DAWLANCE ELECTRONICS (PVT.) LTD. VS COLLECTOR OF CUSTOMS, COLLECTORATE OF CUSTOM, KARACHI
2012PTD980
2012PTD980
[Sindh High Court]
Before Muhammad Athar Saeed and Irfan Saadat Khan, JJ
Messrs DAWLANCE ELECTRONICS (PVT.) LTD. through Director
versus
COLLECTOR OF CUSTOMS, COLLECTORATE OF CUSTOM, KARACHI
Special Customs Reference Applications Nos.150 of 2010 to 158 of 2010, decided on 04/06/2011.
(a) Customs Act (IV of 1969)---
----S.81(2)---Extension of time sought through letter only signed by Collector---Validity---Nothing was written on such letter to show that Collector had approved extension sought thereby---Such extension was not in accordance with law.
PSO v. Collector of Customs 2006 SCMR 425 and Flying Board; Paper Products v. Deputy Collector of Customs 2006 SCMR 1648 and Collector of Customs v. Auto Mobile Corporation 2005 PTD 2116 ref.
Sus Motors (Pvt.) Ltd. v. Federation of Pakistan and others 2011 PTD 235 rel.
(b) Customs Act (IV of 1969)-
----Ss.81 & 196---Reference---Jurisdiction of High Court---Scope--Question as to whether order of final assessment under S.81 of Customs Act, 1969 had been passed within period of limitation for being question of law and not of fact could be decided by High Court' despite decision of three lower forums.
Najeeb Jamali for Applicants.
Raja Muhammad Iqbal for Respondent.
Dates of hearing: 18th. May and 1st June, 2011.
JUDGMENT
MUHAMMAD ATHAR SAEED, J.---These Reference Applications filed against the order of the Tribunal dated 29-7-2010 in C.As. Nos.34/KB/10 to 42/KB/10, the following questions, said to be arising out of the order of the Tribunal, have been proposed for the opinion of this Court:-
(a) Whether the transaction value of the goods declared by the importer under section 25(1) of the Act, can be ignored/rejected by the department without giving specific reasons?
(b) Whether such rejection is in violation of Rule 109 of the Customs Rules, 2001?
(c) Whether under Rule 109(1), if the appropriate officer had reason to doubt the truth or accuracy of the particulars or documents produced in support of the declaration, such officer is required to ask the importer to provide further explanation, including documents or other evidence?
(d) Whether the Demand cum Show-Cause Notice dated 5-3-2007 was issued without giving an opportunity of hearing to the Appellant and the demand was finalized in blatant violation of Rule 109 of Customs Rules, 2001?
(e) Whether the provisions of section 25 of the Act are not to be followed sequentially and without an exercise in writing on record under each subsection before finalizing the assessment of goods or before having a recourse to section 81 of the Act for assessment?
(f) Whether the department erred in law in finalizing the assessment, under section 81 of the Act, of Split Air Conditioners, without first following the provisions of Section 25 of the Act?
(g) As the Director of Valuation had himself observed that the values were only indicative in nature and had directed that the cases may be finalized strictly in accordance with the provisions of section 25 of the Act then, in such circumstances, the indicative prices could be adopted in complete ignorance of section 25 of the Act?
(h) Whether the listed prices which are only indicative in nature (i.e. not being a valuation advice) are not binding on the department, especially where the letter of indicative prices itself directs that the provisions of section 25 of the Act be followed?
(i) That the comments filed by the respondent states that the assessment is covered under section 25(7) and it was never argued by the respondent before CESAT that value could not be determined under section 25(7) and it was never argued by the respondent before CESAT that value could not be determined under section 25(7). It was, therefore, determined under section 25(8). In such circumstances, whether the order of CESAT based on several imaginary arguments (reproduced therein, but never agitated by the respondent at .the time, of oral arguments or in his comments) is sustainable in the eyes of law?
(j) Whether the market inquiry conducted by the representative of the department in presence of the representatives of the Directorate of Valuation and the Chamber of Commerce and Industry under section 25(7) i.e. work-back method (which shows less price than declared by the appellant) can be rejected without cogent reason?
(k) Whether the letter dated 20th April, 2006, where the Director General Customs Valuation and PCA has suggested 8% increase in values of goods for China origin, is self-contradictory, arbitrary and fictitious and hence contrary to Rule 110 of the Customs Rules, 2001?
(l) Whether the Demand cum Show-Cause Notice dated 5-3-2007 of the final assessment was barred by limitation under section 81(2) of the Act?
(m) Whether in the facts and circumstances of the case the Collector of Customs had any lawful authority to extend the period of limitation under section 81(2) for final assessment and in particular without recording reasons?
(n) That the provisional assessment made under section 81, if not finalized within the stipulated limitation period then will the Customs department still be entitled to retain/encash the differential amount secured through bank guarantee or post dated cheque?
Vide application for amendment, the following further question has been raised:--
"(Q) Whether the impugned order of CESAT dated 29-7-2010 is not in accordance with and contrary to the directions issued by the Hon'ble Court vide its under dated 25-1-2010?"
These orders have been passed after this Court had set aside the earlier order of the Tribunal and remanded the case back in Customs Reference Applications Nos.3 to 10 and 12 of 2009 vide its order dated 25-1-2010 to decide the Appeals by placing it before an appropriate Bench and also dilate upon the following questions of law:--
(l) Whether the department while dealing with the goods under question has applied the provisions of Section 25 of the Act, read with Rule 109 of the Customs Rules in its true spirit by fulfilling all the legal requirement as envisaged under the law in this regard?
(2) Whether the department while dealing with the goods under question has applied the provisions of Section 81 of the act in its true spirit by fulfilling all the legal requirement as envisaged under the law in this regard?
Brief facts of the case, as narrated by the applicant, are that the applicant is engaged in the manufacture, import and export of electronic household goods and in the normal course of business into a contract for import of Split Air Conditioners, Model DAC-195CT3G (18000 BTU) as the price of US $ 197.86 per unit. The consignments reached Karachi in various shipments between 29 April, 2006 to 15 May, 2006 and the applicant filed bills of entries for clearance thereof on declared transaction value of the goods, however, the respondents refused to clear the goods on the transaction value and allowed the clearance of the goods provisionally under section 81 of the Customs Act, 1969 at a higher price. The differential amount was secured by receiving post-dated cheques. The Director of Valuation and PAC by its letter dated 20 April, 2006, communicated the respondent indicative value for Split Ai Conditioners which was in complete disregard of provisions of section 25 of the Customs Act. The 'applicant and other importers of Split A/cs protested against the fixation of the indicative value as according to them the same has been fixed in clear violation of section 25 of the Act and on account of this protest it was decided by the Directorate of Valuation to conduct a' fresh joint local market enquiry in the matter on 5th June, 2006. During the market enquiry, in presence of representative of Federation of Pakistan Chamber of Commerce and Industry and the representative of the respondent, it was found that the transaction value declared by the applicant was in accordance with the value declared on the bills of entry and, on this basis, the applicant requested the respondent to accept the transaction value but the Directorate General of Valuation vide its letter dated 12 February, 2007, directed the respondent to finalize the value of goods cleared under section 81 of the Act in accordance with the indicative value report dated 20-4-2006. Against this the applicants filed a constitutional petition before this Court which was disposed of with the direction to the respondent not to encash the post-dated cheques without passing a final order under section 81 of the Customs Act, 1969. After the disposal of this petition a show-cause notice dated 5th March, 2010 was issued by the respondents to the applicants stating therein that the goods imported by the applicant in the above case were cleared under section 81 of the Customs Act against post-dated cheques and the applicant was directed to show cause as to why the value of the Air conditioners may not be fixed at US $ 221 per unit in accordance with the directives of the Director Valuation and PCA, Customs House, Karachi. The applicant responded to the notice but finally order under section 81 of the Act was passed on 16-5-2007 against which the applicant filed an appeal before the Collector (Appeals) which was dismissed. Being still aggrieved the applicant filed appeals before the Tribunal which were dismissed by the Tribunal also vide its order dated 22-12-2008 against which the applicant filed reference applications before us. This Court, vide its order dated 25-1-2010, remanded the matter back to the Tribunal with directions to place the matter before the Chairman of the Tribunal to form a Bench comprising either of Member Judicial or a Member Judicial and a Member Technical and the said Bench should decide all the appeals in accordance with law within a period of 90 days from the formation of the Bench. The Court also directed the Bench that the said Bench while deciding the appeals should consider and dilate upon amongst others, the following questions of law:--
(1) Whether the department while dealing with the goods under question has applied the provisions of section 25 of the Act, read with Rule 109 of the Customs Rules in its true spirit by fulfilling all the legal requirement as envisaged under the law in this regard?
(2) Whether the department while dealing with the goods under question has applied the provisions of section 81 of the act in its true spirit by fulfilling all the legal requirement as envisaged under the law in this-regard?
The Tribunal constituted a Bench in accordance with the direction of this Court and passed the impugned order deciding both the questions in favour of the respondent and against the applicant. Hence these reference applications.
We have heard Mr. Najeeb Jamali, learned counsel for the applicant and Mr. Raja Muhammad Irshad, learned counsel for the respondent.
Mr. Najeeb Jamali, the learned Counsel for the applicant submitted that the applicant is an importer of Split Air-Conditioners and had imported 09 consignments of ACs from China. He showed us copies of the, bills of entries along with goods declarations from which he clarified that the value was declared at US$ 197.86 per unit. According to the learned counsel these imports were made from 29th April 2006 to 15th May 2006 and at that period of time there was already an Indicative Values Report dated 20th April, 2006 prepared by the Director, Directorate of Customs Valuation and PCA, Customs House, Karachi. He took us through this Indicative Values Report, which according to him was worked out on the basis of Work Back Method and showed us that on this basis the value of his import came to US$ 190.96 per' unit whereas value of some other Split ACs of other companies came to US$ 260, 280, 267, 262.18 and some of Split ACs were valued at US$ 187.75 and US$ 171.40. The Director, Directorate of Valuation instead of valuing the split ACs at the value, which have been arrived at by work back method in the case of individual import, arrived at a general indicative value of US$ 221 per unit which according to the learned counsel means that the importers whose indicative value was much more than US$ 221 have been benefited and other importer, including him, whose indicative value was much less than US$ 221 have been burdened with extra valuation. He then took us to the second last paragraph of this report where the Directorate had advised that the cases of assessment of imported goods may be finalized in terms of the provisions of section 25 of the Customs Act 1969. The learned counsel then submitted that the goods were released under section 81 of the Customs Act, 1969 on 29-5-2006 onwards on deposit of postdated cheques and according to him as per joint inquiry report which was conducted on work back method his value which had already been worked out in the indicative values report, was US$ 191 per unit. The learned counsel then took us through the impugned show-cause notice, impugned order-in-original, impugned order-in-appeal and impugned order passed by the learned Tribunal and pointed out that the demand-cum show-cause notice was issued on 6-3-2007 that is after the period provided under section 81(2) had elapsed and the order-in-original was finalized according to the date available in the order on 16-5-2007 but the date of issue of such order is 17-7-2007, which means that it was issued after the period of limitation. The learned Counsel then referred to para 9 of the order of the Collector (Appeals) in which it has been mentioned that before the expiry of prescribed period the Collectorate obtained extension of 90 days from the Collector of Customs on 26-1-2007 as required under subsection (2) of section 181 of the Customs Act, 1969, and produced noting side of the file, which confirmed his contentions. The learned counsel relied on Judgment of this Court in the case of SUS MOTORS (PVT.) LTD. v. FEDERATION OF PAKISTAN AND OTHERS reported in 2011 PTD 235 and specifically referred to paragraph 19 where the Court had held that "an omnibus request, assented to in a mechanical manner, is no compliance with the requirements of the proviso to subsection (2)" and this Court has held that "the stipulated period was not extended as required by law."
At this juncture, we asked Mr. Raja Muhammad Iqbal to produce before us the letter granting extension of time granted by the Collector under section 81(2) of the Customs Act, 1969. In compliance to these directions, Mr. Raja Muhammad Iqbal has produced such letter which is reproduced in toto as under:--
"(15) In view of the above, further extension of 90 days may kindly be granted under section 81(2) of the C.A. 1969.
(16) Same action and orders are solicited in linked identical cases of identical importers and in identical cases:
S. No.????????????? File No.
(1) ?????? VB/44/2006/PQ
(2) ?????? VB/45/2006/PQ
(3) ?????? VB/50/2006/PQ
(4) ?????? VB/51/2006/PQ
(5) ?????? VB/52/2006/PQ
(6) ?????? VB/53/2006/PQ
(7) ?????? VB/54/2006/PQ
(8) ?????? VB/58/2006/PQ
17. Submitted please.?????????????? Sd/- Tqriq Aziz (Appraising Officer)
Sd/- (ACP),???? Sd/- Addl/ Collector,??????????????? Sd/- Collector
26.1???????????????? 25-1-2007?????????????????????????????? 26-1-2007"
A perusal of the above letter reveals that it is basically an application for grant of extension of 90 days but it has only been signed by the Collector but nowhere it is written that the Collector has approved the 90 days' extension. However, Mr. Raja Muhammad Iqbal insisted that this is the routine manner in which extension are granted and the Tribunal has rightly held that extension was granted in accordance with law and, therefore, upheld the orders in adjudication. We asked Mr. Raja Muhammad Iqbal to satisfy us that the above extension is in accordance with the judgment of this Court in Sus Motors reported in 2011 PTD 235. He submitted that he has challenged the judgment in the Sus Motors case before the Hon'ble Supreme Court but conceded that so far neither leave to appeal has been granted nor the impugned judgment has been suspended. He, however, wanted to satisfy this court that despite the judgment in the Sus Motors case this Court still has the discretion to extend time for passing the order. Learned counsel in this connection relied on the judgment of the Hon'ble Supreme Court in the case of PSO v. Collector of Customs (2006 SCMR 425) wherein the Hon'ble Supreme has held that factual inquiry was essential to ascertain the nature of transaction and to determine the commencing date for the purpose of calculation of the period for giving show-cause notice under section 32(1) and (2) of the Act and that such a question shall be considered as a question of fact and not as a question of law to be heard and decided by the High Court under section 196 of the Customs Act. The learned counsel also argued that the fixing of the valuation has to be done by the Authorities and not by the High Court and in this connection relied on a judgment of the Hon'ble Supreme Court in the case of Flying Board and Paper Products v. Deputy Collector of Customs (2006 SCMR 1648). Mr. Raja Muhammad submitted that the show-cause notice issued on 5-3-2007 was specifically an order under section 81(4) of the Act and was not time barred. He also relied on various judgments in support of his contentions that once the forums below have decided a question of fact this High Court, in its advisory jurisdiction under section 196 of the Act, cannot adjudicate on the factual finding and decide a question of fact. The learned counsel also submitted that the order under section 81 of the Act was passed on the instructions of this Court, and, therefore, relied on a judgment of the Hon'ble Supreme Court in which it has been held that wherein an order has been passed on the directions of the High Court then the limitation provided under section 81(2) shall not apply. He, therefore, supported the impugned Order of the Tribunal and prayed that these special customs reference applications may be dismissed.
We have perused these reference applications in the light of the arguments of the learned counsel and have carefully perused the judgments relied upon by them and examined the impugned order.
The Tribunal, on the basis of the directions issued vide the Order of this Court, has stated in the initial paragraph of the Order that the High Court had remanded the applications to the Tribunal to decide the appeals after dilating upon the following questions of law:
Whether the department while dealing with the goods under question has applied the provisions of section 25 of the Act, read with Rule 109 of the Customs Rules in its true spirit by fulfilling all the legal requirements as envisaged under the law in this regard?
(l) Whether the department while dealing with the goods under question has applied the provisions of section 81 of the Act in its true spirit by fulfilling all the legal requirements as envisaged under the law in this regard?
(2) The Tribunal, after elaborate discussion, gave its findings on the above questions as under:--
"(15) After hearing arguments of both the parties, it is observed that the appellant himself opted for provisional assessment under section 81 of the Customs Act, 1969 and goods were accordingly released after obtaining post dated cheques from the appellant. The cases were referred to Director General (Valuation), Customs House, Karachi for determination of assessable customs value of subject goods. The exercise undertaken by the Director General (Valuation) Customs House, Karachi was lengthy and proceedings could not be finalized to the stipulated period, hence, extension in time as provided in law was sought which was duly granted by the competent authority i.e. Collector Customs. Admittedly the appellant sought adjournment from the officer of original jurisdiction and total sixty days adjournments were sought by the appellant. The detail of adjournments sought by the appellant has also been filed by the respondents.
(16) Apart from the factual position, regarding final determination under section 81(2) of Customs Act, 1969, explanation to section 81(4) states in clear terms that provisional assessment means, the amount of duties and taxes paid or secured against the bank guarantee and post dated cheques.
(17) At the face of it, it is evident that provisions of section 81(2) of the Customs Act, 1969 have been complied with and final assessment has accordingly been made. Even otherwise, section 81(4) of the qua Act provides that provisional assessment is deemed to be final assessment, if final assessment is not made with in the statutory time limit as provided in section 81(2) of qua Act. It is a matter of coincidence that final and provisional value assessed is the same.
(18) In the light of the above stated legal and factual position and after conscious application of mind and giving our anxious thoughts, we are of the opinion that both the questions as have been referred to this Tribunal by the Hon'ble Sindh High Court at Karachi relating to application of provisions of section 25 and section 81 of the Customs Act, 1969 in true letter and spirit by the respondents have been applied with in the force-corners of provisions of law and the valuation as determined has been made in consultation with all the stake holders as the valuation is applicable to all the split air-conditioner industry and uniformity is duly maintained."
From the perusal of the above quoted paragraphs it is evident that the Tribunal has held that the extension was properly granted and since the appellant had also sought adjournment from the Officers of the Original Jurisdiction, therefore, the orders under section 81 were finalized within the stipulated time. The Tribunal has, however, failed to examine the letter by which the extension was granted. The Tribunal has also held that regarding final determination under section 81(2) of the Customs Act, 1969, explanation to section 81(4) states in clear terms that provisional assessment means, the amount of duties and taxes paid or secured against the bank guarantee and post dated cheques. We have noted that the decision of the Tribunal is against the specific decision of this Court in the case of Collector of Customs v. Auto Mobile Corporation reported in 2005 PTD 2116 wherein this court had held that where final assessment is not finalized within the stipulated period then the provisional assessment made by the Customs Authorities in terms of section 81(1) of the Act will attain finality on the basis of declared value of goods by the assessee and not in any other manner. This judgment was binding on the Tribunal but has been ignored' by the Tribunal. Even otherwise both the observations of the Tribunal, while deciding the question of limitation as to whether the final order under section 81 was time barred or not have recently been decided by this Court in the case of Sus Motors (quoted supra) whereby this Court, after exhaustive dilation on the provisions of Customs Act and the judgments came to the same conclusion as held in the case reported as 2005 PTD 2116 on the point of effect of non-passing of the final order under section 81 of the Customs Act. As far as extension of time was concerned, the Court has held as under:--
"(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."
From an examination of the letter of extension, which has been provided to us, we have seen that the present case is even on a better footing than the Sus Motors case because in this letter even approval has 1 not been prima facie accorded by the relevant Collector and he has just signed the application for extension. We would also like to state that the observations in para 19 of the judgment in Sus Motors case have been followed with approval by the Hon'ble Supreme Court in Civil Appeals Nos.283 and 284 of 2010 by its judgment dated '1-4-2011 wherein the Hon'ble Supreme Court, after reproducing para 19 of the Sus Motors case, held as under:
"(7) In the case in hand, we find that the order of extension passed by the Collector did not satisfy the parameters laid down in proviso to section 81(2) of the Customs Act to which reference has been made above. In the afore-referred circumstances, we find the impugned judgments of the High Court to be exceptionable -[unexceptionable]. Finding no merit in these appeals, these are dismissed with no order as to costs."
We are, therefore, of the considered view that Mr. Raja Muhammad Iqbal, although making a number of arguments and relying on a number of rulings, has not been able to satisfy us that the final order under section 81 of the Act has been passed within the stipulated time and the extension fulfilled the requirement which were prescribed by this Court in the Sus Motors case and, therefore, we are of the considered opinion that only on this point we can dispose of the above reference applications. We are also of the considered view that the question whether the final assessment under section 81 of the Act has been passed within the period of limitation is a question of law and not of fact and can be adjudicated by this Court despite the decision of the three lower forums. The judgments relied upon by the learned counsel for the respondents are distinguishable and some of them have no nexus with this case. We would also like to clarify that the order under section 84 of the Act has not been passed under our instructions but a provisional order under section 81 had been passed before filing of these reference applications and we had only directed that the post dated cheques may not be encashed till passing of final order under section 81 in accordance with law. We, therefore, refrain from answering any question proposed by the applicant and reframe the following questions to be answered by this Court:
(l) Whether the final order passed by the Tribunal was passed during the period of limitation provided under section 81 of the Customs Act?
(2) Whether the extension granted by the Collector was in accordance with provisions of section 81(2) of the Customs Act and is in accordance with law?
We answer question No.1 in the affirmative and Question No.2 in negative and in favour of the applicant and against the respondent, consequently, all these reference applications are allowed as above.
A copy of this judgment may be sent to the Registrar, Customs Tribunal to pass an order in consonance with the order of this Court.
S.A.K./D-1/K????????????????????????????????????????????????????????????????????????????????????? Order accordingly.