CRYSTAL MOVING SYSTEM through Mian Abdul Ghaffar VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 585 (2005)

Customs Act (IV of 1969)---

----Ss. 82 & 25---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(i)(b)(c)---Customs Rules, 2001, R.48---S.R.O. 45(I)/2001, dated 18-6-2001---Procedure in case of goods not cleared or warehoused or transshipped within one month after unloading---Auction of imported consignments in defiance of High Court's order i.e. without reassessment---Claim of compensation for losses---Validity---Serious doubts arose about the conduct of both the importers and the customs officials---Department's contention that complainant did not comply with the High Court's order was not acceptable---Department should have summoned the import documents from the importer/Group concerned and issued an assessment order within forty-five days---No action was taken for full one year and the goods were auctioned at one third of the reserve price---Importer did not vigorously pursue reassessment and clearance of goods while the customs authorities were more keen to auction the goods---If customs authorities were adamant not to assess the goods, the importer should have protested before the appropriate administrative, quasi judicial or judicial forums---Importer could have paid duty and taxes on 14% enhanced value and represented for refund of difference of duty and tax instead of abandoning the goods to auction---Auction of goods at a very low price and the claim for compensation by the importer were matters of concern and the possibility of collusive foul play by the customs staff, could not be ruled out---Federal Tax Ombudsman recommended that Central Board of Revenue depute the Director General Inquiries to carry out a thorough probe into the matter to ascertain the reasons as to why reassessment was not done for one year as directed by the High Court; that why the goods were disposed of in the third auction at ridiculously low prices instead of release on full payment of duty and taxes at the declared/enhanced value and to ascertain the (collusive) involvement of the importer and/or the customs staff in the auction of goods.

M. Mubeen Ahsan, Advisor, Dealing Officer.

Mian Abdul Ghaffar for the Complainant.

Salamat Ali, Assistant Collector of Customs (Appraisement).

FINDINGS/DECISION

JUSTICE (RETD.) MUNIR A. SIIAIKH (FEDERAL TAX OMBUDSMAN).---The complaint has been filed against the Customs Department for auctioning imported consignments in defiance of the High Court's order and claiming compensation for losses sustained by them. The complainant have stated that they imported two consignments of fabrics from China at the declared value of $ 035/yard and sought in-bonding through Goods Declarations (GD) dated 14-1-2003 and 20-2-2003. They alleged that the value was enhanced illegally to $ 0.40/yard without any basis and in utter disregard of the provisions of section 25 of the Customs Act and the Customs Rules issued under S.R.O. 450(I)/2001.

2. They made the following submissions and argument in the complaint and during personal hearing:

(i) They filed Constitutional Petition in the High Court of Sindh against the enhancement of value, which was disposed of vide Order 890/2003 dated 10-9-2003 directing the Assistant Collector, Additional Collector and the Collector of Customs to pass fresh orders on the bills of entry stating reasons therefore as required under section 25 of the Customs Act within 45 days. Complainants were directed to appear before the Additional Collector for this purpose on 24-9-2003.

(ii) Their representative appeared before the Additional Collector and filed a written request 24-9-2003 for reassessment of goods under section 25 of the Act as ordered by the High Court. After hearing, he informed that reassessment order shall be passed and provided to them within the fixed time. They also requested Assistant Collector and Collector for reassessment of the goods but neither any reassessment was made nor order passed within 45 days.

(iii) Ex-bond GDs were filed at the Customs Customer Services Centre on 22-12-2003. Even if these were not sent to the concerned Group, the customs should have asked the importer/ clearing agent to submit the documents required to finalize the assessment as directed by the High Court.

(iv) 'Instead of issuing an appropriate order with reasons, the customs officials included both the consignments in the auction schedule. Complainants immediately approached the Collector and submitted application dated 24-11-2004 to stop the auction/delivery of goods and reassess the same. The request was refused and goods were auctioned. They were (verbally) informed by customs officials that neither reassessment order shall be passed nor goods be released, which shall be disposed of through auction to teach them a lesson for approaching High Court.

(v) Complainants also approached the proprietors of the bonded warehouses, provided them copies of their application dated 24-11-2004 and requested them not to deliver the goods to the purchased but they advised them to approach the Additional Collector who refused their request and the goods were delivered to the bidder.

(vi) They were not served with the mandatory notice under section 82 of the Customs Act for auction nor were they associated in the auction proceedings and the goods were sold for nominal value which did not cover even the duty and taxes.

(vii) Complainants sustained huge financial loss for blockage of investment for more than two years and consequent additional loss etc. of approximately Rs.20,82,934.

(viii) The maladministration on the part of the respondent was evident from the fact that they ascertained the value of goods at Rs.26,13,541 the duty-paid value amounted to Rs.42,19,559 but the consignments were auctioned for Rs.13,49,232 i.e. approximately 400% less than the duty paid value of the goods. "The entire acts and actions by the respondent were perverse, arbitrary, unjust, biased oppressive, not found on cogent valid reasons" which amounted to maladministration as defined under section 2(3)(i)(b)(c) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

(ix) Due to maladministration, the entire business of the complainant has been adversely affected, they sustained huge financial losses and were dragged into litigation instead of reassessment and release of the goods which were sold at nominal amount in an illegal manner. They were entitled for the refund of the value of the goods ascertained by the customs authorities besides costs, compensation, loss and damages. Complainants requested that the respondent "be directed to pay a sum of Rs.49,23,179 on account of the ascertained value of the goods warehousing charges, business loss profit, litigation charges along with costs, compensation loss and damages" and action be taken against officials responsible for this maladministration.

3. The Deputy Collector of Customs (Appraisement) replying to the complaint raised the following objections:

(i) Assessment of duty and tax liability etc. was outside the jurisdiction of this office.

(ii) Complainants were aggrieved in February, 2003 but the complaint was lodged in February, 2005 after two years and therefore it was time-barred under section 10(3) of the Ordinance.

(iii) Complainants have failed to exhaust their responsibility as directed by the High Court and have failed to provide ex-bond bill of entry in terms of section 104 of the Customs Act.

(iv) The matter is already sub judice before the High Court and therefore the subject cannot be termed as a case of maladministration.

(v) The complainants have not come to this office with clean hands but with mala fide intention to inflict loss on the Government exchequer.

4. In parawise comments to the complaint the following statements were made:

(i) Declared value was not transaction value and goods were assessed at the prevailing customs value of $0.40/meter.

(ii) Complainant's had not only accepted the value and warehoused the goods but after one month presented second GD for assessment and warehousing of the goods. Seemingly they had no objection on the assessment of these two consignments and the Constitutional Petition was filed as an afterthought five months later.

(iii) Nine consignments were cleared without any objection at the values ascertained by the customs but in respect of remaining two consignments ex-bond GDs were never presented to pass a. fresh assessment order in compliance with the High Court's order. The order, for assessment and release could only be passed on ex-bond GDs but even after lapse of 45 days there was neither any complaint nor any representation in the High Court.

(iv) Even if GDs had been presented at the Customs Customer Services Centre, it was the responsibility of the clearing agent to deliver GDs to the Group. Since the importer did not present GDs, notices were issued under section 111(b) of the Customs Act for clearance of the goods; otherwise the goods should be auctioned as per schedule appearing in the newspapers on 30-9-2004.

(v) Complainants failed to approach the respondent and the goods were auctioned on 11-10-2004 and delivered to the successful bidder vide delivery order dated 23-11-2004.

(vi) The subject complaint be dismissed as not maintainable under the aforesaid provisions of the Customs Act.

5. The following picture emerges from the submissions made and arguments advanced by both the sides:

(i) When GDs were filed in January and February, 2002 the customs authorities did not accept the declared value of $ 0.35/yard and enhanced it (by 14%) to $ 1.40/yard.

(ii) Importer contested the 14% value enhancement before the High Court through a Constitutional Petition, which was disposed of on 10-9-2003 with the direction to Customs to reassess the goods within forty-five days.

(iii) Importers claimed that they repeatedly approached the Collector, Additional Collector and Assistant Collector with the request to implement High Court's directive but it was not acceded to and they could not obtain reassessment order and release of 'goods.

(iv) Customs claimed that ex-bond GDs were not presented by the importers and it was not possible to implement the High Court's order for reassessment within forty-five days. Goods were auctioned in accordance with law and there was no maladministration on their part.

(v) Complainants stated that instead of reassessing the goods and releasing them on payment of duty and taxes, customs decided to auction the goods, and the reserve price of the two consignments was, calculated at Rs.42,63,713. According to the figures supplied by the Consultant, three auctions were conducted on 22-6-2004, 11-8-2004 and 11-10-2004. Highest bid in first auction was Rs.11,10,000 in the second auction it was Rs.10,25,000 and in the third auction the highest bid was Rs.15,50,000 which was accepted and the goods were released to the highest bidder on 23-11-2004.

(vi) Complainants alleged that the goods were auctioned for less than one third value of the duty-paid value resulting in huge short recovery of Rs.28,70,000 their investment was blocked for two years; they suffered huge financial loss and entitled to payment of ascertained value of goods and compensation for other expenses and losses incurred by them.

6. The circumstances of the case raise serious doubts about the conduct of both the importers and the customs officials. Respondent's argument that complainant did not comply with the High Court's order is not acceptable. It should have summoned the import documents from the importer/Group concerned and issued an assessment order within forty-five days. No action was in fact taken for full one year and the goods were auctioned at one third of the reserve price. It also seems that importer did not vigorously pursue reassessment and clearance of goods while the customs authorities were more keen to auction the goods. It is a clear case of .gross maladministration on the part of the customs and this office has taken cognizance of the complaint on account of the arbitrary actions of the department and the administrative excess committed by its officials. The objection of the respondent about the jurisdiction of this office is uncalled for.

7. The conduct of the importer is also not free from doubts. If the customs authorities were adamant not to assess the goods, the importer should have protested before the appropriate administrative, quasi judicial or judicial forums. Importer could have paid duty and taxes on 14% enhanced value and represented for refund of difference of duty and tax instead of abandoning the goods to auction. On the other hand, the auction of goods at a very low price and the claims for compensation by the importer are matters of concern and the possibility of collusive foul play by the customs staff cannot be ruled out.

8. It is recommended that C.B.R. depute the Director General Inquires to

(i) carry out a thorough' probe into the matter to ascertain the reasons why reassessment was not done for one year as directed by the High Court;

(ii) why the goods were disposed of in the third auction at ridiculously low prices instead of release on full payment of duty and taxes at the declared/enhanced value;

(iii) ascertain the (collusive) involvement of importer and/or the customs staff in the auction of goods; and

(iv) take appropriate action against defaulters within forty-five days:

(v) result of the inquiry and action taken in the matter be intimated to this office within two months.

C.M.A./531/F. T.O.Order accordingly.