IMDAD HUSSAIN VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2011 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 2381 (2011)

Customs Act (IV of 1969)---

----S. 18---S. R. O. 506(1)/1988 dated 26-6-1988---S.R.O. 577(1)/2006 dated 5-6-2006---S. R. O. 576(1)/2006 dated 5-6-2006---Goods dutiable---Assessment of duty and taxes---Vehicle was initially imported free of duty and taxes---Sale of such vehicle-Customs authorities were approached for assessment of duty and taxes and issuance of NOC on the basis of sale permission issued by the Ministry of Foreign Affairs---Vehicle was assessed to duty and taxes on 5-9-2007---NOC was issued after payment of leviable duty and taxes---Sale permission was turned out to be fake---Vehicle was seized---Appellate Tribunal remitted the redemption fine and ordered its release on payment of leviable amount duty/taxes vide judgment dated 14-2-2010---While determining the short levied amount of duty and taxes, the customs calculated the value, duty/taxes on the basis of exchange rate prevailing on 21-12-2010 instead of assessment made previously as on 5-9-2007---Complainant contended that duty and taxes had already been assessed and paid on the basis of value determined by the Customs with reference to the sale in the local market i.e. 5-9-2007 and only question involved was a short-assessment of amount of duty and taxes on account of change of category and level of concession due to fake sale permission in the name of diplomat, there was no justification either of seizure of vehicle or for changing the date of assessment from 5-7-2009, when the vehicle was sold in the local market, on 21-12-2010 which had no relationship in the matter except for that the complainant had on that day made an application for release of the vehicle in pursuance of the Appellate Tribunal's judgment; and the application could not be construed to be the consent for changing the crucial date for assessment of value; and determination of short-levied amount of duty/taxes with reference to 21-12-2010 after over three years of the date of sale of the vehicle in the local market on 5-9-2007, was against the rules, arbitrary, oppressive, unreasonable and unlawful-Validity-Customs made error in re-determining the value and applying the rates of exchange, duty and other taxes with reference to 21-12-2010 after the Appellate Tribunal's judgment, rather than 05-09-2007 when the vehicle was sold in the local market and the leviable duties and taxes were originally assessed and paid due to fake sale permission---Present was not a case of smuggling or unlawful import of a vehicle but a fraudulent change of level of concession at the time of sale of the vehicle in the local market; it would have been fair to demand the amount of short-levy caused by manipulation of higher level of concession on the same basis of the date of sale of vehicle in the local market i.e. 5-9-2007 rather changing the date of re-assessment to 21-12-2010---Provisions of S.R.O. 576(1)/2006 dated 5-6-2006 did not warrant levy of exchange rate or duty and taxes other than those applicable on the date of sale of vehicle in the local market which was 5-9-2007---No progress had been made after 2008 as the real culprits and their accomplices in the Customs department had yet to be brought to book---Maladministration of the Customs authorities was established---FederalTax Ombudsman recommended the Federal Board of Revenue to direct the Customs to re-determine the short-levied amount, as per law, on the basis of the date of the vehicle's sale in the local market i.e. 5-9-2007, as per provisions of S.R.O. 576(1)/2006; dated 5-6-2006; to release the vehicle to the complainant on payment of the short-levied amount, if any, worked out on the basis of the above and direct the Directorate General I & I to bring the investigation to its logical conclusion by apprehending the culprits and bringing them to justice.

2008 PTD 1482 and 2007 PTD 1630 ref.

Yasin Tghir, Senior Advisor Dealing Officer.

Imdad Hussain for the Complainant.

Mazhar Rauf,??? Deputy Superintendent Departmental Representative.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE (FEDERAL TAX OMBUDSMAN).---Mr. Imdad Hussain, a retired pensioner, complained that the Customs authorities at Islamabad were not correctly implemen?ting the judgment of the Customs Appellate Tribunal vide its Order No.38/CH/IB/2010/675 in respect of his Toyota Corolla DX, Model 1994, seized and confiscated for no violation of law on his part. According to him, the Customs authorities were reluctant to release the vehicle unless an additional amount of Rs:571,796 was paid despite the fact that an amount of Rs.193,495 had already been paid in accordance with the earlier assessment made by the same Customs authorities at Islamabad. He prayed that the Customs be directed to (i) determine the value taking the exchange rate prevailing at the time of import, and (ii) declare as unlawful the revised assessment, taking 21-12-2010 as the relevant date.

2. The complaint was referred for comments to the Secretary Revenue Division as required vide section 10(4) of the FTO Ordinance, 2000. In response, Collector Customs, Islamabad, filed parawise comments stating that the revised assessment was correctly and law-fully made, taking 21-12-2010 for the purpose of calculating the short-levied amount of duty/taxes for which the Complainant had given his consent.

3. During the hearing, the representatives of the parties reiterated the averments of their written pleadings. Referring to the parawise comments, the DR stated that the vehicle under reference was initially imported free of duty and taxes under S.R.O. 506(I)/88 dated 26-6-1988 by Major Kim Hoi-Son, a staff member of United Nations Military Observers Group in India and Pakistan (UNMOGIP), and its entry was duly made in the Booklet No.D003966 issued by F.B.R. The vehicle was allotted Registration No.UN-67-320 by Ministry of Foreign Affairs. It was subsequently transferred to Major Kyung Soo Kim, another staff member of UNMOGIP, as permitted by the F.B.R. vide letter No.5(1)/2005.Cus Exm (PT) dated 30-5-2005. In 2007, UNMOGIP, Rawalpindi, applied for sale permission which was granted under Serial No.14 of 2007 vide Appraisement Collectorate, Karachi, No.SI/MIS/SP/ 14 of 2007-VI dated 2-3-2007, though it was not availed by the applicant.

4. The DR further informed that a PG Haji Osman PG Haji Damit, Attache, High Commission of Brunei Dare Salam at Islamabad, applied to the Customs for assessment of duty and taxes and issuance of NOC in respect of the above vehicle on the basis of sale permission purportedly issued by the Ministry of Foreign Affairs, Islamabad, vide letter No.P(IV)-10/15/2007 dated 24-7-2007. The vehicle was accordingly assessed to duty and taxes on 5-9-2007 in terms of S.R.O. 577(1)/2006 dated 5-6-2006. The customs accordingly issued NOC No.183 of 2007 dated 6-9-2007, after leviable duty and taxes amounting to Rs.193,495 had been paid.

5. In May 2008, the Customs at Islamabad detected 54 cases of fake sale permission letters purportedly issued by Ministry of Foreign Affairs. Subsequently, the Directorate General of Intelligence and Investigation also detected 42 more fake permissions when the investigation into the matter was shifted by the F.B.R. from the Collectorate to the Directorate General. During the investigation, the sale permission of the vehicle under reference also turned out to be fake as confirmed by the Ministry of Foreign Affairs vide its U.O. No.P(IV)-6A/30/33/52/2008 dated 10-5-2008:

"(2) PG. Haji Osman PG Haji Damit, Attache vide Note Verbale No.SJTP.381/2007 dated 11-7-2007. A diplomat by this name left Pakistan in 2005 after completing his tenure. He owned only one vehicle i.e. Toyota Aristo 1996, which he exported and an export permit was issued in July 27, 2005. According to our record, its Chasis No was JZS147-005105. The sale permission for CD 15-35 is fake/forged and bears incorrect information."

6. The vehicle was accordingly seized by the staff of MCC Islamabad, and was adjudicated upon by various fora until the Customs Appellate Tribunal, Islamabad, remitting the redemption fine @ 30% of the value imposed on the vehicle by Collector (Appeals), ordered its release on payment of leviable amount of duty/taxes, vide judgment No.674 dated 14-12-2010. However, while determining the short-levied amount of duty and taxes, the customs calculated the value, duty/taxes on the basis of the exchange rate prevailing on 21-12-2010. The DR contended that the vehicle in question had been lawfully and correctly reassessed with reference to 21-12-2010 instead of the assessment made previously with reference to 5-9-2007. As the vehicle was registered in the name of Major Kyung Soo Kim, a staff member of UNMOGIP, Rawalpindi, and as the sale permission was issued by the Appraisement Collectorate, Karachi, in terms of S.R.O. 576(I)/2006 dated 5-6-2006 relating to the privileged persons, the vehicle was assessed to duty and other taxes under the said S.R.O. instead of S.R.O. 577(1)2006 dated 5-6-2006 Which related to diplomats.

7. Controverting the DR's averments, the complainant stated that duty and other taxes had already been assessed and paid on the basis of value determined by the Customs: with reference to the date of sale in the Iqbal market i.e. 5-9-2007, as per the provisions of law. As the only question subsequently involved was of short-assessment of amount of duty and taxes on account of change of category and level of concession due to fake sale permission in the name of a diplomat, there was no justification either for seizure of the vehicle or for changing the date of assessment from 5-9-2007, when the vehicle was sold in the local market, to 21-12-2010 which had no relationship in the mater except for that the complainant had on that day made an application for release of the vehicle in pursuance' of the Tribunal's judgment. This application could not be construed to be the complainant's consent for changing the crucial date for assessment of value, duty/taxes from 5-9-2007 to 21-12-2010. The complainant contended that determination of short-levied amount of duty/taxes with reference to 21-12-2010, after over three years of the date of sale of the vehicle in the local market on 5-9-2007, was against the rules as stipulated under the relevant S.R.O. 576(I)/2006 dated 5-6-2006 and therefore arbitrary, oppressive, unreasonable and unlawful.

8. The complainant further contended that he was not responsible in any way in the faking scam. He had purchased-the vehicle from open market from a Abdul Rehman son of Shaista Khan of Rawalpindi, after due diligence by personally confirming the genuineness of its registration, its lawful import and payment of duty and taxes on its sale in the local market from relevant authorities, as also accepted by Collector Customs (Appeals) and the Tribunal. He stated that after coming to know of the faking of sale permission, he lodged an F.I.R. No.272 dated 8-4-2010 against Mr. Abdul Rehman son of Shaista Khan. The complainant contended that the issue being of fake sale permission fraudulently presented in the name of an embassy staff member, the culprits who faked the permission letter of Ministry of Foreign Affairs should have been identified and punished instead of punishing an innocent buyer by seizing his vehicle, and demanding a huge amount of duty and taxes which was far in excess of the value of the vehicle.

9. Claiming innocence in the case and denying having given consent for reassessment with reference to 21-12-2010, the Complainant contended that charging any additional amount from him was not only unlawful and unjust but also unreasonable and oppressive. In support of his contention he presented a copy of Lahore High Court Judgment reported as 2008 PTD 1482 which also referred to another Lahore High Court Judgment reported as 2007 PTD 1630.

10. The complaint has been examined in the light of the written and oral submissions of the parties. There are three issues involved in this case:--

(i)???????? whether the Complainant was innocent?

(ii)??????? whether the seizure of the vehicle was justified and

(iii)?????? whether applying the exchange rate and duty/taxes prevailing on 21-12-2010 was lawful?

11. As admitted by the Customs, the complainant had presented all relevant documents such as copy of Bill of Entry (GD), Sale Permission and Registration Book at the time of interdiction of the vehicle by the Customs on 27-8-2009. The Customs did not doubt the bona fides of the Complainant as an innocent buyer of the vehicle. The adjudicating officer of Customs, the Collector Customs (Appeals) and the Customs Appellate Tribunal had all accepted the complainant's innocence and due diligence. However, the adjudicating officer had made a serious mistake while recording his judgment vide para 08 of Order-in-Original No.27 of 2010 dated 30-1-2010:--

"I have gone through the case record and also heard the seizing agency as well as the respondent's counsel. Without prejudice to the bona tide of the respondent, who may be an innocent buyer, the fact remains that the impugned vehicle was unlawfully brought into the country without payment of duty and taxes chargeable thereon."

The above conclusion by the adjudicating officer was factually incorrect as the vehicle was lawfully imported without payment of duty and other taxes under S.R.O'. 506(I)/1988 dated 26-6-1988 which allowed duty free import of vehicles to the privileged persons. This fact was duly recorded vide para 10 of order-in-appeal:

"The contention of the owner that the vehicle was registered by the Islamabad ETO after verification of the relevant documents and the vehicle was brought lawfully into the country, and not unlawfully brought into the country as charged vide Order-in-Original No.27 of 2010 dated 30-1-2010, is correct."

It appears that the mistake made by the adjudicating officer to treat the import of this vehicle as 'unlawful' led to its outright confiscation. It also appears to have influenced the error made by the Customs in determining the value and applying the rates of exchange, duty and other taxes with reference to 21-12-2010 after the Appellate Tribunal's judgment, rather than 5-9-2007 when the vehicle was sold in the local market and the leviable duties and taxes were originally assessed and paid under S.R.O. 577(I)/2006 dated 5-6-2006 instead of S.R.O. 576(1)/2006 dated 5-6-2006 due to fake sale permission.

12. It is also observed that it was not a case of smuggling or unlawful import of a vehicle but of fraudulent change of level of concession at the time of sale of the vehicle in the local market from S.R.O. 576(1)/2006 relating to privileged persons to S.R.O. 577(I)/2006 relating to diplomats. Thus, it would have been fair to demand the amount of short-levy caused by manipulation of higher level of concession on the same basis of the date of sale of the vehicle in the local market i.e. 5-9-2007, rather changing the date of reassessment to 21-12-2010. The provisions of S.R.O. 576(1)/2006 dated 5.6-2006 did not warrant levy of exchange rate or duty and taxes other than those applicable on the date of sale of vehicle in the local market which in this case was 5-9-2007.

13. As regards the fate of investigation into the faking scam, the Directorate General reported the position vide its letter C. No. 1(26)DGCl/Ops/2008/PT. File/3942 dated 11-7-2011 as under:--

(a)? The Court of Special Judge (Customs), Rawalpindi has declared two main accused persons i.e. Muhammad Shafiq Khan and Asghar Hussain as proclaimed offenders.

(b)? Muhammad Shafiq Khan, Assistant has been dismissed from the Government-Service on 17-10-2009 by the Ministry of Foreign Affairs, Islamabad being guilty of "Misconduct".

(c)? Ministry of Interior has been requested through PBR for placing names of two above named accused persons on ECL.

(d)? List of 96 diplomatic vehicles against which fake Sale Permission Certificates were issued has been circulated among the Customs Collectorate for their detention/seizure. 18 such vehicles have already' been seized by various Collectorates/ Directorates.

(e)? List of 96 diplomatic vehicles was also circulated among the Excise and Taxation Departments for cancellation of their registration/hold the transfer of ownership.

(f)?? The Deputy Collector of Customs, Islamabad Dryport, was asked to work out vehicle-wise liability of evaded amount of duty/taxes of 96 diplomatic vehicles. The MCC, Islamabad has sought certain clarifications in this regard from F.B.R.

(g)? After detection of the scam, Ministry of Foreign Affairs has streamlined the procedure for issuance of sale permission certificates of diplomatic vehicles. The Customs authorities of Islamabad Dryport are now making confirmation of sale permission certificates on case to case basis from the Foreign Office. Presently, the NOCs are delivered by the Dryport to the concerned diplomats or authorized representatives of concerned embassies only."

14. It is evident from the report that hardly any progress has been made after 2008 as the real culprits and their accomplices in the Customs department have yet to be brought to book.

Findings:

15. In view of the foregoing discussion, maladministration of the Customs authorities is established in terms of section 2(3) of the FTO Ordinance, 2000.

Re-commutations:--

16. F.B:R. to-

(i) direct the Customs to re-determine the short-levied amount, as per law, on the basis of the date of the vehicle's sale in the local market i.e. 5-9-2007, as per provisions of S.R.O.576(I)/2006 dated 5-6-2006;

(ii) release the vehicle to the complainant on payment of the short-levied amount, if any, worked out on the basis of (i) above;

(iii) direct the Directorate General I and I to bring the investigation to its logical conclusion by apprehending the culprits and brining them to justice; and

(iv) report compliance within 30 days.

C.M.A./204/FTO???????????????????????????????????????????????????????????????????????????????? Order accordingly.