COLLECTOR OF CUSTOMS VS PAK ARAB RAFINERY, KARACHI, 2010 PTD-KARACHI-HIGH-COURT-SINDH 900 (2009)

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

----Ss. 79 & 81(1)---Release of imported goods provisionally after obtaining postdated cheques from importer in respect of difference of duty and taxes between declared value and provisionally determined customs duty in absence of any cogent documentary evidence in support of enhancement of declared value---Validity---Power given to Customs Officer under S.81(1) of Customs Act, 1964 was not an arbitrary, whimsical or mechanical one, but same had to be exercised with due diligence and application of mind and his order of provisional assessment must be reasoned---Provisional assessment made in such manner for being beyond competence of authority was set aside in circumstances---Principles.

Messrs Dewan Farooque Motors Ltd., Karachi v. Customs, Excise and Sales Tax Appellate Tribunal, Karachi 2006 PTD 1276 and Collector of Customs (Appraisement), Karachi v. Messrs Auto Mobile Corporation of Pakistan, Karachi 2005 PTD 2116 rel.

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

----S.194-C, Second proviso---Appeal---Jurisdiction of Member (Technical) of Tribunal while sitting singly---Scope---Such Member could decide appeal only on basis of facts, but could not decide any question of law involved therein.

Collector of Customs, Model Collectorate of PACCS, Karachi v. Muzammil Ahmed 2009 PTD 266; Port Muhammad Bin Qasim, Karachi v. Messrs Mia Corporation (Pvt.) Ltd., Islamabad 2009 PTD 1127; Collector of Customs, Model Customs Collectorate of Appraisement, Karachi v. Messrs Superior Steel Karachi 2009 PTD 1239 and Collector of Customs v. Noman Chughtai 2007 PTD 153 rel.

Ghandara Nissan Diesel Limited v. Collector of Customs 2007PTD 117 and Collector of Customs v. Kaghan Ghee Mills (Pvt.) Ltd. 2006 PTD 541 ref.

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

----S.196---Reference application involving question of fact or question not arising from order of Tribunal---Validity---High Court in exercise of its advisory jurisdiction could not decide any of such questions.

Raja Muhammad Iqbal for Applicant

Zia-ul-Hasan for Respondent.

ORDER

IRFAN SAADAT KHAN, J:---These two Special Customs Reference Applications ("R.As.") have been filed by the Collector of Customs, Model Customs Collectorate of Appraisement, Karachi, against the consolidated Order dated 5-3-2008 passed by the Customs, Excise and Sales Tax Appellate Tribunal, Karachi ("the Tribunal"), in Appeals Nos. K-343 and 344 of 2007, by raising the following questions of law:---

1.Whether in terms of second proviso to subsection (3) of section 194-C of the Customs Act, 1969, a case, which involves an important question of law about correct application of the provisions of section 81 of the Customs Act, 1969, can be heard and decided by a single Member (Technical) of the Tribunal?

2.Whether the legality and propriety of the provisional assessment made in terms of subsection (1) of section 81 of the Customs Act, 1969, can be questioned after the execution of procedure in terms of subsection (4) of section 81 of the Customs Act, 1969?

3.Whether the Tribunal erred in law by not considering the proposition of law that apart from chemical or other test the provisional assessment in terms of subsection (1) of section 81 of the Customs Act, 1969, can be made in a case where the appropriate officer is not satisfied with the assessment/ declaration and required further inquiry?

4.Whether the Tribunal erred in law by not considering the proposition of law that w.e.f. 1-7-2007 under the newly promulgated provision of law i.e. section 25D of the Customs Act, 1969, the Tribunal have no jurisdiction to interfere or decide as issue relating to customs value of the imported goods? (For ease of reference the text of section 25D is reproduced below;

"25D. Review of the value determined:---Where the customs value has been determined by the Collector of Customs or Director of Valuation or any other authority competent to do so, review application shall lie before Director General of Valuation and any proceeding pending before any Court, authority or tribunal shall forthwith abate."

5.Whether the Tribunal erred in law by not considering the proposition of law that in terms of subsection (4) of section 81 and explanation thereof the provisional assessment, so made, at the time of clearance of the goods shall be deemed to be the final determination and the security amount would automatically liable to be encashed for tilt Government exchequer after the expiry of stipulated period as envisaged under subsection (2) of section 81 of the Customs Act, 1969?

6.Whether under the provisions of sections 25D and 25A(3) of the Customs Act, 1969, the Tribunal was not duty bound to refer the matter to the Director General of Valuation?

7.Whether the impugned orders of the Tribunal would not create a discrimination for the other similarly placed importers, who cleared their consignments in terms of subsection (1) of section 81 of the Customs Act, 1969, and paid the security deposits in terms of subsection (4) of section 81 of the Customs Act, 1969, after the expiry of period specified in subsection (2) of section 81 ibid?

8.Whether the findings of the Tribunal are not perverse for non-reading and/or misreading the record available before the Tribunal."

2. Mr. Raja Muhammad Iqbal, learned counsel appeared on behalf of the Collector of Customs and at the very outset submitted that he wished to press question No.1 only as in his opinion this question covers the entire controversy involved in above said two R.As.

3. The learned counsel submitted that the appeals were heard by the Single Bench comprising a Member Technical only who, in his opinion, was not empowered to decide the question of law involved in the appeals before him. He thereafter invited our attention to the decision in the cases of Collector of Customs, Model Collectorate of PACCS, Karachi v. Muzammil Ahmed, 2009 PTD 266, Port Muhammad Bin Qasim? Karachi v. Messrs Mia Corporation (Pvt.) Ltd., Islamabad, 2009 PTD 1127 and Collector of Customs, Model Customs Collectorate of Appraisement, Karachi v. Messrs Superior Steel Karachi 2009 PTD 1239.

4. Mr. Raja Muhammad Iqbal also invited .our attention to sections 25, 32 and 81 of the Act and submitted that the assessments made by the Custom officials on the enhanced value were in accordance with law hence the learned Member Technical was not justified in declaring the said action to be beyond their competence.

5. Mr. Zia-ul-Hassan, Advocate appeared on behalf of the respondent and submitted that no question of law arises out of the order passed by the Tribunal. He read out the impugned decision of the Tribunal and submitted that the decision given by the Tribunal is based upon pure and simple appreciation of facts only. He invited our attention to section 196 of the Act and submitted that as per provisions of this section only a question of law could be referred to this Court and the Tribunal is the final fact finding authority. To supplement his arguments the learned counsel relied upon Collectorate of Customs v. Noman Chughtai 2007 PTD 153 and submitted that under identical circumstances, this Court has dismissed the R.A. filed by the Collector.

6. Briefly stated the facts are that the respondent company imported a consignment of Lubricating Oil from Austria, as the value of the identical/similar goods of the same origin was not available with the department, the goods were provisionally released under section 81 of the Customs Act, 1969 ("Act") and a pay order amounting to Rs.332128 was taken as security deposit as the difference of the amount of duties and taxes between the provisionally determined custom duty and the declared invoice value of the imported goods. The case was thereafter referred to Directorate General Valuation and PCA Karachi for determination of fair value. The Directorate Valuation was not able to complete the investigation within a period of nine months. An extension in time limit was again accorded by the Collectorate Office to finalize the case. After the expiry of mandatory period, as prescribed under the provisions of section 81(2) of the Act, the Valuation Directorate issued a letter dated 3-10-2006, stating therein that they had already issued two valuation advices dated 9-5-2006 and 17-8-2006 for the above said goods and the above two advices were in respect of the consignments originating from UAE and Turkey, which were not akin in respect of the goods imported by the respondent.

7. The Assistant Collector of Customs, Appraisement Group-I, Karachi (A.C.) however, passed the assessment order on February, 2, 2007 thereby directing to encash the securities furnished by the respondent and holding the provisional assessment to be final. It was further held by the Assistant Collector that his this finding will also be applicable in respect of case No.V-288/2005-I pertaining to the same respondent company.

8. Being aggrieved with the said order, the respondent preferred appeals before the Collectorate of Customs, Sales Tax and Federal Excise (Appeals), who vide his order dated 11-6-2007 rejected the appeals.

9. Again being aggrieved with the order passed by the Collector of Customs (Appeals), the respondent filed appeals bearing K-343 of 2007 and K-344 of 2007, before the Tribunal, which were allowed by the impugned order.

10. We have heard both the learned counsel at length and have also perused the relevant sections and the decisions relied upon by both the counsel and would like to observe that the goods of the respondent company were released provisionally under section 81(1) of the Act and the department obtained postdated cheques from them in respect of difference of duty and taxes between the provisionally determined Custom duty and the declared invoice value of the imported goods without bringing on record any material evidence to substantiate their value of assessment, which in our view has rightly been held by the Member Technical to be beyond the competence of the custom officials.

11. The order passed by the Member Technical was premised on the fact that the departmental representative, who appeared before him did not provide any evidence showing the basis of the enhanced value of the goods at the initial stage and thus failed to substantiate the act of enhancement of the value. We have further noted that the Member Technical has categorically observed in his order that in absence of any cogent documentary evidence, which could lead to enhancement of the value declared by the importer, the action could not be sustained under the law and the provisional assessment thus made on the enhanced value by the Custom officials was therefore totally uncalled for.

12. We have further noted that it was only after finding a number of anomalies in the orders framed by the department that the learned Member Technical held the assessment to be suffering from procedural impropriety and set aside the same by allowing the appeals. Apropos, the various decisions referred to by Mr. Raja Iqbal is concerned we found that in those decisions this Court has observed that Member Technical sitting singly is not empowered to decide the matters involving a question of law. We fully endorse and adopt the view expressed in the above referred decisions and would like to state that in the said two R.As. under consideration the Member Technical sitting singly has not decided any point involving a question of law rather the Member Technical has decided the two appeals on the basis of facts only. Hence the decisions relied upon by Mr. Raja is of no help to him rather the same endorses the standpoint of the respondent.

13. We ourselves have been able to lay our hands on Ghandara Nissan Diesel Limited v. Collector of Custom 2007 PTD 117 and Collector of Customs v. Kaghan Ghee Mills Pvt. Ltd. 2006 PTD 541. In the first case this Court had observed that:---

"The scope of R.As. falling under advisory jurisdiction of High Court is limited to question of law arising out of Tribunal's order and no issue beyond the mandate of law can be considered".

In the second referred judgment as above, the Honourable Supreme Court of Pakistan was pleased to observe that:---

"The Tribunal in coming to the conclusion had taken all the aspects of case into consideration and had passed the order of setting aside confiscation of penalty and order for the process of manufacturing ghee from palm oil with full application of mind giving due importance to the test reports that the palm oil would become fit for human consumption if it is subject to processing. High Court was justified in not interfering with the order of the Tribunal. Therefore, leave to appeal refused."

14. We have noticed that Mr. Raja Muhammad Iqbal has failed to point out a single inadvertence, error, misreading of law or fact in the order passed by the learned Member Technical, rather his entire 'argument revolves round the fact that the learned Member Technical has passed the impugned order by dilating upon a question of law, which in our considered view has no force as discussed in detail as aforesaid.

15. Since in advisory jurisdiction we do not have the jurisdiction to decide any question of fact or the questions, which do not arise from the order of the Tribunal. We therefore, in the light of the above discussion do not find any merit in these two R.As. and dismiss the same in limine.

16. In our short order dated 15-10-2009, we have already announced dismissal of these two R.As. and the above are the detailed reasons for the same.

17. The upshot of the above discussion is:

(i) Q. No.1 is answered in negative.

(ii) Q.Nos.2 to 8 have been left unanswered as these were not

pressed by the learned counsel representing the department.

18. Let a copy of this judgment, under the seal of this Court, be sent to the Registrar Tribunal.

(Sd.)

Irfan Saadat Khan

Special Custom Reference Application No.89 of 2008.

GULZAR AHMED, J.---I have gone through the reasons, which my learned brother Irfan Saadat Khan, J. has written for our short order dated 15-10-2009, by which two Reference Applications were dismissed. I would like to add my own note of reasons.

It is not necessary for me to recapitulate the facts of the case and the arguments advanced by the learned counsel, which are amply covered in the reasons of my learned brother.

The question for determination in this case was whether the Member Technical of the Tribunal had the power to decide the question of law. As it appears from the impugned order that no point of law seems to have been considered by the Member Technical of the Tribunal rather the whole order seems to have been premised on the factual aspect of the matter and apparently, under the law the Member Technical was competent to decide such factual controversy.

The factual controversy in the case was whether on filing of goods declaration by the importer in terms of section 79 of the Customs Act (the Act) on what basis and justification power under section 81 of the said Act could justifiably be exercised by the Customs Officer. Subsection (1) of section 81 of the Act provides that where it is not possible for an officer of Custom during checking of goods declaration to satisfy himself of the correctness of the assessment of the goods made under section 79, for the reason that the goods require chemical or other test or a further enquiry, an officer not below the rank of Assistant Collector of Customs may order that the duty, taxes and other charges payable on the goods be determined provisionally. This provision requires an officer not below the rank of Assistant Collector of Customs to pass an order provisionally determining duty, taxes and other charges payable on the goods and in such order he has to give reasons that the goods require chemical or other test or further enquiry. It may be noted that the power given to Customs Officer in terms of section 81(1) is not an arbitrary, whimsical or mechanical one but the same is to be exercised with due. diligence and application of mind and that there has to be a proper reasoned order making the provisional determination of duty, taxes and other charges payable on the goods. No such exercise seems to have been conducted by the custom officer as the bill of entry for home consumption filed with the Reference Application does not at all contain any such order.

It may further be noted that Assistant Collector of Customs in his assessment order dated 2-2-2007 also could not find any material evidence or justification to support the provisional assessment in that he discarded the application of Valuation Ruling No.651/2006 dated 17-8-2006 for the reason that it pertained to the consignment originating from UAE and Turkey and not Austria and secondly the API grades of lubricating oil of UAE and Turkey mentioned in the valuation ruling do not correspond with the API grades of the consignments of Austrian origin. He also did not find any data of identical or similar consignment in the past transactions released through Customs Collectorate, which could be compared with the imported consignment of the respondent. He thereafter merely relied upon the provision of section 81(4) of the Act and came to the conclusion that the provisional assessment has become final and securities furnished by the respondent be enchased. The Collector in his order-in-appeal maintained the assessment order by noting that the provisional assessment stood finalized by operation of law and same could not be reopened. The learned Tribunal, however, gave the finding of fact that there was no occasion or reason for making of a provisional assessment and came to the conclusion that impugned orders suffer from procedural impropriety.

The record of the case do lead to believe that in the first place there is no legal compliance for the provisional determination of duty, taxes and other charges on the goods in terms of section 81(1) of the Act as there is no reasoned order of custom officer as required by the said provision. Secondly the custom officers have not been able to support the very provisional assessment by any cogent reason or evidence or material rather as noted above the Assessing Officer so also Collector in his order-in-original could not find any justification to support even the provisional assessment but sought refuge in the provision of section 81(4) of the Act. Whether such refuge in the facts and circumstances was available to the customs officers, in my view such cannot be the purpose and mandate of the law. If the very provisional assessment had no legs to stand on, the Assessing Officer so also the Collector ought to have admitted the defect of provisional assessment and proceeded to provide relief to the respondent, which in the facts and circumstances of the case would have been the judicious exercise of the powers by them and not to stifle the law and make it a mockery in the eyes of public.

In the case of Messrs Dewan Farooque Motors Ltd., Karachi v. Customs, Excise and Sales Tax Appellate Tribunal, Karachi 2006 PTD 1276 so also in the case of Collector of Customs (Appraisement), Karachi v. Messrs Auto Mobile Corporation of Pakistan, Karachi 2005 PTD 2116 two Division Benches of this Court have categorically held that where the customs authorities failed to finalize the assessment of goods within time stipulated as provided in section 81(2) of the Act, the provisional assessment will become final on declared value of the goods by the assessee and any loading amount by way of guarantee, post dated cheque/pay order or cash deposit are liable to be refunded to the assessee. Consequently, there is no defect in the impugned order, the same is therefore maintained and this Customs Reference Application is dismissed in terms of short order dated 15-10-2009.

S.A.K./C-35/KReference dismissed.