SHAHID MUHAMMAD SWABI VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2012 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1513 (2012)

Pakistan Customs Tariff, 2011-12---

---Heading 87.02 & 87.03---Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10(4) & 9(2)(b)---Complaint against non-refund of additional amount of duties and taxes collected by the Customs due to alleged arbitrary classification of a limousine-car under Pakistan Customs Tariff, heading 87.03 instead of 87.02---Jurisdiction of the Federal Tax Ombudsman to investigate said complaint---Scope---Contentions of the complainant were that he imported the limousine car in question and filed Goods Declaration at the dry port, where the Customs instead of accepting the declared classification under Pakistan Customs Tariff, heading 87.02 (chargeable to 20% duty), arbitrarily determined classification under heading 87.03, chargeable to 100% customs duty and 50% regulatory duty, and that the Customs disregarded an earlier ruling of the Classification Committee and the recommendation of the Federal Tax Ombudsman Secretariat in a previous complaint---Validity---Reading of Pakistan Customs Tariff heading 87.02 and 87.03 was indicative of lack of clarity in the two headings---Office of the Federal Tax Ombudsman had already directed the Federal Board of Revenue to remove the said confusion through addition of an appropriate amendment/explanation in the Pakistan Customs Tariff Code---Although the matter of classification fell under S.9(2)(b) of the Federal Tax Ombudsman Ordinance, 2000, but the issue with which the office of the Federal Tax Ombudsman was seized of was lack of clarity under classification headings 87.02 and 87.03, leading to avoidable confusion/litigation---Federal Tax Ombudsman recommended the Federal Board of Revenue to decide the matter of classification of the limousine car in question as per law, and to consider setting up a separate Classification Directorate, on the pattern of Valuation Directorate, to make the classification rulings more authoritative and binding for all Customs stations across the country or to alternatively entrust classification disputes to the Valuation Directorate.

Yasin Tahir, Senior Advisor Dealing Officer.

Rana Munir Hussain and Ijaz Baig, Special Attorney Authorized Representatives.

Ms. Kanwal Ali, AC Customs, Peshawar and Javaid Iqbal, Appraiser Customs Departmental Representatives.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE (FEDERAL TAX OMBUDSMAN).---The complaint is against non-refund of additional amount ofduties and taxes collected by the Peshawar Customs, due to alleged arbitrary classification of the Chrysler limousine under PCT heading 87.03.

2.The complaint was referred for comments to the Secretary, Revenue Division, in terms of section 10(4) of the FTO Ordinance, 2000. In response, the FBR forwarded para wise comments vide letter C.No.1(1318)S(TO-II)/2011 dated 2-1-2012.

3.During the hearing, the AR stated that the complainant imported the limousine and filed Goods Declaration (GD) dated 1-11-2011 at Peshawar Dryport. However, instead of accepting the declared classification under Pakistan Customs Tariff (PCT) heading 87.02 (chargeable to 20% duty), the Customs arbitrarily determined its classification under PCT heading 87.03 chargeable to 100% Customs duty and 50% regulatory duty. In so doing, the Customs disregarded the ruling of the Classification Committee, Karachi, issued vide CC-20/ 2011(A) dated 17-9-2011 and the recommendation of FTO Secretariat in Complaint No.79/ISD/Cus(16)/818/2011 dated 13-12-2011.

4.Controverting the AR's averments, the DR stated that the Classification Committee's ruling was advisory and not mandatory. Moreover, the World Customs Organization (WCO) had classified limousines under heading 87.03 of the Harmonized Commodity Description and Coding System (HS) as follows:--

"87.03 Motor cars and other motor vehicles principally designed for the transport of persons (other than those of heading 87.02), including station wagons and racing cars.... The heading also includes:

(i)Motor cars (e.g. limousines, taxis, sport cars and racing cars."

5.According to the DR, the Customs General Order (CGO) No.12 of 2002 dated 15-6-2002 specifies the classification methodology vide Serial No.22(b) of the table appended to paragraph 03 stipulating that luxury vehicles originally designed by the manufacturer for less than 10 seats (inclusive of the driver's seat) would be classified under heading 87.03.

6.As regards the Hon'ble FTO's Findings in Complaint No.79/ISD/Cus(16)/818/2011 dated 13-12-2011, the DR stated that the limousine involved in that case was also classified under PCT heading 87.03, as per law. The DR contended that challenging the Classification Committee's decision by the Customs at Peshawar was neither contrary to the Hon'ble FTO's aforesaid Recommendations nor did it involve any maladministration in terms of section 2(3) of the FTO Ordinance, 2000.

7.The DR further contended that the complaint was hit by limitation of section 9(2)(b) of the FTO Ordinance, 2000, as it involved a classification issue.

8.The complaint has been examined in the light of the written and oral submissions of the parties. The classification heading 87.02 reads as follows:--

"87.02 Motor Vehicles for the transport of ten or more persons, including the driver"

This heading covers all motor vehicles designed for the transport of ten persons or more (including the driver). (emphasis added)

A plain reading of PCT heading 87.02 and 87.03 is indicative of lack of clarity in the two headings. The FTO Office has already directed the FBR, being the final authority on classification, to remove this confusion through adding an appropriate amendment/explanation in the PCT Code, as three such cases have already been referred to the FTO Office.

Findings:

9.Though the matter of classification falls under section 9(2)(b) of FTO Ordinance, 2000, the issue the FTO Office is seized with is lack of clarity under classification headings 87.02 and 87.03, leading to avoidable confusion/litigation.

Recommendations:

10.FBR to-

(i)decide the matter of classification of the impugned vehicle, as per law; and

(ii)consider setting up a separate Classification Directorate, on the pattern of Valuation Directorate, to make the classification rulings more authoritative and binding for all Customs stations across Pakistan. Alternatively, the classification disputes also be entrusted to the Valuation Directorate.

M.W.A./112/FTOOrder accordingly.