Messrs TRADE INTERNATIONAL VS DEPUTY COLLECTOR OF CUSTOMS (BANK GUARANTEE SECTION), 2005 PTD-LAHORE-HIGH-COURT-LAHORE 1968 (2005)

Customs Act (IV of 1969)---

----Ss. 25(1) & 81---Non-acceptance of declared value of goods---Provisional assessment of duty---Release of goods on furnishing bank guarantee---Non-finalization of assessment within statutory period---Plea of Revenue for not returning bank guarantee after expiry of statutory period was pendency of appeal in another case of importer---Validity---On failure of revenue to complete final assessment within period prescribed in S.81 of Customs Act, 1969, only assessment in field being at declared value, would mature into final assessment---Revenue would have absolutely no authority to retain bank guarantee after expiry of statutory period---Such plea would hardly be a good defence to secure the differential in another case---Importer could seek remedy at law against Revenue as well as its individual officers responsible directly or indirectly to retain illegally bank guarantee after expiry of statutory period for finalization of assessment.

Messrs Farooq Woollen Mills v. Collector of Customs and others 2004 PTD 795 fol.

Mian Abdul Ghaffar for Petitioner.

M. Shahid Mughal for Revenue.

ORDER

The petitioner imported two consignments of "natural juices" at the declared unite value of U.S. dollars 0.35 per liter from Dubai (U.A.E.) and filed home consumption bills of entry on 16-2-2002 and 7-6-2002 seeking clearance of the goods on the basis of the transactional value in terms of section 25(1) of the Customs Act, 1969. The respondents/custom authorities, however, refused to accept the declared value and proposed its enhancement to U.S. dollars 0.51 per liter. Accordingly the petitioner submitted applications on 16-2-2002 and 22-6-2002 for assessment of goods on the basis of declared value provisionally and securing proposed additional amount of duties and taxes through guarantee under section 81 of the said Act. The request of the petitioner was accepted and he was directed to pay duties and taxes in cash on declared value and to furnish bank guarantees covering the differential amounts at Rs.1,45,068 and Rs.1,41,516.

2. The department/Revenue accepted the guarantees and released the consignment provisionally under section 81 of the said Act on 25-2-2002 and 29-6-2002. If is stated that thereafter the petitioner submitted applications seeking finalization of the assessment at the declared value and return of bank guarantees but without any action on the part of the Revenue/Customs Department.

3. In their reply/comments the Revenue/Department has not disputed the above facts. It is, however, stated that in an identical case the department has filed an appeal against the order-in-original before the Appellate Tribunal and, therefore, the assessment in the case of the petitioner could not be finalized. They wish to take time till a decision is received from that forum.

4. Having heard the parties I am of the view that the reasons stated by the Department to retain bank guarantees after expiry of statutory period for finalization of assessment as contained in section 81 is totally misplaced. The issue as to what amounts to a provisional assessment of duty contemplated in section 81 of the Customs Act, 1969 was considered and decided by me in Constitutional jurisdiction in re. Messrs Farooq Woollen Mills v. Collector of Customs and others 2004 PTD 795. On consideration of various sub-clauses of that section it was finally held that where the Revenue failed to complete final assessment within the stipulated period under section 81 of the Act the only assessment being in field will mature into final assessment. In para 8 of that order it was observed as under:--

"The Revenue may partly be correct is 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 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 in my view is not strong enough to retrain one from interpreting the term provisional assessment in the above manner."

5. In the case in hand as well no assessment order has been finalized within the stipulated period and, therefore, for various reasons stated in the said order the only assessment in field being at the declared value needs to be considered final. After the expiry of the statutory period the Revenue has absolutely no authority to retain bank guarantees. Their defence that in an identical case they had approached the Tribunal against an order-in-original is hardly good defence to return bank guarantees submitted to secure the differential in another case.

6. This petition is, therefore, accepted and the respondent/Revenue is directed to release bank guarantees submitted by the petitioner within seven days from the receipt of this order. The petitioner shall be at liberty to seek his remedy at law against the Revenue as well as its ^D individual officers who have directly or indirectly been responsible to illegally retain bank guarantees after the statutory period for finalization of the assessment.

S.A.K./T-85/L???????????????????????????????????????????????????????????????????????????????????? Petition accepted.