the Customs Act, 1969 is well understood and there is no contradiction between the two, nor the same are misread or mis applied as alleged by the complainant. There exists no ambiguity, in this regard.

13. The transaction value is acceptable, if the same is not influenced by the relationship between the buyer and the seller. In the instant case, however, there exist circumstances which confirm that the price is definitely influenced by such relationship between the complainant and the foreign supplier. The complainants are sole distributors of Messrs Toyota Tsusho Corporation, Japan. They are assemblers/progressive manufacturers of Hino Truck and Buses. The CKD kits for assembling the said‑vehicles are supplied by the said corporation to the complaints against discounted prices to promote the said vehicle in the local market. It is pertinent to mention that in case of import of spare parts of the said‑vehicles from the aforesaid Japanese manufacturers, price discount to the extent of 64% is being availed by the complainants.

14. In view of relationship of the complainants with the suppliers/ Japanese manufacture, the declared value cannot be termed as transaction value for the customs purposes. The application of value‑slip is warranted by law and has never been disputed by the complainant in the past. The claims for refund of duties deposited in accordance with the value‑slip are neither admissible nor entertainable. It may further be pointed out that the remedy of appeal before the Controller of Valuation against the aforesaid value‑slip issued by the Valuation Department has always been available to the complainants. However, the complainant has been paying taxes in accordance with the said value‑slip without any dispute, in this regard.

15. The complainants have throughout been paying taxes in accordance with the value‑slip without raising any dispute. There is no mistake of law rendering refund of any amount on the plea of non -applicability of the aforesaid. Further, the provisions of section 33 of the Customs Act, 1969, are applicable which bar the filing of such claims after expiry of six‑month period from the date of payment of taxes.

16. The issue has been investigated keeping in view the submissions made on behalf of each side. The crux of the matter is whether Rule 116 has been properly applied or not. First requirement of the rule in order to deviate from the declared value which of course conforms to the provisions of section 25 of tire Act is that "the buyer and seller are related". The second requirement is the examination of circumstances surrounding the sale. The Rule requires that the transaction value shall be accepted as the customs value of imported goods provided that the relationship did not influence the price. Where the appropriate officer has no doubts about the acceptability of the price, it may be accepted without requesting further information from the importer. For example, the appropriate officer may have previously examined the relationship, or he may already having detailed information concerning the buyer and the seller, and may already be satisfied from such examination or information that the relationship did not influence the price."

17. Since the appropriate officer in the instant case has followed the already considered view in the case as envisaged in rule 116 supra. the alleged maladministration is not proved. No intervention is called for inthe case; hence investigation closed.

C.M.A./1050/FTOOrder accordingly.