M. N.-IMP. & EXP. COMPANY, KARACHI VS SECRETARY, REVENUE DEVISION, ISLAMABAD, 2007 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 2460 (2007)

Customs Act (IV of 1969)---

----Ss. 81(3) & 25(1),(2)(f),(9)---Valuation Ruling No. 497/2006, dated 21-1-2006---Customs General Order 12 of 2002---Finance Act (VII of 2005), Preamble---Provisional 'assessment of duty---Complainant contended that provisional assessment at the declared value attained finality under subsection (4) read with subsection (2) of S.81 of the Customs Act, 1969 as the Customs Authorities did not pass the final assessment order within the mandatory period prescribed under S.81(2) of the Customs, Act, 1969---Post-dated cheque should have been returned but the Customs Authorities did not fulfil their obligation under S.81(3) of the Customs Act, 1969---Department, stated that with the addition of "Explanation" under S.81 of the Custom Act, 1969, the provisional determination value included the amount of duty and taxes secured with bank guarantee or post-dated cheque and this legal .provision empowered the customs to encash the guarantee---Validity---If the Customs Authorities decided to include the amount of security in the final determination, an appropriate order should have been passed which had not been clone so far---Cause of action did not arise at the time of provisional assessment but after the expiry of mandatory period mentioned in S.81 of the Customs Act, 1969---Fact was established that the assessment of goods was not determined even till 11-7-2007 and no action was taken to return post dated cheque---Provisional determination be deemed to be the final determination of duty and imposition of taxes under S.81(4) of the Customs Act, 1969 was fully justified---Federal Tax Ombudsman recommended that Federal Board of Revenue would direct the Collector of Customs (Appraisement) to return the post-dated cheque of Rs.3,82,193 to the complainant within 15 days.

Complaint No. 85-K of 2007 ref.

Dealing Officer: Mr. M. Mubeen Ahsan, Advisor.

Afzal Awan, Advocate.

Irfan Javed, Deputy Collector of Customs (Appraisement).

Rashid Jamil, Assistant Director Customs Valuation.

M. Aslam, Principal Appraiser, Customs Valuation.

FINDINGS/DECISION

JUSTICE (RETD.) MUNIR A. SHAIKH, (FEDERAL TAX OMBUDSMAN).---The complaint has been filed against the Assistant Collector of Customs (Appraisement-III), Karachi for not releasing Post Dated Cheque (PDC) deposited as guarantee before the final determination of the duty under section 81(1) of the Customs Act.

2. It has been stated in the complaint that the complainant imported a consignment of Glass "Beads which was released under section 81 of the Act to save heavy port demurrage against the security of PDC for Rs.382,193, dated 9-5-2006 to meet the likely difference of duty between the final determination of duty over the provisional amount. The complainant also submitted at, indemnity bond along with the cheque.

3. The Customs Officials disobeyed the provisions of subsection (1) of section 25 of the Act and attempted to apply the valuation ruling of some other consignment of Glass Beads of assorted size, colour and designs under subsection (9) of section 25 of the Act without any lawful reason or proof.

4. The complainant stated he offered the Assistant Collector of Customs to buy the consigmnent under section 25-Aof the Customs Act to which he did not agree. He declined to assess the goods under section 80 of the Act on the basis of the transaction value and referred the case to the .Valuation Department for opinion.

5. It was stated that Valuation Officer as well as the Assistant Collector conducted local market enquiries, the transaction value of the consigmnent was found intact and no evidence was found to ignore the subsection (1) of section 25 of the Act. The provisional assessment at the declared value attained finality under subsection (4) read with subsection (2) of section 81 of the Customs Act. Since the Customs Authorities did not pass the final assessment order within the mandatory period under subsection (2) of section 81, they should have returned the PDC to the complainant but they did not fulfil their obligation under subsection (3) of section 81.

6. It was averred that the non-return of PDC is an act of omission or commission on the part of the Customs contrary to law and thus constitutes maladministration which has seriously damaged .the complainant and caused him harassment by misusing authority by the respondent. The complainant visited the office of the Assistant Collector a number of times and also sent a written request but got no- reply which also amounted to maladminstration.

7. It was requested that:-

(i) the acts of not releasing of PDC on expiry of period of limitation and not replying to the request of the complainant, dated 18-4-2007 be declared as maladministration;

(ii) Respondent be directed to release PDC (guarantee) without further delay; and

(iii) the complainant be allowed the cost and any other relief deemed necessary be awarded.

8. Assistant Director of Customs Valuation replied to the complaint that the burden of proof to justify the fairness of declared value was upon the importer and the respondent was justified to reject the declared value. The Directorate of Customs Valuation conducted enquiry through SGS but its report was not indicative of any price. The discrepancies pointed out by SGS and non-availability of information from the supplier were sufficient reasons to doubt the transaction value.-The adv-ice for finalization of assessment at $1.75/kg was based on evidence of identical/similar goods assessed .and released by the Collcctorate. He stated that the complainant could have moved au appeal before the appellate authority. The complaint was baseless and did not deserve any consideration.

9. The Deputy Collector Customs (Appraisement) also submitted parawise comments and raised the following preliminary objections/ questions of law:---

(i) The case of determination of liability of tax/duty and valuation of goods could not be entertained under section 9(2)(b) of the Federal Tax Ombudsman Ordinance.

(ii) Complainant has failed to identify maladministration or targeted malice, bias or corruption and the complaint is liable to be dismissed.

(iii) In the absence of any new evidence, provisional assessment is to be finalized on the basis of evidence relied upon at the tune of release under subsection (4) of section 81 of the Customs Act read with "Explanation" given thereunder.

(iv) While the complainant was aggrieved with the assessment in May, 2006, the complaint has been filed in June, 2007; under section 10(3) of the Federal Tax Ombudsman Ordinance, 2000, it was barred by time.

10. It was stated that the complainant was not able to substantiate the declared value with any document or evidence; therefore, under clause (t) of subsection (2) of section 25 of the Customs Act the declared value @ $ 0.75/Kg was not accepted as customs value. Glass Beads were normally imported from China with declaration of suppressed value and there was not a single case where declared value was accepted. When the disputed consigmnent was imported, all consignments of Glass Beads of China origin were being assessed @ $ 1.75/Kg in the light of Valuation Ruling 110.497 of 2006, dated 21-1-2006 and this consigmnent was also proposed to be assessed at the same value.

11. It was stated that the complainant consisted on acceptance of the declared value or alternatively offered customs to buy the goods at declared value plus 25%. This offer was not accepted. However, the complainant was offered to get the goods assessed provisionally under subsection (1) of section 81 of the Act or deposit the goods in CPF Bonded Warehouse. The complainant opted for provisional assessment and deposited PDC, dated 8-5-2006 along with indemnity bond, dated 9-5-2006. The insistence for determination of assessment under subsection (1) of section 25 was nothing but a flimsy pretext for subsequent complaint. It was incorrect that Valuation Ruling was applicable on only one GD as it was used as a reference/evidence for assessment of other consignments also.

12. In terms of subsection (4) of section 81 of the Act read with `Explanation' given thereunder, the provisional assessment was automatically finalized after expiry of stipulated period. This provision was promulgated vide Finance Act, 2005 and the contents of CGO 12 of 2002 were not applicable on the current provisions of section 81 of the Customs Act, 196).

13. During the hearing of the complaint, the counsel for the complainant stated that the provisional assessment of the consignment was made on 9-5-2006 and the Customs Officials did not determine the duty and taxes correctly payable within 9 months and even the period extended by the Collector of Customs. The customs were duty-bound wider the customs law to return the PDC. Referring to paragraph 6 of the reply of the Deputy Collector that the provisional assessment became final automatically. after the expiry of the stipulated period, he strongly opposed this view and referred to the Findings of the Federal Tax Ombudsman at paragraph 13 of the Complaint No.85-K of 2007 that it could not be "the intention of the law makers and the government to placed premium on the delay, inaction, indecisiveness" and to reward the Customs Officers for their inefficiency and "arbitrarily deprive the importer of the security deposited." "if the Customs Authorities wanted to include the amount of security within the ambit of duty and taxes, they should have done so only with adequate evidence and passed speaking order observing the due process" of law.

14. The learned counsel also invited attention to paragraph 66 of CGO 12 of 2002 issued by the C.B.R. and contended that it was obligatory for the Customs Officials to comply with the laid down procedure of finalization of value and assessment within the mandatory period, it has been specifically stated that the Collector/Controller of Valuation should ensure that these instructions were complied with in letter and spirit.

15. Assistant Director of Customs Valuation replied that it was intimated to the Assistant Collector of Customs vide letter, dated 2-4-2007 that since identical/similar 'goods were being assessed under section 8D of the Customs Act, the cases of provisional assessment be also finalized accordingly. When it was pointed out that this letter was sent after the expiry of the mandatory period of 9 mouths he stated that the Deputy Collector had been requested vide letter, dated 31-1-2007 to seek extension of 90 days from the competent authority which was granted upto 25-5-2007 and communicated by the .Assistant Collector vide letter, dated 6-7-2007.

16. Deputy Collector of Customs (Appraisement) stated that evidence of higher value of identical goods was available with the Group but in order to facilitate the importer provisional assessment was made and the matter was referred to the Valuation Directorate. The Directorate replied that in view of availability of higher value the assessment be finalized accordingly. With regard to the question of expiry of the period under section 81, he stated that with the addition of "Explanation" under the section, the provisional determination value included the, amount of duty and taxes secured with bank guarantee or post-dated cheque and this legal provision empowered the customs to encash the guarantee. On enquiry the Deputy Collector stated he was not in a position to either state that assessment had been finalized at the higher value even on the date of hearing of this complaint i.e. 11-7-2007 or to confirm whether the PDC had been encashed or not.

17. The learned counsel replied that despite the Ruling No. 497, dated 21-1-2006, the ascertained unit value $ 1.75/Kg was not legally valid because it had been determined under subsection (9) of section 25 of the Customs Act without applying other methods sequentially as required under the law and nothing has been mentioned about the application of provisions of section 25 properly and fully.

18. From a careful examination of the circumstances of the complaint, the statements and arguments put forward by the learned counsel for the complainant and stand taken by the officials of the Appraisement Collectorate and Directorate of Customs Valuation, it transpires that in this case Glass Beads were provisionally released on 9-5-2006 under section 81 of the Customs Act against a post-dated cheque of Rs.382,193 and the case was referred to the Valuation Department for opinion. According to the complainant the valuation office and the Assistant Collector conducted an enquiry and found transaction value as the correct value and got no evidence to ignore the same. Provisional assessment at the declared value thus attained finality under subsection (4) read with subsection (2) of section 81 of the Act as the customs did not pass the final assessment order within the extended mandatory period. They also did not return PDC as required under subsection (3) of section 81.

19. The Assessing Officer argued that the customs relied upon the Valuation Ruling, dated 21-1-2006 and presumed that, in view of the `Explanation' under section 81 of the Act, the amount of deposit was inclusive of the amounts of duty and taxes leviable. PDC was not returned to the importer as it was to be enchased by the Customs.

20. As regards the objections raised by the Collector of Customs, the factual position is that this complaint has not been submitted to this office to determine the liability of tax or value of goods. Even if the respondent's argument arc accepted, the fact remains that they have failed to finally determine duty and taxes leviable on the goods. If the Customs decided to include the amount of security in the final determination, an appropriate order should have been passed which has not been done so far. Further, the cause of complaint did not arise at the time of provisional assessment in May, 2006 but after the expiry of the mandatory period mentioned in section 81 of the Act. The complaint filed in this office on 1-6-2007 was not hit by the time limitation under subsection (3) of section 10 of the FTO Ordinance and was not barred by time. The objections raised by the respondents are not valid, it is a clear case of maladministration and this office has taken its cognizance to redress a genuine grievance of the complainant.

21. It has been clearly established that the assessment of goods was not determined even till 11-7-2007 and no action was taken to return PDC. The contention of the complainant that the assessment under subsection (2) of section 81 had not been finally determined even during the period extended by the competent authority, the provisional determination be deemed to be the final determination of duty and taxes under subsection (4) ibid is fully justified.

22. It is recommended that FBR direct the Collector of Customs (Appraisement) to:---

(i) return the post-dated cheque of Rs.382,193 to the complainant within 15 days; and

(ii) compliance reported to this office within 30 days.

C.M.A./111/FTOOrder accordingly.