MAJEED & SONS STEELS (PVT.) LTD., KARACHI VS SECRETARY, REVENUE DIVISION, GOVERNMENT OF PAKISTAN, ISLAMABAD, 2010 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 783 (2009)

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

----S.25-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.22--Action where declared value is less than the value determined---Delay in determination of value---Release of goods was not allowed on the ground that the goods were of secondary quality---Department made reference to the Pakistan Steel Mills for verification and consignment was held up till the receipt of report---Complainant approached the Department with the request that verification from Pakistan Steel Mills was not required under the law as the parameters of prime and secondary quality were given in Public Notice, wherein it was laid down that if the goods were in mill packing and were accompanied by a mill test certificate the goods would be treated as prime quality---Goods were incurred huge demurrage and container rent---Complainant claimed compensation against demurrage and container rent---Validity---Principal Appraiser proposed a contravention report directly without affording the complainant an opportunity to explain and without referring the case for second opinion, which was done later after seven days---Assessment of goods on higher value than declared one, despite the fact that the goods were held to be of prime quality and value indicated that the same were of prime quality, consumed three days that could have been saved had the contravention report contrary to established practice not been made and spoke of neglect add inattention on the part of senior hierarchy, as also inaptitude on the part of the person calling for documents---Delay of at least 10 days occurred due to available maladministration---Farther, complainant also did not clearly mention in the Goods Declaration that the goods were of prime quality---All the delay could not be attributed to the Customs Authorities---Delay of 10 days was clearly attributable to maladministration---Demurrage, container storage and yard payment were already paid to the respective authorities and Customs Authorities will not be able to get the same refunded neither there was any provision in the Customs Act, 1969 under which the customs may be made to pay the same to the importer---Case was fit for grant of compensation to the complainant under S.22 of the Establishment of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommenced that Federal Board of Revenue to ask Collector of Customs, MCC PACCS, to show cause within 30 days as to why compensation equal to 50% of the demurrage, container rent and container yard payment and additional compensation equal to 5% of the declared value of goods for loss caused to the importer/complainant may not be awarded under S.22 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 on account of undue delay/ maladministration; Collector of Customs may also be asked to state whether he would like to be heard in person; that Federal Board of Revenue to direct the Collector of Customs, MCC, PACCs, to put in place a system to alert the senior Customs Officers if a Goods Declaration was not cleared within a week, as also to solve the problem at Assistant/Deputy Collector/Additional Collector level before proposing of Contravention Report; that Federal Board of Revenue to move a Summary to Economic Coordination of Committee of the Cabinet suggesting inclusion of a provision in the relevant Rules/ procedures of KPT and Terminal Authorities to waive off the demurrage, container rent and container yard payments in case where the delay occurs due to Customs procedure and a Delay and Detention Certificate is duly issued by the Customs Authorities.

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1996 SCMR 727; Complainant No. 1350-K/2002 and M. Yousaf v. The Collector of Customs Kar. PLD 1969 SC 153 ref.

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

----S. 217---Protection of action taken under the Customs Act, 1969---No suit, prosecution or other proceedings could lie against the Customs Officers dealing with cases---In order to avail such exception the presence of good faith was a necessary condition.?

Syed Barkat Ali Bukhari, Consultant, FTO Secretariat, Karachi (Dealing Officer).

Afzal Awan, Imran Iqbal and Akhtar Saeed (Complainant) for the Complainant.

Daud Prizada, Deputy Collector (Customs), Departmental Representative.

FACTS AND FINDINGS

DR. MUHAMMAD SHOAIB SUDDLE, (FEDERAL TAX OMBUDSMAN).---This complaint has been filed by Messrs Majeed Sons (Pvt.) Ltd. against the misadministration of Collector of Customs, MCC. PaCCS, custom House, Karachi on account of non-acceptance of claim of Rs.5,558,216 as detail reproduced below:

2. The first four heads of claim of the complainant are based on the accrual payments made to various relevant companies/departments/ agencies, while the fifth one is based on difference between market price of the goods on the day of import and the day of delivery of the same from the port.

3. Brief facts of the case are that the complaints imported a consignment of 479.360 metric tons of prime hot rolled wire rods from U.S.A and filed Goods Declaration vide CRN No.HC-999180 dated 9-5-2009. The release of goods was not allowed by Customs on the purported ground that the goods were of secondary quality. The respondents also made a reference to the Pakistan Steel Mills for verification and the consignment was held up till the receipt of report thereof. The complainant approached the respondents on 3-6-2009 with the request that verification from Pakistan Steel was not required under the law as the parameters of prime and secondary quality were given in Public Notice No.2 dated 9-1-2002, wherein it was laid down A that if the goods were in mill packing and were accompanied by a mill test certificate the goods would be treated as prime quality. It was further claimed by, the complainant that the goods were incurring huge demurrage and until then an amount of Rs.12,75,000 of demurrage and Rs.7,60,000 of container rent had accumulated (demurrage and container rent being approximately Rs.55,000 and Rs.61,000 per day respectively). The Collector was requested to intervene and rescue the importers from further loss, financial cost, and mental agony with a further prayer to compensate the demurrage and container rent of Rs.20,35,000 incurred until then.

4. The report from Messes Pakistan Steel was issued vide QCD/ Customs/2009 dated 4-6-2009 wherein was confirmed that the imported goods were found to be of prime quality. The importer/ complainant again approached the Department vide their letter dated 5-6-2009, written to Collector of Customs that the verification from Pakistan Steel was not legally required and was unprecedented and that the reference had cost them about five million rupees as losses on account of container rent, port demurrage and financial loss. The Collector was requested to intervene and allow release of goods on that day, issue Delay and Detention certificate and compensate for the container rent. The goods were finally released by Customs on 10-6-2009 after lapse of 31 days from the date of filing of Goods Declaration. Delay and Detention Certificate was also issued but the Assistant Collector of Customs confirming the delay caused in the customs process. Consequent upon the delayed release, the complainant wrote letters dated 15-6-2009, 22-6-2009 and 29-6-2009 for acceptance of their claim as in para. 1 above but no response was given form the respondents. Notice dated 2-7-2009 served upon the respondents to file a complaint before the F'TO also went unheeded, hence this complaint.

5. Reliance by the complainant is made on 1996 SCMR 727 and findings/recommendations in Complaint No.1350-K/2002.

6. In reply, the Department has maintained that:-

(i) The checking of Goods Declaration (G.D) is duty of an officer in terms of Section 80 read with Section 16 of the Customs Act 1969, which cannot be termed as maladministration;

(ii) The contents of complaint tantamount to a "damages suit" and in the absence of Shy mala fides, the same should be dismissed in limine in terms of section 217 of the Customs Act, 1969;

(iii) The subject complaint pertain to refund of port/demurrage charges, which under section 200 of the Customs Act, 1969 are the responsibility of the importer complainant. As held by the Hon'ble Supreme Court of Pakistan in the case of M. Yousuf v. Collector of Customs Karachi PLD 1969 Supreme Court 153, The High Court in writ jurisdiction under Article 98 of the Constitution of Pakistan (1962) could give only those directions for which provision existed in law;

(iv) The applications dated 15-6-2009, 22-6-2009, 29-6-2009 and notice dated 2-7-2009 were not communicated to the PaCCS in terms of section 155F and 155Q of the Customs Act, 1969, nor was the subject refund application covered under any provision of the customs Act, 1969; therefore, the same were not entertained;

(v) The complainant's declaration was neither showing any specification, i.e. prime or secondary, nor the standard AISI number was declared in the relevant column of `specification/ grade' of the Goods Declaration filed terms of section 79(1) of the Customs Act, 1969.

(vi) The goods imported by the complainant were checked/examined in terms of section 80 of the Act and during examination it was found that the wire rods were rusty, in un-even packing, which due to their appearance were considered not in line with the acceptable standard of prime;

(vii) The sub-standard/stock lot quality being "not importable" under Sr. No.10 of Appendix-C of the Import Police Order, 2008-9, and as per practice in vogue, the matter was referred for examination of goods by the Pakistan Steel Mills, prior to taking decision about contravention case for confiscation of goods or release of the same. As the complainant's consignment was a big one consisting of 19 containers (479.360 Kgs), the experts took some time for examination and submission of their report;

(viii) The Public Notice of 2002 referred by the complainant is for "sheets" and not for "rods"; that is why it cannot be applied, mutatis mutandis on the complainant's consignment; secondly, as per the electronically recorded assessment notes in terms of sections 155E and 155Q of the Customs Act 1969, the said Public Notice was nerve provided to the Assessing Officer and. thirdly, even the Public Notice confirms the actions of he department;

(ix) According to electronically recorded assessment history, the GD was completed on 6-6-2009, immediately after receipt of Steel Mills report, however, instead of clearing the goods the complainant availed review and then 2nd review options in terms of Customs Rules 2001. The 2nd review request was decided, after giving opportunity of hearing, on 9-6-2009 and thereafter the complainant accepted the assessment and cleared their consignment on 10-6-2009;

(x) Considering the normal procedure of processing of G.D in such type of disputed cases and also taking into account the Public Notice 16/89 dated 2-7-89, there is no question of any mala fides on the part of the Collectorate;

(xi) Considering the provisions of sections 217 and 33 of Customs Act, 1969, and Hon'ble Supreme Court's judgment PLD 1969 SC 153, there is no question to entertain the claim of the complainant;

(xii) The facts of the reported case-law 1996 SCMR 727 are not identical to the circumstances of the case;

(xiii) The allegations of maladministrations are not well-founded and hot provable in terms of section 2(2) of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000, therefore, no compensation is admissible to the petitioner under section 22 ibid. The complaint is even not maintainable in the light of preliminary objections; hence it may kindly be rejected.

7. Hearing in the case was fixed on 7-9-2009-when the Departmental Representative was present but the complainant or his counsel did not appear. Next date was fixed on 29-9-2009 when the case was heard in detail as discussed in the ensuing paragraphs. The Departmental Representative sought one day's time to bring day to day history of the case. The information was brought on 3-10-2009 when the complainant sought time to bring satisfactory proof that the documents were duly scanned in the system. The final hearing was conducted on 6-10-2009.

8. During the hearing it was contended by the learned counsel for the complainant that the Goods Declaration in this case was filed on 9-5-2009 and the goods were released on 10-6-2009. The delay was due to negligence, inattention and mala fides which tantamount to misadministration. Damages of Rs.5558216 occurred to the importer due to this delay. It was further contended that reference was made to Pakistan Steel on 27-5-2009. The complainant came to know of the objection on 6-5-2009 whereupon a letter dated 28-5-2009 was written to Collector of Customs, MCC, PaCCS which was marked by the Collector to Addl. Collector MCC III. It was told by the complainant that a similar consignment KAPR-HC-69433 dated 14-4-2009 was cleared from Collectorate of Customs Appraisement wherein also reference was made to Pakistan Steel but the opinion was obtained promptly. He further stated that the Collector MCC, PaCCS firstly refused to see but agreed to see the complainant on intervention from the Association. According to complainant, he also apprised the Chief Collector, after clearance of the situation, on whose intervention the delay and detention certificate was issued.

9. The Departmental Representative frankly admitted that delay occurred but according to him it was not due to any mala fide. It was averred that on examination goods were found rusty with uneven packing. Under the Import Policy, substandard goods are not importable; therefore care was required to be taken. He further submitted that documents were called twice on 15-5-2009 and 18-9-2009 but the complainant did not respond. He reiterated the arguments gives in the written reply. Regarding letter dated 28-5-2009, the DR submitted that he could not comment except that by that time samples had been drawn and sent to Pakistan Steel and no action could be taken without receipt of report from that company.

10. In rebuttal, the learned counsel for the complainant argued that the department had admitted the delay which was also clear from the computer print out supplied by the Department. According to him, the delay occurred in there segments: first segment 9-5-2009 to 15-5-2009; second segment 15-5-2009 to 27-5-2009 and third segment 4-6-2009 to 10-6-2009. In reply to Department's argument that there was no provision in the Customs Act 1969 regarding payment of losses/damage, it was argued that the complaint was of maladiministration under the Establishment of FTO Ordinance. The loss occurred due to negligence and maladministration and it is settled law that nobody should suffer loss due to negligence of public functionaries. It was stated by the complainant that the documents were provided twice. First time the same were handed over to the clearing agent and 2nd time to the Additional Collector concerned on 26-5-09. He further argued that goods were referred to Pakistan Steel despite the declared value being that of prime quality. (According to him the value of prime quality ranged from $450 PMT upwards and that of secondary quality from $280 to $300.) He also argued that the coils bore tags affixed by the Mills and that the rust appearing on the same was due to atmospheric effect. The learned counsel for the complainant argued that the judgment referred to by the Department in the case of M. Yousuf vs. The Collector of Customs Karachi PLD 1969 SC 153 was not relevant.

11. During the hearing on 1-10-2009 the Department Representative brought the computer printouts which showed that the examination was first time held on 29-5-2009 and there appeared no action to have been taken prior to that. When the learned counsel for the complainant pointed it out, Departmental Representative sought time to re-verify. Time was granted till 2-10-2009 when he Departmental Representative telephonically sought extension for one more day. Hearing was accordingly fixed on 3-10-2009 when the DR brought 4 pages of computer printout showing that the GD was filed on 9-5-2009 and was selected by the system for examination. First examination was conducted on 10-5-2009; second on 13-5-2009 and the third on 26-5-2009 in collaboration with Pakistan Steel. The complainant expressed reservation saying that the communications did not appear in the inbox of the. importer upon which the Department Representative clarified that the examination orders/reports were not communicated to the imports. The Departmental Representative further clarified that in the present case a contravention report was proposed because the goods were held to be of secondary quality. The complainant while agreeing to the proposition that the system could not be manipulated averred that in the presence of the Public Notice 2/2002, the reference to Pakistan Steel was not necessary. He sought time to confirm in writing that the documents were duly scanned by the importer/clearing agent. Next hearing was fixed on 6-10-2009 when both the Complainant as well as the Departmental Representative confirmed that the documents were scanned into the system by the importer on 17-5-2009 and 20-5-2009 in reply to requests dated 15-5-2009 and 18-5-2009 respectively.

12. After going through various printouts filed by the Departmental Representative, the picture of activities on the Goods Declaration emerges as follows:

13. From the above table it is clear that the Principal Appraiser in this case proposed a contravention report, which was deleted on the order of the Additional Collector Law, on the basis of report from Pakistan Steel to the effect that the goods were of prime quality. After that the Customs officer making the assessment, did not accept the declared value as transaction value due to which the importer had to go through the process of review and second review, delaying the release of goods for further three four days.

14. It is significant to note that the reference to Pakistan Steel was made after the importer personally met the Additional Collector and handed over to him a set of documents already scanned in the system. No use of the documents appears to have been made by the Principal Appraiser who initially created the messages for calling the same. No evidence has been produced before this office to show on what basis the contravention report was proposed by the Principal Appraiser. It was argued by the DR that the checking of correctness of import, including declaration was duty of Customs Officer under section 80 of the Customs Act, 1969, but that does not mean holding of Goods Declaration for two weeks without any action on it. Had the importer/complainant not raised hue and cry, further delay in clearance of goods could no be ruled out.

15. The Departmental Representative relied on section 217 of the Customs Act, 1969under which no suit, prosecution or other proceedings could lie against the Customs Officer dealing with cases, but he was reminded that in order to avail that exception the presence of good faith was a necessary condition.

16. The learned counsel for the Complainant rebutted DR's contention by saying that his claim was under section 22 of the Establishment of Officers of Federal Tax Ombudsman Ordinance and not under any provision of Customs Act 1969.

17. The DR also referred to Hon'ble President of Pakistan decision dated 20-5-2009 in Complaint No.534-K/08 (FBR v. Messrs Umm-e-Kulsoom Trading Company) in which case the Hon'ble President had held that Custom could not implement the recommendations of the FTO 'to release the goods after settling the storage, container and other charges with the KICT and the Shipping Agency???'. However, he was confronted with the fact that the Customs Authorities in the present case had issued Delay and Detention Certificate for KPT as well as for Pakistan International Container Terminal.

18. The learned counsel for the Complainant also referred to FTO Recommendation in Compliant No.1350-K/02 wherein reference to Ministry of Food and Agriculture after clear report from HEJ Laboratory was held to be unwarranted and argued that the referral by Customs Authorities to Pakistan Steel was not required in view of the provisions of the Public Notice 02/2002 and other documents. However, there is no denying the fact that a dispute had arisen between Customs official and the importer regarding quality of goods, which, according to Para 2 of the same Public Notice, could be referred to independent source for verification/confirmation of documents. Therefore while reference to Pakistan Steel cannot be held to be without jurisdiction, the timing of referral was of crucial importance in this case. The appropriate time to send the reference to Pakistan Steel was immediately after the Principal Appraiser called the document and concluded that somehow he was not able to release the goods as prime. Before that the calling of documents to ascertain the quality was well within the scope of section 80 of the Customs Act, 1969, as the importer had not clearly mentioned in the Goods Declaration whether the goods were of prime quality or otherwise. Once the documents had been called to confirm the quality, especially the mill test certificate, and the importer had scanned them in the system, the burden of proof shifted to customs to prove that the goods were not of prime quality. There should have been a system in place to have a second opinion in case the Customs Officer checking the documents did not agree with the veracity of the same. In this case, and similar other cases, there does not appear to be a system in place to provide for that second check it the matter before making out a contravention case. The Principal Appraiser in this case proposed a contravention report directly without affording the importer an opportunity to explain and without referring the case for second opinion, which was done later in the case after seven days. Then, again, the assessment of goods on higher value than declared one, despite the fact that the goods were held to be of prime quality and the value indicated that the same were of prime quality, consumed three days that could have been saved had the contravention report contrary to established practice not been made and speaks of neglect and inattention on the part of senior hierarchy, as also ineptitude on the part of the person calling for documents. Thus, it is obvious that delay of at least 10 days occurred due to avoidable maladministration in this case.

19. Coming to the claim of the complainant, it is worth noting that initially the importer did not clearly mention in the Goods Declaration that the goods were of prime quality; therefore all the delay cannot be attributed to the Customs Authorities. However, as held in para.18 above, a delay of 10 days is clearly attributable to maladiministration. The demurrage, container storage and yard payment is already paid to the respective authorities and Customs Authorities will not be able to get the same refunded neither there is any provision in the Customs Act 1969 under which the Customs may be made to pay the same to the importer. However, this seems to be a fit case for grant of compensation to the complainant under section 22 of the FTO Ordinance.

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20. On the basis of above findings it is recommended that:-

(i) FBR to ask Collector of Customs, MCC, PaCCS, to show cause within 30 days as to why compensation equal to 50% of the demurrage, container rent and container yard payment and additional compensation equal to 05% of the declared value of goods of loss caused to the Importer/complainant may not be awarded under section 22 of FTO Ordinance, 2000 on account of undue delay/maladministration. The Collector Customs may also be asked to state whether he should like to be heard in person.

(ii) FBR to direct the Collector of Customs, MCC, PaCCS, to put in place a system to alert the senior Customs Officers if a Goods Declaration is not cleared within a week, as also to solve the problem at Assistant/Deputy Collector/Additional Collector level before proposing of a Contravention Report.

(iii) FBR to move a Summary to Economic Coordination Committee of the Cabinet suggesting inclusion of a provision in the relevant Rules/Procedures of KPT and Terminal Authorities to waive off the demurrage, container and container yard payment in cases where the delay occurs due to Customs procedure and a Delay and Detention Certificate is duly issued by the Customs Authorities.

(iv) Compliance Report regarding (i), (ii) and (iii) above be submitted within 60 days of the communication of the recommendations

C.M.A./185/FTO???????????????????????????????????????????????????????????????????????????????? Order accordingl