COLLECTOR OF CUSTOMS (APPRAISEMENT), KARACHI VS Messrs AUTO MOBILE CORPORATION OF PAKISTAN, KARACHI, 2005 PTD-KARACHI-HIGH-COURT-SINDH 2116 (2005)

Customs Act (IV of 1969)---

-------Ss.81 & 196---Interpretation of S.81, Customs Act, 1969---Provisional assessment of duty---When no -final assessment is made in terms of S.81(2) of the Customs Act, 1969, the provisional assessment will become final on declared value of goods by the assessee, and disbursement of additional amount or guarantee furnished by the importer/exporter, in terms of S.81(3) of the Customs Act, 1969, will be regulated on such premises---Principles.

A plain reading of S.81 of the Customs Act, 1969 goes to show that' it has been meant to facilitate both the Customs Authorities as well as the assessee in a situation, where it is not possible to assess the customs duty immediately, to get the goods, released on the basis of provisional assessment for want of required test/reports/documents, for further enquiry or wherefor any other valid reason(s) final assessment of the goods is not possible, at the relevant time. The proviso to subsection (1)

Provides that at the time of provisional assessment the Customs Authorities may ask the importer or the exporter, as the case may be, for payment of additional amount as security or to furnish such guarantee of scheduled bank, to secure the payment of such amount, which may be further found due on final assessment of duty over the provisional assessment. Subsection (2) to section 81 of the Act of 1969 provides the period during which such provisional assessment is to be finalized by the Assessing Authority while the proviso to subsection (2) empowers the Collector of Customs to extend the period of. final assessment up to 90 days under circumstances of exceptional nature after recording such circumstances. Subsection (3) to section 81 provides that on completion of assessment, the concerned Assessing Officer shall order that the amount already paid or guaranteed be adjusted against the amount payable on the basis of final assessment and the difference between the two amounts, if any, shall be paid forthwith to or by importer or exporter as the case may be. Further, subsection (4) to section 81 provides that if the final assessment is not completed within the specified period given under subsection (2) to section 81 then provisional assessment shall become final. In other words, subsection (4) to section 81 is a penal provision incorporated in the scheme for the benefit of the assessees/importers/exporters to save them from unnecessary harassment by the Customs Authorities by way of keeping their cases lingering on for indefinite period on the pretext of finalizing the assessment. When the practical working of the scheme of provisional assessment, as provided under section 81 of the Act of 1969, is analyzed, it will be seen that the figure of provisional assessment denotes figure of levy of duty on the basis of value declared by the importer/exporter plus any reasonable percentage of loading over such declared value made by the Assessing Officer to secure any excess payment of duties/charges, which may be found due in addition to the duty levied on the declared value of the goods, at the time of final assessment within the period stipulated by subsection (2) to section 81. It is such excess payment of duty/charges levied on the basis of loading, which are secured by charging additional amount or furnishing of guarantee of scheduled bank. Thus, it is apparent that charging of such additional amount or furnishing of guarantee is subject to the terms of final assessment and not otherwise. In other words, when no final assessment is made in terms of subsection (2) to section 81, the provisional assessment will become final on declared value of goods by the assessee, and disbursement of additional amount or guarantee furnished by the importer/exporter, in terms of subsection (3) to section 81, will be regulated on such premises.

In the present case admittedly the Customs Authorities had failed to finalize the assessment of the assessee within the stipulated period as provided by subsection (2) to section 81 of the Act of 1969. In such circumstances, the provisional assessment made by the Customs Authorities in terms of section 81(1) of the Customs Act, 1969, had attained finality on the basis of declared value of the goods by the assessee and not in any other manner.

Messrs Farooq Woollen Mills v. Collector of Customs, Customs Dryport, Sambrial and 2 others 2004 PTD 795 and Hassan Trading Company v. Central Board of Revenue, Government of Pakistan 2004 PTD 1979 ref.

Raja Muhammad Iqbal for Appellant.

Miss Danish Zuberi for Respondent.

Date of hearing: 3rd May, 2005.

ORDER

ANWAR ZAHEER JAMALI, J.---By these three appeals under section 196 of the Customs Act, 1969, the Collector of Customs (Appraisement) Karachi has challenged the common order, dated 16-4-2004 (copy received by him on 12-5-2004) passed in Central Excise Appeals Nos.179 to 181 of 2002, whereby these appeals preferred by the respondent were allowed and consequently the impugned orders in original passed against them, on their applications for refund claim, were set aside.

2. Briefly stated, relevant facts of the case are that the goods/ consignments of the respondent were subjected to assessment by the appellant under section 81(1) of the Customs Act, 1969, (hereinafter referred to as 'the Act of 1969), which contemplates scheme of provisional assessment. Such provisional assessments could not be finalized by the customs authorities within the stipulated period, thus, became final by virtue of subsection (4) to section 81 of the Customs Act, 1969. The respondents thereafter moved their applications for refund claim as according to them their assessment had become final at the declared value and thus they were entitled for refund of the excess payments made by them under provisional assessment. Such applications of the respondent were rejected by the Deputy Collector of Customs (Appraisement) vide his order, dated 28-11-2001 with the following observations:

"After examining the plea of the claimant, I am of the opinion that the claim does not merit consideration since provisional assessment was made at the "enhanced value" (and not on declared value) by the competent Authority in the original file which became final in terms of section 81(4) of the Customs Act, 1969. After lapse of prescribed time limitation."

3. In the appeals preferred by the respondent they challenged the observations of the Deputy Collector of Customs (supra) as according to them it was gross misapplication and misinterpretation of subsection (4) to section 81 of the Act for 1969. The plea of the respondent was accepted by the Customs, Central Excise and Appellate Tribunal, Karachi, and consequently their appeals were allowed.

4. Mr. Raja Muhammad Iqbal, learned counsel of the appellants, referring to the questions proposed in these appeals, conceded that the view taken by the Tribunal in its impugned order in the context of interpretation and spirit of subsection (4) to section 81 of the Act of 1969 regarding provisional assessment has been approved by the learned Single Judge of Lahore High Court in the case of Messrs Farooq Woollen Mills v. Collector of Customs, Customs Dryport, Sambrial and 2 others (2004 PTD 795). However, referring to the observations of the Honourable Federal Tax Ombudsman; contained in the impugned order, he contended that till the amendment in law, as suggested by the Federal Tax Ombudsman, is not made the interpretation of section 81 of the Act of 1969 advanced by the learned Tribunal is not warranted by law and liable to be set aside.

5. In reply to the above, Miss Danish Zuberi, learned counsel for the respondents has vehemently agreed that the object of making the provisional assessment, made under section 81(1) of the Act of 1969, final on expiry of the stipulated period provided under subsection (2), is that the assessment shall be deemed to be final at the declared value of the assessee and not at the one made by the customs officers at higher value by labelling it as provisional assessment. In this context, she placed reliance upon the case of Hassan Trading Company v. Central Board of Revenue, Government of Pakistan 2004 PTD 1979. She further contended that if the interpretation advanced by Mr. Raja Muhammad Iqbal as regards finality of provisional assessment is accepted, it will amount to giving premium to the customs officers for their inefficiency, instead of penalizing them; which cannot be the spirit of substitution of original subsection (2), by subsection (2), (3) and (4) to section 81 of the Act of 1969 by Finance Act, 1991.

6. We have carefully considered the arguments advanced by the learned counsel and perused the material placed on record.

7. The short controversy involved in these appeals seems to be with regard to the true interpretation of finality of provisional assessment as contemplated under subsection (4) to section 81 of the Act of 1969. Before we proceed to examine this aspect of the case it will be advantageous to reproduce hereunder the relevant provisions of the Act of 1969, which reads thus:---

"Provisional assessment of duty (1) where it is not possible immediately to assess the customs duty that may be payable on any imported goods entered for home consumption or for warehousing or for clearance from a wherehouse for home consumption or on any goods entered for exportation, for the reason that the goods required chemical for other test for a further enquiry for purpose of assessment, or that all the documents or complete documents or full information pertaining (Assistant Collector or Deputy Collector) of Customs may order that the duty payable on such goods be assessed provisionally:

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 or duty over the provisional assessment.

(2)Where any goods are allowed to be cleared or delivered on the basis of such provisional assessment, the amount of duty actually payable on those goods shall, as soon as may be, finally assessed within one hundred and eighty days of the date of provisional assessment:

Provided that the Collector of Customs may, under circumstances of exceptional nature, extend the period for final assessment by not more than ninety days, after recording such circumstances.

(3)On completion of such assessment, the appropriate officer shall order that the amount already paid or guaranteed be adjusted against the amount payable on the basis of final assessment, and the difference between the two amounts hall be paid forthwith to or by the importer or exporter, as the case may be.

(4)If, the final assessment is not completed within the period specified in subsection (2), the provisional assessment shall become final.

8. A plain reading of the above provisions of law go to show that it has been meant to facilitate both the Customs Authorities as well as the assessee in a situation, where it is not possible to assess the customs duty immediately, to get the goods released on the basis of provisional assessment for want of required test/reports/documents, for further enquiry or where for any other valid reason(s) final assessment of the goods is not possible, at the relevant time. The proviso to subsection (1) provides that at the time of provisional assessment the Customs Authorities may ask the importer or the exporter, as the case may be, for payment of additional amount as security or to furnish such guarantee of scheduled bank, to secure the payment of such amount, which may be further found due on final assessment of duty over the provisional assessment. Subsection (2) to section 81 of the Act of 1969 provides the period during which such provisional assessment is to be finalized by the Assessing Authority while the proviso to subsection (2) empowers the Collector of Customs to extend the period of final assessment up to 90 days under circumstances of exceptional nature after recording such circumstances. Subsection (3) to section 81 provides that on completion of assessment, the concerned Assessing Officer shall order that the amount already paid or guaranteed be adjusted against the amount payable on the basis of final assessment and the difference between the two 'amounts, if any, shall be paid forthwith to or by importer or exporter as the case may be. Further, subsection (4) to section 81 provides that if the final assessment is not completed within the specified period given under subsection (2) to section 81 then provisional assessment shall become final. In other words, subsection (4) to section 8l,is a penal provision incorporated in the scheme for the benefit of the assessees/importers/exporters to save, them from unnecessary harassment by the Customs Authorities by way of lingering on their cases for indefinite period on the pretext of finalizing the assessment. When the practical working of the scheme of provisional assessment, as provided under section 81 of the Act of 1969, is analyzed, it will be seen that the figure of provisional assessment denotes figure of levy of duty on the basis of value. declared by the importer/exporter plus any reasonable percentage of loading over such declared value made by the Assessing Officer to secure any excess payment of duties/charges, which may be found due in addition to the duty levied on the declared value of the goods, at the time of final assessment within the "period stipulated by subsection (2) to section 81. It is such excess payment of duty/charges levied on the basis of loading, which are secured by charging additional amount or furnishing of guarantee of scheduled bank. Thus, it is apparent that charging of such additional amount or furnishing of guarantee is subject to the terms of final assessment and not otherwise. In other words, when no final assessment is made in terms of subsection (2) to section 81, the provisional assessment will become final on declared value of 'goods by the assessce, and disbursement of additional amount or guarantee furnished by the importer/exporter, in terms of subsection (3) to section 81, will be regulated on such premises.

9. Similar issue when came up for consideration before a learned Single Judge of Lahore High Court in the case of Messrs Farooq Woollen Mills v. Collector of Customs, Customs Dryport, Sambrial and 2 others (2004 PTD 795), the learned Judge aptly observed as under:-----

"(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 context 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, 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. On the other hand the Revenue, if we go by 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."

10. This legal position is also amplified by the judgment of a Division Bench of this Court in the case of Messrs Hassan Trading Company v. Central Board of Revenue, Government of Pakistan, Islamabad (2004 PTD 1979)' relevant observations read as under:--

"However, in view of the provisions of sections 32 and 81 of the Customs Act, the Customs Department was under a legal obligation to finalize the assessment under section 81 and to issue a notice under section 81 if at the time of finalization of the assessment it was discovered that the goods imported by the petitioners did not conform to the description of the imported goods. On failure of the Customs Department to proceed in accordance with the provisions of section 81 of the Customs Act, the provisional assessment attained finality after the expiry of the period of 270 days which conferred a right on the petitioners to get the imported goods cleared on the value/price declared by them.

11. In the instant case admittedly the Customs Authorities have failed to finalize the assessment of the respondents within the stipulated period as provided by subsection (2) to section 81 of the Act of 1969. In B such circumstances, the provisional assessment made by the Customs Authorities in terms of section 81(1) of the Customs Act, 1969, has attained finality on the basis of declared value of the goods by the assessee and not in any other manner.

12. For the foregoing reasons the view taken by the Tribunal in its impugned order is unexceptionable. These appeals are accordingly dismissed in limine.

M.B.A./C-29/KAppeals dismissed.