FACO TRADING VS MEMBER, CUSTOMS, FEDERAL BOARD OF REVENUE, 2013 PTD-ISLAMABAD 825 (2012)

Customs Act (IV of 1969)---

----Ss. 25 & 25-A---Constitution of Pakistan, Art. 199---Constitutional petition---Determination of customs value of goods---Adoption of the "Fallback method"---Scope---Petitioners impugned valuation order passed by Director Valuation on the ground that same was not according to law---Contention of the petitioners was that customs officials were obligated to assess valuation on basis of transactional value/declared value of goods, however, if they were prepared to accept the same, then under S. 25-A of the Customs Act, 1969 valuation could be determined after following the sequential method laid down in S.25 of the Customs Act, 1969, and that Customs authorities were bound to give reasons for selecting the fallback method and not the other methods of valuation---Validity---Valuation officer presently, may adopt any method provide in S. 25 of the Customs Act, 1969, however the same did not mean that valuation officer had unfettered powers to adopt any method on basis of pick and choose and had to keep in view the interest of the importer as well---Valuation officer had the discretion to follow any method provided in the subsections of S. 25 of the Customs Act, 1969 however, the method adopted must not be to the detriment of the importers and for the purpose of excluding other methods, reasons must be given---Reasons were also to be given for adopting a particular method so that it became clear to the importer that the order of valuation was in the public interest and not to his detriment---Under S. 25(9) Customs Act, 1969 criteria had been given to adopt the "fall back method"and if the said method is adopted, reasons must be given as to why customs value could not be determined under the other methods---Reasons given, in the present case, for the adoption of the "fall back method" were in violation of S. 25(9) of the Customs Act, 1969 asthey were based on presumption as prices taken into consideration were taken from the internet and no reasons were given as to how value of goods could not be determined under any other methods given in S. 25 of the Customs Act, 1969 that made recoursetoS. 25(9)oftheCustomsAct,1969 necessary---HighCourt set aside impugned valuation orders and directed Collector Customs to passfreshorderasperlawand guidelinesprovidedby the High Court---Constitutional petitions were allowed, accordingly.

Shafqat Mehmood Chohan, Mian Muhammad Athar, Toufique Asif, Muhammad Umer Riaz, Ch. Abdul Aziz, Naseem Sikandar and Niaz Ullah Niazi for Petitioners.

Dr. Rana M. Shamim, Raja Muhammad Iqbal, Mujeeb-ur-Rehman, Izhar-ul-Haque, Amin Feroze Khan, Muhammad Abid Raja, D.A.G. and Muhammad Anwar Ch, Deputy Collector Customs for Respondents.

Date of hearing: 23rd May, 2012.

ORDER

RIAZ AHMAD KHAN, J.---This judgment is directed to dispose of instant petition as well as Writ Petitions Nos.523, 1757 and 2892 of 2010, 165, 632, 1093, 1587, 1617, 1659, 1710, 1864, 1865, 1931, 1964, 2035, 2086, 2400, 2402, 2504, 2554, 2588, 2731, 2803, 3054, 3055, 3087, 3093, 3181, 3183, 3269, 3270, 3271, 3374 and 3376 of 2011, 27, 29, 64, 368, 540, 541, 783, 955, 1010, 1088 and 1273 of 2012.

2.Brief facts of the case are that the petitioners are business establishmentsengagedinthebusinessofimportingceramics/ porcelain tiles, sanitary goods, petrol/diesel, natural gas, portable generators and other items from China, Japan, Korea, Turkey, Europe and other countries. The Directorate General of Customs Valuation, Karachiissuedvaluationadviceregardingsaiditemstilesundersection 25-Aof the Customs Act, 1969 Para-5 of the same reads as follows:--

"An independent market survey was conducted which showed an increasing trend in the prices of Chinese tiles. The prices available on internet were also consulted which point out large variation in prices depending on size quality and quantity. However, such values (FOB) are in the range of U$$ 2 to U$$ 5.54 for Ceramic tiles and U$$ 3.43 to U$$ 5.9 for Procelain Tiles depending on their size, quality and quantity. Analysis of the Customs Data obtained from the China Customs was also conducted which indicated an average price for the commodity in the range of U$$ 5.628/SM."

3.In Para-6, it was stated that 'Fall Back Method' of Valuation as envisaged in section 25(9) of the Customs Act, 1969 arriving at the fair assessable value, was adopted.

4.In Para-7, it was provided that the valuation provided shall remain valid till revised. However, if the declared/invoice value is higher the same shall be applied.

5.The petitioners feeling aggrieved of valuation advice, filed above said writ petitions. The grievance of the petitioners it that the custom duty on imported items is to be assessed on the basis of declared value and if the same is not accepted, then the customs authorities may assess the goods on the basis of valuation advice under section 25-A, but while preparing valuation advice under section 25-A, the sequential order provided in section 25 of the Customs Act, 1969 is to be kept in view. According to petitioners, the impugned valuation advice was contrary to law and therefore, they filed these petitions with the prayer that the impugned valuation advice orders be declared illegal, unlawful and without lawful authority.

6.Mr. Shafqat Mehmood Chohan, Advocate for the petitioners submitted that section 25 of the Customs Act, 1969 provided that the customs value of the imported goods, shall be the transaction value, that is the price actually paid or payable for the goods when sold for export to Pakistan.

7.The petitioner had declared the said value and the customs authorities under section 25 of the Customs Act, 1969 were under obligation to assess the goods on the basis of declared value, however, if the customs authorities were not prepared to accept the transaction value, then under section 25-A, the Collector of Customs or Director of customs valuation could determine the custom value of goods imported, after following method laid down in section 25. According to learned counsel, section 25 provided different modes of valuation and there was a sequential order. The customs authorities were bound to follow that sequential order and for adopting any particular method, are required to give reasons for avoiding other modes. Customs authorities could not pick and choose a particular mode of valuation even if the same is provided in section 25 of the Customs Act. Learned counsel further submitted that while preparing the valuation advices, opportunity of hearing was not provided to the petitioners and the same is violative of the principle of natural justice. Furthermore, the valuation advices were prepared at the behest of the local manufacturers and the object of these local manufacturers was to discourage imports, so the impugned valuation advices were based on malice.

8.Mr. Muhammad Umer Riaz, Advocate for the petitioner while adopting the aforementioned arguments added that in the impugned valuation advice orders, the respondents had stated that they had adopted the fall back method as provided in section 25-A, but the fact is that even the said method was not properly followed. Learned counsel however, submitted that valuation advice under section 25-A could be issued for a period of 90 days, whereas in the present case, the valuation advice orders were issued for indefinite period. It was further submitted that the impugned valuation advices are self contradictory as on the one hand, it was provided that this valuation advice would be followed and on the other hand, it was provided that if the declared value is more than the value given in the valuation advice, then the earlier would be followed.

9.On the other hand, all the learned counsel for the respondents submitted that the impugned valuation advice orders were issued at Karachi and therefore, Islamabad High Court had no jurisdiction to adjudicate upon the matter in dispute. It was further submitted that under section 25-D of the Customs Act, 1969, the provision of revision was provided and in presence of alternate remedy the writ is not maintainable. It was further submitted that petitioners had alternate remedy of appeal under section 194-A of the Customs Act as well as of reference under Section 196 of the Act.

10.I have heard learned counsel for the parties and have also perused the record.

11.At the time of import of goods, the value of imported goods is to be determined for the purpose of duty and taxes. For the said purpose, the importers are required to furnish a declaration disclosing full and accurate details regarding value of imported goods and other statement, information or documents as considered necessary by the custom officer for determination of value of imported goods. If the concerned officer considers that the value declared by the importer is correct, then the same may be accepted, however, if the concerned officer does not accept the value declared by the importers, then the Collector of Customs or the Director of Customs Valuation under section 25-A may determine the custom value of any goods or category of goods imported into or exported out of Pakistan, after following the method laid down in section 25-A, whichever is applicable.

12.Section 25 of the Customs Act, 1969 shows as to how the custom value of the imported goods is to be determined. For the said purpose, section 25 has been divided into subsections (1), (5), (6), (7), (8) and (9). These sub-clauses in fact are the methods of customs valuation. Prior to 2007, the customs authorities were bound to follow the sequential order provided in section 25 of the Customs Act, however, in 2007, subsection (10) of section 25 was amended and it was provided that method of customs valuation may or may not be applied in sequential order. Earlier the situation was that for the purpose of valuation first of all transacticn value as provided in subsection (1) of section 25 was to be applied and if for reasons, the customs authorities were not prepared to accept this method, then the second method as provided in subsection (5) i.e. "Transaction Value of Identical Goods" could be adopted. Presently, the valuation Officer may adopt any of the method provided in section 25 of the Customs Act, 1969, however, it does not mean that valuation officer has unfettered powers to adopt any method on the basis of pick and choose. In fact the valuation officer has to keep in view the interest of the importer as well. He has discretion to follow any method provided in subsections (1), (5), (6), (7) or (8). However, the method adopted must not be to the detriment of the importers and for that purpose for excluding the other methods, reasons must be given. Similarly, the reasons for adopting a particular method are also required to be given, so it becomes clear to the importer that the order is in the public interest and not to the detriment of the importer.

13.Subsection (9) of section 25 of the Customs Act, 1969 is regarding 'Fall Back Method'. Recourse to this method can be made only if the customs value of the imported goods cannot be determined under subsections (1), (5), (6), (7) and (8). In other words, if the Fall Back Method is to be adopted, then reasons must be given that the customs value of the imported goods could not be determined under the earlier methods. Rule 110 of Customs Rules, 2001 provided that where the value of imported goods cannot be determined under subsections (1), (5), (6), (7) and (8) of section 25 o the Act, the customs value shall be determined on the basis of data of imports available with the Customs Department. However, no value shall be determined under this chapter on the basis of:--

(i)the selling price of the identical goods produced in Pakistan;

(ii)the price of the goods in the domestic market of the country of origin except after allowing deduction of local taxes and profits at each level of sale in the country or exportations;

(iii)arbitrary or fictitious values; or

(iv)the minimum customs values, except those notified under subsection (4) of section 25 of the Act.

14.In other words, a criteria has been provided for valuation of custom duty under the Fall Back Method.

15.In addition to that Rule 121 provides that the Value of imported goods determined under subsection (9) of section 25 of the Act, shall, to the greatest extent possible be based on previously determined customs values of identical goods assessed within ninety days.

16.Criteria adopted under subsections (1), (5), (6), 7 and (8) of section 25 remains applicable until and unless revised or resented by the competent authority, however, the criteria adopted under subsection (9) of section 25 of the Act shall remain operative for three months and after every three months, has to be changed for the reason that in this method of valuation previously determined customs value identical goods assessed within 90 days is to be taken into consideration.

17.On determination of valuation, the order must be communicated to the importer, so that if he feels aggrieved of the same, he may file a revision petition under section 25D of the Customs Act, 1969. However, if the order by itself is in violation of the provisions of the Act, or there is no order or if same has not been communicated to the importer, then the writ would be competent remedy, as no other adequate or efficacious remedy would be available to the importer.

18.In the present case, determination of customs value was made by adopting the Fall Back Method provided in subsection (9) of section 25 and reasons were given by the valuation officer i.e. Director. Para-5 of the valuation advice reads as follows:--

"An independent market survey was conducted which showed an increasing trend in the prices of Chinese tiles. The prices available on internet were also consulted which point out large variation in prices depending on size quality and quantity. However, such values (FOB) are in the range of U$$ 2 to U$$ 5.54 for Ceramic tiles and U$$ 3.43 to US$ 5.9 for Procelain Tiles depending on their size, quality and quantity. Analysis of the Customs Data obtained from the China Customs was also conducted which indicated an average price for the commodity in the range of US$ 5.628/SM."

19.Afore-stated reasons clearly show that the order is in clear violation of subsection (9) of section 25 of the Customs Act, 1969. The order is also based on presumptions as the prices available on internet were taken into consideration. There are no reasons given as to how value of goods could not be determined under the provisions of subsections (1), (5), (6), (7) and (8) of section 25 and why the recourse to section 9 was necessary. In addition to that, subsection (9), which is Fall Back Method, was also not adopted in accordance with law. Since the order itself is illegal and in violation of the Act, therefore, writ petition is competent.

20.In the above said circumstances, impugned valuation orders are set aside and all the cases are remanded back with the direction that the Collector of Customs or the Director of Customs valuation may pass a fresh order regarding determination of customs value of above said items in accordance with law and rules as well as guidelines provided in this judgment. All the writ petitions are disposed of in the above terms.

KMZ/8/IslCase remanded.