SHAMS-UZ-ZAMAN BUTT VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 571 (2005)

(a) Customs Act (IV of 1969)---

----Ss. 169(4), 168 & 201---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Things seized how to be dealt with---Under S.169(4) of the Customs Act, 1969 when anything liable to confiscation under the Customs Act, 1969 is seized under S.168 of the Customs Act, 1969 it could be sold in accordance with the provisions of 5.201 of the Customs Act, 1969 pending appeal or proceedings before any court of law---Proceeds are required to be kept in deposit pending adjudication of the case or disposal of the appeal or final judgment by the Court.

(b) Customs Act (IV of 1969)---

----Ss. 201 & 169(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Procedure for sale of goods and application of sale proceeds---Although department had issued a notice to complainant under S.169(4) of the Customs Act, 1969 the record of the case did not show that the vehicle in question was formally confiscated---Had the vehicle been confiscated there was no need for the department to issue notice to the complainant under S.201 of the Customs Act, 1969 because according to said section goods other than confiscated goods could be sold after due notice to the owner by auction---Department, therefore, issued notice to the complainant under S.169(4) of the Customs Act, 1969 without finally confiscating the goods---If the goods were not confiscated auction notices were required to be issued as per S.201 of the Customs Act, 1969---Department committed lapses which amounted to maladministration.

(c) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S. 2(3)---Customs Act (IV of 1969), S.25---Maladministration---Delay to some extent in finalizing the assessment, which was not explainable by the department amounted to maladministration.

(d) Customs Act (IV of 1969)---

----S. 201---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Procedure for sale of goods and application of sale proceeds---Non-payment of sale proceeds on the ground that after deduction of duty and taxes there was no amount left in balance from the sale proceeds---Validity---Department informed that after deduction of duty and taxes there was no amount left in balance from the sale proceeds, which could be paid to the owner---Department had committed `maladministration'---Federal Tax Ombudsman could not allow any relief to the complainant because the rates of duty and taxes leviable on the vehicle being very high the auction price did not leave any balance to be paid to the complainant---While it was not to provide any relief to the complainant as after adjustment of duty and taxes no balance was left in the sale proceeds for payment to the complainant---Federal Tax Ombudsman however, observed that the Collector Incharge should look into the lapses committed by Customs Authorities by not adhering to some of the provisions of the Customs Act, 1969 for taking remedial measures so as to avoid occurrence of such lapses in future.

Muhammad Akbar, Advisor, Dealing Officer.

Mian Abdul Ghaffar for the Complainant.

Abbas Ali Babar, A.C. Customs, Dryport for Respondents.

DECISION/FINDINGS

JUSTICE (RETD.) MUNIR A. SHAIKH (FEDERAL TAX OMBUDSMAN).---Facts of the complaint are that the complainant, who was residing in Canada, shipped his household effects, along with a 1995 Model Dodge (Caravan), to Pakistan on 3-3-2004 under transfer of residence scheme. On arrival at Lahore Dry port, while household effects were released the vehicle was detained for want of import licence. Subsequently, the Customs authority issued import permit for import of the aforesaid vehicle. Thereafter, the Deputy Collector and Additional Collector, Customs initiated the process of valuation/assessment of the vehicle. The D.C. vide letter dated 6-7-2000 asked the Ministry of Transportation, Canada, to verify registration of the vehicle he also asked the manufacturing company to provide Export Trade Price (ETP) of the subject vehicle. The Customs Department did not complete the process of valuation/assessment in one year despite complainant's application to the Provincial Monitoring Team for intervention. It took more than two years for completing the process. As a result, huge amount of Rs.3,00,000 had accumulated on account of demurrage, storage and other port charges. Finally, the D.C. determined value of vehicle at US$1,107,108 assessing it to, duty and taxes amounting to Rs.2,169,155. The vehicle was assessed arbitrarily. Its value was assessed in US$ rather than Canadian Dollars. The respondents informed the complainant that if duty and taxes were not paid the vehicle would be auctioned. The complainant also protested against illegal assessment and asked the department to re-assess the value on the basis of Canadian Dollars instead of US$. The D.C. vide his letter dated 30-12-2002 had asked D.C. Customs Valuation, Karachi to advise on the assessable value of the vehicle to which no reply was received nor was assessment revised. The complainant had to surrender his vehicle. As he could not afford to pay exorbitant duty and taxes, he advised the Customs through an application to auction the vehicle and pay him the depreciated value, as assessed. Subsequently, the department auctioned the vehicle. He had submitted applications on 18-5-2004, 27-7-2004 and 20-11-2004 to D.C. for payment of sale proceeds of the vehicle after deduction of duty and taxes or to pay the depreciated value but these applications failed to elicit any response. However in response application dated 20-11-2004 D.C. Customs, NLC advised him to approach D.C. Customs (Auction) for payment of sale proceeds of the auctioned vehicle. Accordingly, he submitted an application dated 17-2-2005 to the concerned D.C. for payment of sale proceeds after deduction of duty and taxes or give the complainant the depreciated value but neither any payment was made nor was the application responded to. Whereas depreciated value was assessed at Rs.604,779 duty and taxes worked out to Rs.2,169,155. The vehicle was sold for a nominal amount in auction, without notice to the complainant. Delay in finalizing the assessment, determination of exorbitant value of the vehicle and respondents' failure to pay to the complainant either the depreciated value or the sale proceeds from auction caused loss to the complainant, all of which amounted to 'maladministration'. They may be directed to pay sale proceeds of the vehicle after deducting duty and taxes or its depreciated value as assessed by the department. They may also be directed to pay cost, compensation and damages borne by the complainant.

2. In reply, the respondents have submitted that originally the vehicle was registered in the name of the complainant's son whereas as per the provisions of Import Policy Order it should have remained registered in the name of the 'importer (the complainant) for two years before its arrival in Pakistan. The complainant took considerable time in getting the relevant documents rectified. The bill of entry No.000477 for clearance of vehicle was filed on 22-7-2000. As the I.T.P. (Import Trade Price) of the old vehicle was not readily available with Car Section the Karachi Customs was contacted to supply the I.T.P. Karachi Customs provided `Kelly Blue Book' showing prices of Dodge Cars. The vehicle was assessed to duty and taxes in the light of said valuation book. The clearing agent of the complainant was duly informed of the assessed amount of duty and taxes i.e. Rs.2,169,155 but the complainant was not prepared to pay the amount in question. He had himself asked the department on 17-1-2001 to put the vehicle to auction, which clearly showed that it did not take the department more than a year to finalize the assessment for the bill of entry was filed on 22-7-2000. As far the sale proceeds, the department had to act as per the provisions of section 201 of the Customs Act, 1969. The vehicle was auctioned on 8-11-2003 to a successful bidder for Rs.5 lac. On receipt of complainant's application for refund of sale proceeds, the amount was calculated after deduction of Government duty and taxes as per law and it transpired that no balance whatsoever was left to be paid to the owner. Reply to complainant's letter seeking payment of sale proceeds was given on 30-12-2004. No doubt, the vehicle's value was determined at Rs.604779 but the rate of customs duty, prevalent at that time being 250%(in addition to other allied taxes, such as sales tax W.H. Tax and CVT) inflated the amount of payable duty and taxes. The department could not reduce the rates of duty and taxes or the amount of payable dues. The respondents auctioned the vehicle lawfully and that too at the request of the complainant. As no reasonable bid was forthcoming the vehicle had to be put to public auction 15 times. Only at the last auction one bidder bid for it for Rs.5 lac, which was accepted.

3. During the hearing, the A.R. explained that the complainant had contested respondents' action to assess the value of the vehicle arbitrary ignoring evidence of Canadian value of Dollars 2653 provided by him. The Deputy Collector, Dryport, Lahore, had addressed the Valuation Department, Karachi vide letter dated 30-12-2002 seeking advice on value of the vehicle to which no reply was received. Value adopted by the respondents was baseless. The Canadian value of the vehicle was fair. Even on that value the complainant was entitled to 50% depreciation on account of vehicle's age. Had that value been adopted the complainant would have become entitled to sale proceeds. The A.R. submitted that if the Collectorate had addressed the Valuation Department, Karachi for tendering valuation advice, it should not have determined the value on the basis of advice of the Appraisement Collectorate, Karachi. The respondents did not complete the assessment on the bill of entry.

4. The D.R. submitted that consequent upon filing of bill of entry on 22-7-2000 it was found that the I.T.P. value of the vehicle in question was not readily available. The Lahore Dryport authority, therefore, addressed a letter dated 12-8-2000 to Appraisement Collectorate, Karachi Custom House to obtain its price/value. Karachi Customs, vide its letter dated 21-8-2000, sent a bluebook showing the cost of vehicle of the model in question which turned out to be US$20275. According to CGO No.12/02 the aforesaid cost/value was depreciated by 50% which worked out to US$11071 inclusive of freight. Unfortunately, the rate of customs duty during the year 2002 was 200%. The complainant was not prepared to pay duty and taxes amounting to Rs.2,169,155. He had himself vide his letter dated 12-1-2001 asked the Customs to dispose of the vehicle by auction. Auction notice dated 21-5-2001 was issued to the complainant. Asked why complainant's request for ascertaining the value on the basis of Canadian bluebook was ignored, the D.R. stated that as the respondents had already obtained the manufacturing cost given in proper blue book forwarded by Karachi Collectorate of Appraisement they assessed the vehicle accordingly. He added that on 18-10-2002 the complainant was invited to attend the auction but he did not turn up. The complainant was informed vide letter dated 21-2-2005 that after deduction of duty and taxes nothing remained to be paid for the auction had not yielded even State duty and taxes. He further submitted that at one stage, on the insistence of the complainant, a letter dated 23-12-2004 was addressed to the manufacturing company to provide export trade price but no reply was ever received. Hoping that the vehicle would fetch a better price fifteen auctions were arranged---first took place on 27-5-2002 and final one on 8-11-2003. The vehicle was finally re-appraised on 19-7-2003 when it was sold for Rs.5 lac. The assessment could not be finalized because as early as in January, 2001 the complainant advised the department to auction the vehicle. Explaining the delay the D.R. explained that it took one and half year and 15 auctions to dispose of the vehicle in open auction.

5. The arguments of the two sides and record of the case have been considered and examined. It is observed that the bill of entry No.000477 was filed on 22-7-2000. As the value of the vehicle in question was not readily available, the Lahore Customs addressed the Appraisement Collectorate, Custom House, Karachi as well as the Valuation Department, Karachi to ascertain the value/price of the vehicle. They also wrote a letter dated 23-10-2000 to Chrysler Canada Limited to supply the export trade price of vehicle in question. Whereas the Valuation Department and M/s Chrysler Canada Limited did not respond the Karachi Appraisement Collectorate vide its letter dated 21-8-2000 forwarded to .the Lahore Dryport authority a copy of `Kelly Bluebook' showing list of prices of various models of Dodge Caravans. On that basis the Lahore Customs determined the value of the vehicle at Rs.604,779. Duty and taxes at the prevalent rates worked out to Rs.21,69,155. Finding customs duty and taxes exorbitant and unable to pay the same the complainant vide his letter dated 12-1-2001 requested the Customs authorities to dispose of the said vehicle through auction and pay him market value of the vehicle. Subsequently, the vehicle was put to various auctions (15 in all), with first auction taking place on 27-5-2002 and the last one on 8-11-2003. The respondents received a final bid for Rs.5 lac and delivered the vehicle to the highest bidder.

6. According to the complainant no notice of auction was served on him. On the contrary, the respondents claim that they had issued a notice dated 21-5-2001 to the complainant under section 169(4) of the Customs Act, 1969 showing department's intention to put the vehicle to auction. They also claim to have served another notice dated 10-8-2002 on the complainant notifying him of the date of auction held on 17-8-2002. The A.R. denied receipt of both notices. However, complainant's letter dated 5-11-2001 (on record) shows that notice C.No.33/2000(CPF)71 dated 21-5-2001 was received by the complainant. It is also observed that in the same letter the complainant had stated that the vehicle required body repairs to make it road worthy and expressed apprehension that the vehicle would not fetch more than Rs.70,000 or Rs.80,000 in auction yet he showed his attention to pay Rs.1 lac toward final settlement of customs duty and taxes or alternatively he asked the department to pay him the maximum monetary relief as per market value. Notice dated 10-8-2002 for auction on 17-8-2002 inviting the complainant to attend and participate in auction was issued to the complainant as is evident from the postal receipt dated 10-8-2002 placed by the respondents on record. Notices for the rest of the auctions were not made available. According to section 169(4) of the Customs Act, 1969 when anything liable to confiscation under the Customs Act is seized under section 168 of the said Act it can be sold in accordance with the provisions of section 201 of the Act pending appeal or proceedings before any Court of law. The proceeds are required to be kept in deposit pending adjudication of the case or disposal of the appeal or final judgment by the Court. Although the department had issued a notice to the complainant under section 169(4) of the Customs Act, 1969 the record of the case does not show that the vehicle in question was formally confiscated. Had the vehicle been confiscated there was no need for the respondents to issue notice to the complainant under section 201 of the Customs Act, 1969 because according to the section goods other than confiscated goods can be sold after due notice to the owner by auction. Thus the respondents issued notice to the complainant under section 169(4) of the Act without finally confiscating the goods. If the goods were not confiscated auction notices were required to be issued as per section 201 of the Act. The respondents had, therefore, committed lapses, which amount to `maladministration'. However, it is a fact that the complainant had himself vide his letter dated 12-1-2001 requested the Customs authorities to sell the vehicle in auction. He had vide his letter dated 5-11-2001 offered to pay only Rs.1 lac only as the customs duty and taxes and was not prepared to go beyond that. This means that he had practically surrendered the vehicle to the customs asking them to auction the same. The respondents accordingly auctioned the goods. Complainant's offer of paying rimy and taxes of Rs.1 lac only was much less than duty and taxes actually involved. It is observed that it took some time for the respondents to obtain value of the vehicle in question from Custom House and to arrange 15 auctions, after re-appraisements, due to deteriorated physical condition of the vehicle. In a situation where I.T.P. was not available and had to be gathered and documents of registration had to be rectified and where finally the vehicle had to be put to auction for as many as fifteen times to obtain a better bid offer delay is bound to occur. However, there was delay to some extent in finalizing the assessment which is not explainable by the respondents, which also amounts to `maladministration'. The respondents finally informed the complainant that after deduction of duty and taxes there was no amount left in balance from the sale proceeds, which could be paid to the owner. While the respondents had committed `maladministration' as explained above, it is not possible for this forum to allow any relief to the complainant because the rates of duty and taxes leviable on the vehicle being very high the auction price did not leave any balance to be paid to the complainant. While it is not possible to provide any relief to the complainant as after adjustment of duty and taxes no balance is left in the sale proceeds for payment to the complainant, it is felt that the Collector Incharge should look into the lapses (as identified above) committed by the respondents by not adhering to some of the provisions of the Customs Act, 1969 for taking remedial measures so as to avoid occurrence of such lapses in future.

7. The complaint is disposed of with the observations made above.

C.M.A./530/F.T.O.Order accordingly.