PAKISTAN CYCLE INDUSTRIES COOPERATIVE SOCIETY, LAHORE VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2009 P T D 11
[Federal Tax Ombudsman]
Before Justice (Retd.) Munir A. Sheikh, Federal Tax Ombudsman
PAKISTAN CYCLE INDUSTRIES COOPERATIVE SOCIETY, LAHORE
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complainant No.344-L of 2006, decided on 12/06/2006.
Customs Act (IV of 1969)---
----Ss. 32 (3A), 179(3) & 206---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---S.R.O. 436(I)/01, dated 18-6-2001---S.R.O. 434(I)/01, dated---Untrue statement, error, etc. Deletion program---Demand of duty and tax against import on the ground that the importation of components was allowed on concessionary rates of duty for local manufacture of motorcycle and importer failed to achieve the deletion program---Short-fall of 3.8004% in the Deletion Program was found. Due to failure to achieve the deletion program the components imported in violation of the indigenization program would attract statutory rates of duty and taxes on C.B.U. vehicles because exemption was available only on achievement of progressive annual indigenization---Filing of complaint as well as appeal---Validity---Complainant had. filed appeal against order-in-original before Collector of Appeals, which was pending final decision---Department had neither disclosed the basis on which the value and duty/taxes were calculated/determined nor did they supply the formula applied before deciding it---Quantum of value and duty and taxes which were arbitrarily determined were not agreed upon by the complainant---Complainant had already obtained an interim stay against recovery of such amount from Appellate Tribunal---Main appeal before Collector of Appeals was still pending decision---Complainant could argue the same before Collector of Appeals---Appellate Authority who was competent to sort out both points of law and facts would decide the case on merits after due consideration of complainant's defence---No `maladministration' having been observed complaint was disposed' of with observations that complainant may pursue its appeal before the competent appellate forum.
Complainant No.805 of 2003 ref.
Muhammad Akbar, Advisor (Dealing Officer).
Akhtar Javed, Omar Arshad Hakeem and Waseem Ahmad for the Complainant.
M. Mohsin Rafiq, D.C., Customs, Lahore for Respondent.
DECISION/FINDINGS
JUSTICE (RETD.) MUNIR A. SHEIKH (FEDERAL TAX OMBUDSMAN).---Based on a report submitted by the Engineering Development Board (EDB) vide letter, dated 25-5-2004, the Deputy Collector of Customs, Dryport, Lahore issued a show-cause notice, dated 7-2-2004 calling upon the complainant to pay duty and taxes amounting to Rs.51242334 against import value of Rs.194079319 on the ground that the complainant, who was allowed importation of components on concessionary rates of duty in terms of S.R.O.434(I)/01 for local manufacture of Sohrab JS 70 motorcycle, had failed to achieve the deletion program for the period 2001-2002 as communicated by the EDB. There was short-fall of 3.8004% in the Deletion program. The respondents also alleged that due to failure to achieve the deletion program the components imported in violation of the indigenization program would attract statutory rates of duty and taxes on CBU vehicles because exemption was available only on achievement of progressive annual indigenization. Subsequent to issue of a corrigendum of the show-cause notice, the D.C. heard the case on six different dates during the period from 7-10-2004 to 12-9-2005. The show-cause notice issued in the case was vague inasmuch as it failed to disclose the basis on which the so-called fictitious figures of value and duty were calculated. The EDB had indicated only a short-fall of 3.8004% in the deletion program. The Additional Collector, who finally decided the case, heard the case five times during the period from 31-10-2005 to 30-1-2006 but he too did not disclose the source/method of calculation of value and duty. He was apprised that the statutory rates of duty were not chargeable; hence the demand was unlawful. The copy of computer print out on which the respondents had based their calculations (the amount of import and the amount of duty) by applying a certain formula was not supplied to the complainant. EDB's letter, dated 15-7-2004 pertained to implementation of short-fall in the indigenization program to Toyota Corolla assembled by Messrs Indus Motors Co. Ltd. and was not relevant to the complainant's case. The Additional Collector appointed an appraiser to reconcile the figures of goods imported during the year, 2001-2002. The complainant cooperated with the department by supplying bills of entry for the relevant period which showed that only a value of Rs.88253787 was involved and the same was reconciled between the complainant and the customs staff. Since the complainant admitted short-fall of 3.8004% in deletion program, recoverable duty and taxes worked out to Rs.2892823. The appraising officer agreed with the calculation. The value of goods of Rs.88253787 imported during the year, 2001-2002 was also reconciled with the department. Without going into the merits of the case and without giving the complainant the opportunity of submitting final reply, the Additional Collector passed O.I.O. No. 26/06, dated 2-3-2006, distorting facts and attributing certain admissions/confessions to the complainant's counsel, which were never made before him. The O.I.O. did not record true facts. The complainant's counsel and Deputy Manager had given affidavits to the effect that (i) the calculation sheet of Rs.22357988 was never supplied, hence there were no question of showing satisfaction on that figures, (ii) the formula of EDB in respect of Pakistan Cycle Industrial Cooperative Society was never communicated to the counsel, (iii) they had never admitted the liability of Rs.22357988. The complainant was unaware of formula provided by EDB for calculation of duty and taxes because the same was not supplied to it. The O-I-O passed in the case suffered from the illegality and impropriety and was beyond jurisdiction. The respondents have committed `maladministration', As per the mandatory provisions contained in subsection (3) of section 179 of the Customs Act, 1969 the case had to be decided within 90 days of the receipt of contravention report but the impugned order was passed beyond the prescribed period. The order was also silent whether any extension in the time for deciding the case was ever obtained/granted or whether there were special circumstances warranting such extension. The show-cause notice was issued on 7-10-2005. The order was passed on 2-3-2006 after 511 days. The order was hit by time limitation. The FTO had held in identical cases that passing the order after expiry of limitation period was act of `maladministration'. Departmental representation made against FTO's findings in complaint No.805 of 2003 was rejected by the President of Pakistan. The complainant admitted that there was short fall of 3.8004% in deletion program in year, 2001-2002 and was ready to pay duty and taxes recoverable in the light of EDB's letter, dated 8-5-2003 in respect of CKD kits imported, after 30-6-2002. The O.I.O. No.26/06, dated 2-3-2006 passed by the Additional Collector may be declared without lawful authority.
2. In reply, the Collector of Customs, Lahore has submitted that the complaint was not maintainable because the complainant had already taken the issue to the Appellate Tribunal. It did not fall within the jurisdiction of FTO. Demand-cum-show-cause notice was issued under section 32(3A) of the Act, which was quite different is scope from a show-cause notice issued under section 180 of the Act. Show-cause notice was not issued under section 180 of the Act nor was the order passed under sections 179 and 180 of the Act. The impugned order was not hit by section 179(3) of the Customs Act, 1969. The case pertained to adjudication of short-fall in achieving deletion program in terms of S.R.O.436(I)/01, dated 18-6-2001 under section 32(3A) of the Act. The adjudication of the case did not involve confiscation of goods or imposition of penalty. FTO's findings in other cases were not relevant. Ample opportunities of hearing were provided to the complainant to settle the amounts demanded in demand-cum-show-cause notice and the complainant was supplied details of short-fall. The Adjudicating Officer passed a comprehensive and appealable order covering complainant's arguments. The adjudication authority required the appraising staff to reconcile the figures of goods imported. Reconciliation was done in collaboration with complainant's counsel. Denial of facts at this stage was an afterthought. Once the value of goods was agreed to, the other calculation could not be disputed. The complainant had admitted the liability vide para. 11 of the complaint. If there was any misconception about the calculation of liability, the complainant could have approached the adjudicating authority under section 206 of the Customs Act, 1969. No `maladministration' was committed. The complaint may be dismissed.
3. During the hearing, the submitted that appeal against Additional Collector's order was filed before the Collector of Appeals on 3-4-2006 whereas the complaint was filed in the FTO's Secretariat on 27-3-2006, prior in point of time to the filing of appeal. He also clarified that the complainant had moved an application to the Collector of Appeals for stay of recovery of the amount determined and demanded vide the impugned O-I-O, which was rejected by him on 24-4-2006. Thereupon, the complainant filed an application for interim stay before the Appellate Tribunal on 25-4-2006. The Tribunal granted the stay and disposed of the appeal on 27-4-2006. However, the main appeal was still pending before the Collector of Appeals. He reiterated the arguments advanced in the written complaint, emphasizing that EDB had only pointed out a short-fall of 3.8004. The adjudication authority did not disclose the basis on which the value and duty/taxes were calculated. During reconciliation, the complainant's counsel never agreed to the figures of value and duty/taxes. The so-called formula applied by the respondents to the complainant's case was not applied to any motorcycle manufacturer. The complainant was prepared to pay the correct liability. In regard to the argument that the impugned order was hit by time limitation as; per the provisions of section 179(3) of the Customs Act, 1969, the AR. was asked to comment on respondents' argument that since the case did, not involve confiscation of goods or imposition of penalty, the aforesaid time limitation was not attracted, he submitted that he would not press the plea of time limitation. However, he added that the respondents needed to reconcile the figures of value and duty and taxes as to determine the correct liability.
4. The DR reiterated the arguments advanced in the written comments, emphasizing that since the case was pending with the Collector of Appeals, the complainant should pursue its appeal before him. Duty and taxes were correctly calculated and the complainant was confronted with the relevant materials before deciding the case.
5. The arguments of the two sides and records of the case have been considered and examined. The AR did not press his plea of time limitation. It is observed that the Additional Collector (Adjudication) has passed a comprehensive and appealable O-I-O No.26/06, dated 2-3-2006. The complainant has filed appeal against the aforesaid O-I-O before the Collector of Appeals, which is reportedly pending final decision.
6. The main contentions of the complainant are that (i) the respondents had neither disclosed the basis on which the value and duty/taxes were calculated/determined nor did they supply the formula applied in the complainant's case before deciding it and (ii) complainant's counsel had not agreed to the quantum of value and duty and taxes which were arbitrarily determined by the authorities. It is noted that the complainant has already obtained an interim stay against recovery of amounts adjudged in O-I-O No.26/06 from the appellate Tribunal. The main appeal filed by the complainant before Collector of Appeals is still pending final decision. The complainant can argue the aforesaid contentions before the Collector of Appeals. The appellate authority who is competent to sort out both points of law and fact will decide the case on merit after due consideration of complainant's defense. As it is, no `maladministration' is observed. The complainant may pursue its appeal before the competent appellate forum.
7. The complaint is disposed of with observations made above.
C.M.A./138/FTOOrder accordingly.