VS, 2010 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1787 (2009)

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

----Ss.25(15), 32, 223---S.R.O. 412(I)/2001 dated 18-6-2001---S.R.O. 823(I)/2001 dated 1-12-2001---S.R.O. 377(I)/2002 dated 15-6-2002---Standing Order No.17/91---Customs General Order 2 of 1994---Customs General Order No.5/94 dated 8-2-1994---Customs General Order No.12/2002 dated 15-6-2002, Para-78---Value of imported and exported goods---Determination of--- Price-check Committee---Executive Collectorate--- Jurisdiction--- Appellant contended that S. R. O.377(1)/2002 dated 15-6-2002 empowered the adjudicating authorities of Collectorate of Customs, Sales Tax and Central Excise (Adjudication) to adjudicate the cases relating to contravention of the provisions of Customs Act, 1969 and rules and regulation framed there-under which inter alia included the issue of value; that on the contrary officers of Executive Collectorate were entrusted with the job of adjudication given in sub-paras (a) to (h) of Para 2 of the S.R.O.377(I)/2002 dated 15-6-2002, since case of the appellant related to the issue of value the Collector adjudication was the prescribed and competent forum of jurisdiction as against the Executive Collectorate and that department despite being an officerof Executive Collectorate assumed the power of Adjudication Collectorate rendering the order in original and show-cause notice null and void ab initio and suffering from lack of jurisdiction---Validity---Contention that order suffered from lack of jurisdiction carried weight in terms of sub-para. (a) relating to the rejection of refund application (b) relating to Technical violation of manifest clearance and (f) relating to condonation of time or procedural omission of Para 2 of the S.R.O. 377(I)/2002, dated 15-6-2002 whereby Executive Collectorate had been empowered to perform these functions---Subject case pertained to determination of value of goods in terms of S.25 read with S.32 of the Customs Act, 1969 which was outside the purview of the Executive Collectorate---Order was unlawful, illegal, coram non judice and being issued without jurisdiction and based on a deficient and defective show-cause notice in contravention of settled law which explicitly deprecate the determination of valuation of the goods for export through a Valuation Committee---Order was set aside and appeal was allowed by the Appellate Tribunal.

Major Syed Walayat Shah v. Muzaffar Khan and 2 others PLD 1971 SC 184; Omer and Company v. Controller of Customs, (Valuation) (1992 ALD 449(1); Karachi AAA Steel Mills Ltd v. Collector of Sales Tax and Central Excise Collectorate of Sales Tax (2004 PTD 624); Ali Muhammad v. Hussain Bukhsh and others PLD 1976 SC 514 and Land Acquisition Collectorate, Noshehra and others v. Sarfraz Khan and others PLD 2001 SC 514 rel.

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

----S.25---Value of imported and exported goods---Show-cause notice without specific allegations---Validity---Show-cause notice was vague and defective for want of necessary particulars---Show-cause notice did not contain specific allegations and was silent in respect of contravention of relevant provisions of Customs Act, 1969 and penal clauses attracted thereto---Show-cause notice and all subsequent proceedings including the order-in-original based on such a defective and deficient show-cause notice were unlawful, illegal and coram non judice.

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

----S.25---Value of imported and exported goods---Valuation of exported goods through Valuation Committee---Validity---Provisions of S.25(15) of the Customs Act, 1969, clearly specify that the customs value of any exported goods shall be the value at the prescribed time on a sale in open market of the country of exportation for the country to which the goods were consigned---Provision of S.25 of the Customs Act, 1969 no where states valuation of exported goods through formulation of any Valuation Committee---Valuation of the goods through Valuation Committee constituted in the absence of legal sanction, amounted to transgression of authority and forced construction of law which was deprecated---Such isolated, unilateral and arbitrary determination of export value were rendered the valuation of subject goods determined as a nullity in the eyes of law.

Collector of Customs, (Exports), Custom House, Karachi v. Messrs Bilal International, Lahore Customs Appeal No. K-332/2003; M/s. Horizon Exports, Karachi v. The Additional Collector, Exports-II, Karachi, Customs Appeal No.K-454 of 2003; M/s. Glaxo Welcome. Pakistan Ltd. v. The Collector of Customs (Appeals), South Zone, Karachi and others, Appeal No. 131/99; M/s. Muhammad Farooq & Sons v. The Collector of Customs, Sales Tax & Central Excise (Appeals) Karachi Customs Appeal No. K-128 of 2005; The Collector of Customs and another v. Abdul Razzak PLD 1996 Kar. 451; Collector of Customs (Appraisement v. H.M. Abdullah and another Yousaf Enterprises v. The Collector 2004 PTD 2993 and Pakistan Dry Battery Manufacturers Association v. Federation of Pakistan 2006 PTD 674 rel.

(d) Customs Rules, 2001----

----R.107(a)---Customs General Order No.12/2002 dated 15-6-2002, para. 78-Definition-At or about the same time"---Limitation---Allegation of wrong declaration/misdeclaration could not be levelled in the absence of any evidence as directed by Federal Board of Revenue in Para 78 of Customs General Order No.12/2002 dated 15-6-2002 for the period contemporaneous as expressed in R.107(a) of the Customs Rule, 2001 and even in terms of principlesof natural justice and law.

M/s. National Radio Products, Karachi v. The Collector, Customs, Sales Tax & Central Excise, Karachi, Customs Appeals Nos. K-249/2000/13372; M/s. Iqbal Brothers, Lahore, Karachi v. The Additional Collector, Customs (Adjudication-1), Karachi, Customs Appeal No.K-35/2002; M/s. Tauheed Glass House, Lahore v. The Collector of Customs, (Appraisement), Karachi Customs Appeal No.K-1670/2001 2000 PTD (Trib) 617; M/s. Muhammad Farooq & Sons v. The Collector of Customs, Sales Tax & Central Excise (Appeals), Karachi, Customs Appeals Nos. 1668/LB and 1669/LB of 2002, Customs Appeal No.K-1281/05; M/s. Collector of Customs, MCC, Karachi v. M/s. FACO Trading, Karachi & The Collector, Customs, Sales tax & Central Excise, (Appeals) Karachi Customs Appeals No.K-576/2007; M/s. Punjab Baverages (Pvt.) Ltd. v. Appellate Tribunal (Customs Excise 7 Sales Tax) and 2 others 2002 PTD 2957; Collector of Customs, (Valuation) another v. Karachi Bulk Storage and Terminal Ltd. 2007 SCMR 1357=2007 PTD 1858 and Collector of Customs, Port Muhammad Bin Qasim v. M/s. Zymotic Diagnostics International, Faisalabad 2008 SCMR 438 rel.

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

----S.37---S.R.O. 412(I)/2001 dated 18-6-2001---S.R.O. 823(I)/2001 dated 1-12-2001---Drawback on goods used in the manufacture of goods which are exported---Duty drawback rates---Provisions of notifications S.R.O. 412(I)/2001 dated 18-6-2001 and S.R.O.823(I)/2001 dated 1-12-2001 envisaged the duty drawback rate @ 5.03% and 5.71% under Schedule III attached to said notifications which did not exceed the benchmark of 10% prescribed by the competent authority.

Nadeem Ahmed Mirza, Consultant/A.R. for Appellant.

Hyder Pirwani, Appraiser, D.R. for Respondent.

ORDER

MUHAMMAD ARIF MOTON, MEMBER (JUDICIAL-II).---This order will dispose of Customs Appeal No.K-353/2003 filed by the appellant against Order-in-Original No. 021/2003 Exports, dated 26-5-2003, passed by Additional Collector of Customs (Exports), Customs House, Karachi.

2. Brief facts of the case are that Bill of Export No.51446 dated 16-2-2002, for rebate @ 5.03% & 5.71% in terms of Schedule-III, S.R.O. 412(I)/2001, dated 18-6-2001 and S.R.O. 823(I)/2001, dated 1-12-2001 was presented for export to Saudi Arabia covering made up garments of different sizes and different values.

3. That during examination the declaration was found correct to the extent of description, quality, quantity and weight. Consequent to which the examiner endorsed the examination report and Appraiser who along with representative samples referred the matter to Price Check Committee for valuation check. The consultant of the appellant attended the meeting and challenged the authority of the committee for fixation/determination of value of the exported goods contrary to the provision of section 25(15) of the Customs Act, 1969, Customs General Order 2/94 and Standing Order No.17/91. The Members of the Committee refused to listen and proceeded with the determination of value of the exported goods of the appellant and slashed the declared values of the appellant.

4. The consultant of the appellant forwarded several letters to the respondent-Collectorate agitating the slashing of value through an illegal body formed outside the provisions of sections 25(15) of the Customs Act, 1969. The appellant also filed a complaint bearing No.C-14981K/2002 with the honourable Federal Tax Ombudsman, who after hearing both the parties recommended on 15-4-2003 as follows:

(i) examine the duty drawback claim, in the light of the value evidence available with the department and afford the complainant the opportunity to examine and rebut the evidence relied upon by the department, furnish the evidence in support of the declared value and represent their case;

(ii) decide the claim within thirty days and;

(iii) compliance be reported within forty five days.

5. In compliance to the directives of Federal Tax Ombudsman adjudication proceedings were undertaken by the respondent. The respondent passed Order-in-Original No. 021/2003/Export, dated 26-5-2003 on the grounds that he found no reason to overrule the finding of Price Check Committee, which is a legally formed under section 25(15) of the Customs Act, 1969, the respondent also did not bring evidence or record to support the values fixed by the Committee and ordered processing of claim of appellant on the values fixed by the Committee. The vires of the aforesaid order has been challenged by the appellant before this forum by way of this Appeal.

6. The following issues are involved:

1.Whether the Executive Collectorate was empowered under S.R.O. 377(I)/2002 dated 15-6-2002 to adjudicate cases relating to value disputes or misdeclaration?

2.Whether the show-cause notice has been issued in accordance with the relevant provisions of law supported by various judgments of superior judicial fora?

3.Whether valuation of the exported goods can be unilaterally made on the basis of arbitrary and baseless assumptions contrary to the provision of section 25(15) of the Customs Act, 1969 by Price Check Committee not notified under the Customs Act, 1969?

4.Whether allegation regarding misdeclaration of value can be levelled against the appellant in absence of any valid evidence of the identical/similar goods of the same period and country of export as envisaged in para 78 of Customs General Order No.12/2002?

5.Whether Federal Board of Revenue's directives issued vide Customs General Order No.5/94 dated 8-2-94 are to be complied by the Administrative Collectorate in terms of section 223 of the Customs Act, 1969?

7. The learned consultant for the appellant reiterated the arguments as incorporated his memo of appeal. He emphasized on the following points: -

(i) That the relevant Notification S.R.O. 377(I)/2002, dated 15-6-2002 empowers the adjudicating authorities of Collectorate of Customs, Sales Tax and Central Excise (Adjudication) to adjudicate the cases relating to contravention of the provisions of Customs Act, 1969 and rules and regulation framed there under which inter alia included the issue of value. On the contrary officers of the Executive Collectorate were entrusted with the job of adjudication given in sub-para (a) to (h) of para 2 of the said notification. Since the case of appellant relates to the issue of value the Collector adjudication was the prescribed and competent forum of jurisdiction as against the Executive Collectorate. The respondent despite being an officer of Executive Collectorate assumed the power of the Adjudication Collectorate rendering the impugned order-in-original and show-cause notice null and void ab initio suffering from lack of jurisdiction as held by High Court/Supreme Court of Pakistan in their reported judgments of Major Syed Walayat Shah v. Muzaffar Khan and 2 others PLD 1971 SC 184), Omer and Company v. Controller of Customs, (Valuation): (1992 ALD 449(1) Karachi AAA Steel Mills Ltd v. Collector of Sales Tax and Central Excise Collectorate of Sales Tax (2004 PTD 624), PLD 1976 Supreme Court 514, Ali Muhammad v. Hussain Bukhsh and others and PLD 2001 Supreme Court 514 Land Acquisition Collectorate, Noshehra and others v, Sarfraz Khan and others.

(ii) That the show-cause notice itself is illegal and without jurisdiction since the same incorporates no specific allegations against the appellant. In addition it does not contain the contravening provisions of the Customs Act, 1969 and penal clauses that are attracted. It renders the subject show-cause notice as vague unspecific, deficient, unlawful and illegal as per reported judgments, namely Assistant Collector of Customs vs. Khyber Electric Lamp 2001 SCMR 838, D.G. Khan Cement Co. Ltd. v. Collector of Customs, Sales Tax and Central Excise 2000 PTD 1797, Atlas Tyers v. Adjudication 2003 PTD 1593 and Caltex Oil (Pvt.) Ltd v. Collector Central Excise 2005 PTD 480.

(iii) That the value of the exported goods has to be determined as per laid down mechanism in section 25(15) of the Customs Act, 1969, which emphasizes that the customs value of any exported goods shall be the value at the prescribed time on a sale in open market for exportation to the country to which the goods are consigned having regard to the provisions (a) (b) (c) & (d). Hence, internal prices in the country of exportation are not relevant. The expression of section 25(15) is without mention of determination of export value on the recommendation/advice of any committee/association. Determination of value of the exported goods through any committee including Price Check Committee is nullity in the eyes of law as per law laid down by the Appellate Tribunal and High Court in their judgments viz. Customs Appeal No.K-332/03 the Collector of Customs, (Exports), Custom House, Karachi v. M/s Bilal International, Lahore, Custom A. No. K-454 of 2003 M/s. Horizon Exports, Karachi v. The Additional Collector, Exports-II, Karachi, Appeal No. 131/99, M/s. Glaxo Welcome Pakistan ltd v. The Collector of Customs (Appeals), South Zone, Karachi and others Custom Appeal No.KT-128/05, M/s. Muhammad Farooq & Sons v. The Collector of Customs, Sales Tax & Central Excise (Appeals) Karachi H.M. Abdullah v. Collector of Customs (Appeals), PLD 1996 Karachi 451 The Collector of Customs and another v. Abdul Razzak, 2004 PTD 2993, Collector of Customs (Appraisement) v. H.M. Abdullah and another 2005 PTD 21, Yousaf Enterprises v. The Collector and 2006 PTD 674, Pakistan Dry Battery Manufacturers Association v. Federation of Pakistan.

(iv) That in cases where customs authorities cannot assess the value of the exported goods under section 25(15) of the Customs Act, 1969, onus to prove the claim to value stood shifted on the customs authorities. In such circumstances it is mandatory for the customs authorities to provide the evidential values of similar/identical goods of the contemporaneous exports relied upon as expressed in para 78 of the Customs General Order No.12/2002 dated 15-6-2002 read with rule 107(a) of the Customs Rules 2001. In the absence of evidential invoices declared value cannot be rejected as per dictum laid down by the Appellate Tribunal viz. Customs Appeal No.K-249/2000/13372 M/s. National Radio Products, Karachi v. The Collector, Customs, Sales-tax & Central Excise, Karachi, Customs Appeal No.K-35/2002. M/s Iqbal Brothers, Lahore, Karachi v. The Additional Collector, Customs (Adjudication-1), Karachi, Customs Appeal No.K-1670/2001 M/s. Tauheed Glass House, Lahore v. The Collector of Customs, (Appraisement), Karachi, 2000 PTD (Trib) 617 issued in Customs Appeals Nos. 1668/LB and 1669/LB of 2002, Customs Appeal No.K-1281/05, M/s. Muhammad Farooq & Sons v. The Collector of Customs, Sales Tax and Central Excise (Appeals), Karachi, Customs Appeals No.K-576/2007, M/s. Collector of Customs, MCC, Karachi v. M/s. FACO Trading, Karachi & The Collector, Customs, Sales Tax & Central Excise, (Appeals) Karachi 2002 PTD 2957, M/s. Punjab Baverages (Pvt.) Ltd. v. Appellate Tribunal (Customs Excise and Sales Tax) and 2 others 2007 SCMR 1357=2007 PTD 1858 Collector of Customs, (Valuation) another v. Karachi Bulk Storage and Terminal Ltd. and 2008 SCMR 438, Collector of Customs, Port Muhammad Bin Qasim v. M/s. Zymotic Diagnostics International, Faisalabad."

(v) That in terms of Standing Order No.17/91, the procedure for drawing of samples for export consignments has been outlined. Clause 4 reads that "sample will not be drawn from export goods regardless of destination on the pretext of value mis declaration where notified composite rate of duty drawback rate is 10% or less". As per Customs General Order No.5/94 dated 8-2-2004, the Federal Board of Revenue has issued direction to the filed formations for compliance under section 223 of the Customs Act, 1969 that "all such cases where total rebate rates on all items do not exceed 10% of the FOB value, shall not act ordinarily be subjected to valuation scrutiny/check. The value declared by the exporter may be accepted in such cases."

8. The Appraising Officer supported the impugned order and contended as follows:-

(a) That clauses (a), (b), (c) & (f) of para. 2 of S.R.O. 377(I)/2002 dated 15-6-2002 empower the Executive Collectorate to adjudicate the cases of duty drawback claims. The dispute in the instant case pertains to the settlement of original duty drawback claim. Para 2 of S.R.O. 377(I)/2002 empowers the Executive Collectorate and not the Adjudication Collectorate to adjudicate the cases of duty drawback claims involving the rejection of rebate and sales tax refund. The Additional Collector correctly adjudicated the case of duty drawback deriving authority from the notification S.R.O. No.377(I) 2002 dated 15-6-2002.

(b) That the Examining Officers forwarded the representative samples drawn in accordance with relevant rules with their observations to submit them before the Price Check Committee. However when Appraising Officer was confronted by this forum to this effect no evidence was produced by him to support this deposition.

(c) That since the value of the subject goods not be determined under section 25(15) of the Customs Act, 1969 nor any evidential invoice of the similar/identical goods was available on record, the case was referred to the Price Check Committee constituted for determination of fair value of exported goods by the Collector of Exports vide Public Notice No.18/93-(Exports) dated 9-8-1993 comprising of representatives from Valuation Department, Textile Manufacturers Association and headed by Additional Collector of Customs, Exports as Chairman.

(d) That the Price Check Committee in its meeting convened on 7-1-2003 vide Reference No.2435 dated 7-1-2003 determined the normal fair export unit prices of the each exported item on the basis of value prevailing in the local market.

(e) That the Standing Order No.17/91 give the bench mark of the composite rate of duty drawback of 10% or less. However composite rate of duty drawback at the time of issuance of Standing Order No.17/91 denotes the rate of duty drawback comprising of Customs duty, Sales Tax & Excise Duty whereas, the present rate of duty drawback only comprises of customs duty. Resultantly, reliance on the same is out of context. On the contrary, Customs General Order No.5/94 states that if the rate of duty drawback does not exceed 10% the items may not ordinarily be refereed to valuation scrutiny. The fact remains that it does not disallow the same in doubtful cases

9. Rival submissions heard and case record examined. The contention of the learned counsel for the appellant that the impugned order suffers from lack of jurisdiction carries weight in terms of clause (a) relating to the rejection of refund application (b) relating to technical violation of manifest clearance 7 (f) relating to condonation of time limit or procedural omission of para. 2 of the Notification No.377(I)/2002 dated 15-6-2002 whereby Executive Collectorate has been empowered to perform these functions. The implementation of the directives of the Hon'ble Federal Tax Ombudsman have been interpreted on a wrong premise since clause (f) of para. 2 of the aforesaid S.R.O. deals with cases assigned to the Executive Collectorate by a Court. The subject case pertains to the determination of value of the subject goods in terms of section 25 read with section 32 of the Customs Act, 1969 which is outside the purview of the Executive Collectorate. The orders/ judgments cited by the learned counsel appearing in para 7(i) above are relevant authorities on this point.

10. Apart from the jurisdiction issue the ,show-cause notice in question is not in keeping with the principles enunciated by the Hon'ble Supreme Court in the judgments reported as 2001 SCMR 238 & 2005 PTD 580. In the present case the show-cause notice is vague and defective for want of necessary particulars. The show-cause notice does not contain specific allegations and is silent in respect of contravention of relevant provisions of Customs Act, 1969 and penal clauses attracted thereto. Judgments of the superior Courts cited in para 7 (ii) ante are relevant to this point. As such the show-cause notice and all subsequent proceedings including the order-in-original based on such a defective and deficient show-cause notice are unlawful, illegal and coram non judice.

11. As regards the value expect the provisions of section 25(15) of the Customs Act 1969, clearly specify that the customs value of any exported goods shall be the value at the prescribed time on a sale in open market of the country of exportation for the country to which the goods are consigned. The said section nowhere states valuation of exported goods through formulation of any valuation Committee. Resultantly, valuation of the subject goods through Valuation Committee constituted in the absence of legal sanction, amounts to transgression of authority and forced construction of law. The judgments relied upon by the appellant in para 7(iii) ante are relevant and deprecate such isolated, unilateral and arbitrary determination of export value which renders the valuation of subject goods determined as a nullity in the eyes of law.

12. It is also pertinent to observe here that the allegation of wrong declaration misdeclaration cannot be levelled in the absence of any evidence as directed by Federal Board of Revenue in para 78 of Customs General Order No.12/2002 dated' 15-6-2002 for the period contemporaneous as expressed in Rule 107 (a) of Customs Rule, 2001 and even in terms of norms of natural justices and law laid down in reported judgments referred by the Consultant in para 7 (iv) above.

13. Apart from above infirmities patently reflecting in the impugned order the provisions of relevant notifications S.R.O. No.412(I)/2001 dated 18-6-2001 and S.R.O. 823(I)/2001 dated 1-12-2001 envisage the duty drawback rate @' 5.03% and 5.71% under Schedule II attached thereto which do not exceed the benchmark of 10% prescribed by the competent authority.

14. In the light of foregoing it is concluded that the impugned order is unlawful, illegal, coram non judice and being issued without jurisdiction and based on a deficient and defective show-cause notice in contravention of the judgments of superior judicial fora which explicitly deprecate the determination of valuation of the goods for export through a Valuation Committee. The impugned order is, therefore, set aside and the subject appeal is accordingly allowed.

C.M.A./100/Tax(Trib.)Appeal accepted.