SALEH EJAZ CONSTRUCTION COMPANY, ISLAMABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2014 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1723 (2014)

Customs Act (IV of 1969)---

----S. 81---Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 10---Maladministration---Importer alleged that authorities caused inordinate delay in clearance of consignment---Validity---Acts of omission and commission of customs appraiser and principal appraiser constituted very serious maladministration in terms of S. 2(3) of Federal Tax Ombudsman Ordinance, 2000---Issuance of auction notice without confirming facts also showed inefficiency and ineptitude on the part of Assistant Collector of Customs incharge of auction---Federal Tax Ombudsman directed Collector of Customs to get the matter investigated to determine extent of maladministration by each of three customs officials involved in the matter and proceed against those found responsible for irregularities---Federal Tax Ombudsman further directed to compensate complainant's loss to be determined by Collector---Federal Tax Ombudsman also directed to get demurrage and storage charges remitted by Container Terminal Operator---Complaint was allowed accordingly.

Yasin Tahir, Senior Advisor Dealing Officer.

Umar Vardag, Ejaz Abbasi and Jawad Abbasi for Authorized Representatives.

Syed Ali Zaman Gardezi, DC (Customs) Departmental Representative.

FINDINGS/RECOMMENDATIONS

ABDUL RAUF CHAUDHRY, FEDERAL TAX OMBUDSMAN.---The complaint was filed in terms of section 10(1) of the FTO Ordinance, 2000 (the Ordinance), against maladministration by the Customs Authorities of Model Customs Collectorate of Appraisement (MCC Appraisement), Karachi in terms of inordinate delay in clearance of an old and used, 1998 Model, Hino Ranger Sprinkle Truck Besides, an auction notice Lot No.CF-02/Oct-12 dated 14 March, 2013 was unjustifiably served on the complainant by Assistant Collector, Auction, although payment of duty and taxes had been blocked by the Customs authorities themselves.

2.The complaint was referred for comments to the Secretary Revenue Division in terms of section 10(4) of the Ordinance. In response, the Department (Deptt) filed para wise comments denying the allegations of delay and maladministration.

3.During the hearing, the complainant stated that he was an Overseas Pakistani who worked in Saudi Arabia for a number of years during the 1980s. After returning to Pakistan, he started working as construction contractor and got his company registered with the Pakistan Engineering Council, Islamabad. He was awarded a number of construction contracts by the Government of N.-W.F.P. (Now KPK) during a decade long working relationship between them. As his company needed to reinforce his mechanical capacities to discharge his contractual obligations, he imported a sprinkle truck during 2012 which arrived at Karachi Port on 7 September 2012. When the Goods Declaration (GD) was filed on 18 September, 2012, the Customs Examination staff of MCC Appraisement, Karachi did not find the Pre-Shipment Inspection Certificate issued by Messrs Bureau Veritas at Osaka, Japan appropriate and relevant because, instead of sprinkler truck, which was permissible for import in used condition vide Appendix-A of Import Policy Order-2009, the PSI Certificate described it as 'Tank Truck' which was not considered permissible for import by the Customs in terms of the aforesaid Appendix-A. Besides, compliance to EURO-II emission standards and confirmation of residual life had not been certified. When, the prerequisites were met, the Customs Appraisement staff processed the GD and allowed payment of duty and taxes. A day thereafter the Principal Appraiser blocked the GD and subsequently, the Assistant Collector, Customs Auction issued an auction notice.

4.The Importer filed this complaint with the FTO Secretariat against unjustified auction notice, and inordinate delay in clearance of the sprinkle lorry which he had imported for timely execution of his construction and road clearance contracts with the Provincial Government of the Khyber Pakhtunkhwa.

5.During hearing, the parties reiterated the averments of their written submissions. The complainant alleged that he had been financially and emotionally ruined due to inefficient, wilful, and oppressive handling of this case by the Customs officers. He complained that, apart from huge amount accumulated as storage charges (demurrage) at the Container Terminal where the vehicle was held up, he had to make alternate arrangements by hiring a sprinkler lorry in order to fulfil his contractual obligations with the Highway Department of the Provincial Government. Besides, being a resident of Islamabad, he had to frequently travel by Air to Karachi, stay in hotels and do a lot of running around between Karachi and Islamabad which involved huge costs. Due to these financial and other costs, his health had seriously suffered under the emotional, physical and financial stress.

6.Responding to the submissions of the complainant, the DR stated that the main cause of his difficulties at the Customs stage was his failure to fulfil the mandatory requirement of the Import Policy Order (IPO) 2009. He contended that the Pre-Shipment Inspection Certificate obtained by the Importer from Japan described the vehicle as 'Tanker Truck' which was not permissible for import in old and used condition. Besides, neither compliance of the vehicle to EURO-II emission standards had been certified nor its residual life of five years was confirmed in the aforesaid Certificate. In order to prove that the Pre-Shipment Inspection Certificate provided by the complainant was not proper, the DR showed samples of some Pre-Shipment Inspection Certificates issued by Messrs Bureau Veritas at UAE which categorically confirmed compliance of EURO-II or Pakistan Emission Standards and the residual life of the vehicles in a uniform and standard format.

7.The DR also contended that the GD manifested on 18th September, 2012 was presented in Appraisement Group VI after examination over 04 months later, on 25 February, 2013. Subsequently, though, a Post-Shipment Inspection Certificate, issued by Messrs Bureau Veritas, Karachi confirming compliance of EURO-II emission standard and residual life of five years was produced, yet, the NOC of Ministry of Commerce for acceptance of the Post-Shipment Inspection Certificate was not available with the Importer. Despite that, the GD was inadvertently and mistakenly processed and handed over to the Clearing Agent for payment of assessed amounts of duty and taxes. On realization of the mistake, the GD was subsequently blocked by the Principal Appraiser. So, the fault, all along, was on the part of the Importer who had failed to provide proper documents required by law and procedure to validate import by the Customs authorities. The DR, however, informed that, taking a lenient view in the case, he had allowed release of the vehicle and also issued delay and detention certificate for waiver of demurrage to mitigate the suffering of the Importer.

8.The complaint has been examined in the light of written and oral submissions of the parties and the documents on record. The complaint mainly involves the following issues:--

(i)Whether the vehicle under reference was a 'Tank Truck' as described in the Pre-Shipment Certificate No.2012001-1 dated 30 July, 2012 issued by Messrs Bureau Veritas at Osaka, Japan, or a sprinkle truck as declared by the Importer in the GD?

(ii)Whether no objection of Ministry of Commerce (MOC) was required in the presence of 'Pre-Shipment Certificate complemented by Post Shipment Certificate confirming the requisite compliance of EURO-II emission standards and five years residual working life of the vehicle?

(iii)Whether auction notice dated 14 March, 2013 was justified in this case while payment of duty and taxes had been blocked by the Principal Appraiser himself?

(iv)Whether handling of this case by the Customs staff at Karachi was efficient, just and fair?

(v)Whether explanation by the Customs supervisory management in their annotated replies to the FTO Secretariat's questions was fair and credible?

(vi)Whether handling of this matter by the Clearing Agent was competent and straightforward?

9.Issue-wise position is discussed below:--

Issue No.1

10.The vehicle under reference was imported and parked at Al-Hamd Container Terminal vide IGM No.489/2012 dated 7th September, 2012. The GD No.KAPR-HC-347040 was filed with the request of 1st Examination and registered by the Customs on 18th September, 2012. As the Pre-Shipment Inspection Certificate issued at Osaka, Japan described the vehicle as 'Tank Truck', the request of the Clearing Agent for 1st Examination was accepted by the Customs authorities in order to determine the correct description of the vehicle in order to assist the Customs Appraisement staff stationed at Custom House, Karachi to appropriately determine tariff classification in terms of the H.S. Code, correctly assess the applicable rates of duty and taxes, properly calculate the assessable value and confirm the import status of the vehicle. So, the Customs Appraisement staff endorsed the examination order the same day, to the Machinery Shed Appraiser (MSA) at the Container Terminal. The Clearing Agent statedly presented the GD for examination to the MSA at the Container Terminal along with Delivery Order, issued by the Shipping Agent, Invoice and B/L supplied by the Shipper in Japan and Pre-Shipment Certificate issued by Messrs Bureau Veritas, a Pre-Shipment Inspection Company, at Osaka, Japan. The PRAL print out containing the history log shows receipt of GD for examination on 26 September, 2012.

11.The MSA verbally expressed dissatisfaction with the PSI Certificate, and asked for catalogue of the vehicle and required confirmation by a Technical Engineer of the spraying function of the vehicle. The Clearing Agent accordingly asked the Importer, Mr. Ejaz Abbasi, resident of Islamabad, to get the deficiencies in the PSI Certificate rectified and send Technical Engineer of the company to confirm the spraying function of the vehicle. He also sent the case papers back to the Importer who statedly expressed his intention to himself take up the matter with the Customs staff at Karachi.

12.The Importer visited Karachi on 11 February, 2013 and met the dealing Customs Appraiser (Mr. Anwar Khan) along with Mr. Yousaf, a representative of the Clearing Agent. The Customs Appraiser admittedly told them that the 'Tank Truck' was different from 'Sprinkle Truck'. So, the condition of Import Policy Order was not met as Sprinkle Truck was importable in used condition whereas Tank Truck was not. After explaining the difference in the import status of the vehicles, he admittedly advised them either to get the description rectified or apply for conversion of Pre-Shipment Inspection condition in the Import Policy Order to Post-Shipment Inspection from the Ministry of Commerce. In his reply to a written query by the FTO Secretariat, the aforesaid Customs Appraiser admitted having given the above mentioned advice but averred that 'the above opinion was given in good faith to the best of my professional ability'. 'As this opinion was not binding on the Importer or his Clearing Agent, they could approach higher officers for resolution of the dispute' the Customs Appraiser contended in his written reply.

13.This is a strange position taken by the Customs Appraiser who is the departmental expert in these matters. His professional advice is normally taken for granted by the Clearing Agents and the Importers unless they have anything else in their knowledge out of their own experience of dealing with Customs matters. As the Importer and the representative of the Clearing Agent, did not doubt his expert advice, they embarked upon the course advised by the dealing Appraiser. The Importer contacted his supplier in Japan for change of description. As the vehicle had already left Japan and arrived in Pakistan, it was obviously impossible for Messrs Bureau Veritas at Osaka, Japan to change the description of the vehicle without inspecting it again. The Deputy Collector of Customs while replying to the FTO Secretariat's written query No.(xi), also confirmed the impossibility of the proposition of rectification of description in the PSI Certificate as follows:--

"procuring of a Pre-Shipment Inspection Certificate in the situation may have been a near impossible proposition."

14.In such view of the facts, the Customs Appraiser's advice to get the PSI certificate rectified from Messrs Bureau Veritas, Japan obviously suffered from rationality deficit. An appropriate course for the Customs staff would have been to examine the vehicle, as initially requested by the Clearing Agent, to determine the essential character of the impugned vehicle. If it was confirmed through examination that the vehicle was an ordinary truck and not a sprinkle truck, then the suggestion given by the Appraiser for obtaining the MOC's NOC to obtain Post-Importation Inspection Certificate from any PSI company listed in Appendix-H of the relevant IPO, would have been obviously irrelevant. Therefore, the professional advice given by the dealing Appraiser statedly 'in good faith' was obviously inappropriate and wrong.

15.Similarly, the MSA's alleged refusal in September, 2012 to conduct the examination and oral advice to the Clearing Agent either to produce catalogue of that old and used vehicle of 1998 model, or confirmation by a technical engineer of the spraying function of the vehicle, and subsequently conducting the examination after about a delay of five months without availability of either of the required catalogue and confirmation by the Technical Engineer, makes both the requirements questionable. If the examination was so much contingent upon availability of the catalogue or confirmation by a technical engineer, why did the MSA subsequently conduct the examination without availability of either of these, after a lapse of about five months from 26 September, 2012 to 21 February, 2013? It is interesting to note that when, finally the MSA, conducted the examination on 21 February, 2013, he confirmed the vehicle to be 'old and used adapted sprinkling water lorry fitted with pump, nozzle and unit'. This clearly proved that the MSA had the capacity and expertise to examine the old vehicle under reference without the help of the catalogue, which was not available, and a Technical Engineer to confirm the spraying function. It also lends a lot of credence to a written submission by the complainant vide his letter dated 15 January, 2013 addressed to the FTO Secretariat explaining the reason of injustice done to him by the Customs staff in this case. Concluding his submissions by the following phrase, speaks volumes about the reason behind the unreasonable acts of omission and commission by the Customs Appraisement and Examination staff in this case:--

"This all has been done to me", the complainant said, in his aforesaid letter, "so that I would submit to the illegal dictates of the officials of the Customs."

16.It is also interesting to note that the DR presented copies of a number of PSI Certificates issued by Messrs Bureau Veritas at UAE where vehicles were released by the same Customs authorities showing the following descriptions:--

(a)Mazda truck

(b)Hino truck

17.It is a question why did the addition of the word 'Tank' with the impugned 'Truck' became a problem when the MSA finally found it to be a 'sprinkling water lorry fitted with pump, nozzle and tank'. It is thus, obvious that the Customs treatment of this case was neither straightforward nor reasonable nor justified.

Issue No.II

18.As the Importer had provided a Pre-Shipment Inspection Certificate issued by Messrs Bureau Veritas, Osaka, Japan, and its short comings had been made up by a Post-Shipment Inspection Certificate by Messrs Bureau Veritas at Karachi, there was no need for an NOC by Ministry of Commerce. That is why, the Deputy Collector of Customs finally decided to allow release of the vehicle as the letter and spirit of Import Policy had been fulfilled in terms of the Pre and Post-Shipment Inspection Certificates issued by a listed company in Appendix-H of the IPO.

Issue No.III

19.Although clearance of the vehicle was blocked by the Customs staff in February, 2013, the Assistant Collector of Customs (Auction) issued an auction notice Lot No.CF-02/Oct-12 dated 14 March, 2013 alleging the Importer's failure to clear the vehicle within one month's time after unloading it from the ship. It was threatened that the vehicle would be auctioned without further notice, if not cleared within seven days unless stay order was issued by a competent authority.

20.It is obvious that such a notice was not justified in this case at a time when clearance of the vehicle had been excessively delayed by the Department itself for almost six months on one pretext or the other and when the GD had been blocked by the Principal Appraiser himself. It clearly showed that, the failure to clear the vehicle at that point in time was not on the part of the Importer. So, the auction notice was not justified at all. Its issuance appeared to be for lack of coordination between the Customs Auction staff and the Appraisement staff. The DR plainly admitted lack of coordination between the Customs Auction staff and the Appraisement staff as the main reason for such a belated issuance of auction notice. However, the victim of such lack of coordination in the Customs Deptt was again the hapless Importer whose misery cannot be imagined when, after much ado during a hectic period of about six months after import, he had crossed the stages of examination and assessment. Shocked by such a treatment of his case by the Customs staff, the health of the Importer broke down critically. He had to be hospitalized.

Issue No.IV

21.It is evident from the facts explained above that the Customs Appraisement and Examination staff did not handle this case fairly, justly and competently. They did not tender proper advice to the Importer and they raised objections which were subsequently eschewed without assigning any reasons. They subjected the Importer to extreme pressure by issuing an unjustified auction notice; they blocked the GD for payment of duty and taxes only a day after its clearance after about six months of its import. These acts of omission and commission speak volumes about the inefficiency, ineptitude, injustice and high handedness of the Customs staff at all stages of handling this case.

22.The most critical issue at the outset was that the Pre-Shipment Inspection Certificate issued in Japan described it as 'Tank Truck', whereas the Importer/Clearing Agent had declared it to be a 'Sprinkle Truck' in the GD. Whereas old and used sprinkle trucks were being imported and released by the Customs in terms of sub-para (5) of Para 9(ii) of the IPO-2009, the vehicle under reference should have been examined first to determine its essential character. Had the examination been conducted, it would have been found to qualify being a sprinkle lorry fitted with necessary gadgets. Thus, the issue of ban would have been out of the Customs way. As the Pre-Shipment Inspection Certificate was deficient in confirmation of EURO-II compliance and five years residual working life of the vehicle, the Importer/Clearing Agent should have been advised to obtain a confirmation of the requisite aspects from any of the Pre-Shipment Inspection Companies listed in Appendix-H and operating in Pakistan as per the plain reading of sub-para (5) of Para-9(ii) which did not require Prior Inspection Certificate as is specifically required under all other sub-paras under Para-9(ii) and Para-9(iii) of the IPO-2009.

23. The Importer/Clearing Agent would have obtained the requisite certificate, as they actually did in this case on 01 March, 2013 when they were advised to do by the Appraiser in February 2013 and thus, the 'Sprinkler Truck' could have been released expeditiously to save the hapless Importer from unnecessary hold up of the vehicle at the Container Terminal, accumulation of storage charges/demurrage/rent etc (amounting to Rs.1,404,301 as worked out by the Terminal Operator in October, 2013). It would have also forestalled the need for hiring, at exorbitant cost of a replacement 'Sprinkler' to fulfill the Importer's contractual obligations with the Provincial Government of KPK.

24.There was also no justification for requiring the MOC's NOC after clearance of the GD for payment of duty and taxes as the critical omissions in the Pre-Shipment Inspection Certificates had been fulfilled by the Importer by obtaining a Post-Shipment Inspection Certificate on the advice of the Appraisement staff. Besides, neither sub-para (5) of Para 9(ii) of the IPO-2009 required a Prior Shipment Inspection Certificate, nor was it necessary as the deficiencies in the Pre-Shipment Certificate were basically due to lack of the Importers knowledge of the aforesaid sub-para (5), which he got made up under advice of the Customs Appraiser, through a Post-Shipment Certificate. It is noteworthy that requiring unnecessary NOC's of the MOC adds exorbitantly to the cost and hassle of import. So, the Customs authorities should have avoided blind following of any perceptions about these legal provisions as they are the professionals who are daily dealing with this law. They should ensure acting in accordance with law and procedure, in the interest of fairness and justice. So, the benefit of omission of the requirement of 'Pre-Shipment or Prior-Shipment Inspection Certificate' in sub-para (5) of Para-9(ii) in contradistinction to specific stipulation of this requirement in other sub-paras under Para 9(ii) and Para-9(iii) of the IPO-2009, in all fairness, should have gone in favour of the Importer in this case.

Issue No.V

25.The Clearing Agent also does not appear to have rendered service to the taxpayer efficiently and effectively. He wasted a lot of time in unnecessarily requiring rectification of the Pre-Shipment Inspection Certificate from Japan. He should have known that since the vehicle had arrived in Pakistan, Messrs Bureau Veritas at Osaka, Japan would not be in a position to change any entries in the Pre-Shipment Certificate already issued by them. Besides, he should have immediately checked up with the Importer at Islamabad whether he possessed the catalogue of the vehicle and intimated its non-availability to the MSA as the vehicle was already under demurrage. He should have explained the difficulty of arranging the travel of a Technical Engineer from Islamabad to Karachi and suggested an alternate at Karachi. Messrs Bureau Veritas at Karachi could provide a solution. As the Customs staff did not offer necessary help, he should have immediately brought the problem to the notice of supervisory management i.e. AC, DC, Addl. Collector or the Collector, all of whom are readily accessible for resolving such issues. The Clearing Agent should have the capacity to comprehend the provisions of IPO to ensure justice and fairness with his clients. Instead of doing so, he just conveyed the verbal requirements of the MSA to the Importer in Islamabad without providing the requisite solutions himself.

26.Experience has shown that a serious systemic issue obtaining in the Customs administration is that some of the Clearing Agents collude with the corruption-prone Customs Appraisers and Examiners to entangle the importers and exporters belonging to far off cities in the quagmire of technicalities. Those importers/exporters who reside in or operate their. business at places away from the port/dry port cities, face more difficult entanglements, as the one involved in the present complaint. As the importers/exporters of far off places cannot easily access the supervisory management personally, they succumb to the technical bluffs of the Customs staff relayed to them by the permissive among the Clearing Agents who find safety and benefit in acquiescence rather than resistance. Being licensees of the Customs, even the well-meaning among the Clearing Agents, some times fall a victim to the machinations of the corruption-prone among the Customs staff. So, the Customs supervisory managements need to be extremely watchful of this phenomenon.

Findings:

27.The acts of omission and commission of the Customs Appraiser, the MSA and the Principal Appraiser constitute a very serious maladministration in terms of section 2(3) of the FTO Ordinance, 2000. The issuing of auction notice without confirming the facts also shows inefficiency and ineptitude on the part of the Assistant Collector of Customs incharge of auction.

Recommendations:

28.The FBR to direct the Collector of Customs, MCC Appraisement, Karachi, to:--

(i)get this matter investigated to determine the extent of maladministration by each of three Customs officials involved in this case; and proceed against those found responsible for these irregularities;

(ii)compensate the complainant's loss to be determined by the Collector;

(iii)get the demurrage and storage charges remitted by the Container Terminal Operator; and

(iv)report compliance within sixty days.

MH/53/FTOOrder accordingly.