M.N. IMP. & EXP. COMPANY, KARACIH VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1676 (2008)

Customs Act (IV of 1969)---

----Ss. 25A(3), 25D, 25(1)(8), 79 & 80(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9(2)(b) & 10(2)---Federal Tax Ombudsman Investigation and Disposal of Complaints Regulations, Regulation No.23(i), (ii) and (iv)---Action where declared value is less than the value determined---Import of consignment of Battery Operated Toys and Toys without Battery---Goods declaration was filed and the leviable duty and taxes were deposited under S.79 of the Customs' Act, 1969---Complainant alleged that Department was under obligation to make an order for clearance---Department, after wasting fourteen days time, unlawfully assessed the customs. value and collected additional amount of duty and taxes---Contention was that customs value of the goods was enhanced in violation of the mandatory provision of law under S.25(1) of the Customs Act, 1969, misuse of State power and possible designs of bribery and jobbery without disclosing any evidence for not accepting the declared value and arbitrarily and unlawfully, determined the value of goods; that delay, neglect, harassment, detention and duress resulted into penalty and storage and demurrage charges which were borne by the complainants; action of Department was unlawful, perverse and arbitrary and amounted to maladministration; and that enquiry be conducted and direction be issued to the Department to compensate the complainants with the refund of, the money paid in duty and taxes, storage and demurrage charges---Validity---Value of Battery-operated Toys and Hand-operated Toys were determined by the Valuation Department taking into consideration the data of past assessment and cost of raw materials, and after discussion with the representatives of the KCCI and FPCI and other stakeholders---Valuation Advice was issued under S.25A of the Customs Act, 1969---Values of imports from China were revised on the representations of the importers Associations and under the direction of Federal Board of Revenue---Valuation Directorate had determined the assessable values in accordance with law and Collectorate had stated that the assessment had to be made in accordance with the valuation Advices issued from time to time---Allegation of maladministration against the Valuation and Customs Department was not established---Complainant had the option to file a review application before the Directorate-General of Customs Valuation under S.25D of the Customs Act, 1969; however, protest of the importer for payment of demurrage of KICT for port/demurrage charges was justified---Federal Tax Ombudsman recommended that Federal Board of Revenue direct the Director General of Customs Valuation to examine the review application and, after hearing the importer, decide the same on merits within thirty days of its receipt; that the Collector of Customs to investigate into the reasons of delay of 14 days in the examination of consignment by the shed staff and that in case the delay took place because of the customs examination, the Collector of Customs may take up the matter with the KICT to refund the excess amount of charges recovered from the importer.

No.1386-L/2002 and No.214-L/2002 ref.

M. Mubeen Ahsan, Advisor, Dealing Officer. M. Afzal Awan.

Ameeruddin and Muhammad Rashid Khan for KCIT.

Zeba Bashir, Deputy Director of Customs Valuation.

Syed Fawad Ali Shah, Deputy Collector of Customs PACCS.

FINDINGS/DECISION

JUSTICE (RETD.) MUNIR A. SHEIKH, (FEDERAL TAX OMBUDSMAN).----The complaint has been filed alleging maladministration against the Collector of Customs PACCS and the Director General of Customs Valuation for arbitrarily enhancing the customs value (of Toys) in violation of the provisions of section 25(1) of the Customs Act and over-charging an amount of Rs.463,114 in customs duty. The complainants have requested that the excess duty of Rs.463,14 be refunded and port demurrage Rs.25,650 which accrued due to delay in the assessment by the Collector of Customs and recovered by KICT be reimbursed.

2. The complainants stated they imported a consignment of Battery Operated Toys and Toys without Battery, the Goods Declaration was filed and the leviable duty and taxes were deposited on 9-2-2008 under section 79 of the Customs Act. The respondents were under obligation to make an order for clearance. But, it was alleged, the respondents after wasting fourteen days' time unlawfully assessed the customs value on 23-2-2008 and collected additional amount of Rs.463,114 in duty and taxes on 28-2-2008. It was alleged that the customs value of the goods was enhanced in violation of. the mandatory provision of law under subsection (1) of section 25 of the Customs Act, misused of state power and possible designs of bribery and jobbery without disclosing any evidence for not accepting the declared value of $ 275/kg and $1.020/kg and, arbitrarily and unlawfully, determining the value at $3.30/kg for Battery-operated Toys and $3/kg for Toys without Battery.

3. It was alleged that this delay, neglect, harassment, detention and duress resulted into penalty and storage and demurrage charges of Rs.25,650 which were borne by the complainants. It was further alleged that the respondents' action was unlawful, perverse and arbitrary and amounted to maladministration; it was requested that enquiry be conducted under section 10(2) of the Federal Tax Ombudsman Ordinance and direction be issued to respondents to compensate the complainants with the refund of the money paid in duty and taxes, storage and demurrage charges.

4. The Deputy Director of Customs Valuation stated in reply to the complaint that under section 9(2)(b) of the Federal Tax Ombudsman Ordinance, this office had no jurisdiction to investigate or inquire into the matters which relate to assessment of income or wealth, determination of liability of tax or duty, classification or valuation of goods, interpretation of laws, rules and regulations etc. Reference was also made to the decisions of the President of Pakistan on representations made against the findings in Complaints No.1386-L/2002 and No.214-L of 2002 that the jurisdiction of the Federal Tax Ombudsman was barred and the office did not provide appeal against the unfavourable decisions of tax authorities on merits. It was further stated that the complainants had approached this office without exhausting adequate remedy available under the law under section 25A(3) and section 25D of the Customs Act and, as such, the complaint did not merit consideration.

5. With regard to the facts of the case it was stated that on receipt of a reference from the Model Customs Collectorate against the under-invoicing the imports of miscellaneous children Toys, inquiry was initiated for determination of fair customs values. The data received from PRAL was scrutinized and it was observed that the declared import value was invariably rejected under section 25(1) of the Customs Act and (assessable) values were determined by Assessing Officers under subsequent valuation methods. Due to this reasons, the data reflected under sections 25(5) and (6) of the Act was not considered appropriate for determination of value, and reliance was placed upon the subsequent method of valuation and market inquiry conducted under section 25(7) ibid.

6. It was stated that the prices of Toys were also worked out under section 25(8) of the Customs Act from the prices of basic raw materials and customs values under section 25A of the Customs Act were determined. On a representation from the Association and general body of importers as well as on the direction from the Federal Board of Revenue, the matter was reconsidered and, after detailed proceedings, with the consent of the stakeholders, the customs values of imported Toys were re-determined by downward revision of imports from China while the values for Thailand and UAE origin Toys remained the same. It was stated that the action of the Directorate-General was lawful land correct and the complaint be set aside being bad in the eyes of law.

7. The Deputy Collector of Customs in reply to the complaint raised the objections similar to those mentioned at paragraph 4. In parawise comments on the main grievances, it was stated that it was not a case of determination of value under section 25 of the Customs Act; the valuation was made under section 25A of the Act by the Director of Valuation. The customs were duty-bound to assess the commodity as per the Valuation Ruling and if the importer had any reservation about the determined value he could file an application for review before the Director General of Valuation under subsection (3) of section 25A ibid. It was further stated that:

(i) Each declared value could not be termed as representing as the value actually (paid or) payable and was not acceptable as transaction value for the purpose of assessment.

(ii) There was no delay in determination of value. After examination the goods were assessed on 22-2-2008, complainants filed review request on 23-2-2008 to the Principal Appraiser and to the Deputy Collector who after hearing the complainants' representative conveyed the decision electronically on the same date but they failed to lift the cargo till 28-2-2008.

(iii) The respondent has acted within the ambit of law, a few days were spent in examination owing to improper stacking of the goods.

(iv) Under section 80 of the Customs Act, the respondents have every right of check the declaration and payment of duty and taxes by importer. As the self-assessment made by the complainants was not in accordance with law, the goods were re-assessed in terms of section 80(3) ibid.

(v) There was no delay on the part of the respondents, legitimate revenue was collected from the importer and the contents of the complaint are wrong and incorrect. If the respondents' action was considered unlawful, the complainants should have taken action under sections 25A(3), 25D and 193 of the Customs Act.

(vi) As per PACCS record, and the request for second review, the decision taken by the Deputy Collector, was electronically transmitted to the complainants' inbox at 5-48 p.m. on 23-2-2008, and 28-2-2008 was the actually the date on which they had taken the printout of the message.

(vii) The allegations against the officials of PACCS Collectorate were incorrect and the complaint was liable to be dismissed.

8. Messrs Karachi International Container Terminal (KICT) stated that the complaint was barred under section 9 of the Establishment of the Federal Tax Ombudsman Ordinance, 2000, because the agency was neither a Government Department nor collecting any tax on behalf of the Government. The complainants did not disclose any act of omission on the part of the KICT which could be termed as maladministration as defined under subsection (3) of section 2 of the Federal Tax Ombudsman Ordinance and may be disposed of under Regulation No.23(i), (ii) and (iv) of the Federal Tax Ombudsman Investigation and Disposal of Complaint's Regulations.

9. KICT further stated that

(i) Complainants have stated that the delay in assessment and release of consignment was caused by the Collector of Customs and no maladministration has been attributed to the KICT.

(ii) The President of Pakistan has decided that there was no law which obligated the port authorities to waive demurrage charges on the recommendations of the customs, KICT is working under the implementation agreement with the KPT to provide modern, efficient, competitive and non-discriminatory container handling services at Karachi Port for the shipping lines, the shippers, the consignees and other port users in a manner consistent with the requirements of the shipping trade. It was requested that the complaint against the KICT be dismissed.

10. During the hearing of the complaint, the learned counsel stated that the Goods Declaration was filed and duty and taxes were paid on the declared value on 9-2-2008 but the customs did not allow release of the goods. On the basis of Valuation Advice, dated 26-1-2008 already available with the Collectorate, the goods was assessed on 23-2-2008 and released on 28-2-2008. The assessment had been made on enhanced value i.e. the value determined by the Valuation Directorate under section 25A of the Customs Act. The learned counsel stated that the Valuation Ruling was illegal.

11. He argued that the declared value should have been accepted under subsection (1) of section 25 of the Customs Act but the Customs authorities did not examine the declared value under this subsection. Additionally, he argued, the Valuation Directorate did not determine the value after following the method as laid down under section 25 of the Act. He further stated that the Collector of Customs assessed the goods at the value of $2.5/kg while another valuation of $1.40/kg was also determined by the Valuation Department. It gave another ruling on 15-3-2008 under which the value was determined at $1.40/kg.

12. The learned counsel stated that the since the assessment was made at a much higher value, the complainants were entitled to refund of duty and taxes in excess of the duty and taxes assessable on the basis of declared value; secondly, the customs officials delayed the assessment unnecessarily with the result that the goods remained stored in the port area; thirdly, since the KICT works as a Terminal Operator under a Customs' license, it cannot release the goods without the direction of the Customs and if delay takes place they have no authority to recover demurrage charges from the importer. The goods were released only when the Customs so ordered, KICT had no right to recover the demurrage charges. Since the assessment was done by the Customs without valid reasons and legal basis the demurrage charges should be borne by the Customs.

13. The Deputy Collector of Customs replied that after the filing of GD on 9-2-2008 it was electronically sent to the examination staff the same day and the examination report was received electronically on 22-2-2008. He stated that he did not have the details about off loading of the container and its de-stuffing by the Customs staff and the reasons it took 13 days for the shed staff to carry out the examination and send the report.

14. He further stated that the Appraiser completed the assessment on the basis of the available value on 22-2-2008, the first and second review applications were made to the Principal Appraiser and the Deputy Collector same day who upheld the valuation and assessment was thus finalized on 23-2-2008. The differential of duty and taxes was paid by the importer on 28-2-2008 and clearance obtained. In spite of the fact that it took about 13 days for the shed staff to examine the goods and send the examination report, the Deputy Collector of Customs stated that delay did not take place due to the Customs staff.

15. The Deputy Director of Customs Valuation stated that the Collector of Customs had taken up the matter with the Directorate of Valuation on 3-12-2007 about the under-invoicing of Toys and furnished comprehensive information about the cost of the components' materials and fair values of Toys of different categories importer from different origins. Based on the report of the Collector of Customs and detailed investigation was taken in the hand and the representatives of the FPCCI, KCCI and other stakeholders were invited for meeting with the Valuation Department to sort out the matter. At this stage the importers' Association did not come forward and their opinions were not available. After completing the exercise 'the valuation Directorate issued Valuation Advice on 26-1-2008 under which the Plastic Toys Hand-operated were valued $3/kg and Battery-operated Toys at $3.50/kg imported from China/UAE.

16. Subsequently, after reconsideration on the request of the Associations from Lahore and Karachi, the values of Toys imported from China were determined at $ 1.40/kg to $1.70/kg for Hand-operated Toys, and $ 2/kg for Battery operated Toys. This Advice was circulated on 15-3-2008. The complainants did not approach the Valuation Department at any stage. With regard to this particular import, the matter was between the Collector of Customs add the importer and the Valuation Directorate was not involved in the individual assessment of consignments.

17. The contents of the complaint, the comments of the Deputy Director of Customs Valuation and Deputy Collector of Customs, PACCS, and statements made at the time of hearing have been examined. It transpires from the facts of the case that the values of Battery-operated Toys and Hand-operated Toys were determined by the Valuation Department taking into consideration the data of past assessments and cost of raw materials, and after discussion with the representatives of the KCCI and FPCI and other stakeholders. Valuation Advice was issued under section 25A of the Customs Act. The values of imports from China were revised on the representations of the Importers' Associations and under the direction of the Federal Board of Revenue. The Valuation Directorate has determined the assessable values, in accordance with law and the Collector has stated that the assessment has to be made in accordance with the Valuation Advices issued from time to time. The allegation of maladministration against the Valuation and Customs Departments is not established. However, the complainants have the option to file a review application before the Directorate-General of Customs Valuation under section 25D of the Customs Act. No satisfactory explanation has been given about 13 or 14 days taken by the Shed staff in the examination of goods. The protest of the importer for payment of Rs.25,650 to KICT for port/demurrage charges is justified.

18. It is recommended that the Federal Board of Revenue direct-

(i) the Directorate-General of Customs Valuation to examine the review application and, after hearing the importer, decide the same on merits within thirty days of its receipt;

(ii) the Collector of Customs to investigate into the reasons of delay of 14 days in the examination of consignment by the shed staff.

(iii) In case the delay took place because of the customs examination, the Collector of Customs may take up the matter with the KICT to refund the excess amount of charges recovered from the importer.

(iv) Action taken on-(i)(ii) and (iii) be reported to this office within forty-five days.

C.M.A./53/FTOOrder accordingly.