GADOON TEXTILE MILLS LTD. VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2009 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 167 (2008)

Customs Act (IV of 1969)---

----Ss. 80(1) & 25(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3) & 9(2)(b)---Finance Act (IV of 2007), Preamble---Provisional Assessment of duty---Limitation---Post dated cheque was issued by the complainant with the understanding that if it was proved that Customs Value under S.25(1) of the Customs Act, 1969 was not the declared value, the cheque would be encashed otherwise the same would be returned to the company---Cheque was neither encashed nor released to the complainant, the company requested the department to return such post dated cheque or pass a valid order determining the final value of the goods imported---Issue for determination of transaction value was kept pending and no order was passed under S.80(1) of the Customs Act, 1969 within the prescribed ,period---Complainant had contended that since the stipulated period provided under S.80(2) of the Customs Act, 1969 had lapsed, the value declared by the complainant company had become final and the department was under legal obligation to release the post. dated cheque; instead of returning the cheque, the department issued a notice for revalidation of the post dated cheque which was illegal and amounted to maladministration---Department's contention that since the complainant had responded to their requisition letter regarding revalidation of post dated cheque and sought adjournment of hearing same proved that the view taken by the department that letter was within time, was not correct---Validity---Notice was issued long after the expiry of statutory limit of time provided in S.81(2) of the Customs Act, 1969 and was not in accordance with law---Maladminsitration having been established Federal Tax Ombudsman recommended that Federal Board of Revenue was to direct the Collector Appraisement to withdraw the letter/notice and to finalize the assessment on the basis of declaration of the complainant and return the post dated cheque within 15 days of the receipt of the present order.

C.P. No.137 of 2006; Messrs Shakeel Enterprises Karachi v. C.B.R. Complaint No.474-K of 2002; Complaints No.1569-K/2008; Complaint No. 88-K/2007 and Complaint No.85-K of 2007 ref.

S. Asghar Abbas, Adviser (Dealing Officer).

Afzal Awan for the Complainant.

Habib Ahmed, Deputy Collector Customs Appraisement, Karachi present of Respondents.

FINDINGS/DECISION

JUSTICE (RETD.) MUNIR A. SHAIKH, (FEDERAL TAX OMBUDSMAN).---The complainant a limited company is aggrieved by non-release of post dated cheque for Rs. 113,170 and issuance of notice for revalidation of post dated cheque vide No, V-34206-III, dated 21-7-2008 by the Collectorate of Appraisement Karachi. The facts of the case are briefly stated as under:--

2. The complainant company imported a consignment of Polyester Staple Fibre vide Goods Declaration IGM No.856, dated 10-5-2006. The concerned officer of the Customs decided to make provisional determination of value and amount of duty taxes etc. under section 81 of the Customs Act, 1969. The Goods were released after securing the deferential amount between the final determination of duty and the amount of duties determined provisionally worked out at Rs.113,170 vide post dated cheque drawn on Metropolitan Bank Karachi. It is stated that the post dated cheque was issued by the complainant with the clear understanding that if it was proved that Customs value under section 25(1) of the Customs Act was not the declared value, the cheque would be encashed otherwise the same would be returned to the company. Since the cheque was neither encashed nor released to the complainant, the company requested the department vide letter, dated 15-3-2007 to return the post dated cheque of Rs.113,170 or pass a valid order determining the final value of the goods imported. The issue for determination of transaction value was kept pending and no order was passed under section 80(1) of the Customs Act, 1969 within the prescribed period. It is pleaded by the complainant that since the stipulated period provided under section 81(2) had lapsed, the value declared by the complainant company had become final and the respondents were under legal obligation to release the post dated cheque. It is contended that instead of returning the cheque, the respondents issued a notice for revalidation of the post dated cheque vide their letter, dated 21-7-2008. This illegal action of the respondents amounted to maladministration. The complainant requested the respondents to withdraw the aforesaid notice and return the post dated cheque. Since no response was received the complainant reminded the authority concerned vide letter, dated 15-3-2007 and 4-8-2008. The complainant has prayed for issuance of directions to the concerned officers of the Customs to respond its letter, dated 15-3-2007 and 4-8-2008 and release the post dated cheque of Rs.113,170. R is also requested that the Collectorate Appraisement be directed to withdraw the notice for revalidation of post dated cheque vide letter, dated 21-7-2008.

3. The respondents have forwarded the parawise comments of Collectorate of Appraisement Customs House Karachi. The respondents have raised preliminary objection regarding jurisdiction of this forum in terms of section 9(2)(b) of the FTO Ordinance, 2000 on the ground that the present complaint has been filed against the finalization of provisional assessment under the amended provisions of subsection (4) of section 81 of the Customs Act, 1969. It is contended that the said provision was communicated to the complainant vide letter, dated 21-7-2008 and reminder, dated 64-2008. It is pleaded that the complainant and his A.R. have responded to the said letters and requested for time and re-fixation of hearing vide letter, dated 20-8-2008. It is further pleaded that the complainant's case pertained to determination of liability of tax/duty and valuation of the imported goods and therefore fell within the purview of section 9(2)(b) of the FTO Ordinance, 2000. It is also pleaded that every declared value could not be accepted as Customs Value and as per law the appropriate Assessing Officer could assess the goods provisionally under section 80(1) of the Customs Act. The respondents have referred to various subsections of section 25 of the Customs Act, 1969 regarding determination of value of imported goods. It is pleaded that as per amended provision of section 81(4) and explanation thereof the provisional assessment was automatically finalized within the stipulated period when the finalization was not made with any new evidence of value under section 81(2) of the Customs Act, 1969. It is further, pleaded that as per section 81 read with section 180 of the Customs Act, 1969, the issuance of order was not mandatory in the case of provisional assessment and this view was confirmed by the Honourable High Court's judgment, dated 26-4-2006 in C.P. No.137 of 2006. It is contended that as per aforesaid amended provision of law there was no question to accept the declared value for the finalization of provisional assessment. The respondents have contended that the decisions cited by the complainant were not related to the amended provision of section. 81(4) and explanation thereof and therefore the cited decisions had no nexus with the case under consideration. The respondents have prayed to dismiss the present complaint on the basis of aforesaid submissions.

4. The case has been discussed elaborately with the representatives of both the sides. The D.R. has reiterated the pleas taken in the parawise comments and insisted that in view of the amended provisions of subsection (4) of section 81 of the Customs Act, 1969, the action of the department was fully justified and the present complaint is devoid of merit. The A.R. of the complainant argued at the out set that the reliance placed by the respondents on the amendment of subsection (4) of section 81 and insertion of an explanation thereto is quite misconceived and misplaced. The aforesaid amendments were made by the Finance Act, 2007 and was applicable with effect from 1st July, 2007 whereas provisional determination of value and duties etc. in the case of the complainant was made under section 81 on 13-5-2006. The amended provisions in subsection (4) of section 81 were therefore not applicable in the case of the complainant. The A.R. further pleaded that the post, dated cheque was given by the complainant on the clear understanding and trust that if it was proved that the Customs value under section 25(1) of the Customs Act was not the declared value, then the department would be justified in encashing the post dated cheque otherwise the same would be returned to the complainant. The A.R. contended that the respondents were duty bound to determine the correct value, duty, taxes and charges within the statutory period as provided under subsection (2) of section 81. Since the respondents failed to make compliance of subsection (2) of the said section it was imperative on their part to return the post dated cheque secured at the time of provisional assessment/ determination of value under subsection (4) of section 81. He has placed reliance in support of his contention on a number of identical cases decided by this forum in favour of the complainants and confirmed by his Excellency the President of Pakistan on representation made by the department under section 32 of the FTO Ordinance, 2000. He has furnished copies of the orders of identical cases and the final decision of the President of Pakistan in Complaint No.474-K/2002, in the case of Messrs Shakeel Enterprises Karachi v. C.B.R. The A.R. further stated that the Assistant Collector Customs Appraisement-III, violated the aforesaid provisions of the Customs Act, 1969 and the judgment/ recommendations of this forum and the decision of the President of Pakistan by issuing letter, dated 21-7-2008 to the complainant for submission of revalidated post dated cheque against the above referred consignment imported by the complainant.

5. The arguments of the representative of the complainant as well as department have been given due consideration and the copies of documents filed by the A.R. have also been examined. The reliance placed by the complainant on the identical cases in Complaints Nos.474-K/2002, 1569-K/2008 etc. is quite well founded. Findings of this forum have been confirmed by his Excellency the President of Pakistan and an extract from Complaint No. 88-K/2007 is reproduced hereunder for ready reference:--

"It has already been decided by the President by his Order No.80 of 2002---Law (FTO), dated 8-11-2002 in Complaint No.474-K/2002 Messrs Shakeel Enterprises Karachi v. C.B.R. that where the Collector fails to make final determination of the duty within the prescribed time the duty determined provisionally on the value declared by the importer becomes the final determination. The FTOs findings and recommendation are well founded (Dewan Farooq Motors Ltd. v. Customs Excise and Sales Tax Appellate Tribunal 2006 PTD 1276 Karachi H.C. also refers)."

6. The contentions of the A.R. that the amended provisions of subsection (4) of section 81 are not applicable in the case of his client as the same were made by the Finance Act, 2007 whereas in the case under consideration period involved was 2005-2006 is quite well founded. The complainant imported a consignment of-Polyester Staple Fibre and filed goods declaration on 10-5-2006. The Provisional Assessment was made by obtaining post dated cheque drawn on Metropolitan Bank Karachi on 13-5-2006. In such circumstances the amended provisions of sub-section (4) of section 81 was obviously not applicable in the case of the complainant.

7. Notwithstanding the aforesaid factual position, the interpretations of the department of amended provisions of subsection (4) of section 81 of the Customs Act, 1969 have been found by this forum as misconceived. The arguments that after the expiry of the stipulated period, the provisional assessment made under section 81(1) of Customs Act attained finality which included the amount of duty and taxes paid or secured as envisaged in the explanation to section 81 is also not tenable as discussed in an identical case of Complaint No.85-K/2007 decided by this forum. The relevant extract therefrom is reproduced hereunder:--

"The entire reliance on the "Explanation" under section 81 betrays complete disregard for the elaborate system of provisional determination of tax liability which has developed over a long period of time and a progressive formulation of the procedure has been enacted under the four subsections of section 81. It cannot be the intention of the law makers and the government to place a premium on the delay, inaction, indecisiveness, lack of investigation, lack of any new valuation evidence, and failure of the Collectorate and the Valuation Department to determine with substantive reasons and justification the final assessment within considerably long period of nine months, to reward the customs officers for their inefficiency, neglect and lack of will or ability to decide pending valuation/assessment cases on substantive grounds and arbitrarily deprive the importer of the security deposited in the belief that a fair decision would be taken. If the customs authorities wanted to include the amount of security within the ambit of duty and taxes they should have done so only with adequate evidence and passed speaking order observing the due process."

8. The respondent's objection regarding jurisdiction in terms of section 9(2)(b) of the FTO Ordinance, 2000 is placed and misconceived. There is no provision of appeal under section 193 of the Customs Act, 1969 against any decision or order passed under section 81 of the Customs Act. Moreover it has been repeatedly held in a number of complaints that if maladministration is established, the FTO is vested with the jurisdiction to investigate the allegation of the complaint. The respondent's contention that since the complainant had responded to their requisition letter, dated 21-7-2008 regarding revalidation of post dated cheque and sought adjournment of hearing proved that the action taken by the department was within time, is not correct. The notice, dated 21-7-2008 was issued by Assistant Collector Customs Appraisement-III, Karachi long after the expiry of statutory limit of time provided in subsection (2) of section 81 of the Customs Act. The notice issued was therefore not in accordance with law.

9. In view of the above maladministration is established and the following recommendations are therefore made:--

(i) The F.B.R. to direct the Collector Appraisement to withdraw the letter/notice No.V-34/06/III, dated 21-7-2008 and to finalize the assessment on the basis of declaration of the complainant and return the post dated cheque, dated 13-5-2006 within 15 days of the receipt of this order.

(ii) Compliance be reported within a week thereafter.

C.M.A./113/FTOOrder accordingly.