SHAMS-UD-DIN VS THE STATE through DIRECTOR, DIRECTORATE OF INTELLIGENCE AND INVESTIGATION-F.B.R., LAHORE, 2008 PTD-LAHORE-HIGH-COURT-LAHORE 1916 (2008)

Customs Act (IV of 1969)---

---Ss. 156(90) & 25---Constitution of Pakistan (1973), Art.199---Constitutional petition---Assessment of duty---Adjudication officer ordered outright confiscation of goods---Order was partly allowed in appeal in the manner that the goods were allowed to be released on payment of 30% fine in lieu of confiscation in addition to payment of assessed duty, taxes etc.---Word "propriety" in this context has reference to the propriety of the order in the light of the law which was applicable and was not intended to grant general and unlimited jurisdiction to the revising authority to set aside any ground whatsoever---Where the declared value had not been appraised properly and the market factors made it clear unequivocally that the declared and appraised value were still ridiculously low, department could exercise its jurisdiction---Appraisement could not be called as legal if the same had been done mala fide with the intention of depriving the revenue of its well deserved share---If such factor is proved beyond doubt that the value of raw-material of the product is higher than the price of the manufactured item it is definitely improper---Onerous duty of the department is to determine the value of goods by adopting the methods provided under S.25, Customs Act, 1969---High Court confirmed the exercise of jurisdiction by the Collector but repelled the view that subsequent appraisement could be made on the basis of the valuation ruling---Constitutional petition was disposed of accordingly.

Khan Trading Company, Gujranwala v. Collector of Customs, Excise and Sales Tax (Adjudication), Lahore 2002 CLC 705 and Shahzad Zahir Shah and 6 other v. Muhammad Usman Ghani and 3 others 2005 YLR 1394 ref.

Umar Ahmad Khan for Petitioner.

Khawar Ikram Bhatti for Respondents.

Date of hearing: 5th August, 2008.

JUDGMENT

KHAWAJA FAROOQ SAEED, J.---This writ petition has been filed for setting aside the order dated 26-7-2008 passed by respondent No.2 in terms of section 195 of the Customs Act, 1969.

2. The brief facts of the case are that staff of respondent No.1 seized 14,49,000 pieces of DVD-RS on 21-7-2007 of foreign origin. The Additional Collector of Customs (Adjudication), Lahore, issued a show-cause notice on 19-9-2007 and the order-in-original was passed on 3-12-2007 vide No.116/2007. The Adjudicating Officer held that the charge of smuggling against the petitioner could not be substantiated. However, ordered outright confiscation of the said DVDs under clause 90 of subsection 156(1) along with imposition of penalty. In appeal, the order was partly allowed in the manner that the goods were allowed to be released on payment of 30% fine in lieu of confiscation in addition to payment of assessed duty, taxes etc.

3. For assessment of duty/taxes, the petitioner approached the concerned authority and then deposited the sum of Rs.36,23,885 in National Bank of Pakistan on 21-5-2007 on the basis of the re- appraisement. Later the respondent No.1 addressed a letter on 18-7-2008 which inter alia challenged the assessment on the basis of following:

"The perusal of the assessment sheet signed by the appraiser and Principal Appraiser (Annex-B) revealed serious discrepancies which are enumerated hereunder:--

The appraiser has given no basis for assessment of the goods i.e. DVD-RS and has simply given the assessed value at Rs.4564350.

By working back the per piece value 4564350+144900=2.15 per piece.

Considering the US $ as 4.14 the per piece value comes to 3.15+64.40=0.049 US$ per piece.

However as per valuation Ruling No. Misc 6-2008 VHA 25-A-75 dated 16th February, 2008, issued by the Director Valuation and PCA Karachi under section 25-A of the. Customs, Act, 1969 (Annex-C), the per piece value of DVD-Rs in US $ 0.16. The following valuation is further supported by Karachi data.

KAPR HC GD No.90793 dated 23-4-2008.

In this way this Duo of Appraiser and Principal Appraiser have attempted to give undue benefit to the Mr. Shams-ud-Din"

The petitioner challenged the same by arguing that the valuation ruling dated 16-2-2008 has already been challenged before this Court and the same has been set aside in writ petition No.2414/07, hence, cancellation of the order on the basis thereof, is illegal, unlawful. The exercise of jurisdiction under section 195 has therefore been challenged to be as illegal, unlawful and against the mandate of the judgments on the issue in terms of 2002 CLC 705 re: "Khan Trading Company, Gujranwala v. Collector of Customs, Excise and Sales Tax (Adjudication), Lahore" and 2005 YLR 1394 re: "Shahzada Zahir Shah and 6 others v. Muhammad Usman Ghani and 3 others".

4. So far as the arguments of the learned counsel regarding reappraisal on the basis of valuation ruling in this case is concerned, one can readily agree that if the said ruling has not lawfully been prepared, no case can be reopened or revised on the basis thereof. Especially when the valuation ruling under consideration has already been statedly set aside by this Court. The Valuation Ruling having itself lost its origin cannot be followed for any purpose. However, before reaching conclusion reproduction of the relevant provision of law shall be of help. The same speaks as follows:--

Section 195:-

"Power of Board of Collector {* *} to pass certain orders.---(1) The Board or the Collector of Customs{***} may, within his jurisdiction, call for and examine the records of any proceedings under this Act for the purpose of satisfying itself or, as the case may be, himself as to the legality or propriety of any decision or order passed by a subordinate officer and may pass such order as it or he may think fit:

Provided that no order confiscating goods of greater value or enhancing any fine in lieu of confiscation, or imposing or enhancing any penalty, or requiring payment of any duty not levied or short levied shall be passed unless the person affected thereby has been given an opportunity of showing cause against it and of being heard in person or through a counsel or other person duly authorized by him.

(2) No record of any proceedings relating to any decision or order passed by an officer of customs shall be called for or examined under subsection (1) after the expiry of two years {from the date of such decision or order. }"

5. Section 195 is very clear in its application. It provides for:

(i) the direction to call for and examination of record of any proceedings under this Act,

(ii) his satisfaction as to the legality or propriety of any decision,

(iii) passed by a subordinate officer.

6. The Collector or for that matter the Board thus has to satisfy itself with regard to legality or propriety of any decision passed by a Subordinate Officer. Legality or propriety, both words are wide in their meanings. However, in the present case the valuation ruling having already lost its sanctity the decision made in ignorance, thereof, cannot be considered as illegal or improper. The question of revising an order even if the valuation ruling otherwise was valid, would still remain debatable. However, since the same is invalid, obviously cannot be applied by any authority.

7. The matter does not however, end there. In the present case the facts are different. The value of the items declared and assessed statedly is less than even the raw-material which is used for its manufacturing.

The cost price of the product under discussion even after addition of the duties and taxes still remains at a ridiculously low rate if compared to its price in open market. This is where this Court would agree with the learned Legal Advisor of the department that the price being ridiculously low, the satisfaction of the propriety of the assessment becomes doubtful.

8. The term propriety has not been defined in Customs Act, hence, its dictionary meaning shall become applicable. The same has been defined in `Oxford English Dictionary' as follows:--

"Correctness concerning standards of behaviour or morals--Proprieties the details or rules of conventionally accepted behaviour appropriateness rightness"

8A. This Court obviously agrees that the word `property' in this context has reference to the propriety of the order in the light of the law which was applicable and is not intended to grant general and unlimited jurisdiction to the revising authority to set aside any ground whatsoever. However, this Court cannot agree that where the declared value has not been appraised properly and the market factors make it clear unequivocally that the declared and appraised value are still ridiculously low, the jurisdiction cannot be exercised. Furthermore, appraisement cannot be called as legal if the same has been done with mala fide and the intention of depriving the revenue of its well deserved share. As for example in the present case if this fact is proved beyond doubt that the value of raw-material of the product is higher than the price of the manufactured item it is definitely improper. The onerous duty of the appraisement department of Customs is to determine the value by adopting the methods, provided under section 25. The order of the first appellate Court i.e. Collector was to release the goods after its appraisement as well as by charging 30% penalty additionally. It, however, does not provide any unbridled authority to make any assessment or to determine the value ignoring the provisions of law relevant to the issue. Not only that the provisions of section 25 were to be applied but even otherwise, the appraisement have to be justly, fairly and reasonably and for the advancement of law under which the same was to be done. This Court, therefore, confirms the exercise of the jurisdiction by the Collector under section 195, but however, does not agree that the subsequent appraisement can be made on the basis of the valuation ruling mentioned in the order. The revising authority, therefore, shall further proceed in the matter strictly observing the sequential order provided under section 25 of the Customs Act. This writ petition, therefore, stands accordingly disposed of.

A.M.R./S-86/LOrder accordingly.