OMERJEE VAMRA, KARACHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD

2011 PTD 2816

2011 PTD 2816

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs OMERJEE VAMRA, KARACHI and 27 others

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint Nos.284-311/Khi/Cust(117-144)738-765 of 2011.

Customs Act (IV of 1969)---

----Ss. 25-A, 25-D, 80, 81, 155E & 155Q---Customs Rules, 2001, R.107(a)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 10(3)---Delay and inaction in finalization of provisional assessment order---Objection about jurisdiction of Federal Tax Ombudsman, on the ground that the electronic message about final determination of value was appealable; and the matter involving assessment of duty and taxes, being outside the jurisdiction of Federal Tax Ombudsman, were not relevant as the complainants had neither challenged the electronic message nor the assessment of duty and taxes---No dispute existed between the complainants and the department that the imported goods were provisionally assessed under S.81 of Customs Act, 1969, despite the presence of applicable valuation ruling dated---Such was done on the insistence of the complainants that the value fixed under that valuation ruling, were much higher than the actual transaction values; and the Directorate General (Valuation) was already considering the request of the complainants for downward revision of the value order---Directorate General (Valuation), rejected the plea of the complainants to finalize the provisionally assessed value under the newly issued valuation ruling, and instead directed the complainants to approach Assessing Officer for issuance of final assessment order under S.80 of Customs Act; 1969---Representative body of the complainants approached the Director General (Valuation) for downward revision of customs value fixed under the valuation ruling but Director General (Value) rejected review application under S.25-D of Customs Act, 1969, for giving retrospective effect to valuation ruling unjustly---Interim order issued in favour of the complainants, had created vested interest to the complainants which could not have' been justly ignored at the time of issuance of subsequent valuation ruling---Issuance of said valuation ruling by Directorate General (Valuation) without applying the same to the impugned goods allowed provisional release; and rejected the review application, ignoring altogether the interim order, being arbitrary, unjust and unreasonable, was tantamount to maladministration under S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Ombudsman recommended the FBR to direct the Director General (Valuation) to extend the application of Value Ruling to the impugned goods released provisionally under S.81 of the Customs Act, 1969 within 21 days; and report compliance within 30 days.

CIT v. Olympia Watch Co. 1987 PTD 739 ref. Justice (R) M. Nadir Khan, Advisor Dealing Officer.

Sattar Silat and Tanveer Ahmed, Importer Authorized Representative.

Muhammad Tahir, Director (Valuation), Abdul Hayee Sheikh, Deputy Director (Valuation) and Naveed Abbas Memon, Assistant Collector (PaCCS), Departmental Representatives.

FINDINGS/RECOMMENDATIONS

DR. MUIHAMMAD SHOAIB SUDDLE (FEDERAL TAX OMBUDSMAN).---These complaints have been' filed by 28 importers of Medium Density Fiber Board (MDFB) during the period from p 6-2-2009 to 5-5-2009 against the alleged delay and inaction in finalizing the provisional assessment made under section 81 of the Customs Act, 1969 (the Act).

2. The complaints were sent to the Secretary, Revenue Division, for comments. The Department filed parawise reply wherein preliminary objections were raised about maintainability of complaints on the grounds:

(i)???????? that the complaints had been filed with mala fide against recovery proceedings under section 202 of the Act initiated after finalization of provisional assessment within the period provided under section 81(2) of the Act;

(ii)??????? that remedy of appeal was available against decision of assessment conveyed electronically;

(iii)?????? that the matters about assessment of duty and taxes fell outside the jurisdiction of FTO Office; and

(iv)?????? that the complaints were filed after expiry of period of limitation provided under section 10(3) of FTO Ordinance.

3. On merits, the Department pleaded that as the complainants failed to substantiate their declared values, which were much lower than the values fixed under section 25A of the Act through the Valuation Ruling Order No.Misc/01/2007-II(B)/5143 dated 20-11-2007, and, according to the complainants, they had already approached the Department for revision of 'supra Valuation Ruling, the imported goods were provisionally assessed under section 81 of the Act. The Department contended that there was no legal requirement for issuance of paper-based order in terms of section 80 of the Act, and so the order regarding finally determined Customs values in terms of Valuation Ruling No. Misc/01/2007-II(B)/5143 dated 20-11-2007 was electronically conveyed to the complainants in terms of sections 155-E and 155-Q of the Act read with Rule 440 of the Customs Rules, 2001. The Department also denied that Collector (Appeals) had accepted the complainant's plea that paper-based order was required. According to the Department, review application filed by the complainants under section 25D of the Act was rejected, holding that the provisional assessment had correctly been finalized within the stipulated period.

4. The complainants were' supplied copies of parawise comments,' but they did not opt to file any rejoinder.

5. During hearing, the AR reiterated the arguments mentioned in the 'complaints. He claimed that without passing any order about final determination of value, notices dated 15-7-2009 were issued by Preventive Officer/Incharge (Securities and Verifications) stating that provisional assessment on expiry of period specified in the Act had become final assessment in terms of section 81(4) of the Act. The complainants were called upon to make the payment of differential amount within 06 days without affording them an opportunity of hearing and issuance of order. The complainants, therefore, filed a review application with the Director General (Valuation), who ordered that they should approach the Assessing Officer for issuance of final assessment order under section 80 of the Act. The complainants accordingly approached the Collector Customs (PaCCS), vide application dated 18-8-2009, who also directed the Additional/Deputy Collector to decide the matter under section 80 of the Act in the light of decision by DG (Valuation). However, despite repeated approaches, the Department did not pass any order under section 80 of the Customs Act. Instead, vide letter dated 13-11-2010, the complainants were directed to pay duty and taxes as per provisional assessment.

6. The AR argued that after provisional assessment the Directorate General (Valuation) issued Valuation Ruling No. Misc/01/2007-11(B) dated 9-5-2009, determining the value of subject goods, which was above the declared value but below the values fixed under Valuation Ruling dated 20-11-9007. The AR maintained that after the Valuation Ruling dated 9-5-2009, which was issued at the request of the complainants, the Department was under legal obligation to finalize the provisionally assessed values accordingly, as per provisions of Rule 107(a) of Customs Rules 2001. He also claimed that issuance of Valuation Ruling dated 9-5-2009 had nullified the earlier Valuation Ruling dated 20-11-2007. The AR stated that the complainants were willing to pay duty and taxes in terms of Valuation Ruling dated 9-5-2009 which was issued by the Valuation Department on the basis of import data of their imports during the period from 1-2-2009 to 30-4-2009 and in consultation with them as well as with the local manufactures of impugned goods.

7. Controverting the AR's contention, the DR for Valuation Department submitted that valuation of any particular item was what was applicable on the day of import, and so the Valuation Ruling dated 9-5-2009 issued months after the impugned imports could not be applied to the goods under reference.

8. The DR for MCC (PaCCS) submitted that provisional assessment was made on the complainants' insistence, and the value was finalized by Valuation Department within the stipulated time period, and, thereafter, notices issued for encashment of securities.

9. Before going into merits of the case, legal objections raised by the Department need to be addressed. The objection about complaint having been filed with mala fide to thwart recovery proceedings relates to the merits of the case, and will be settled in the findings. The objections about jurisdiction of the FTO Office, on the grounds that the electronic message about final determination of value was appealable and the matter involving assessment of duty and taxes being outside the jurisdiction of Hon'ble FTO, were not relevant as the complainants had neither challenged the electronic message nor the assessment of duty and taxes. With regard to objection about complaints having been filed after period of limitation provided under section 10(3) of FTO Ordinance, it would suffice to observe that FTO Office without going into technicalities prefers to decide complaints of tax maladministration on merit, by condoning limitation, where appropriate, as per the-latter part of section 10(3) ibid. Having regard to the facts and circumstances emerging from the record of the case, the limitation in this case has been condoned in the interest of justice.

10. On facts, there is no dispute between the complainants and the Department that the imported goods were provisionally assessed under section 81 of the Act, despite the presence of applicable Valuation Ruling No. Misc-01/2007-II(B)/5143 dated 20-11-2007. This was done on the insistence of the complainants that the values fixed under this Valuation Ruling were much higher than the actual transaction values and the Directorate General (Valuation) was already considering the request of the complainants for downward revision of the values fixed under the Ruling dated 20-11-2007. However, the Directorate General (Valuation), firstly vide Order dated 30-6-2009 and then vide Order-in-Review dated 11-8-2009; rejected the plea of the complainants to finalize the provisionally assessed values under the newly issued Valuation Ruling (No. Misc-01/2007-II(B) dated 9-5-2009), and instead directed the complainants to approach the Assessing Officer for issuance of final assessment order under section 80 ibid. The complainants repeatedly approached the Assessing Officer who issued notices and even conducted two hearings but failed to issue the final assessment order till the filing of these complaints before the Hon'ble Federal Tax Ombudsman on 9-7-2011.

11. The case record and the arguments advanced by each party have been duly considered. The scrutiny of the record reveals that the complainant No.1 and the Karachi Chamber of Commerce and Industry, as a representative body of the complainants, had approached the Directorate General (Valuation), for downward revision of the Customs values fixed under the Valuation Ruling No. Misc-01/2007-II(B)/5143 dated 20-11-2007 on the plea that the actual transaction values in the international market had declined substantially. It was in this backdrop that the Additional Director (Valuation), vide Letter No. Misc/ADC/01/2008/254 dated 3rd February, 2009, issued with the approval of the Director General (Valuation), advised the Collectors of Appraisement and PaCCS, Custom House, Karachi, that the two consignments of the impugned goods imported by the Complainant No.1 be assessed under section 81 of the . Act, ignoring the Valuation Ruling No.Misc-01/2007-II(B)5743 dated 20-11-2007. Even the goods imported by other complainants during the period between 6-2-2009 to 5-5-2009 were likewise allowed release provisionally under section 81 of the Act. The Directorate General (Valuation) considered the point of view of the importers of impugned goods in the light of 90 days import data .for 'the period from 1-2-2009 to 30-4-2009, and issued the Valuation Ruling No.Misc/01/2007-II(B) dated 9-5-2009, though unfairly with immediate effect. The Director General (Valuation) later rejected the review application filed by the complainants under section 25D of the Act, for giving retrospective effect to Valuation Ruling dated 9-5-2009, unjustly ignoring, the factum that the provisional release of impugned goods had been allowed under the specific directions issued by the Directorate General (Valuation), and the Valuation Ruling (supra) was based on the data of imports made by the complainants during the period of 1-2-2009 to 30-4-2009 (as mentioned in para. 2 of the Ruling).

12. The main question which arises is whether the Directorate General (Valuation) could reasonably ignore the interim order it had issued vide letter No.Misc/ADC/01/2008/254 dated 3rd February, 2009, under the signatures of the Additional Director (Valuation). The answer is no, firstly because the interim order of 3rd February, 2009, was issued after accepting the contention of the complainants that the transaction value of impugned goods in the international market had declined substantially, and secondly, the Valuation Ruling dated 9-5-2009 was issued on the basis of data of imports of the impugned goods from 1-2-2009 to 30-4-2009 which covered the entire period of imports of the complainants. There also seems to be substance in the contention of the complainants that the interim order dated 3rd February, 2009, created vested interest of the complainants, which could not have been justly ignored at the time of issuance of Valuation Ruling dated 9-5-2009 with immediate effect. To support their contention, the complainants cited the case of CIT v. Olympia Watch Co. reported as 1987 PTD 739 Tax wherein the High Court of Sindh ordered retrospective effect of legal amendment for extending benefit to the affected parties in pending cases to remedy a similar wrong being done to the assesses. The Director General, (Valuation) obviously also erred in not making any reference to the interim order dated 3rd February; 2009, while issuing the Valuation Ruling No.Misc/01/2007-II(B) dated 9-5-2009, and even while rejecting the complainants' review application.

Findings:

13. The issuance of Valuation Ruling No. Misc/01/2007-11(B) dated 9-5-2009 by the Director (Valuation), without applying the same to the impugned goods allowed provisional release, and rejection of review application by the Director General (Valuation), ignoring altogether the interim order dated 3rd February, 2009, being arbitrary, unjust 'and unreasonable is tantamount to maladministration under section 2(3) of the Establishment of the Office of Federal Tax Ombudsman Ordinance; 2000.

Recommendations:

14. F.B.R. to direct the Director General (Valuation) to ---

(i) extend the application of Valuation Ruling dated 9-5-2009 to the impugned goods released provisionally under Section 81 of the Act, within 21 days; and

(ii) report compliance within 30 days.

H.B.T./239/FTO????????????????????????????????????????????????????????????????????? ??????????? Order accordingly.