(a) Customs Act (IV of 1969)---

----S.37---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(b)---Deductions made from the duty drawback without notice to the exporters and without intimating the reasons for deduction was arbitrary, unreasonable and unjust.  

(b) Customs Act (IV of 1969)---

----S.37---Customs General Order 2 of 1999---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Drawback on goods used in the manufacture of goods which were exported---Deduction from payment of duty drawback without assigning any reasons---Validity---Such was a unique case of maladministration on the part of the Export Collectorate where the Authorities did not pay the full amount of rebate and did not disclose the reasons for the wrong deductions, the payment on the supplementary claims was inordinately delayed,, and eventually when they did sanction the supplementary claims, actual payment was not made on the illogical and flimsy pretext that the claim of refund of the deductions made in 1997 merited a low priority, after five years, in 2002---Federal Tax Ombudsman recommended that. Central Board of Revenue to admonish the Collectorate of Exports for illegally, without reasonable grounds, and arbitrarily delaying the sanction of genuine supplementary claims for two years and, in effect, for its unwillingness to make good the payment even after the lapse of almost five years; direct the Customs Authorities that when deduction from duty drawback claims is made on any account, a notice specifying reasons thereof should be issued with the cheque of the reduced amount and admissible supplementary claims should be processed, sanctioned and paid on priority basis as there is no justification for according these claims a low priority.

Mirza Muhammad Awais for the Complainant.

Feroze Alam Junejo, Deputy Collector of Customs (Exports).

FINDINGS/DECISION

The complaint has been filed against the Customs Department alleging maladministration arising out of discriminatory treatment and non-payment of duty drawback claims on the export of 39 consignments. The complainants have stated that they were bona fide leading exporters of cotton made-ups for the last two decades. When they file duty drawback claims of the exported goods (in these 39 consignments), their claims were paid after allegedly making illegal and arbitrary deductions without observing the law and related directives. The reason for the arbitrary deduction was not disclosed in writing, which was illegal, mala fide, against natural justice, and thus a clear-cut case of maladministration.

2. The complainants stated that they filed supplementary claims 19-12-2000 for the deductions made from their duty drawback claims on the grounds that Customs General Order-2/99 had been wrongly applied in their case as it actually applied on the exports made on or after 23-7-1998. They stated in their application to the Additional Collector-I that supplementary--duty drawback claims of Messrs Soorti Enterprises on the same issue had already been sanctioned and invited his attention to the Collector's ruling that the CIF value of duty-free chemicals be deducted from the FOB value of the consignments where duty-free chemicals had been utilized. After filing 39 supplementary claims for Rs.10,44,978 in December, 2000, several reminders were sent to the Collector (Exports) and the Deputy Collector and the Authorities were approached in person also but to no avail.

3. The complainants stated that the admissibility of the claims had been verified, the claims had been processed and sanctioned but kept detained without any cogent and legal cause, the release of the amount had been inordinately delayed, and the illegal and mala fide delay raised doubts of ulterior motives which deserved serious probe. They had intimated the Authorities that it was in their own interest to release the amount, otherwise the matter would be referred to the Federal Tax Ombudsman to seek remedy and justice but they turned a deaf ear to the pleas and requests which proved that they had no worry for their illegal activities and there was no accountability to fix responsibility for the inordinate delay. They requested that the C.B.R. and the Collector (Exports) be asked to released the sanctioned amount without further delay.

4. The Deputy. Collector of Customs (Exports) replied to the complaint that deduction from the duty drawback claims was made by proportionately reducing the amount of duty chargeable on duty free imported material used in the manufacture of goods in accordance with the guidelines of Customs General Order-2/99. However, the complainants had availed the legal remedy acid filed 39 supplementary duty drawback claims. Since the duty drawback claims had to be disposed off within a specified period, no show-cause notice was issued. The remedy was always available to the exporters to file supplementary claims. C.B.R. subsequently, clarified that in such cases CIF value of duty-free imported goods should be deducted from the FOB of exported goods for calculation of admissible duty drawback.

5. He added that supplementary claims filed by the complainants in the light' of Board's clarification had been finally sanctioned and the delay in issue of cheques was due to the reason that the supplementary claims merited low in the order of priority. He further stated that the 'supplementary duty drawback claims required utmost care and thorough scrutiny for processing and sanction. No timeframe had been prescribed for sanctioning such claims. There was no mala fide or maladministration involved in the case.

6. During .the hearing of the complaint, the counsel representing the complainants stated that on, receiving cheques for reduced amounts they visited the Custom House and made efforts to ascertain the reasons and basis of deduction. They came to know that the deductions had been made from the duty drawback claims on account of the Customs General Order-2/99, which was arbitrary as the Customs General Order-2/99 was not applicable to their exports but to the goods exported on or after 23-7-1998.

7. The counsel stated that these 39 supplementary duty drawback claims remained without action from December, 2000 to October, 2001. On 18-10-2001, the complainants were informed that the claims were under active consideration: Even then no action was taken despite repeated reminders. The Collector had stated in his reply to the complaint that duty drawback claims were disposed off within the specified period but did not mention what the specified period was, and also did not cite the law under which show-cause notice was not required. The filing of supplementary claims did not provide the opportunity for redressal of grievance to the exporters who did not know why the deduction had been made. The counsel also contested the assertion of the Collector that the supplementary claims merited low in the order of priority. He stated that this assertion was without justification; in fact supplementary claims should be given priority over the new claims to rectify the mistake committed by making deductions in the original claims. He agreed that the Customs Authorities had sanctioned 39 supplementary claims but disbursed the amount of 33 claims only and the amount of six claims had yet to be paid. The Deputy Controller promised that the cheque would be issued within a month.

8. From the facts of the complaint brought out in the foregoing paragraphs, it is clearly established that the deductions made from the duty drawback claims without notice to the exporters and without intimating them the reasons for deduction was arbitrary, unreasonable and unjust. Subsequently when the supplementary claims were files in December, 2000, no action was taken and, after one year, the complainants were informed that the matter was under process. When the complaint was filed with this office in October, 2002, the supplementary claims were sanctioned but even then the payment was not made under the pretext that the supplementary claims were low in order of priority.

9. This is a unique case of maladministration on the part of the Export Collectorate where the authorities did not pay the full amount of rebate and did not disclose the reasons for the (wrong) deductions, the payment on the supplementary claims was inordinately delayed, and eventually when they did sanction the supplementary claims, actual payment was not made on the illogical and flimsy pretext that the claim; of refund of the deductions made in 1997 merited a low priority, after five years, in 2002.

10. It is recommended that C.B.R.:---

(i) Admonish the Collectorate of Exports for illegally, without reasonable grounds, and arbitrarily delaying the sanction of genuine supplementary claims for two years and, in effect, for its unwillingness to make good the payment even after the lapse of almost five years; and

(ii) direct the Customs Authorities that

(a) When deduction from duty drawback claims is made on any account, a notice specifying reasons thereof should be issued with the cheque of the reduced amount; and

(b) Admissible supplementary claims should be processed sanctioned and paid on priority basis as there is no justification for according these claims a low priority.

(iii) Compliance be reported within one month.

C.M.A./869/FTOOrder accordingly.