SHAHZAD-UR-REHMAN VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2009 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1128 (2005)

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

----Ss.80(1) & 25(1)---Customs Rules, 2001, R. 109(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Provisional assessment of duty---Value of imported and exported goods---Assessment had to be completed without undue delay---Complainant contended that in event of dispute, or where the goods were required to be tested, the goods, pending such tests could have been released provisionally under S.81(1) of the Customs Act, 1969---Department did not do that and took more than one month to determine the description/composition of goods---Validity---Department detained the samples for a period of one month without any justification causing undue delay which amounted to maladministration---Complainant had to unnecessarily incur demurrage---Department should issue to the complainant 'delay and detention certificate' for the said period to enable the complainant to seek waiver of demurrage from the Port authorities---Undue delay of one month caused by the department in dispatching samples of goods to the Laboratory was clearly an act of `maladministration'---Federal Tax Ombudsman recommended that the Central Board of Revenue direct the relevant Customs authority to issue delay and detention certificate to the complainant for the period from 2-8-2004 to 2-9-2004 to enable him to apply to the port authorities for waiver of demurrage charges.

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

----Ss.25(1) & 80(1)--Customs Rules, 2001, R.109(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Value of imported and exported goods---Complainant asked the Department to disclose and confront him with the material/evidence on the basis of which they had arbitrarily enhanced the value but they did not---Value of consignment was assessed without any basis--Complainant was incurring heavy demurrage, storage and other port charges---Duty and taxes were paid under protest and got the goods released--Neither the complainant was given any notice as required under S.25(4) of the Customs Act, 1969 nor for that matter passed any order under R.109(3) of the Customs Rules, 2001---Validity---Complainant requested the Department to determine value of consignment on the basis of Customs Data and the Department finalized it accordingly---Fact remained that complainant paid duty and taxes under protest, as was evident from the bill of entry---Department needed to show to the complainant the evidential values of similar/identical goods imported in Karachi or elsewhere with reference to specific bills of entry/goods declarations showing import of identical goods, the value at which the complainant's consignment was assessed---Complainant agreed to the course of action that the department should pass a speaking order disclosing therein specific bills of entry/goods declarations involving similar/identical goods cleared by the Customs at the assessed value at the place of clearance or elsewhere during the relevant period of import---Federal Tax Ombudsman recommended that department should pass a speaking and well reasoned order disclosing therein evidential values on the basis of which the complainant's assessment was finalized at the assessed value to enable the complainant to appeal against the assessment order if he so wished.?

Muhammad Akbar, Advisor (Dealing Officer) Mian Abdul Bari Rashid for the Complainant.

Ms. Farah Farooq, A.C. Dryport, Lahore for Respondents.

DECISION/FINDINGS

JUSTICE (RETD.) MUNIR A. SHEIKH, (FEDERAL TAX OMBUDSMAN).---Fact of the complaint are that the complainant had imported 200 Metric Tons of Waste Iron/Steel Wire Cutting Scrap at a unit price of US$ 0.23/kg from Thailand. He tiled Bill of Entry No.1421, dated 28-7-2004 at Lahore Dry Port under `First Appraisement' system requesting the Customs to examine and assess the goods in terms of CGO No.12/2002, dated 15-6-2002. Although the consignment was examined and found as per complainant's declaration the respondents did not finalize the examination report. Instead, an unnecessary objection was raised about the description/composition of the goods. The complainant requested the respondents that if they had any reservations about the description/composition of goods they may draw samples of goods and send them to Laboratory for analysis. As per section 80(1) of the Customs Act, 1969 the examination and assessment had to be completed without undue delay. In the event of a dispute, or where the goods were required to be tested, the goods, pending such tests could have been released provisionally under section 81(1) of the Customs Act, 1969. The respondents did not do that. They, however, took more than one month to determine the description/composition of goods. Finally, they drew samples of goods and sent them to Pakistan Standard and Quality Control Authority (PSQCA) for test/analysis vide their letter, dated 2-9-2004. As per lab. report, dated 10-9-2004 the goods were found to be the same as declared by the complainant. On receipt of Laboratory report the Appraiser finalized the examination and put up the case to the Principal Appraiser/Deputy Collector for further orders. Not accepting the value of US$230/MT as declared by the complainant the respondents enhanced it to US$700/MT. The complainant asked the respondents to disclose and confront him with the material/evidence on the basis of which they had arbitrarily enhanced the value but they did not. Subsequently, the consignment was assessed at a value of US$365/MT, without any basis. As the complainant was incurring heavy demurrage, storage and other Port charges he paid duty and taxes at US$ 365/MT under protest and got the goods released. The goods kept lying at the port from 28-7-2004 to 5-11-2004. As a result, the complainant had to incur huge demurrage, storage and other port charges. The respondents also acted illegally in not accepting the transaction value of the goods as stipulated under section 25(1) of the Customs Act. Nor did they give the complainant any notice as required under subsection (4) of section 25 of the Act nor, for that matter, passed any order under rule 109(3) of the Customs Rules, 2001. They should have given a notice to the complainant as to why they had intended to enhance the declared value and given him the chance to explain his position and then passed a speaking order if they are not satisfied with the explanation. No such notice was given nor any order was passed nor was the complainant provided the opportunity to justify his declared value. Not only did the complainant incur heavy demurrage etc. but he was also made to pay extra amount of duty and taxes. All this amounted to `maladministration'. The acts of the respondents be declared perverse, unlawful, unreasonable, unjust, biased and oppressive. They may also be directed to accept the declared value and pay back the excess amount of duty and taxes charged from the complainant. The complainant may also be awarded costs/compensation and damages.

2. In reply, the respondents have submitted that the complainant had imported the goods declaring them as Waste Iron/Steel Wire Cutting Scrap at unit value of US$0.23/kg claiming assessment under HS Code 7204.4910 on payment of customs duty at 10% and sales tax 15%. The consignment was examined under First Appraisement System. On physical examination the goods were not found to tally with the declared description. The consignment actually comprised `Semi Circular Iron Steel Strip Wire in Coils magnetic type (Secondary Quality)' as against the description declared as `Waste Iron/Steel Wire Cutting Scrap-after products of steel wool'. In order to confirm the description/ composition of the goods and determine HS Code the samples of goods were drawn and forwarded to PSQCA. The laboratory reported that `the goods were `Plain Carbon Steel Type AISI 1010-USES and application of AISI 1010: Automobile body and tender stock, hoods, frames, panels, etc. The goods were classifiable under HS code 7217.9000 leviable to customs duty at 25% and sales tax at 15%. The allegations of unnecessary delay were frivolous. If anything, the delay occurred on the part of the complainant who had deliberatly mis-declared the goods. The Lab test report, dated 11-9-2004 confirmed that the goods were different from those declared. The importer and his clearing agent did not submit the goods declaration for assessment, kept the documents to themselves. The assessment could not be finalized without submission of documents. The complainant never requested for provisional release of goods. There was no mala fide on the part of the Appraiser. The assessment/valuation was carried out at US$365/MT as against the declared value of US$230/MT on the specific request of the complainant himself in the light of evidential data (of value) vide KCH Bill of Entry No. 5820, dated 6-8-2004 for similar goods. The complainant had requested on 10-7-2004 on the face of goods declaration that the value be finalized on the basis of KCH valuation data. Hence, assessment was finalized accordingly. The allegation of delay was baseless. The respondents classified the goods correctly on the basis of physical attributes of the goods and the Lab report and finalized the value as per the request of the complainant's agent. The respondents did not violate the provisions of law. The complainant was given enough time to prove his `declaration' but he failed to do so. In order to avoid demurrage etc. the complainant was permitted, at his own request, to shift the consignment to Customs Bonded Warehouse. Had there been no misdeclaration, the goods would have been released promptly. Once the department ascertained the correct description of goods on the basis of Lab. report the value too was finalized with the consent of the complainant. As soon as the complainant's representative presented the goods declaration in the Appraisement Group the assessment was finalized on the same day, without any delay. The complaint being baseless may be rejected.

3. During the hearing, the AR reiterated the arguments advanced in the written complaint. He stated that samples of goods were drawn on 2-8-2004 but were sent to the Lab. for test/analysis on 2-9-2004 after a period of one month as was evident from respondents' forwarding letter, dated 2-9-2004 to the Lab. The respondents arbitrarily enhanced the value from US$230/MT to 365/MT without any basis. He submitted that the complainant's agent had not requested the respondent to finalize the value at US$ 365/MT. They had only requested the respondents to determine the value according to law. The AR also added that although the complainant did not request for provisional assessment the respondents should have done so. The duty and taxes were paid under protest on 5-11-2004. The respondents did not determine the value in terms of the provisions of section 25 of the Customs Act, 1969 read with Customs Rules, 2001. Given the chance, he submitted, his client would prove that the value per ton of the subject consignment was even lower than adopted or applied by the respondents.

4. Explaining delay in dispatching the samples to the Lab. the D.R. stated that the samples could be forwarded to the Lab. only when the complainant had deposited the test fee. Asked as to when exactly the complainant deposited it she promised to check it up and intimate the same later. She added that at one stage the complainant had sought permission to shift the goods to the CPF bond, which was allowed. The complainant could have moved the application for shifting the goods earlier so as to avoid delay and demurrage. The respondents did not need to issue notice under subsection (4) of section 25 of the Customs Act. As per the provisions of the aforesaid section the department could either accept the transaction value or, alternatively, they could finalize the value of the basis of evidential `valuation data' of identical and similar goods. No doubt, previously the complainant was asked to pay duty and taxes at a value of US$700/MT. Finally, however, the value in this case was determined on the basis of data of valuation of similar/identical goods imported via Karachi Customs House during the same period of import at the request of complainant himself. Never before had the complainant complained to the department about one month's delay in dispatch of samples to the lab. He also did not ask the department for issuance of Order-in-Original (O-I-O) covering valuation aspect to enable him to file appeal against the assessment order.

5. At the next date of hearing the DR produced extract of a dispatch register showing dispatch of samples to the lab. on 2-8-2004. Asked to produce a covering letter of the said date addressed to the Lab. showing dispatch of samples for testing/analysis the DR stated that the covering letter was not forthcoming from record. Further asked to produce Lab.'s receipt in token of having received the samples on 2-8-2004 she could not produce any such receipt. She, however, stated that the samples sent on 2-9-2004 might have been sent the second time but without furnishing any evidence to support the contention that these were sent on 2-8-2004. She disclosed that the complainant had deposited fee in the Lab on 3-9-2004.

6. The AR submitted that the complainant had made the request to evaluate the goods as per Customs House Data basically because he was under-pressure to clear the goods and because the respondents were in the first instance trying to assess the goods at an exorbitant value of US$700/MT.

7. Asked whether the respondents had passed the assessment order covering valuation aspect in the form of an O-I-O the DR submitted that the complainant never asked for it. She added that the department could pass a speaking assessment order disclosing therein evidence of value (US$365/MT) at which similar/identical goods were imported by other importers during the relevant period. The AR agreed to this course of action for it would provide his client the opportunity of filing appeal against the assessment order.

8. The arguments of the parties and record of the case have been considered and examined. The record shows that the importer had filed Bill of Entry No.1421, dated 28-7-2004 for clearance of goods declaring the goods as `Waste Iron/Steel Wire Cutting Scrap' at a value of US$230/MT. The respondents drew samples of the consignment with the consent of the importer and sent the same to the Lab. on 2-9-2004. The lab, however, confirmed the description/composition of goods as conforming to "plain carbon steel type AISI 1010. Uses and application of AISI 1010 Automobile body and tender stock, hoods, frames, penels; etc." on the basis of which the department classified the goods under HS 7217.9000. The respondents also did not accept the value declared by the complainant and enhanced the same initially to US$700/MT instead of US$230/MT as declared by the complainant. However, the declaration of goods (bill of entry on record) shows that at one stage the complainant's clearing agent himself requested the department "it is requested that the subject consignment may please be assessed as per KCH Data because the Appraiser has ignored the same---KCH 5820". The goods were accordingly assessed as per Karachi Valuation Data (KCH No.5820) at US$365/MT. This shows that assessment at a value of US$365/MT was finalized on the basis of request of complainant's clearing agent. For this the complainant had himself partially to blame. However, the bill of entry also shows that the complainant paid duty and taxes under-protest.

9. There is substantial force in the complainant's contention that although the samples were drawn on 2-8-2004 the same were unduly detained for a period of one month before these were forwarded to the Lab. on 2-9-2004 for determination of description/type/chemical composition of goods and classification. As a result, the complainant had to unnecessarily suffer demurrage during the period of one month. The D.R. could not produce any evidence of dispatch of samples to or receipt by the Lab. on 2-8-2004. A perusal of department's letter, dated 2-9-2004 addressed to the Director PSQCA lab. shows that the samples were sent for the first time to the lab. for testing on 2-9-2004. Had that not been the case the D.C. Customs would have, while calling for a test report from the lab vide Dry Port's letter, dated 2-9-2004 (on record), referred to department's earlier communication indicating dispatch of samples on 2-8-2004. The letter, dated 2-9-2004 does not make a mention of any earlier reference or dispatch. Clearly, the lab also sent its report, dated 10-9-2004 to the Department only with reference to Dry port's letter, dated 2-9-2004 under which the samples were actually despatched. It is, therefore, established beyond doubt that the samples were indeed sent to the lab. for chemical test on 2-9-2004 and not on 2-8-2004 as shown in the so-called extract from the dispatch register. The respondents have clarified that the complainant had deposited the fee on 4-9-2004. Had the samples been sent earlier and the complainant had not deposited the fee and the lab had refused to carry out the test one could blame the complainant for causing the delay. The fact is that the respondents detained the samples for a period of one month without any justification causing undue delay which amounts to `maladministration' as defined in section 2(3) of the F.T.O. Ordinance, 2000. As a result, the complainant had to unnecessarily incur demurrage during the period from 2-8-2004 to 2-9-2004. The respondents should, therefore, 'issue to the complainant `delay and detention certificate' for the aforesaid period (from 2-8-2004 to 2-9-2004) to enable him to seek waiver of demurrage from the Port authorities.

10. As to the valuation of goods the bill of entry (on record) shows that the complainant had through his agent requested the respondents to determine value of the consignment on the basis of Karachi Customs Data. The respondents finalized it accordingly. However, the fact remains that the complainant paid duty and taxes under-protest, as is evident from the bill of entry. The respondents need to show to the complainant the evidential values of similar/identical goods imported in Karachi or elsewhere with reference to specific bills of entry/goods declarations showing import of identical goods at US$365/MT, the value of which the complainant's consignment was assessed. The D.R. submitted during the complaint proceedings that if the complainant had wanted to appeal the assessment finalized by the respondents he could have asked the Assessing Officer to pass a proper and well-reasoned assessment order in the shape of the Order-in-Original, but he did not. Asked as to whether the respondents would be prepared to issue the O-I-O disclosing therein the evidential value (citing specific goods declarations/bills of entry transacted during the relevant period of import) on the basis of which the complainant's consignment was assessed at a value of US$365/MT in order to enable the complainant to file an appeal if he so wished, the D.R. stated that the respondents would be willing to do that. The AR agreed to this course of action provided the respondents passed a speaking order disclosing therein specific bills of entry/goods declarations involving similar/identical goods cleared by the Customs at US$365/MT at Karachi or elsewhere during the relevant period of import. The respondents should, therefore, pass a speaking and well-reasoned order disclosing therein evidential values on the basis of which the complainant's assessment was finalized at US$365/MT, as agreed by the D.R. during complaint proceedings, to enable the complainant to appeal the assessment order if he so wishes.

11. The undue delay of one month caused by the respondents in dispatching samples of goods to the Lab. was clearly an act of `maladministration'. Accordingly, it is recommended that the C.B.R. direct the relevant customs authority to:---

?

(i) Issue delay and detention certificate to the complainant for the period from 2-8-2004 to 2-9-2004 to enable him to apply to the port authorities for waiver of demurrage charges.

(ii) Compliance be reported within 30 days of the receipt of this order.

C.M.A./439/F.T.O.????????????????????????????????????????????????????????????????????????????? Order accordingly.