(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.81‑‑Scope of S.81, Customs Act, 1969.

Section 81 of the Customs Act, 1969 provides for, provisional assessment of duty, subsection (1) thereof explains the reasons and the conditions in which a provisional assessment of duty can be made. The proviso to subsection (1) contemplates payment of additional amount as security or furnishing of bank guarantee by the importer or exporter to meet the excess of the final assessment of duty over the provisional assessment, subsection (2) of section 81 provides for a time limit of one year from the date of provisional assessment. Subsection (3) contemplates that on framing of final assessment the amount already paid or guarantees furnished shall be adjusted against the amount payable on the final assessment and the difference between the two shall be paid forthwith by the importer or exporter. Lastly subsection (4) of section 81 is a mere affirmative of proviso to subsection (2) stating that if a final assessment is not completed in the period given in subsection (2) the provisional assessment shall become final.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.81(2) & (4)‑‑‑Provisional assessment of duty‑‑‑Goods allowed to be cleared or delivered on the basis of final assessment was to be finally assessed within one year of the provisional assessment‑‑‑If the final assessment was not completed within that period, the provisional assessment shall become final‑‑‑Both the Department and the assesee, in the present case, had agreed that a period of more than two years since the passing of provisional assessment had already lapsed‑‑‑Assessment had thus become final under S.81(4) of the Customs Act, 1969 and the Department could not be allowed to take advantage of its own default.

(c) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 81(1), proviso‑‑‑Provisional assessment of duty‑‑‑Maximum figure at which the interim assessment was made would not automatically mature into final assessment‑ ‑‑Principles elucidated‑‑‑No final assessment, in the present case, was made within the prescribed period and the taxpayer was not even informed for another year and it was only after expiry of almost two years that he demanded release of Bank guarantees when the Department came up with the plea that the provisional assessment had become final and therefore he was not entitled to the return of 'guarantees‑‑‑Validity‑‑‑Such plea of the Department was not available to the Revenue Authorities by any rule of reason, logic or law‑‑‑High Court rejected the plea of the Department and directed that the. Revenue will be obliged to return Bank guarantees submitted by the assessee within seven days when the present order was conveyed to it and after expiry of that period, for whatever reasons, if the guarantees were not released, the payment of interest or profit on these guarantees shall be the responsibility of the Revenue.

Generally provisional assessments under section 81 of the Customs Act, 1969 involve two amounts besides the declared value by the importer or exporter. Obviously the declared value is not acceptable to the Revenue and therefore a provisional assessment can be framed for the reasons stated in subsection (1) of section 81. The Revenue on the basis of comparable case or material available with it makes a tentative assessment. That tentative amount is the upper‑ceiling and at the same time the Assessing Officer leaving a room for allowing the importer or exporter a possibility to contest the same fixes a lower sum on which the duties and levies are charged to release the consignment while the upper limit is secured through payment of additional amount or a bank guarantee. The two sums disclose the mind of the Revenue. Provisional assessment could not in any case be less than the amount at which duties and levies are charged and the consignment released. It further indicates that the Revenue is of the tentative view that final assessment or valuation of goods will not increase normally beyond the upper limit. Therefore, the, difference between tentative minimum and maximum is secured by way of requiring payment of additional amount or bank guarantee. The payment of additional amount or bank guarantee having been‑ required to secure the tentative maximum in the mind of the Revenue it cannot mature into final assessment merely for the reason of expiry of the period of one year contemplated in subsection (4) of section 81. No mechanism is available in the Customs Act, 1969 whereby an importer or exporter can force the department to finalize an assessment. On the other hand the Revenue, if one goes by its interpretation, will gain by not doing anything. It may be noted that the Department having given the tentative maximum still remains comfortable as the importer/exporter remains at a disadvantageous position either depositing the additional amount or furnishing the bank guarantee on which he is liable to pay interest as long it remains intact.

The Revenue nay partly be correct in asserting that sub section (4) of section 81 gives it protection against a slow or even a mala fide functionary. Also the maturity of provisional assessment into a final assessment after expiry of that period appears reasonable and in accordance with the, facts on ground. However, the contention of the Revenue that the maximum figure at which the interim assessment was made automatically matures into final assessment cannot be accepted. The proviso to section 81(1) of the Customs Act, 1969 makes it clear that an exporter will be required to pay additional amount as security or a bank guarantee, "to meet the excess of the final assessment of duty over the provisional assessment". These words indicate that the amount at which the consignment was released on payment of taxes and duties was the provisional assessment while the difference secured through Bank guarantee was tentatively the final assessment. The word "provisional" according to Chamber's 20th Century Dictionary, 1983 Edition means "provided for the occasion", "to meet necessity", "adopted can the understanding, that it will probably be changed later". The amount on which a consignment is generally released on payment of levies is therefore, provisional assessment as the goods are released on the understanding that it could be charged later. To secure the change which must happen in the form of final assessment or expiry of a period of one year additional amount as security or furnishing of Bank guarantee is required. Although the provisions of subsection (3) of section 81 do leave a room open for the possibility that the amount of provisional assessment including the one for which, a bank guarantee was required could further be pushed up at the final assessment stage yet that probability is not strong enough to restrain one from interpreting the term provisional assessment in the above manner.

In the present case no final assessment wag made within the prescribed period and the taxpayer was not even informed for another year. It was only after expiry of almost two years that he demanded release of bank guarantee when the Department came up with the plea that provisional assessment had become final and therefore he was not entitled to return of the guarantee.

The above defence is not available to the Revenue Authorities by any rule of reason, logic or law. Therefore, it shall be rejected. The Revenue will be obliged to return bank guarantees submitted by the assessee within 7 days when the present order is conveyed to it. After expiry of that period, for whatever reason if the guarantees are not released, the payment of interest or profit on these guarantees shall be the responsibility of the Revenue.

Chamber's 20th Century Dictionary, 1983 Edn. ref.

Muhammad Akram Nizami for Petitioner.

Dr. Sohail Akhtar for the Revenue.

ORDER

This Constitutional petition involves the determination as to what amounts to provisional assessment of duty contemplated in section 81 of the Customs Act 1969.

2. The petitioner imported a consignment of 15292.7 Kgs. of Acrylic Tops, From UK and declared its value at US $ 1/kg. The respondent‑Department however, did not accept the declared value. In para. 5 of their reply their view was stated as under:‑‑

"As the declared value of the petitioners' goods was prima facie on considerably lower side so the goods were assessed provisionally Q US $ 1.68/kg. +5% loading on Bill of Entry No.794, dated 25‑10‑2000. The party deposited duty and taxes US $ 1.40 + 5 % loading and submitted a Bank Guarantee for differential amount of duty and taxes to avoid any hardship which might be caused to the importer. The provisions assessment @ US $ 1.68 + 5 % loading has taken finality under section 81(4) of the Customs Act, 1969."

3. On the other hand, it is the case of the petitioner that the department having failed to complete/frame final assessment in terms of subsection (2) of section 81 it has become final at 1.40 kg + 5 loading. According claims that he is entitled to release of bank guarantee furnished to source the difference. The issue, therefore, precisely being as to what is the amount at which the provisional assessment in this case can be said to have been made. Whether it is US $ 1.68/Kg + 5 loading as detailed on the Bill of Entry No.794, dated 25‑10‑2000 or else it should be taken to have been completed at US$ 1.40kg + 5 % loading on which the duties were paid while the difference US$ 0.28/kg was secured through a bank guarantee.

4. Section 81 provides for provisional assessment of duty, subsection (1) thereof explains the reasons and the conditions in which a provisional assessment of duty can be made. The proviso to sub section (1) contemplates payment of additional amount as security or furnishing of bank guarantee by the importer or exporter to meet the excess of the final assessment of duty over the provisional assessment. Subsection (2) of section 81 provides for a time limit of one year from the date of provisional assessment. Subsection (3) contemplates that on framing of final assessment the amount already paid or guarantees furnished shall be adjusted against the amount payable on the final assessment and the difference between the two shall be paid forthwith by the importer or exporter. Lastly subsection (4) of section 81 is a mere affirmative of proviso to subsection (2) stating that if a final assessment is not completed in the period given in subsection (2) the provisional assessment shall become final.

5. On consideration of the contentions put forth by the parties, I am of the view that the Department cannot be allowed to take advantage or its own default. Subsection (2) of section 81 provides that the goods allowed to be cleared or delivered on the basis of final assessment shall be finally assessed within one year of the provisional assessment. Subsection (4) of section 81 further states that in case final assessment is not completed within that period, the provisional assessment shall become final. It needs to be noted that both the parties agree that period of more than two years since the passing of provisional assessment has already lapsed and therefore, it has become final under the law i.e. subsection (4) of section 81. However as noted earlier, the dispute only remains as to which of the two amounts could be taken to be the provisional assessment.

6. In my reading of the proviso to subsection (1) of section 81, the first mentioned amount i.e. US$ 1.40/kg + 5% loading is the amount of provisional assessment. The proviso which supports my view reads as under:‑‑

"Provided that the importer (save in the case of goods entered for warehousing) or the exporter pays such additional amount as security or furnishes such guarantee of a scheduled bank for the payment thereof as the said officer deems sufficient to meet the excess of the final assessment of duty over the provisional assessment." (emphasis provided).

7. It may be observed that generally provisional assessments under section 81 involve two amounts besides the declared value by the importer or exporter. Obviously the declared value is not acceptable to the Revenue and therefore a provisional assessment can be framed for the reasons stated in subsection (1) of section 81. The Revenue on the basis of comparable case or material available with it makes a tentative assessment. That tentative amount is the upper‑ceiling and at the same time the Assessing Officer leaving a room for allowing the importer or exporter a possibility to contest the same fixes a lower sum on which the duties and levies are charged to release the consignment while the upper limit is secured through payment of additional amount or a bank guarantee. The two sums disclose the mind of the Revenue. It is that provisional assessment could not in any case be less than the amount at which duties and levies are charged and the consignment released. It further indicates that the Revenue is of the tentative view that final assessment or valuation of goods will not increase normally beyond the upper limit. Therefore, the difference between tentative minimum and maximum is secured by way of requiring payment of additional amount or bank guarantee. The payment of additional amount or bank guarantee having been required to secure the tentative maximum in the mind of the Revenue it cannot mature into final assessment merely for the reason of expiry of the period of one year contemplated in subsection (4) of section 81. No mechanism available in the Customs Act, 1969 whereby an importer or exporter can force the Department to finalize an assessment. On the other hand the Revenue, if we go by its interpretation, will gain by not doing anything. It may be noted that the Department having given the tentative maximum still remains comfortable as the importer/exporter remains at a disadvantageous position either depositing the additional amount or furnishing the bank guarantee on which he is liable to pay interest as long it remains intact.

8. The Revenue may partly be correct in asserting that sub section (4) of section 81 gives it protection against a slow or even a mala fide functionary. Also the maturity of provisional assessment into a final assessment after expiry of that period appears reasonable and in accordance with the facts on ground. However, the contention of the Revenue that the maximum figure at which the interim assessment was made automatically matures into final assessment cannot be accepted. The proviso reproduced above makes it clear that an exporter will be required to pay additional amount as security or a bank guarantee, "to meet the excess of the final assessment of duty over the provisional assessment". These words indicate that the amount at which the consignment was released on payment of taxes and duties was the provisional assessment in this case US$ 1.40/kg + 5% loading while the difference of .28 US$ secured through Bank guarantee was tentatively the final assessment. The word "provisional" according to Chamber's 20th Century Dictionary 1983 Edition means "provided for the occasion", "to meet necessity", "adopted on the understanding that it will probably be changed later". The amount on which a consignment is generally released on payment of levies is therefore, provisional assessment as the goods are released on the understanding that it could be changed later. To secure the change which must happen in the form m final assessment or expiry of a period of one year additional amount as security or furnishing of Bank guarantee is required. Although the provisions of subsection (3) of section 81 do leave a room open for the possibility that the amount of provisional assessment including the one for which a bank guarantee was required could further be pushed up at the final assessment stage yet that probability in my view is not strong enough to restrain one from interpreting the term provisional assessment in the above manner.

9. In the present case no final assessment was made within the prescribed period and the tax payer was not even informed for another year. It was only after expiry of almost two years that he demanded release of bank guarantee when the department came up with the plea that provisional assessment had become final and therefore he was not entitled to return of the guarantee. The departmental reply, dated 23‑4‑2003 explains that defence in the following words:‑‑

"Your case has been examined and it has been observed that you did not challenge the enhanced value and now more than two years have lapsed since the provisional assessment whereas the stipulated period within which provisional assessment becomes final is only one year. Therefore, as per subsection (4) of section 81 of the Customs Act, 1969 "if the final assessment is not completed within the period specified in subsection (2) the provisional assessment shall become final.

In the light of above rules your request cannot be acceded to and is therefore, regretted."

10. The above defence, for the said reasons is not available to the Revenue Authorities by any rule of reason, logic or law. Therefore, it shall be rejected. The Revenue will be obliged to return bank guarantees submitted by the petitioner within 7 days when this order is conveyed too it. After expiry of that period, for whatever reason if the guarantees are not released, the payment of interest or profit on these guarantees shall be the responsibility of the Revenue.

Petition accepted.

M.B.A./F‑2/LPetition accepted.