OWAISCO, KARACHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 462 (2004)

Customs Act (IV of 1969)---

----Ss. 81 & 202---S.R.O. 1108(I)/94 (Pre-Shipment Inspection Scheme)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9, 10(3) & 11---Release of goods after provisional assessment of duty---Non-finalization of assessment within period under S.81 of Customs Act, 1969 for being inapplicable to decision taken under Pre-Shipment Inspection Scheme---Issuance of recovery notice under S.202 of the Customs Act, 1969 after decision of Working Committee under S.R.O. 1108(I)/94---Validity---Instructions contained in Standing Order 9/95 and Public Notice 44/95 had to be followed within mandatory time-frame as provided under S.81 of 'the Customs Act, 1969, from which no escape was provided in Pre-Shipment Inspection Scheme---Finalization of assessment by Working Committee after such mandatory period had no legal validity---Encashment of pay-order and issuance of recovery notice were without lawful authority---Complaint against recovery notice was within time---Maladministration was established---Federal Tax Ombudsman recommended to C.B.R. to direct Collector to cancel recovery notice and refund ''amount to complainant within specified time.

2002 MLD 1098 ref.

M. Mubeen Ahsan, Dealing Officer.

Muhammad Junaid Ghaffar, Advocate.

Dr. Akhtar Hussain, Deputy Collector of Customs (Appraisement).

Naseem Ahmed Nisar, Examining Officer.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---The complaint has been filed against the recovery notice under section 202 of the Customs Act issued to the Complainants in respect of two consignments-imported in 1995. The Complainants have stated in the complaint that at the time of importation the Pre-Shipment (PSI) Scheme was in vogue. They imported two consignments (in 1995) and Messrs Cotecna issued two CRFs at exorbitant prices of SEK 37/KG against the invoice value of SEK 22/KG and SEK 35/KG against the invoice value SEK 25/KG. They stated that they were regular' importers of the same item from the same source and their previous imports at the same prices had been accepted by Messrs Cotecna without objection. Despite their representation on the basis of the evidence, the values were not revised by Messrs Cotecna.

2. The Complainants stated that on their request the assessment of goods was allowed under section 81 of the Customs Act. They submitted a pay order for Rs.642,394 for the differential amount against one consignment and a post-dated cheque dated 11-2-1996 for the second consignment. The consignments were provisionally released against these securities under subsection (1) of section 81. They represented the valuation dispute before the Working Committee appointed under S.R.O. 1108(I)/94 for correct assessment on the basis of previous evidence but the request, was not acceded to. They did not agree with the findings of the Working Committee and wanted to file an appeal before the Steering Committee constituted in terms of paragraph xiv of Public Notice No.44/95. They requested the Working Committee to pass an order on which appeal could be preferred but no such order was passed.

3. The Complainants approached the Sindh High Court with the prayer that since no order had been passed despite several reminders, the respondents be directed to pass appropriate orders to enable them to make appeal against the same. The High Court, vide order dared 11-12-1997 directed the respondents to pass appropriate order within one month on merits of the case. The respondents then issued the decision of the Working Committee dated 31-7-1997 informing that they had admitted 10% discount and the PSI Company had been directed to issue revised C.R. F.

4. The Complainants were 'not satisfied as the decision was not taken on merits and filed an appeal dated 5-12-1997 to the Steering Committee. Thereafter no further communication way received from the Department and suddenly a notice dated 21-6-2003 under section 202 of the Customs Act has been served upon them demanding payment of outstanding amount of the post-dated cheque which was not encashed at that time.

5. The Complainants stated that the respondents have acted in violation of law and procedure and acted in a manner which was alien to law, justice, equity and fair play. They violated the mandatory provision of section 81 of the Customs Act, clause 24-A of the General Clauses Act and the relevant procedures laid down in the Standing Order and public notice. The Complainants had not received any communication from the Steering Committee. They stated that they have been approaching the Department through their agent but no positive reply was ever given received and suddenly a notice dated 21-6-2003 under section 202(1) of the Customs Act has been issued which has completely halted their business operations due to which they filed this complaint under section 2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

6. They stated that the Department had obtained pay order and the post-dated cheque under subsection (1) of section 81 of the Customs Act for the differential amount of duty and taxes. The provisional assessment was supposed to be finalized within a period of 180 days in terms of subsection (2) of section 81. It should have been done by 8-5-1996 failing which the provisional .assessment on die declared invoice value became final. The Department never finalized the assessment under subsection 3 of section 81 and no order to this effect was passed under subsection (4) ibid.

7. The Complainants stated that even the decision of the Working Committee dated 31-7-1997 delivered on the directive of the High Court was issued much beyond the period of 180 days and was not an order contemplated under section 24-A of the General Clauses Act 1897 against which an appeal could be filed except before the Steering Committee which was done by the Complainants.

8. The Complainants invited attention to the decision of this office, 2002 MLD 1098, in Complaint No.1464 of 2001, and reiterated that the assessment on the values declared by them had attained finality. They contended that they were entitled to refund of Rs.642,394 against the pay order encashed by the Department, and, in the second case, they were not required to pay the amount on the basis of excessive price; therefore, the notice dated 21-6-2003 under section 202 of the Customs Act being illegal and without jurisdiction be set aside.

9. The Complainants also discussed the merits of the case and stated that the working committee decision dated 31-7-1997 was devoid of any merit. The claim of Messrs Cotecna that the same item was supplied to other countries at higher price had no justification for up-lifting the value of their consignments. Under the Brussels Definition of Value, the variation of prices to different markets was acceptable and the decision of the PSI company was not based on cogent reasons.

10. They requested that the Department be directed to withdraw the impugned notice dated 21-6-2003 and immediately refund the security amount Rs.642,394 encashed fraudulently as the assessment on the basis of declared value had become final under subsection (4) of section 81 of the Customs Act.

11. The Deputy Collector of Customs replied the complaint that the working committee decision was taken on 31-7-1997 while the instant complaint has been lodged in November 2003 after a lapse of six years. The complaint was therefore time barred under section 10(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000. He stated that this being a case of valuation and assessment of the imported goods was beyond the jurisdiction of this office under section 9(2)(b) of the Ordinance. He stated that on account of the valuation dispute the goods were released provisionally but the assessment was not made under section 81 of the Customs Act but under rules and regulations of the PSI scheme subject to final decision by the working committee. The working committee decided the matter on 31-7-1997 allowing 10% discount on the CRF value. The importers were required to pay the due amount, but failed to make payment, and despite repeated notices they failed to clear their liability.

12. The Deputy Collector stated that the release of previous consignments at lower value did not confer any right, on the importers for future assessment at the same value and the decision of the working committee should have been complied with by the importers. Since they did not make the outstanding payment despite notices issued on 6-2-2003 and 30-5-2003, action was taken under section 202 of the Customs Act. The importers wilfully did not contact the authorities to get their cases decided/finalized. He argued that the action taken by the respondents was legal and within .the limits of law and there was no question of maladministration.

13. The position as stated above was reiterated by both the sides on personal hearing. The complaint relates to the provisional assessment and release of two consignments, against a post-dated cheque on 12-11-1995 and a pay order on 27-11-1995. The Complainants have contended that the assessment was not finalized within the mandatory period under section 81 of the Customs Act. Under the High Court order dated 11-12-1997, the customs issued the assessment order dated 31-7-1997. This was supposed to be the decision of the Working Committee as provided under sub-rule(6) of Rule 4 of the PSI Rules vide S.R.O. 1108(I)/94. The Complainants were not satisfied with the decision of the Working Committee and applied to the Steering Committee vide application dated 5-12-1997 as prescribed under sub-paragraph xiv of Public Notice No.44/95-Appraisement to the Steering Committee. The complainants adopted this course because the Department did not deal with the matter in the normal course of adjudication as laid down under clause (iii) of sub-paragraph (E) of paragraph 2 of Standing Order No.9/95.

14. The Complainants thus contend in respect of the release against the pay order that (i) the assessment was not finalized under section 81 of the Customs Act, (ii) even if the decision of the Working Committee dated 31-7-1997 were taken as the final assessment, it was barred by time, (iii) their application before the Steering Committee was never disposed off, (iv) the pay order deposited by them as security was wrongly and unlawfully encashed without finalization of assessment within the prescribed period, (v) they did not file application for refund as they were still waiting for the decision of the Steering Committee, and (vi) now they claimed that the amount should be refunded to them.

15. In respect of the second consignment: released against a post-dated cheque, they claimed that (i) the customs did not finalize the assessment within the prescribed period, (ii) the order of the Working Committee dated 31-7-1997 was barred by time, (iii) the provisional assessment at the declared value had attained finality, and (iv) the demand notice, the recovery notice and the notice under section 202 issued by the customs authorities in 2003 had no legal validity. The customs authorities on the other hand maintained that since the assessment was made under PSI Scheme the time-frame prescribed, under section 81 of the Customs Act was not applicable. They argued that the assessment was finalized by Working Committee which was applicable to both the cases, the Complainants were not entitled to refund and they should pay the amount due from them in respect of the consignment released against a post-dated cheque which was honoured.

16. The Complainants have approached this office with their grievance against the decision contrary to law, departure from the established practice without valid reasons, an arbitrary, unjust and oppressive action whereby the mandatory requirement of section 81 has been ignored on the invalid ground that it was not applicable to the decision taken under the PSI Scheme. This office has taken cognizance of the complaint on account of the arbitrary and illegal manner in which the demand has been thrust in complete disregard of the mandatory provisions and time-frame enshrined in section 81 of the Customs Act. The instructions contained in the Standing Order 9/95 and Public Notice 44/95 were to be followed within the mandatory time-frame and the PSI Scheme also did not provide for any escape from the limits imposed under, section 81. The Complainants' contention that the so-called finalization of assessment dated 31-7-1997 had no legal validity is justified. It has been established that the encashment of the pay order and issue of recovery notice have been done without lawful authority and maladministration as defined, under Ordinance No. XXXV of 2000 has been established.

17. The department has raised objection that the complaint is barred by time. The complaint is directed against the notice under section 202 of the Customs Act dated 21-6-2003. The complaint filed on 12-11-2003 is within time. Furthermore the department has not passed order under section 81 which is also subject-matter of the complaint. The objection is over-ruled.

18. It is recommended that C.B.R. direct the Collector of Customs to

(i) cancel the recovery notice issued under section 202 of the Customs Act;

(ii) refund the amount of Rs.642,394 to the Complainants;

(iii) take action on (i) and (ii) within thirty days; and

(iv) report compliance within forty-five days.

C.M.A./241/FTOOrder accordingly.