DEWAN SALMAN FIBRE LTD. VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2009 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 140 (2008)

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

----S.81 (2)---Customs General Order No. 01/2000 dated 20-1-2000---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9(2) & 10(3)---Provisional assessment of duty---Consignments were provisionally released against security of bank guarantees subject to final assessment by PCT Committee---Issue had not been resolved after lapse of nine years---Complainant contended that provisional assessment would become final if not finalized within the prescribed period of one year--Validity---Fact that no action was taken by the Department to decide the classification dispute and finalize cases of provisional assessment for about eight years was a clear case of inaction, inefficiency, neglect, inattention, inordinate delay incompetence, inefficiency and inaptitude and the charge of mal administration was established---Federal Tax Ombudsman recommended that Federal Board of Revenue direct the Collector of Customs (Appraisement) to finalize the assessment in accordance with the declaration of the importer and release bank guarantees within fifteen days.

Messrs Dewan Farooque Motors Limited v. Customs, Excise and Sales Tax Appellate Tribunal 2006 PTD 1276 ref.

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

----S.22---Customs Act (IV of 1969), S.81(2)---Award of costs and compensation and refund of amounts---Delay in final assessment---Request to pay compensation equal to surcharge (a~ 14% per annum---Validity---Complainant could not be absolved of their part of responsibility for the delay because of their inaction to pursue the matter for an early decision or, otherwise, file a complaint in the office of Federal Tax Ombudsman or other legal forums for redressal of their grievance---Request for compensation, held, was not justified.

M. Mubeen Ahsan, Advisor (Dealing Officer).

M. Afzaal Awan for the Complainant.

Imran Iqbal for Respondent.

Masood Sabir, Assistant Collector of Customs (Appraisement).

FINDINGS/DECISION

JUSTICE (RETD.) MUNIR A. SHEIKH (FEDERAL TAX OMBUDSMAN).---Messrs. Dewan Salman Fibre Limited have filed this complaint against the Collector of Customs, (Appraisement) for not releasing 35 bank guarantees for a total amount of approximately Rs.16, 87 million filed during 1999 to 2002 for provisional release of 35 consignments of Titanium Dioxide under section 81(2) of the Customs Act. They feel seriously aggrieved on account of inattention, delay and neglect to their applications dated 19-3-2008, 10-4-2008, 12-4-2008 and 14-4-2008 which allegedly constitute maladministration under subsection (3) of section 2 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

2. It has been stated by the Complainants that they sought release of the consignments of "Titanium Dexoide" under PCT heading 2823.0000 but the customs authorities held that the goods were classifiable under heading 3206.0000. The consignments were provisionally released against the aforesaid security of bank guarantees subject to the final assessment by the PCT Committee. The issue has not been resolved after lapse of nine years due to which they were suffering financially by paying huge amount of mark up to the banks on their guarantees. It was argued that the prime condition of section 81(2) of the Act was that provisional assessment would become final if not finalized within the prescribed period of one year.

3. It has been alleged that despite several representations made to the Collector of Customs (Appraisement) they received no response for release of guarantees notwithstanding the fact that the PCT Committee had failed to decide the classification and the period prescribed under section 81(2) of the Customs Act had lapsed. No reasons were communicated to them for not releasing the bank guarantees. It was reiterated that under section 81 of the Act the assessment under the declared heading HS 2823.0000 had become final and the Customs Authorities were obliged to release the bank guarantees immediately. They cited the judgment of the Sindh High Court in the case of Messrs Dewan Farooque Motors Limited v. Customs, Excise and Sales Tax Appellate Tribunal 2006 PTD 1276, wherein it has been held that .where the Collector fails to make final determination of the duty within the prescribed time the duty determined provisionally on the declared value becomes the final determination.

4. It was requested that the inaction of the respondent for not issuing any formal order about the release of their 35 bank guarantees despite the letters mentioned above may be declared as maladministration under the Federal Tax Ombudsman Ordinance, 2000, and the respondent be directed to release the 35 bank guarantees along with compensation equal to surcharge @ 14% per annum under section 22 of the Ordinance.

5. The Assistant Collector of Customs (Appraisement) in the reply to the complaint raised the preliminary objection that the issue of classification of goods was sub-judice before, the Classification Committee under order dated 7-5-2000 of the Lahore High Court. The complaint has been filed after the lapse of six months when the Complainants first felt aggrieved and under section 10(3) of the Federal Tax Ombudsman Ordinance, 2000 it was barred by time. The subject matter of the complaint was not a case of provisional assessment but a case of mis-declaration of PCT classification and the Customs authorities agreed to facilitate the industrial concern and acceded to their request to keep the enforcement of demands in abeyance till disposal of the matter by the Classification Committee. The Complainants' contention and allegation regarding delay in classification were not correct. For these reasons, it was stated, the matter was outside the jurisdiction of this office.

6. With regard to the facts of the case it was stated that the importer filed a bill of entry under PCT heading 2823.0000 chargeable to customs duty @ 10% and Sales tax @ 12.5%. In the light of the test report of the Customs House Laboratory the goods were classified under heading 3206.1100 chargeable to duty @ 25% and sales tax @ 12.5%. The importer did not accept the test report. Since the declared classification was not accepted, a show-cause notice, dated 18-5-1998 was issued to the importer, and he was asked to pay the differential amount of duty and taxes. Since the importer did not accept the classification under heading 3206 the case was referred to the PCT Committee for correct classification.

7. The Assistant Collector of Customs recounted the details of the components materials of the imported goods and test reports under which the goods were classifiable under heading 3206. It was stated that considering the adamant attitude and persistent requests of the Complainants for classification under heading 2823, the matter was referred to the C.B.R. to get the opinion from the World Customs Organization (WCO). After consulting the WCO, C.B.R. issued Customs General Order No. 1 of 2000 dated 20-1-2000 giving the ruling that the imported product was classifiable under PCT heading 3206. The importer filed a writ petition No. 380 of 2000 in the Lahore High Court which directed vide order dated 25-2-2000 not to implement CGO 1/2000 and vide order dated 7-5-2000 asked the respondent to decide the case by considering the arguments put forward by the petitioner and the aforesaid CGO was to remain inoperative.

8. The, Assistant Collector of Customs reiterated that the respondents were confident and certain about their version that the goods were classifiable under heading 3206.1100. It was not a case of provisional assessment under section 81 of the Customs Act and in fact it was a case where the High Court ordered that the payment be held in abeyance till the disposal of the case by the Classification Committee. He further stated that in view of the contents of CGO 1/2000 and the order of the Lahore High Court, there was no question to release the bank guarantees. C.B.R. had decided the classification in consultation with the WCO vide CGO 1/2000 which the Complainants did not accept. He argued that the Complainants' contention for release of the bank guarantees under section 81 of the Customs Act was not correct and therefore the complaint be dismissed under sections 9(2) and 10(3) of the Federal Tax Ombudsman Ordinance, 2000.

9. During the hearing of the complaint the learned counsel stated that the importers had filed a petition before the Rawalpindi Bench of Lahore High Court which directed the C.B.R. to decide the matter before 30-5-2000. However, High Court's order was not complied with. Since the dispute was not decided within the prescribed period of one year under section 81 of the Customs Act, the declared classification attained finality and the bank guarantees should be released. He stated that the classification of the goods has not been decided by the Classification Committee as yet. Therefore whatever decision; is taken by the said Committee it would not be applicable to the consignments provisionally released from 1999 to 2002, and the security (bank guarantees) should be released immediately.

10. The Assistant Collector of Customs admitted that High Court vide order dated 7-3-2000 had directed the C.B.R. to decide the classification by 30-5-2000. The matter was referred to the Collector of Customs (Appraisement) although no documentary evidence to this effect was available in Collectorate. PCT Committee held its first meeting on 16-5-2002 followed by meetings on 28-5-2002 and 18-12-2003. Another meeting was held on 7-8-2008 and the next meeting has been scheduled for 13-8-2008.

11. On inquiry the learned Counsel stated that High Court vide order dated 7-3-2000 suspended the operation of CGO 1/2000 and directed the C.B.R. to decide the classification by 30-5-2000. There was no mention of the mode of release of the consignments in the High Court's order. However, the Customs authorities decided, in pursuance of the High Court's order, to release .the consignments against bank guarantees for the differential amount of duty and taxes as approved by the Collector on 4-5-2000. This policy was followed in all the 35 consignments and the bank guarantees accepted by the customs adequately approved that the release was allowed under section 81 of the Customs Act. The Counsel emphasized that besides section 81 of the Customs Act there was no provision under the law to allow release against bank guarantee. He stated that either the goods could be released under section 80 after completion' of assessment or under section 81 against security by provisional assessment and there was no other tool of release of goods. He urged that since 35 consignments were released under bank guarantees accepted by the Customs it should be presumed that this was done under section 81 of the Act.

12. The Assistant Collector of Customs stated that the show-cause notice dated 18-5-1998 did not relate to any consignment mentioned in the list submitted with the complaint. It seemed that no decision was taken on this .show-cause notice presumably because of the High Court's order. The Collector of Customs, in defence to the decision of the High Court, decided to release the subject 35 consignments against bank guarantees. However, the classification matter was not decided. He stated that the Classification Committee has completed the deliberations and would soon forward its recommendation to the Federal Board of Revenue to issue a classification ruling.

13. This office has taken cognizance of this complaint on account of the special circumstances of the case that High Court's direction to decide the classification by 30-5-2000 was not complied with and the PCT Committee did not decide the issue for the last eight years. It is significant that during the six years from 2002 till 2008 when the last bank guarantee was given, the Complainants did not seem to have pursued the matter with the Custom House, the C.B.R. or approach any other legal forum for redressal of their grievance. They have not given any valid reason for not agitating the matter for six years except that a new administration has taken over Messrs. Dewan Salman Fibre Limited who have taken notice of the 35 bank guarantees for a total amount of Rs. 16.87 million pending with the Customs for several years and decided to approach this office.

14. The complaint was received in this office in May, 2008 and comments were called for from the Revenue Division in June 2008. Thereafter a meeting of PCT committee was held on 7-8-2008 and the next meeting was scheduled for 13-8-2008. Assistant Collector has reported that PCT Committee has taken a decision which would be forwarded to the Federal Board of Revenue for issue of a ruling. The fact that - no action was taken by the Department to decide the classification dispute and finalize 35 cases of provisional assessment for about eight years is a clear case of inaction, inefficiency, neglect, inattention, inordinate delay incompetence, inefficiency and inaptitude and the charge of maladministration is established.

15. The Complainants have requested this office to direct the respondents to pay compensation equal to surcharge @ 14 % per annum under section 22 of the Federal Tax Ombudsman Ordinance, 2000. It has been noted that the Complainants cannot be absolved of their part of the responsibility for the delay because of their inaction to pursue the matter for an early decision or otherwise, file a complaint in this office or approach other legal forums for redressal of their grievance. The request for compensation is not justified.

16. It is recommended that Federal Board of Revenue direct the Collector of Customs (Appraisement) to:--

(i) finalize the assessment in accordance with the declaration of the importer and release bank guarantees within fifteen days.

(ii) Compliance be reported to this office within thirty days.

C.M.A./104/FTOOrder Accordingly.