SUS MOTORS (PVT.) LTD., KARACHI VS FEDERATION OF PAKISTAN through Secretary Revenue Division/Chairman, Islamabad, 2011 PTD-KARACHI-HIGH-COURT-SINDH 235 (2010)

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

----Ss. 79, 80 & 81---Provisional assessment and provisional determination---Scope---Scheme of Customs Act, 1969, is that there should be only one assessment of goods at any given time---Assessment (whether provisional or final) properly so called (stricto sensu) is ascertainment or fixing of amount of duty or tax payable, it would, therefore, wrong in principle for two or more assessments in respect of same goods to be simultaneously in the field---Assessment in field may be set aside ,and replaced by another assessment but until that is done in accordance with law, it continues to be the assessment of goods and another assessment cannot and ought not to be piled on top of it---If and when S.81 of Customs Act, 1969, is invoked, importer's self-assessment is already in filed and purpose of proceedings thereunder is to ascertain whether that assessment is correct, however, until such exercise is completed, it is the assessment---If in the meanwhile goods have to be provisionally released (which is another purpose of S. 81 of Customs Act, 1969), it would be wrong in principle to pile another assessment on top of importer's self-assessment, which would be the result if there were to be a provisional assessment stricto sensu--Provisional determination to be made in terns of S. 81(1) of Customs Act, 1969, cannot be equated with a "provisional assessment"---Provisional assessment can be regarded as a reassessment in miniature and if properly carried out can, therefore, lead to computation of "additional amount" that is closest to "final determination" that would result from re-assessment and would, therefore, the best safeguard against interest of the State, if importer's self-assessment is found to be incorrect; it is for such reason and in such sense that proviso to S.81(1) of Customs Act, 1969, uses provisional assessment to provide basis for determining additional amount.

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

----S. 81(1), first proviso---Provisional assessment---Scope---Provisional assessment in first proviso to S. 81 (1) of Customs Act, 1969, merely provides statutory guideline ("the basis") for determining "additional amount" and that is all.

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

----Ss.32, 79, 80 & 81 (1) (2), proviso--Constitution of Pakistan, Art. 199--- Constitutional petition---Provisional release--- Re-assessment--- Limitation---Extension of time--- Principle--- Words "circumstances of exceptional nature "---Scope---Vehic'es imported were provisionally released on the basis of provisional assessment and after lapse of nine months, authorities issued valuation advice and intended to initiate proceedings against petitioner under S. 32 of Customs Act, 1969---Validity---Purpose behind requiring Collector to record exceptional circumstances which warranted extension of time was to ensure that Collector had applied his mind to relevant facts of each case and made his decision on a proper consideration of the same---Omnibus request, assented to in a mechanical manner was no compliance with the requirements of proviso to S. 81(2) of Customs Act, 1969---Stipulated period was not extended by the authorities, as required by law, with the result that the period lapsed on the expiry of nine months---Additional amount computed on the basis of "provisional assessment" in terms of first proviso to S. 81(1) of Customs Act, 1969, was not included in "provisional determination" on the basis of which goods were provisionally released---If final determination was not completed within stipulated period, then provisional determination would have become final and the same did not include "additional amount"---Stipulated period was not extended in terms of proviso to S.81(2) of Customs Act, 1969, and hence expired at the end of nine months---No final determination was available within nine months, therefore, provisional determination became final---Petitioner having discharged its liability in terms of provisional determination, no other amount was payable by it, and no "additional" amount could be recovered front petitioner---Constitutional Petition was allowed accordingly.

Hassan Trading Company v. C.B.R. and others 2004 PTD 1979; Colgate Palmolive (Pakistan) Ltd. v. Federation of Pakistan 2004 PTD 2516; Collector of Customs v. H. M. Abdullah and others 2004 PTD 2993; Habib-ur-Rehman and Company v. Collector (Appraisement) and others 2005 PTD 69; Collector of Customs (Appraisement) and others v. Auto Mobile Corporation of Pakistan 2005 PTD 2116; Wall Master v. Collector of Customs and others 2005 PTD 2573; Dewan Farooque Motors Ltd. v. Customs Excise and Sales Tax Appellate Tribunal and others 2006 PTD 1276. Rehan Umar v. Collector of Customs and others 2006 PTD 909; Collector of Customs v. Pak Arab Refinery 2010 PTD 900; Sohrab Global Marketing (Pvt.) Ltd. v Deputy Collector of Customs 2005 PTD 67; Commissioner of Income Tax v. Asbestos Cement Industries Ltd. 1993 PTD 459; Bismillah and Co. and others v. Secretary, Ministry of Finance, GOP 2005 PTD 1942; Collector Sales Tax and Central Excise v. Al Hadi Industries (Pvt.) Ltd. 2002 PTD 2457; Noble (Pvt.) Ltd. v. Federal Board of Revenue and others 2009 PTD 844; Irshad Ahmad Shaikh v. The State 2000 SCMR 814; Khairpur Textile Mills Ltd. and others v. National Bank of Pakistan and another . 2003 CLC 326 and Iqbal Pahore v. The State 2004 YLR 2136 ref.

Khalid Jawed Khan for Petitioner.

Zain A. Jatoi along with Ilyas Ahsan (Departmental Representative) for Respondent No.2.

Raja Muhammad Iqbal for Respondent No.3.

Ms. Cookie Rawat, Standing Counsel.

ORDER

MUNIB AKHTAR, J.---This petition arises under the Customs Act, 1969 ("the Act"), and raises important questions regarding the proper interpretation and application of section 81 thereof. On 16-9-2010, learned counsel for the parties were put on notice that the petition would be heard and disposed of at katcha peshi stage. The petitioner is the importer of the "Geely" brand of motor vehicles from China. It appears that it started to import these vehicles from around December, 2006 onwards. The first consignment consisted of four vehicles. The petitioner filed the relevant goods declaration under section 79 of the Act and declared the value of the vehicles at what it claimed was the transactional value under section 25(1) of the Act. However, the Customs Department did not accept the declared value and sought to assess the imported vehicles at a significantly higher price. The petitioner objected to this and was allowed the provisional release of the vehicles under section 81 of the Act. The duty and taxes payable were provisionally determined on the basis of the declared value, with the differential amount being secured by a post-dated 'cheque. In the meanwhile, the petitioner's other consignments of the same motor vehicle ' also started arriving such that, insofar as this petition is concerned, a total of 86 vehicles were imported and declared in four different consignments. Each consignment met the same fate, i.e., the declared value, which according to the petitioner was the transactional value, was not accepted by the Department, but the petitioner was allowed provisional release under section 81 on provisional determination of duty and taxes, with the differential amount being secured by one or more post dated cheques. It may be noted that the petitioner's consignments were released under PACCS, the Pakistan Customs Computerized System.

2. Learned counsel for the petitioner submitted that thereafter, the petitioner diligently pursued the matter to have it finalized under section 81. According to him, although some hearings did take place, no final decision was ever arrived at, with the result that eventually, the period stipulated in section 81 passed without a final determination being made. Learned counsel submitted, and this issue lies at the heart of the present petition, that since no final determination was made, the provisional determination (on the basis of the declared value) was deemed to have become final, and the petitioner's liability to pay duty and other taxes had crystallized on that basis. Thus, according to him, the post-dated cheques cannot be encashed and the Department is liable to return them to the petitioner. The relevant dates in respect of the four consignments, as shown in the petition, are set forth below:--

Learned counsel submitted that after the expiry of the limitation period, the petitioner was shocked to discover that the Department had issued some sort of valuation advice/letter dated 19-4-2008, which purported to state that since the Department was not satisfied with the values declared by the petitioner, it had requested Pakistan's commercial consular in China to provide the correct prices of the subject vehicles, and the data obtained from the latter showed that the prices were much higher than those that had been declared. The advice/letter also noted that the Department had examined the data regarding Chinese vehicles exported to Pakistan and even on that basis, the declared value was much lower than the actual price. The advice/letter concluded that since the prices declared by the petitioner were "untrue", action be initiated against it under section 32 of the Act, and other applicable provisions thereof. It appears that on the basis of this advice/letter, the post-dated cheques were sought to be encashed, but were dishonored on presentation.

3. Learned counsel for the petitioner submitted that the entire exercise, which had culminated in the advice/letter aforementioned, was unlawful since it had been undertaken behind the petitioner's back and without joining the latter and enabling it to present its case. Learned counsel emphasized that the petitioner had sent repeated reminders to the Department and had participated in all the 'proceedings and hearings that had taken place under section 81, but the Department, instead of finalizing the matter thereunder had instead chosen to take recourse to a completely unlawful method, which was liable to be set wide. Thus, the petitioner's grievance is twofold. Firstly, and most fundamentally, the petitioner claims that its goods were released on a provisional determination under section 81 and since no final determination was made within the stipulated period, the provisional determination has attained finality arid it is only liable to pay duty and other taxes in terms thereof (i.e., on the basis of the declared value). Since that amount has already been paid, the petitioner claims that it has no further liability in this regard. Secondly, the entire exercise relating to the final determination of valuation was unlawful since it was violative of the principles of natural justice, had been carried out without notice to the petitioner, or confronting it with the material/evidence being used against it. Thus, the action proposed to be taken by the Department, and in particular the retention and attempted encashment the post-dated cheques, was entirely without lawful authority and liable to be so declared and quashed.

4. As regards section 81, learned counsel for the petitioner submitted that it was well settled that if the matter thereunder was not finalized within the stipulated period, then the provisional determination was deemed to have become final. He placed reliance on a number of decisions of this Court, including Hassan Trading Company v. C.B.R. and others 2004 PTD 1979, Colgate Palmolive (Pakistan) Ltd. v. Federation of Pakistan 2004 PTD 2516, Collector of Customs v. H. M. Abdullah and others 2004 PTD 2993, Habib-ur-Rehman and Company v. Collector (Appraisement) and others 2005 PTD 69, Collector of Customs (Appraisement) and others v. Auto Mobile Corporation of Pakistan 2005 PTD 2116, Wall Master v. Collector of Customs and others 2005 PTD 2573 and Dewan Farooque Motors Ltd. v. Customs Excise and Sales Tax Appellate Tribunal and others 2006 PTD 1276, Learned counsel submitted that although section 81 had been substituted in its entirety with new provisions in 2005 (which included in particular, an explanation that had not been part of the section previously), the section as substituted had been interpreted and applied by this Court in Rehan Umar v. Collector of Customs and others 2006 PTD 909. This Court had, according to learned counsel, come to the same conclusion as before, namely that if the matter under section 81 was not finalized within the stipulated period, the provisional determination attained' finality. Learned counsel pointed out that since the Rehan Umar case was decided by a Division Bench, the matter of the proper interpretation of section 81, as presently relevant, stood decided as regards the present petition. He also referred in particular to the Dewan Farooque case (supra) and to Collector of Customs v. Pak Arab Refinery 2010 PTD 900. As regards the finalization of the value by means of the advice/letter of 9-4-2008, learned counsel relied on the Habib ur Rehman case (supra) and Sohrab Global Marketing (Pvt.) Ltd. v Deputy Collector of Customs 2005 PTD 67 (Lah.) to submit that since the petitioner had not been confronted with the evidence used against it, the entire exercise in this regard was a nullity.

5. Learned counsel for the respondent No 2 (the Model Collectorate (PACCS)), ably assisted by the learned representative for the Department, submitted that on a proper interpretation of section 81, as substituted in 2005, the provisional determination thereunder included the differential amount, so that even if the final determination came about simply as a result of a lapse of the stipulated period, the differential amount was payable. Learned counsel submitted that this followed directly from the explanation that had been included in the substituted provisions. His case was that the Rehan Umar case did not decide this issue, especially as to the proper interpretation and effect of the explanation, and did not constitute any binding authority in this regard. He had prepared a useful chart which, according to him, showed exactly what was decided in the Rehan Umar case. He therefore submitted that this was an issue that remained open to be decided in the present petition, and according to him, the correct interpretation was as noted above. As to the effect and proper interpretation of an explanation in the context of fiscal statutes, he placed reliance on Commissioner of Income Tax v. Asbestos Cement Industries Ltd. 1993 PTD 459 (SC) and Bismillah and Co. and others v. Secretary, Ministry of Finance, GOP 2005 PTD 1942 (SC). Learned counsel also submitted that section 81 could not be read in isolation, but had to be interpreted and applied along with the preceding two sections. He also placed reliance on two decisions of this Court reported as Collector Sales Tax and Central Excise v. Al Hadi Industries (Pvt.) Ltd. 2002 PTD 2457 and Noble (Pvt.) Ltd. v. Federal Board of Revenue and others 2009 PTD 844 to highlight the correct principles to be applied in the interpretation of fiscal statutes. According to learned counsel, although the substituted provisions of section 81 used both the words "determination" and "assessment", on a proper interpretation thereof, the terms were interchangeable and were being used in the same sense throughout the section. Thus, according to him, when the section was read as a whole and in particular, the explanation thereto was taken into account, the only proper and reasonable interpretation possible was that the differential amount calculated on the basis of the provisional assessment stood included in the provisional determination, and hence, if the latter became the final determination through lapse of time, the differential amount became part of the duty and taxes payable by the importer. Learned counsel also submitted that the period stipulated in section 81 for final determination was nine months (at the relevant time), but this was extendable by a further period of 90 days by the concerned authority. According to him, this power had been properly exercised in the present case with respect to the second, third and fourth consignments, with the result that the period of limitation ended at, or extended beyond, 19-4-2008, when the advice/letter aforementioned was issued. It was also his submission that the final determination in the case of the first consignment was made on the- last day of the stipulated period. Thus, according to him, on any view of the matter, the petitioner was liable to pay the differential amount in respect of all the consignments. Insofar as the exercise carried out which resulted in the issuance of the advice/letter aforementioned, the learned counsel submitted that this had been done strictly in accordance with law and was therefore proper and binding on all concerned, including the petitioner. Learned counsel for the respondent No. 3 challenged the maintainability of the petition and submitted that since an adequate alternate remedy was available to the petitioner, the petition ought to be dismissed on this ground alone. The learned standing counsel adopted the submissions of the other counsel appearing for the respondents.

6. We have heard learned counsel for the parties, examined the relevant record with their assistance and carefully considered the case law and statutory provisions referred to and relied upon by them. As noted above, the petitioner's consignments started arriving from December, 2006 onwards. The relevant provisions of the Act, being sections 79 to 81, were each substituted in their entirety by the Finance Act, 2005, and it is therefore the substituted provisions that apply in the present case. We will have occasion later in this judgment to consider these sections, both as they stood prior to 2005, and after being substituted by the Finance Act of that year. (It may be noted that when reference is made in this judgment to changes and/or amendments being made in a stated year without anything more, the reference is to the Finance Act of that year.) It is not in dispute that section 81, as interpreted by this Court as it stood prior to 2005, provided that if the provisional assessment was not finalized within the stipulated period, then the said assessment (which was invariably made on the basis of the declared value) became final. The question, and this is the crucial point requiring determination, is whether that is still the position post-2005. Learned counsel for respondent No. 2 would answer this question in the negative, and places strong reliance on the explanation in the substituted provisions--an explanation that was not to be found in the earlier provisions. Learned counsel for the petitioner would give an answer in the affirmative, and submits that in fact, this question has been so answered in the Rehan Umar case, and is part of the ratio decidendi of that decision. The first order of business is therefore to see whether and if so, to what extent, learned counsel for the petitioner is correct in this regard.

7. The goods declaration for the consignment imported in the Rehan Umar case was filed on 24-10-2005, and it was therefore the substituted section 81 that applied. It appears that the value declared by the importer was not accepted by the Department, and he was asked to deposit an additional amount by way of duty payable. The importer thereupon asked that his goods be provisionally released under section 81. He was however informed that his goods had already been assessed on the basis of a valuation advice, and his request for provisional release under section 81 was turned down. It was in these circumstances that the petitioner filed a petition before this Court. The Division Bench seized of the matter framed four questions that required determination, and it is only the third question that is presently relevant. This was framed in the following terms:--

"If the declared value in Bill of Entry/Goods Declaration is not acceptable to the appropriate officer and he is of the view that customs value cannot be determined under the provisions of subsection (1) of section 25 and resort is to be made to the methods provided in subsections (5), (6), (7), (8) or (9) and for that purpose further inquiry is required, an importer is entitled for release of goods under section 81 of the Customs Act, by provisional determination of liability, as a matter of right and not as a matter of concession within the discretion of the appropriate officer of the customs?" (pg. 923)

It will be seen that the question is narrowly focused. In essence, the question is whether, if the declared value is not accepted by the appropriate officer, the importer is entitled as of right to have recourse to section 81 and not merely as a matter of concession and at the discretion of the said officer. It was to answer this question that section 81 was considered. The Court examined in detail its various provisions, and also referred to the explanation. It then answered the question posed in the following terms:--

"It is therefore, held that if the declared value in the Bill of Entry/goods declaration is not acceptable to the appropriate officer of the customs department and the value cannot be determined under the provisions of subsection (1) of section 25 and resort is to be made to the other methods provided in section 25 of the Customs Act, then the importer is entitled for the release of goods under section 81 of the Customs Act, by provisional determination of the liability. The release of goods in such manner is a matter of right of importer and not a matter of concession within the discretion of appropriate officer of the customs." (pg 950)

In our view, it is quite clear that the question that falls for determination in the present case was not in. issue in the Rehan Umar case and in particular, did not fall within the ambit of the third question with reference to which section 81 was analyzed and interpreted. The reason is simple. In the present case, the question raised is post-provisional determination-how and in what manner does the provisional determination become the final determination on lapse of the stipulated period? The question posed and answered in Rehan Umar is pre-provisional determination-is an importer entitled as of right to have section 81 applied to his case if there is a valuation dispute? It is the answer to this question, and this question alone, which is the ratio decidendi of the decision (as presently relevant) and binding on subsequent Division Benches. Any other finding is only in the nature of an obiter dictum, which does not have binding effect. This is a well settled principle, and reference may be made to Irshad Ahmad Shaikh v. The State 2000 SCMR 814, where it was observed as follows:

"Now, every case is an authority, to the extent the same decides the legal controversy encompassed in it. In other words, the declaration of law has to be confined to the four corners of the dispute agitated before the Court. The rest, if any, is obiter and obiter, except of this Court or, before it, of the Privy Council is not/has not been binding." (pg. 822)

Accordingly, we are of the view that any observations made by the learned Division Bench in the Rehan Umar case with regard to the interpretation of section 81 once it has been applied, and goods are released in terms thereof, are only dicta and do not constitute binding authority. In the present context, we would also note in passing that the learned Judge (Mujeebullah Siddiqui, J.) who was the author of the decision in the Rehan Umar case was also party to, and author of the decision in, another Division Bench case reported as Khairpur Textile Mills Ltd. and others v. National Bank of Pakistan and another 2003 CLD 326. The Division Bench examined in detail the rules applicable to precedents, and in the course of the judgment, observed as follows:--

"...the law of precedent is a delicate one and before following a decision it is necessary to see as to what were the facts of the case in which the decision was given and what was the point which was to be decided. Too rigid observations to the precedent may lead to injustice in a particular case and also unduly restrict the proper development of the law. As it has been very aptly observed by Sir Henry Slessar, in his classical book 'The Art of Judgment', that the good Judges and lawyers should never be slave of the precedent, the precedent should be a guide and not a dictator." (para 39, pg 346)

We therefore now turn to consider the important questions of interpretation raised in the present petition with regard to section 81 and other applicable provisions.

8. As noted above, learned counsel for respondent No. 2 and the learned departmental representative, submitted that section 81 could not be read in isolation; it had to be understood and interpreted in conjunction with sections 79 and 80. We agree that these three sections need to be considered together. We propose to first examine these sections as they stood before the Finance Act, 2005, and then consider the post-2005 position. It is only in this way that the correct meaning will emerge, and the questions raised in the present petition be properly answered.

9. Section 79 of the Act, as presently relevant, was in the following terms prior to the Finance Act, 2005:--

(79) Entry for home-consumption or warehousing.---(1) The owner of any imported goods shall make entry of such goods for home-consumption or warehousing or for any other approved purpose by delivering to the appropriate officer a bill of entry or goods declaration thereof in such form and manner and containing such particulars as the Board may direct ..

It will be seen that section 79 merely required that the importer file the bill of entry or goods declaration for the imported goods. In particular, section 79 did not in any manner deal with the assessment of the goods, which was covered by section 80. This section (as presently relevant) was in the following terms:

(80) Assessment of duty.---(1) On the delivery of such bill, the goods or such part thereof as may be necessary may, without undue delay, be examined or tested, and thereafter the goods shall be assessed to duty, if any, and the owner of such goods may then proceed to clear the same for home-consumption or warehouse them, subject to the provisions thereinafter contained:

The important point to note is that under section 80, it was for the appropriate officer to assess the goods to duty. This assessment was done on the filing of the necessary documents and an examination and/or testing of the goods. If however, the goods could not be immediately assessed to duty because some test or further inquiry was required in relation thereto, they could be provisionally assessed under section 81. This section provided in its material terms as follows:

(81) Provisional Assessment of duty.---(1) Where it is not possible immediately to assess the customs-duty that may be payable on any imported goods entered for home-consumption for reason that the goods require chemical or other test or a further enquiry for purposes of assessment, or that all the documents of complete documents or full information pertaining to those goods have not been furnished, an officer not below the rank of Assistant Collector or Deputy Collector of Customs may order that the duty payable on such goods be assessed provisionally:

Provided that the importer ... pays such additional amount as security or furnishes such guarantee of a scheduled bank for the payment thereof as the said officer deems sufficient to meet the excess of the final assessment of duty over the provisional assessment.

(2) Where any goods are allowed to be cleared or delivered on the basis of such provisional assessment, the amount of duty actually payable on those goods shall be finally assessed within one year of the date of provisional assessment:

Provided that the Collector of Customs may, under circumstances of exceptional nature, extend the period for final assessment by not more than ninety days, after recording such circumstances.

(4) If the final assessment is not completed within the period specified in subsection (2), the provisional assessment shall become final.

Thus, goods were either assessed under section 80, or under section 81. Two points need to be kept in mind. Firstly, in either case, the assessment was by the appropriate officer concerned. Secondly, goods could be cleared only after there had been an assessment, either under section 80 or under section 81. The assessment under section 81 was in two stages. In the first instance, there was a provisional assessment (and the goods could be cleared after such an assessment). It is important to keep in mind that prior to this assessment, the goods had not been assessed at all. In addition to provisionally assessing the goods, the appropriate officer was also required, in terms of the proviso to subsection (1), to determine the additional amount which the officer deemed would be sufficient to meet any excess of the final assessment over the provisional assessment. This amount was to be secured by the importer, either by way of payment of the said amount or the furnishing of a bank guarantee. Subsection (2) provided that the final assessment had to be completed within one year from the date of the provisional assessment and crucially, subsection stated that if the final assessment were not completed within the stipulated period, the provisional assessment would become final.

10. Two further points need to be made before we proceed to consider sections 79 to 81 after their 2005 'substitutions. Firstly, it appears that a departmental practice evolved of releasing the goods under section 81 on the payment of duty and taxes on the basis of the "declared" value, and computing the additional amount required as security on the basis of a "provisionally assessed" value-the so-called "assessed value". It would seem that this terminology even came to be used in the case law. However, it is important to keep in mind that regardless of the terminology used in the eyes of the law, there was (and indeed, had to be) a provisional assessment of the goods, even if this assessment was based on the value declared by the importer. Equally, the amount required of the importer under the proviso to subsection (1) was simply the additional amount required by way of security, even if this amount was being computed on the basis of a so-called "assessed value". Secondly, as noted above, under both sections 80 and 81, the goods were assessed by the appropriate officer. The determination of the value of the imported goods is of course, central to the assessment exercise. It will be recalled that prior to the WTO system of valuation, goods were valued' under section 25 on the basis of the "normal price". This was a notional value, determined on the basis of the parameters laid down in section 25 as it -then stood. Obviously, since the "normal price" was a legal construct, it could not be determined by the importer, but had to be established by the appropriate officer, and therefore, all assessments, both provisional and final, were exclusively his domain. With these points in mind, we now turn to consider the statutory provisions in the post-2005 scenario. The sections are considered as they stood over the period during which the petitioner's consignments were imported, i.e., inclusive of the 2006 amendments, but prior to the 2007 (and subsequent) changes.

11. Section 79, as presently relevant, now provides as follows:

(79) Declaration and assessment for home consumption or warehousing.---(1) The owner of any imported goods shall make entry of such goods for home consumption or warehousing or for any other approved purposes, within fifteen days of the arrival of the goods, by,

(a)filing a true declaration of goods, giving therein complete and correct particulars of such goods, duly supported by commercial invoice, bill of lading or airway bill, packing list or any other document required for clearance of such goods in such form and manner as the Board may prescribe ; and

(b)assessing and paying his liability of duty, taxes and other charges thereon, in case of a registered user of the Customs Computerized System:...

It will be seen that section 79 has undergone a fundamental change. It now requires the importer to himself assess the imported goods, and in the case of goods being released under PACCS, to make payment of duty and taxes on the basis of such assessment. Thus, section 79 has introduced a system of self-assessment. No longer is assessment the exclusive preserve and function of the appropriate officer. Furthermore, the goods are assessed right from the very beginning, i.e., at the time of the filing of the goods declaration. These changes have naturally altered the role of the customs officer, and this is duly reflected in section 80, which, insofar as is presently relevant, now provides as under:

(80) Checking of goods declaration by the Customs.---(1) On the receipt of goods declaration under section 79, an officer of Customs shall satisfy himself regarding the correctness of the particulars of imports, including declaration, assessment, and in case of the Customs Computerized System, payment of duty, taxes and other charges thereon.

(3) If during the checking of goods declaration, it is found that any statement in such declaration or document or any information so furnished is not correct in respect of any matter relating to the assessment, the goods shall, without prejudice to any other action which may be taken under this Act, be reassessed to duty

As is clear from subsection (1), the primary role of the customs officer is now to check and satisfy himself as to the correctness of what the importer has declared and done, including the assessment, and in respect of goods cleared under PACCS, the payment of duty in terms thereof. It is only if the customs officer concludes during such checking that any statement has been made, or information or document furnished, that is not correct in relation to the assessment (which obviously, is the self-assessment by the importer) that he is empowered (under subsection (3)) to reassess the duty. The power of the appropriate officer is therefore not to assess, but to reassess. This is completely different from the pre-2005 position, when section 80 was the main section for the assessment, which was to be made by the customs officer alone. In our view, section 80 now contemplates two situations:--

(a)the customs officer is satisfied that the assessment (i.e., the importer's self-assessment) is correct, in which case the process is complete and stands concluded;

(b)the customs officer is satisfied that any statement, information or document in relation to the assessment (i.e., the importer's self-assessment) is not correct, in which case he has the power to reassess the goods.

In addition to the foregoing, there is also one situation which is implicit in subsection (3): what if it is not possible for the customs officer to complete the exercise of satisfying himself as to the correctness of the importer's self-assessment on the basis of the documents, statements and information at hand? This is of course the situation that is addressed by section 81, which also, in line with sections 79 and 80, stands substituted in its entirety.

12. Before proceeding to consider section 81, it is necessary to explore in some more detail the new system of self-assessment introduced by the 2005 changes. It will be recalled that the WTO system of valuation was enforced with effect from 1-1-2000, when section 25 stood substituted in its entirety. The earlier system of a notional "normal price" has been completely done away with. The cornerstone of the new system is that the customs value of imported goods is the transactional value, i.e., the price actually paid or payable for the goods by the importer. It is only if the transactional value cannot be determined that section 25 (read with the Customs Rules, 2001) set forth, in elaborate detail, alternative methods of valuation, which are to be deployed sequentially. Now it is obvious that the importer (of all people) knows, and should know, the transactional value, i.e., the price actually paid or payable, by him for the goods, and he is under a statutory obligation to properly "declare" this value. It is for this reason that the law has been able to shift the assessment process from assessment by customs officers, to self-assessment by the importer. The duty which the customs officers now have to perform has likewise undergone, a fundamental shift. Their task is no longer what it was under the previous scheme, which was to assess the goods to duty. It is now simply to determine whether the importer has correctly self-assessed. It is only if it is established that the importer has not correctly self-assessed the goods that the customs officer can step in and reassess the goods. It will be noted that the power of the customs officer to reassess under section 80(3) is only exercisable if he detects any incorrect statement, declaration or information "during the checking of goods declaration", and not otherwise. Section 81 must, in our view, be examined and interpreted while keeping the foregoing points in mind.

13. Section 81, as substituted by the Finance Act, 2005, now provides as follows:--

(81) Provisional determination of liability.---(1) Where it is not possible for an officer of Customs during the checking of the goods declaration to satisfy himself of the correctness of the assessment of the goods made under section 79, for reasons that the goods require chemical or other test or a further inquiry, an officer, not below the rank of Assistant Collector of Customs, may order that the duty, taxes and other charges payable on such goods, be determined provisionally:

Provided that the importer, save in the case of goods entered for warehousing, pays such additional amount on the basis of provisional assessment or furnishes bank guarantee or a post-dated cheque of a scheduled bank along with an indemnity bond for the payment thereof as the said officer deems sufficient to meet the likely differential between the final determination of duty over the amount determined provisionally;

Provided further that there shall be no provisional assessment under this section if no differential amount of duty and tax is paid or secured against bank guarantee or post-dated cheque.

(2) Where any goods are allowed to be cleared or delivered on the basis of such provisional determination, the amount of duty, taxes and charges correctly payable on those goods shall be determined within nine months of the date of provisional determination:

Provided that the Collector of Customs may in circumstances of exceptional nature and after recording such circumstances, extend the period for final determination which shall in no case exceed ninety days.

(3) On completion of final determination, the amount already paid or guaranteed shall be adjusted against the amount payable on the basis of final determination, and the difference between the two amounts shall be paid forthwith to or by the. importer, as the case may be.

(4) If the final determination is not made within the period specified in subsection (2), the provisional determination shall, in the absence of any new evidence, be deemed to be the final determination.

Explanation.---Provisional assessment means the amount of duties and taxes paid or secured against bank guarantee or post-dated cheque.

In our view, the opening words of subsection (1) are crucial for a proper understanding of the section. The exercise under section 81 is carried out if, "during the checking of the goods declaration", it is not possible for the customs officer to "satisfy himself of the correctness of the assessment of the goods made under section 79", i.e., the self-assessment made by the importer, because the "goods require chemical or other test or a further inquiry". The focus, as in section 80, is on whether the importer has correctly self-assessed. It is also to be noted that by the time (and if at all) section 81 becomes applicable, the goods have already been assessed to duty an exercise carried out by the importer under section 79. Again, this is completely unlike the situation prior to 2005. Then, the goods were, assessed for the first time when the customs officer made the provisional assessment under the section. It will also be seen that the term "provisional assessment", as now used in section 81, appears for the first time in the first proviso to subsection (1) and then also, only in relation to the "additional amount". In our view, the manner in which this term was previously used is quite different from the manner in which it is now being used. In the pre-2005 section, "provisional assessment" was an assessment stricto sensu. At the time of the provisional assessment (by the customs officer), there was no other assessment in the field. The goods stood assessed to duty only in terms of this assessment. Once the final assessment was completed, that became the assessment of the goods, but prior thereto, there was only one assessment in the field, i.e., the provisional assessment. Since this was the only assessment at the relevant time, the goods were released on the payment of duty in terms of this assessment. Of course, it was also necessary to consider the possibility that the final assessment to duty could be higher than the provisional assessment, and the interest of the State had to be appropriately secured. It was for this reason that the proviso to subsection (1) required the importer to provide an additional amount as security.

14. In the post-2005 scenario, the situation is completely different. There is already an assessment in the field-the importer's self-assessment under section 79. Until the customs officer is satisfied, on the basis of the test or the further inquiry under section 81, that the importer's self-assessment is incorrect, and thereupon exercises his power to reassess the goods, the former assessment continues to hold the field. In our view, a provisional assessment stricto sensu would be required only if the goods have not yet been assessed to duty-a situation that obtained prior to the 2005 substitutions, but is no longer true in the post-2005 scenario. It is for this reason that subsection (1) speaks of a "provisional determination" and not a "provisional assessment". The scheme of the Act is that there should be only one assessment of the goods at any given time. An assessment (whether provisional or final) properly so called (i.e., stricto sensu) is the ascertainment or fixing of the amount of duty or tax payable. It would therefore be wrong in principle for two or more assessments in respect of the same goods to be simultaneously in the field. Of course, the assessment in the field may be set aside and replaced by another assessment. But until that is done in accordance with law, it continues to be the assessment of the goods, and another assessment cannot, and ought not to be, as it were, piled on top of it. If and when section 81 is invoked, the importer's self-assessment is 2 already in the field, and the purpose of the proceedings thereunder is of course, to ascertain whether that assessment is correct. However, until this exercise is completed, it is the assessment. If in the meanwhile the goods have to be provisionally released (which, of course, is another of the purposes of section 81), it would be wrong in principle to pile another assessment on top of the importer's self-assessment, which would be the result if there were, to be a provisional assessment stricto sensu. In our view therefore the "provisional determination" to be made in terms of subsection (1) cannot be equated with a "provisional assessment".

15. If the foregoing analysis is correct, the obvious question that arises is, why then has the term "provisional assessment" been used in the first proviso? Why did not (e.g.) the first proviso simply replicate the language used in the pre-2005 version? And what is the purpose of the explanation? In our view, the answer to these questions lies in the context in which the term "provisional assessment" is being used in the first proviso. The proviso does not use the term "provisional assessment" in the sense of an assessment stricto sensu. What the proviso is concerned with is the determination of an "additional amount". This "additional amount" must be sufficient for a certain purpose, namely, to meet the "likely differential" of the final determination over the provisional determination. The proviso stipulates that this "additional amount" that is to be computed "on the basis of provisional assessment". The words emphasized provide the crucial context. They are key to a proper understanding of how the term is being used. The "provisional assessment" in the first proviso merely provides the statutory guideline ("the basis") for determining the "additional amount", and that is all. It serves no other purpose and has no other function. Of course, the next question that arises is why was "provisional assessment" chosen to serve as the "basis" for determining the "additional amount"? To answer this question, the exercise being carried out under section 81 needs to be considered in a little more detail. As noted above, the purpose of the exercise is to enable the customs officer to satisfy himself about the correctness of the importer's self- assessment under section 79. There are two possibilities. One is that the customs officer is satisfied that the self-assessment is correct. In that case, there is obviously no "additional amount" payable by the importer. The other possibility is that the customs officer concludes (on the basis of the test or further inquiry) that the self-assessment is incorrect. In that case, he is empowered to reassess the goods to duty. It is in this situation that the "additional amount" may become payable. Thus, the "additional amount" should be sufficient to meet the final liability of the importer if the goods have to be reassessed to duty. The law has considered the most appropriate basis for determining this "additional amount" to be a provisional assessment, and the reason for this is not difficult to discern. A provisional assessment, like the reassessment, is an exercise that is carried out by a customs officer, and involves the application of the same principles. Indeed, a provisional assessment can be regarded as a reassessment in miniature. A provisional assessment, properly carried out, can therefore lead to a computation of the "additional amount" that is closest to the "final determination" that would result from a reassessment, and would therefore best safeguard the interest of the State if the importer's self-assessment is found to be incorrect. It is for this reason, and in this sense, that the proviso uses the provisional assessment to provide the basis for determining the additional amount.

16. In our view therefore, a "provisional determination" and a "provisional assessment" under the post-2005 section 81 are different and cannot be equated. The purpose behind each is different, and that purpose can be ascertained by looking at section 81 as a whole and the context in which these terms are used therein. The provisional assessment under the proviso serves only as the "basis" for determining the "additional amount", and this is the reason why the explanation defines this term as meaning the "amount of duties and taxes paid or secured against bank guarantee or post-dated cheque". In Iqbal Pahore v. The State 2004 YLR 2136, a Division Bench of this Court observed as follows:--

"Normally, an explanation is added to a provision of law, where the Legislature is of the view that there is likelihood of an interpretation which is not in consonance with the intention of the Legislature or for the purpose of clarifying any ambiguity. It has been aptly said that normally an explanation does not contain a substantive legislation but is a note of caution by the Legislature to convey its intention and to prevent the substantive provision contained in a particular section from being interpreted in any other way." (pg. 2144)

In our view, that is precisely the role of the explanation to section 81. It is being used to clarify that the term "provisional assessment" is being used in the first proviso to subsection (1) not as it was used previously, i.e., an assessment properly so called, or stricto sensu, but rather in a different and more limited manner, as simply providing the basis for determining the "additional amount" required to be paid or secured by the importer.

17. It follows that in our view the "provisional determination" of the duty and taxes does not include the "additional amount" determined on the basis of the "provisional assessment". If therefore, the stipulated period lapses, and the provisional determination becomes the "final determination" by virtue of the deeming provision, that does not include the "additional amount". It is only if there is an actual "final determination" within the stipulated period that the "additional amount" becomes relevant and is adjustable in terms of subsection (3).

18. The exercise required to be carried out under section 81 has been examined in detail in the paras supra. For reasons that will presently become clear, this exercise needs also to be considered from another perspective. It is important to keep in mind that what the customs officer is statutorily required to do is satisfy himself that the importer's self-assessment is correct. He is not empowered to satisfy himself that the self-assessment is not incorrect. There is a substantive difference between these two formulations, and it is not merely a matter of a rearrangement of words. The difference lies in the approach that the customs officer is legally empowered to take. While the customs officer must exercise vigilance when examining the importer's self-assessment, he must not be over-zealous. He must look at the goods declaration and the documents and information supplied or statements made by the importer critically and not suspiciously-unless of course, on a critical examination, he finds something in there that legitimately arouses suspicion. The exercise under section 81 can be regarded as a two-stage process. First, the customs officer must satisfy himself whether the importer's self-assessment is correct. If he is so satisfied, then the matter. ends (and there is, e.g., no need for any "final determination"). If however, he is satisfied that the self-assessment is not correct, then (and only then) is he to move on to the second stage, i.e., reassess t e goods and make a final determination of the duty and taxes payable. I so far as valuation is concerned, this exercise must of course be carried out in accordance with section 25. What is of critical importance is that he cannot, and must not., reverse this process by, in effect, purporting to "assess" the goods himself (on whatever basis) and then, in the light of such "assessment", examine the importer's self-assessment, and the goods declaration and the documents and information supplied and statements made by the latter, to satisfy himself that they are not incorrect. As already noted, he has not the power to assess, but only to reassess, should the circumstances so warrant. Unfortunately, it appears from the cases that come regularly before the courts that the customs officers all too often adopt the latter, and not the former, approach. We would emphasize that it is, only the former approach that is lawful, being based on the statutory powers conferred on the customs officers. The latter approach is unlawful and impermissible. As shall be seen presently, the foregoing observations have a direct bearing on the case at hand.

19. As noted above, it was contended by learned counsel for respondent No. 2 that the period of nine months for completion of the final determination under subsection (2) was properly extended by further ninety days pursuant to the proviso thereof. Now the proviso applies only if both the conditions stated therein are fulfilled, i.e., (a) there are circumstances of an "exceptional nature", and (b) the Collector has recorded those circumstances. The onus lies on the Department to show that these conditions have been complied with. In the present case, nothing was shown to us that would establish that these conditions had been complied with. Our attention was drawn to a noting in the relevant file, which lists a number of cases received from different collectorates in which the stipulated period was about 'to expire, and to which noting the Director (Valuation) simply appended his signature. It appears that an extension was given simply because it was reported that the stipulated period was close to expiry. However, the mere fact that the stipulated period of nine months is about to expire is not, in and of itself, a circumstance of an "exception nature". Furthermore, it is apparent that the order relied upon was passed in a mechanical manner on an omnibus request made in respect of a number of consignments/cases. Thus, there was not, and could not be, any recording of the exceptional circumstances as required by the proviso. We may note that the purpose behind requiring the Collector to record the exceptional circumstances which warrant extension of time is clearly to ensure that the Collector has applied his mind to the relevant facts of each case, and made his decision on a proper consideration of the same. An omnibus request, assented to in a mechanical manner, is no compliance with the requirements of the proviso to subsection (2). In our view therefore, the stipulated period was not extended as required by law, with the result that the period in each case lapsed on the expiry of nine months.

20. Since the foregoing analysis is sufficient to dispose of this petition, we do not consider it necessary to examine the other ground taken by the petitioner. We have however recorded the same so as to enable the petitioner to take it up, if so deemed appropriate, should this matter proceed to a higher forum. However, we would note that action under subsections (2), (3) or (3A) of section 32, and subsection (2) of section 32A is only warranted if there has been any short levy or short recovery of duty and taxes. If the provisional determination has become the final determination by virtue of the deeming clause (i.e., on lapse of the stipulated period), then obviously, there has been no such short levy or recovery, since duty and taxes on the basis of the provisional determination have already been paid. In such circumstances, issuance of a notice under the foregoing provisions would not be warranted.

21. The respondent No. 2 has, along with the counter affidavit/para wise comments, annexed a letter dated 1-9-2008 that was received by the said respondent from the office of the respondent No. 3 (the Director General Valuation). This letter purports to explain the basis on which the matter was finalized in respect of the petitioner's four consignments. As regards the second, third and fourth consignments, it is noted that the stipulated period was extended by ninety days, and the matter finalized within the extended period. We have already held that the extension was not in accordance with law. Hence, in respect of these consignments, the stipulated period expired without there being a final determination, with the result that the provisional determination became final by virtue of the deeming provision. Duty and taxes in respect of these consignments were therefore payable as per the provisional determination, i.e., on the basis of the declared value. As regards the first consignment, the letter aforementioned states that the final determination was made within (and indeed, on the last day of) the stipulated period. The letter records that the petitioner was electronically issued a number of notices, but no one appeared to "contest" the assessment. The letter then records: "The case was electronically retrieved by the Collectorate for encashment of PDC [post dated cheque] to avoid the case from becoming time barred. Assessment was therefore finalized under section 81(4) of the Customs Act, 1969". It is quite clear from this description that the Department failed to carry out the exercise under section 81 as required by law, and in particular, in terms as described in para. 18 supra. The Department had its own "assessment" in mind and was satisfied on the basis of this "assessment" that the petitioner's self-assessment was incorrect. Since the stipulated period was about to expire, it then made a "final determination" on this basis. For the reasons already given, this approach was legally incorrect and impermissible. The Department had not the power .to assess, but only to reassess. And this power was exercisable only on a proper satisfaction (i.e., determination) that the petitioner's self-assessment was not correct. Therefore, in our view there was no "final determination" within the meaning of law within the stipulated period even in respect of the first consignment, with the result that the provisional determination in this case also must be deemed to have become final.

22. Accordingly, we hereby declare that as a matter of law and on the proper. interpretation of section 81, the "additional amount" computed on the basis of a "provisional assessment" in terms of the first proviso to subsection (1) is not included in the "provisional determination" on the basis of which the goods are provisionally released. If the final determination is not completed within the stipulated period, then the provisional determination becomes final, and this does .not include the "additional amount". In the facts and circumstances of the present case, we hold that the stipulated period was not extended in terms of the proviso to subsection (2), and hence expired at the end of nine months. Since there was no final determination within the nine months, the provisional determination became final. Furthermore, since the petitioner had discharged its liability in terms of the provisional determination, no other amount was payable by it, with the result that any cheques given by the petitioner for securing the "additional amount" cannot be encashed and must be forthwith returned to it by the Department.

23. The petition and listed application stand disposed of in the above terms.

M.H./S-105/KOrder accordingly.