T.F. PIPES LTD., ISLAMABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2010 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 124 (2009)

Customs Act (IV of 1969)---

----S.25---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Enhancement of assessable value of imported goods---Demand of short levied amount of customs duties and taxes---Complaint against---Complainant had filed complaint against customs for arbitrary enhancement of assessable value of its imports of goods without supplying evidence of higher assessable value---On continued failure of customs to produce proper proof of higher value, complainant filed a refund claim of the amount of customs duties and taxes which had been forcibly recovered from the complainant---Settlement of said refund having excessively been delayed by the customs authorities, complaint was filed---Customs authorities forced the demand of short levied amount of customs duties and taxes on the complainant company by threatening closure of their bonded warehouses operations and in circumstances had forcibly recovered the additional amount---Besides the customs authorities failed to protect their live file containing the documents of the case from loss and misplacement---As protection of live file containing the documents of the case against loss or misplacement was a top res ponsibility of every Government Department, its loss or misplacement aggravated the extent and seriousness of maladministration involved in the case---Customs Officers dealing' with pre-audit of refund claims objected to refunding the amount on the basis of which the Audit Para had been settled and thus the decision to grant unlawful and unjustified refund was timely aborted---In view of said findings recommendations had been made that disciplinary action be taken under the Removal from Service (Special Powers) Ordinance, 2000 against: Customs Officers/officials who initially assessed the goods on lower value without obtaining the relevant valuable advice in terms of relevant Import Trade Price, Customs Officers/officials who failed to obtain the requisite evidence from Directorate of Revenue Receipt Audit of higher Import Trade Price after detection of short levy and Customs Officers/officials who sanctioned refund claim after the Audit Para was settled---Complaint could be included as a case study in the training module for customs officers in order to forestall chances of recurrence of such practice, FBR to put in place a foolproof and sustainable system to protect their live files against loss or misplacement; FBR to identify all excessively delayed funding cases for deciding them in the next three months and compliance be reported within 100 days.

G.A. Naqvi, G.M. Finance Authorized Representative.

Masood Ahmad, D.C. Customs, Islamabad Departmental Representative.

Yasin Tahir, Advisor, F.T.O. Secretariat Islamabad, Dealing Officer.

FACTS AND FINDINGS

DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---Messrs TF Pipes Ltd., Islamabad, a subsidiary of Telecom Foundation, filed Complaint No.16 of 2009 dated 5-1-2009 against Islamabad Customs for arbitrary enhancement of assessable value of their imports of Suspension grade PVC Resin imported in the year, 1994 without supplying evidence of higher assessable value.

2. Brief facts of the case are that the complainant Company Imported 165 M. ton of suspension grade PVC Resin under heading 3904.1000 of Pakistan Customs Tariff (PCT) in 1994 and filed into bond bill of Entry No.271 dated 25-9-1994 for temporary warehousing of the same in their Bonded Warehouse in Islamabad duly licensed by the Customs Department. They subsequently cleared the raw material under reference on the basis of declared value for assessment of customs duties and taxes as indicated against each ex-bond bill of entry as follows:--

3. During post clearance audit in 1995, the Directorate of Revenue Receipt Audit (DRRA) pointed out that the customs authorities had wrongly assessed the goods at the declared values of US$ 825 PMT and US$ 910 PMT because the Import Trade Price (i.e. assessable value) of the goods under reference had been revised by the Competent Authorities in Customs House Karachi during the relevant periods as US$ 920 PMT vide C.No.Si/Miscellaneous./636/94-IV dated 4-10-1994 and US$ 980 PMT vide C.No. Si/Miscellaneous./636/94-III dated 22-10-1994 which were applicable to the whole of Pakistan. Thus DRRA pointed out a short levy of customs duties and taxes to the tune of Rs.316,549. The demand of short levied amount was accordingly raised against the importing Company, and the recovery was made good by Islamabad Customs by threatening closure of operations of their Bonded Warehouse. The Audit Para-on the subject was accordingly settled on the basis of recovery of the short levied amount.

4. The importing Company kept on demanding copies of the evidence of the revised assessable values in terms of the Import Trade Price (ITP) fixed as per the aforesaid documents of Custom House, Karachi. The customs authorities in Islamabad however, could not obtain this evidence either from the DRRA who had pointed out the short levy, or from Custom House, Karachi to prove the fact of revision of assessable values for suspension grade PVC Resin under reference. On continued failure of Islamabad Customs to produce proper proof of higher value, Messrs TF Pipes Ltd., filed a refund claim of the amount of customs duties and taxes which had been, forcibly recovered from them. Settlement of this refund claim was also excessively delayed by the customs authorities. The importing company there-fore, filed the Complaint under reference in the FTO Secretariat, Islamabad.

5. The parties were heard in the FTO Secretariat on 25-8-2009 and 14-9-2009. During hearing, the Departmental Representative (DR) informed that Islamabad Customs tried to obtain the relevant evidence of higher ITP value from Custom House, Karachi. Despite reminders, Karachi Customs did not supply the requisite evidence. He showed a couple of letters written by Islamabad Customs to Custom House, Karachi which were statedly not responded to. The DR however, admitted that it was not clear whether copies of evidence were demanded from DRRA as the relevant file on the subject was missing from customs record due to shifting of offices from one hired building to another during the intervening period. Therefore, .it was not possible at this belated stage to supply the requisite evidences of higher assessable values. That is also why it was not known whether the revised values which were meant for implementation on all Pakistan basis and which were regularly circulated by Custom House, Karachi to all customs stations of the country, reached Islamabad Customs and if these reached why these were not applied in the first instance. Under the circumstances, the DR was advised to make another attempt to procure evidence of assessment of suspension grade PVC Resin from Custom House, Karachi in the relevant period of 1994 from the computerized database managed by Pakistan Revenue Automation Ltd. (PRAL).

6. The DR made a renewed and earnest effort and obtained computer printout from Custom House, Karachi showing values on which these goods were being assessed during the relevant periods in 1994. This data clearly showed that suspension grade PVC Resin had been- assessed on revised ITP of US$ 920 PMT in the earlier part of October and at US$ 980 PMT during the later part of October and early November, 1994 as already pointed out by DRRA. This evidence was presented to the Authorised Representatives (ARs). They accepted this evidence and agreed to treat the valuation issue as settled. They, however, felt extremely bitter about 15 long years since, 1994 during which period they had been made to suffer extreme hassle, anguish and difficulties involved in dealing with customs authorities to get the matter settled on the basis of revised Import Trade Price (ITP). They stated that had Islamabad Customs taken the same course which they have now taken on the direction of FTO Secretariat, they would have obtained the same information far more easily in 1995 when the short recovery was pointed out by DRRA and thus the 15 years of hassle to the complainant and sheer wastage of management time by Islamabad Customs in handling this case would have been spared both to the complainant company and the customs department.

7. It is regretfully observed from the facts of the case, that this matter has been unnecessarily mishandled both by DRRA and Islamabad Customs for the last 15 years when the goods were cleared from the Customs Licensed Bonded Warehouse. As a matter of fact, the DRRA should have attached with their audit observation the relevant evidence of higher ITP on the basis of which they had pointed out the short recovery. Had DRRA backed up their audit observation with appropriate documentary evidences, the maladministration involved in this case and sheer wastage of time and energy by the customs department as well as the complainant Company could have been avoided. Secondly, Islamabad Customs failed to obtain the requisite evidence of higher assessable values either from DRRA or from Custom House Karachi for want of effective correspondence and efficient follow up. Their major mistakes were firstly to issue demand on the basis of DRRA objection without obtaining. the evidence of higher value on the basis of which audit objection had been made. Secondly, they addressed the letter asking for the requisite evidence to Assistant Collector Customs in Karachi rather than Collector Customs Incharge of the Appraisement Collectorate in Custom House, Karachi. The established norm of correspondence between Customs Collectorates is at the level of Collectors and not subordinate officers. In any case, the letter should have been effectively followed up by written reminders as well as telephonic reminders, which was not done in this case. Thirdly, instead of obtaining the requisite evidence either from DRRA or from Custom House, Karachi, Islamabad Customs forced the demand of short levied amount of customs duties and taxes on the complainant Company by threatening closure of their bonded warehouse operation and thus forcibly recovered the additional amount of Rs.316,549. Besides, Islamabad Customs failed to protect their live files containing the documents of this case from loss and misplacement. As protection of live files against loss or misplacement is a top responsibility of every Government Department let alone the Customs Department whose operations are better structured and highly documented, therefore, its loss or misplacement aggravates the extent and seriousness of maladministration involved in this case.

8. It is also regrettable to note that after settlement of the Audit Para, the customs authorities took a u-turn and sanctioned refund of Rs.117,497 and indicated adjustment of an amount of Rs.66,159 from the Company's future Income Tax and sales tax liabilities but an amount of Rs.132,893 was again decided to be non-refundable. However, the customs officers dealing with pre-audit of refund claims objected to refunding this amount on the basis of which the Audit Para had been settled and thus the decision to grant unlawful and unjustified refund was timely aborted.

Recommendations:

9. In view of the above findings, the following recommendations are made:

(i) Disciplinary action be taken under the Removal from Service (Special Powers) Ordinance, 2000 against:

(a) the customs officers/officials who initially assessed the goods on lower values without obtaining the relevant valuation advice in terms of relevant Import Trade Price of PVT from Custom House, Karachi.

(b) the customs officers/officials who failed to obtain the requisite evidence from DRRA of higher ITP after detection of short levy by them; and

(c) the customs officers/officials who sanctioned the refund claim after the Audit Para was settled.

(ii) This complaint may be included as a case study in the training module for Customs Officers, in order to forestall chances of recurrence of such practices;

(iii) FBR to identify all excessively delayed funding cases for deciding them in the next three months.

(iv) Compliance be reported within 100 days.

H.B.T./138/F.T.OOrder accordingly.