CRESCENT TEXTILE MILLS LIMITED, FAISALABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2009 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1968 (2009)

Customs Act (IV of 1969)---

----S.81(2)--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.3---S.R.O.27(I)/98, dated 17-1-1998---S.R.O.554(I)/98, dated 10-6-1998---S.R.O.987(I)/99---Customs General Order No.7/1998---Customs General Order No. 14/1998---Provisional assessment of duty---Non-implementation of High Court's order in a case of provisional assessment whereof the goods were provisionally released against bank guarantee---Complainant contended that application was sent to Secretary (Machinery), Revenue Division, to implement the judgment and release the bank guarantee but no action had been taken---Department contended that at the time of import the exemption of customs duty and sales tax was not available under Customs General Order No. 7 of 1998--- Customs General Order No. 14 of 1998 was issued at a later stage which was not applicable retrospectively and the benefit of exemption was denied---Complainants should adhere to the instructions contained in the judgment of High Court to pursue the case before the Secretary (Machinery), Federal Board of Revenue, and not to approach the office of Assistant Collector of Customs---Complainants failed to comply with the order of High Court by not pursuing the case with the Federal Board of Revenue---Complaint be rejected being premature, the benefit of S.R.O.554(I)/1998 and S.R.O.987(I)/99 was not admissible to the complainants as the goods were manufactured locally, and the concession if granted would be a great loss to national exchequer---Validity---Held, it was established that High Court's order for decision within two months was not complied with and provisional release under S.81 of the Customs Act, 1969 attained finality due to inaction on the part of the Customs officials--Maladministration was established---High Court's order had now been complied with by the Chief Federal Board of Revenue after lapse of eight years; it would be appropriate if the complainants filed an application to bring the factual position to the notice of High Court for redressal of their long outstanding grievance.

M. Mubeen Ahsan, Advisor (Dealing Officer).

Afzal Awan for the Complainant.

Imran Iqbal for Respondents.

Shahid Jan, Assistant Collector of Customs (Appraisement).

ORDER

DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---The complaint has been filed against the Collector of Customs (Appraisement) for not implementing the Sindh High Court's judgment, dated 15-3-2001 in a case of provisional assessment under section 81 Of the Customs Act whereof the goods were provisionally released against a bank guarantee, dated 29-10-1999 due to expire on 28-1-2000. The High Court had ordered on 15-3-2001 that the Secretary (Machinery) Revenue Division, Central Board of Revenue, Islamabad, shall decide the question of exemption from payment of duty in the light of the Customs General Order applicable to the goods imported by the petitioner who shall appear before the Secretary (Machinery) within fifteen days .and the Secretary shall decide the issue within two months thereafter and pass a speaking order after giving opportunity of hearing to the petitioner.

2. The complainants have alleged that they sent applications, dated 14-5-2003, 25-11-2004, 16-2-2005 and 12-3-2008 to the Secretary (Machinery), Revenue Division, to implement the judgment and release the bank guarantee of Rs.27,54,710 but no action has been taken.

3. The facts of the case have been stated as follows:--

(i) The complainants imported Ring Spinning Frames for balancing, modernization and replacement of their manu facturing plant and sought exemption of duty and sales tax under S.R.O.27(I)/98, dated 17-1-1998 and S.R.O.554(I)/98, dated 10-6-1998. The benefit of exemption was denied on the grounds that the imported Ring Spinning Frames were manufactured locally and included in the list of Customs General Order No. 7 of 1998.

(ii) C.B.R. vide letter No.1(4) Mach/98, dated 17-10-1999 "allowed provisional release of ring spinning frames against bank guarantee equal to the amount of duty and taxes, at least for a period of three months," subject to the condition that they will abide by the decision of C.B.R. taken in this regard."

(iii) The bank guarantee for Rs.27,54,710, dated 29-10-1999 valid for a period of three months was submitted to the Collector of Customs (Appraisement).

(iv) Instead of deciding the dispute the Deputy Collector of Customs (Bank Guarantee Cell) issued a notice, dated 2-5-2000 for encashment of the bank guarantee. (The notice seems to have been actually issued in August, 2000).

(v) The Complainants filed a Constitutional Petition No.D-653/2000 in' the High Court of Sindh and the High Court vide its order, dated 15-3-2001 restrained the respondent from encashment of the bank guarantee and remanded the case to the Secretary (Machinery) Revenue Division to decide the issue within two months and thereafter pass a speaking order after giving opportunity of hearing to the complainant. This order has not been implemented so far.

(vi) The Counsel for the complainants approached the Secretary (Machinery), vide letters dated 14-5-2003, 25-11-2004, 16-2-2005 and a notice dated 12-3-2008 requesting the Secretary (Machinery), the Chairman, Federal Board of Revenue, and the Chief Collector of Customs to intervene in the matter and release the bank guarantee within a week and intimate the reasons for not releasing the guarantee Complainants representatives also made personal visits but failed to get any positive response. The order of the High Court has not been implemented and the complainants have been paying additional mark-up to the Bank due to non-release of the bank guarantee.

(vii) During the last seven years, the Secretary (Machinery) has not implemented the High Court's order, dated 15-3-2001, he has not given the complainants the opportunity of hearing and not passed a speaking order despite clear cut direction of the High Court to decide the dispute within two months.

(viii) Customs General Order No. 7 of 1998 was amended vide Customs General Order No. 14 of 1998 and Ring Spinning Frames were excluded from the list of locally manufactured goods. These Frames are still not been manufactured locally.

4. It has been alleged that a decision, process, recommendation, act of omission or commission which is contrary to law, rules or regulations, perverse, arbitrary or unreasonable, unjust, biased, oppressive or discriminatory, or there is neglect, delay, incompetence, inefficiency in the administration and discharge of duties and responsibilities, is covered under the definition of maladministration' under section 2 of the Federal Tax Ombudsman Ordinance, 2000. It has been requested that the non-implementation of the aforesaid order of the High Court of Sindh and not responding to the letters and applications sent to the Secretary (Machinery) be declared maladministration under section 2(3) of the Federal Tax Ombudsman Ordinance. It has also been requested that the respondents be directed to release the aforesaid bank guarantee of Rs.27,54,710 along with compensation equal to surcharge @ 14% per annum under section 22 of the Federal Tax Ombudsman Ordinance, 2000 in juxtaposition with section 83(2) of the Customs Act which provides for payment of surcharge @ 14% per annum on import duty and other charges payable on imported goods if the owner fails to pay duty and other charges.

5. The complaint was referred to the Secretary Revenue Division, on 27-10-2008 for submission of reply to the allegations contained therein followed by another notice, dated 15-11-2008. This office has not received any reply from the Secretary (Machinery) Federal Board of Revenue or any other officer of the Federal Board of Revenue. However, the Assistant Collector of Customs (Appraisement) sent an undated reply received in this office on 12-11-2008. He stated that the benefit of duty and sales tax exemption was not given as, according to the Customs General Order No. 7 of 1998, the goods were manufactured locally. The goods were provisionally released pending clarification from the F.B.R. He also admitted that the Sindh High Court passed an order that Secretary (Machinery) shall decide the question of exemption and pass a speaking order after hearing, the petitioner" within two months. The Collector requested the F.B.R. vide letter No. SI/Miscellaneous/IB/ 99-VI, dated 28-10-2003 to intimate the final decision taken in the light of the Court's judgment and the matter has been under consideration with the F.B.R.

6. The Assistant Collector of Customs denied the allegations of maladministration but admitted that the issue regarding determination of "locally manufactured" status for the Ring Spinning Frames was under consideration with the Board and the Collectorate would implement the decision as and when received. The Department has also issued reminder, dated 20-10-2008 to the F.B.R. to expedite the decision. He stated that at the time of import the exemption of customs duty and sales tax was not available under C.B.R. 7/1998. The Customs General Order No. 14 of 1998 was issued at a later stage which was not applicable retrospectively and therefore the benefit of exemption was denied. It has been stated that the complainants should adhere to the instructions contained in the judgment of the High Court to pursue the case before the Secretary (Machinery), F.B.R., and not to approach this office. He has further stated that the complainants failed to comply with the order of the High Court by not pursuing the case with the F.B.R. It was requested that the complaint be rejected being premature, the benefit of S.RO.554(I)/1998 and S.R.O.987(I)/99 was not admissible to the complainant as the goods were manufactured locally, and the concession if granted would be a great loss to national exchequer.

7. During the hearing of the complaint, the learned counsel. for the complainants stated that the Sindh High Court vide order, dated 15-3-2001 had directed that the petitioner shall pursue for remedy before the respondent No.4 (Secretary Machinery, Revenue Division), petitioner shall appear before the respondent No.4 within fifteen days who shall decide the issue within two months after hearing the petitioner through a speaking order. He stated that complainants' Representative called upon the Secretary (Machinery) in 2001 but no order was passed. The then counsel for the complainants in letter, dated 14-5-2003 mentioned that the representative of the importer had met the Secretary (Machinery) but thereafter neither any opportunity of hearing was afforded nor the controversy resolved. The same position was reiterated in letters, dated 25-11-2004 and 16-2-2005. They sent a letter to the Chairman, F.B.R., on 12-3-2008 reiterating their case and emphasizing that even after lapse of more than six years the Secretary (Machinery) had neither given an opportunity of hearing nor passed any speaking order.

8. The learned counsel stated that besides the letters sent to the Secretary (Machinery) and Chairman, F.B.R., the matter was pursued almost constantly at personal level but no progress was made. Even after the letter, dated 19-3-2008 no action was taken by the F.B.R., by the Chief Collector of Customs or the Collector of Customs (Appraisement) and no decision was taken; thereafter the complaint was filed in this office: It was further stated that the goods were provisionally released under section 81 of the Customs Act against a bank guarantee, dated 29-10-1999 which expired on 28-1-2000. Under the orders of the High Court the matter should have been resolved within two months, but since, 2001 the matter has not been resolved by the Customs authorities or the F.B.R. It was requested that the respondent be directed to release the bank guarantee and compensation equal to the surcharge Ca? 14% per annum be allowed under section 22 of the Federal Tax Ombudsman Ordinance in juxtaposition of the liability that occurs against the importer under section 83(2) of the Customs Act.

9. It was noted out that the Revenue Division had not submitted its comments called for vide this office notice, dated 1-12-2008 and Secretary (Machinery) had neither submitted reply to the allegations nor appeared for hearing on 22-12-2008. The Assistant Collector of Customs (Appraisement) stated that Second Secretary (Tariff-II), F.B.R., vide letter C.No.2(9) Mach/08, dated 20-12-2008 had written to the Collector of Customs (Appraisement) that the matter was under consideration in the Board, it would be decide shortly and this office be requested to grant adjournment for a month's time to enable to the Board to dispose of the matter on merits. Adjournment was allowed.

10. The learned counsel reiterated his argument that the complainants have approached this office primarily on the ground of grave maladministration whereby the provisional assessment of goods of released in 1999 under section 81 of the Customs Act had not been finalized despite lapse of more than eight years and the bank guarantee submitted on 29-10-1999 has not been returned to the complainants. He argued that the provisional assessment had attained finality seven years ago which has not been recognized by the Collector of Customs and the matter has been kept pending without any justification. The non-compliance of the order of the High Court has added to the 'gravity of the maladministration.

11. On the next hearing the learned counsel for the complainants stated that the Chief (Tariff and Trade), F.B.R., after hearing on 28-1-2009, issued an order, dated 7-2-2009. He decided that the complainants were not entitled to the benefit under S.R.O.554(I)/98, dated 12-6-1998 and thus the request for tax exemption was rejected.

12. The learned counsel argued that, firstly, the fact that the direction of the High Court in its order of 2001 was not complied with for about eight years established inaction amounting to grave maladministration. It has taken such a long time for the F.B.R. to decide it only under the direction of the Federal Tax Ombudsman clearly proved that maladministration against which the complaint was filed in this office. Secondly, he argued, a 'decision communicated by the. Chief (Tariff and Trade) F.B.R. in his order, dated 7-2-2009 that the benefit of duty and tax exemption would not be available to the importer has further aggravated the gravity of maladministration because an action which the F.B.R. should have taken eight years ago has been denied to the Complainants even after lapse of such a long time.

13. The learned counsel stated that on receipt of notice of hearing from the F.B.R., reply, dated 19-1-2009 was sent wherein certain clarifications were made and arguments were put forward. F.B.R. neither replied to this letter nor did the Chief, F.B.R., discussed the arguments in his order, dated 7-2-2009 and it seemed that the Chief had totally ignored the crucial arguments submitted to him.

14. The Assistant Collector of Customs submitted a copy of the order passed by the Chief (Tariff and Trade) and invited attention to paragraph 4(ii) under which the Secretary (Machinery) had advised the Collector of Customs (Appraisement) vide letter, dated 27-10-1999 to finalize the provisional release and recover the dues leviable therein within the stipulated period. On inquiry he stated there was nothing on record to show that any action was taken by the Collectorate in this case. This is yet another instance of maladministration that the Collector did not comply with the order of the F.B.R. This letter lost its relevance when the High Court issued an order on 15-3-2001 directing the Secretary (Machinery), author of this letter, to decide the case within sixty days.

15. From the foregoing facts it is established that High Court's order for decision within two months was not complied with and provisional release under section 81 of the Customs Act attained finality due to inaction on the parts of the Customs officials. Maladministration is established. The High Court's order, dated 15-3-2001 has now been complied with by the Chief F.B.R. after lapse of eight years. It would be appropriate if the complainants file an application and bring the factual position to the notice of the High Court for redressal of their long outstanding grievance.

C.M.A./94/FTOOrder accordingly.