GOODWILL TRADERS, KARACHI VS FEDERATION OF PAKISTAN through Secretary, Revenue Divisio, 2014 PTD-KARACHI-HIGH-COURT-SINDH 176 (2013)

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

----Ss. 25(9) & 25-A [as inserted by Finance Act (III of 2006) and substituted by Finance Act (IV of 2007)]---Customs Rules, 2001, Rr.110 & 121---Imported goods---Valuation Ruling, application of---Procedure/ Method stated.

Subsection (9) of Section 25 of Customs Act, 1969 comprises of following elements:

Firstly it is to apply only if it is determined that the valuation methods contained in subsections (1), (5), (6), (7) and (8) cannot be applied; Secondly, its application is subject to "rules", which at present means the Customs Rules, 2001 ("Rules"); Thirdly the basic framework of how value is to be determined in terms of the subsection has also been specified. The value must be determined on a basis that is "derived" from among the valuation methods specified in subsections (1), (5), (6), (7) and (8). However, it is permissible to apply these subsections in a "flexible manner". Two points may be noted regarding the basic framework that has been laid down. Firstly, it does not permit a completeabandonmentofthevaluationmethodsspecifiedinsub-sections (1), (5), (6), (7) and (8). These cannot simply be pushed aside and ignored altogether. Rather, what subsection (9) envisages is a value derived on the basis of any one of the other valuation methods, flexibly applied or a suitable blending of elements from two or more of the other valuation methods, again applied flexibly. The fall-back method as contained in subsection (9), therefore, envisages the application of a method that must recognizably be referable back to any one of the other valuation methods or to a combination of the elements of two or more of them. The Second point to be noted with regard to the basic framework is that it ties subsection (9) much more closely and strictly to the other valuation methods than does Article 7 of the WTO Valuation Agreement. The latter allows the use of "reasonable" means, which are required only to be "consistent" with the "principles" and "general provisions" of the Valuation Agreement and also of Article VII of GATT, 1994. Thus, Article 7 allows for greater latitude and may possibly make permissible a larger departure from the other valuation methods. This, however, is not permissible under subsection (9). It is more rigidly structured. Rather than leaving the matter rather open-ended, for the value to be determined by customs authorities essentially at their discretion under loosely worded guidelines (as would have been the case had the language of Article 7 been used), the legislature has chosen to draw the boundaries more tightly. The requirement is not of reasonableness or of consistency with principles and provisions generally. The procedure or method to be followed is laid down with much greater specificity and expressly tied to the other valuation methods.

The reference to "subsection (4) of section 25" in Rule 110(iv) of Customs Rules, 2001 is actually a typographical error; the reference ought to have been to subsection (14), which however was omitted by the Finance Act, 2005. Thus, it is permissible, without exception, to establish minimum values. Secondly, Rules 110 clearly states that if the value cannot be determined in accordance with the valuation methods laid down in subsections (1), (5), (6), (7) and (8) (i.e. resort must be had to the fall-back method under subsection (9), then the import data available with the Department must be used. Thirdly, sub-rule (1) of Rule 121 required that "to the maximum extent", values under sub-section (9) must be based on "previously determined customs values of identical goods assessed within ninety days". Lastly, the work "may" as used in sub-rule (2) of Rule 121 must be understood and applied contextually. The work "may"istobeunderstoodinthecontextofthe basic framework provided by the legislature for purposes ofsub-section (9). It certainly does not, and cannot, be regarded as conferring a discretion on the customs authorities to abandon the other valuation methods altogether.

The forgoing Rules are not, sensu stricto, applicable to section 25-A. However, the manner in which that section interacts with the various subsection of section 25 means that whenever a valuation ruling is to be issued under section 25-A with reference to the fall-back method, the concerned authority is duty bound also to keep in mind and take into consideration the relevant Rules. The valuation rule must be issued in a manner that is not inconsistent with the Rules.

Section 25-A confers a statutory power on the concerned authority. That power must be lawfully exercised. If it is not, then it is no answer to the importer's case that he brought in his goods by accepting the value given in the ruling. To hold otherwise would, e.g., make it permissible for the concerned authority to issue a valuation ruling on the basis of an understanding or agreement with one or more concerned importers or an association or other trade body. Such a ruling would be unlawful as it would in negation of the mandate of law.

It would not be open for the Department to apply a ruling issued in a manner contrary to law.

Sadia Jabbar and others v. Federation of Pakistan and others 2012 SCMR 617; 2012 PTD 898 and Ayesha Impex v. Federation of Pakistan 2012 PTD 1 ref.

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

----Ss. 25(9) & 25-A---Customs Rules, 2001, Rr. 110 & 121---Constitution of Pakistan, Art. 199---Constitutional petition---Imported goods---Issuance of Valuation Ruling by authority on basis of market survey of prices of such goods---Department's objection that such petition was not maintainable as petitioner had not availed alternate statutory remedies---Validity---Questions raised in such petition were of general importance and determination thereof would necessarily be an extension of analysis and discussion in earlier judgment of High Court, which was itself of general application---Conclusions and observations to be made by High Court in such petition would apply to all manner of imports and valuation rulings issued or to be issued in future---High Court repelled such objection in circumstances.

Ammar Yasar for Petitioner.

S. Mohsin Imam along with Ilyas Ahsan, Departmental representative for Respondents.

Date of hearing: 11th September, 2013.

ORDER

MUNIB AKHTAR, J.---This petition raises issues relating to the proper interpretation and application of section 25A read with sub-section (9) of section 25 of the Customs Act, 1969 ("Customs Act"). Before proceeding further, we may note that in a sense this decision can be regarded as being in extension of a judgment given earlier by a Division Bench of this Court, in which sections 25 and 25A were considered in detail. That judgment (herein after referred to as the "Earlier Judgment"), dated 28-2-2011, was given in a number of connected petitions (including Sadia Jabbar v. Federation of Pakistan and others, C.P. No. D-2673 of 2009). The Earlier Judgment appears not to have been reported, but is available on the website of the High Court (with reference to C.P. No. D-2673 of 2009). Two points may be noted in connection therewith. Firstly, appeals were preferred to the Supreme Court against the decision by some of the petitioners, but leave to appeal was refused: see Sadia Jabbar and others v. Federation of Pakistan and others 2012 SCMR 617, 2012 PTD 898. Secondly, the Earlier Judgment was cited with approval, and applied, by the Lahore High Court in Ayesha Impex v. Federation of Pakistan 2012 PTD 1.

2.The material facts can be stated with brevity. The petitioner imported two consignments of spare parts for motorcycles from China, being shock absorbers for the front and rear sides. The shipments arrived in Pakistan on or about 23-9-2010. The goods declarations were filed (on or about 3-11-2010) on the basis of the declared value, i.e., the price that according to the petitioner was actually paid for the spare parts. The Department however refused to accept this value and applied valuation Ruling No. 176 dated 30-10-2009, issued under section 25A by the Director, Valuation. This ruling ("Valuation Ruling"), being of central importance, will have to be considered in some detail and must be set out in its entirety:--

"Messrs Agriauto Industries Ltd., complained to this Directorate General regarding under invocing and misdeclaration in the import of Shock Absorbers. Meeting with all stakeholders was held on 10-10-2009 which was attended by the complainant M/s. Agriauto Industries Ltd, and others including representatives of MCC (Appraisement), MCC (Port Muhammad Bin Qasim), Pakistan Automobile Manufacturers Association, Pakistan Association of Automotive Parts and Accessories Manufacturers Association and the representatives of Pakistan Motorcycle Spare Parts Importer and Dealers Association and local manufacturers for the determination of values. The importers requested for decrease in value owing to the decrease in prices of basic raw materials and fuel, citing smuggling as discouragement to genuine imports. Messrs Agriauto contended that the shock absorbers are being cleared through misdeclaration and under-invoicing and also produced the data of import of Shock Absorbers to substantiate their view point. They also submitted their selling price of shock absorbers in the local market and requested to determine realistic values which should curb under invoicing and misdeclaration.

(2)The above mentioned contentions of local manufacturers, importers and trade bodies have been examined in the light of data available and local market survey. The scrutiny of physical import data could not prove useful as complete description of imported shock absorbers has not been declared by the importers, which is essential to analyze values in correct perspective. Market survey was also conducted to analyze the prices available in the local market.

(3)The transaction value data could not be accepted as true values under sections 25(1), 25(5) and 25(6) ibid. It was also not possible to straight away apply Deductive Value Method envisaged under section 25(7) ibid as the market is full of shock absorbers brought into market through smuggling under invoicing or misdeclaration. Computed value method envisaged under section 25(8) also cannot be relied upon as the shock absorbers are manufactured of various metals and alloys through precision engineering involving further costs of research and development, design and brands. Therefore, reliance had to be made upon the Fall Back Method as laid down under section 25(9) for arriving at the fair assessable values for various imported non-genuine replacement shock absorbers. In order to curb group under invoicing, misdeclaration and proper assessment of goods, following values are notified under section 25-A of the Customs Act, 1969 for implementation:--

(4)The aforesaid values are inclusive of essential packing and shall remain valid till revised. However, if the declared/invoice value is higher the same shall be applied."

There was, it appears, a substantial difference in the duty payable in respect of the consignments on the declared value as compared with the amount payable on an application of the Valuation Ruling.

3.Learned counsel submitted that the petitioner contested the application of the Valuation Ruling to the imported goods. His case was that the goods had to be valued in terms of section 25. It appears that the goods were taken into bond. Learned counsel relied on the Earlier Judgment, and in particular on para 21 thereof, to contend that by the time the goods declarations were filed, more than six months had already passed since the date of issuance of the Valuation Ruling. He submitted that the said ruling had accordingly expired as held in the Earlier Judgment and therefore was, in law, no longer in the field. The matter fell to be determined in terms of section 25 and the declared value (the price actually paid) had to be accepted. He prayed for relief accordingly.

4.Learned counsel for the Department, ably assisted by the learned departmental representative, contested the petitioner's case. It was submitted that the goods were taken into bond after a proper assessment under section 80. Learned counsel submitted that the petitioner had accepted the application of the Valuation Ruling and had given an indemnity bond and post dated cheque for the differential amount. The petitioner could not now turn around and challenge the valuation on such basis. Learned counsel pointed out that at the time that the goods declarations were filed, the Earlier Judgment was not in the field. Reliance was also placed on subsection (4) to section 25A, which had been added by the Finance Act, 2010 and was therefore in the field when the goods declarations were filed. It was submitted that the Valuation Ruling was fully operative and applicable at all material times and had been rightly applied to the petitioner's consignments. It was also submitted that even in terms of the Earlier Judgment, the petitioner had failed to make out any case, since it was not held therein that a valuation ruling under section 25A ceased to apply after the expiry of six months. Rather, it had been laid down in para 21 thereof, with specific reference to subsection (4) of section 25A, as follows:--

"In our view, the proper interpretation and application of this subsection ... is that while the valuation ruling will continue to hold the field unless revised or rescinded, any aggrieved importer has the right to approach the concerned officer after the ninety day period mentioned above, and he would then have to give reasons why the ruling has not been revised or rescinded."

Learned counsel submitted that statutory remedies were available to the petitioner both against the assessment order and the Valuation Ruling, which had not been availed and for this reason alone, the petition ought to be dismissed. Thus, the petitioner had no case whatsoever, whether in law or otherwise. Exercising his right of reply learned counsel for the petitioner referred to Rule 109 of the Customs Rules, 2001 and submitted that the furnishing of the indemnity bond(s) and cheque(s) did not at all come in the way of a proper determination of value in accordance with law. It was reiterated that the petitioner had all along disputed the application of the Valuation Ruling.

5.We may note before proceeding further that by means of an order dated 22-5-2013 made in the petition, the petitioner was allowed to ex-bond the goods by way of an interim arrangement subject to deposit of one-half of the differential amount in cash with the Nazir of the Court and submission of post-dated cheques for the balance.

6.We have heard learned counsel as above and considered the record and the relevant statutory provisions. As is apparent, the petitioner's case turns primarily, if not solely, on the Earlier Judgment. The applicability and interaction of sections 25 and 25A were considered in detail in that decision. If this judgment were to be made self contained, it would be necessary to quote extensively from the Earlier Judgment. However, this would add excessively to the length of this decision. At the same time, it may not be possible to follow the discussion herein without some appreciation and knowledge of the Earlier Judgment. As noted above, the Earlier Judgment does not appear to have been reported, but has been posted on the website of the High Court.Wehavethereforeattemptedtostrikeabalancebyquotingfrom the Earlier Judgment to the extent absolutely necessary and unavoidable but at the same time have assumed a basic familiarity with that decision.

7.We begin, in order to aid the reader, by giving a brief overview of what was said in the Earlier Judgment, as presently relevant. In that judgment, from para 8 onwards, there is a consideration of how section 25 took its present form, which was to comply with Pakistan's WTO requirements in respect of the Valuation Agreement. In para 12, one of the most important principles of the Valuation Agreement, and hence section 25, namely that of sequential application of the various valuation methods has been considered. From para 13 onwards, there is a detailed consideration of section 25A. It is noted that this section was brought in by the Finance Act, 2006 and substituted in its entirety the very next year, by the Finance Act, 2007. In paras 18 and 19, there is a consideration and comparison of section 25A as originally added and as substituted. The manner in which section 25A is to apply has been explained in detail. In our view, it is these paras (rather than para 21 relied upon by learned counsel) which require consideration for purposes of the present matter and these, unavoidably, need to be set out in full. (At the risk of repetition, we again emphasize that in order to fully appreciate and understand these paras, it is necessary to read the Earlier Judgment in its entirety.) These paras are as follows (emphasis by way of underlining supplied):--

"18. When the substituted section 25A is compared with the section as originally enacted (see para 13 [of the Earlier Judgment]), it will be seen that subsections (2) and (3) are the sameasbefore.Therealchangehascomeaboutinsub-section (1). As before, this subsection opens with a non-obstante clause which overrides section 25, and closes by mandating that the provisions of the latter section are to apply. The difference is that while earlier, subsection (1) required that "the scheme and sequential order as laid down under section 25" was to be followed, it now mandates that the "methods laid down in section 25, whichever is applicable" are to be followed. The question that requires consideration is whether, and if so, to what extent, this change in language has brought about a change in the manner in which section 25A is to be applied. It will be noted that apart from this change, subsection (1) as now in force is otherwise in the same form as originally enacted. The analysis in paras 14 and 15 [of the Earlier Judgment] therefore applies just as much. As before, the subsection permits a predetermination of the customs value of goods to be imported into Pakistan. This, as before, has the effect of knocking out the primary method of determining the customs value of imported goods, i.e., the transaction value, with the result that there continues to be a major departure from the Valuation Agreement. Previously, the subsection sought to minimize this divergence by requiring that the remaining methods of the agreement be followed and applied in the same manner as laid down therein. Now however, the language is different: the "methods laid down in section 25, whichever is applicable" are to be followed, and the question is, what do these words entail.

19. In our view, it is clear that a change was intended in the manner in which section 25A is to be applied when this provision was substituted in 2007, and this is especially true of subsection (1). Earlier, this subsection, by referring to the "scheme" and "sequential order" of section 25, bound section 25A tightly to the Valuation Agreement. In particular, it required a strict adherence to the principle of sequential application. The language is now markedly different. section 25A has not of course, been cut loose from the Valuation Agreement. It still remains expressly tethered to it. In determining the customs value under subsection (1), the concerned officer is still limited and restricted only to the methods set forth in section 25. If therefore, some method other than that specified in section 25 is applied, that would be clearly ultra vires the powers conferred by section 25A. But the drift and divergence now permissible is greater. In our view, when all of the relevant factors, including in particular the principles stated in para 10 [of the Earlier Judgment], are kept in mind, the proper interpretation and application of section 25A, as it now stands, is as follows. Strict adherence to the third element of the principle of sequential application (see para 12 [of the Earlier Judgment]) is now no longer mandatory. However, this does not mean that the concerned officer (the Collector Customs or Director Valuation) can simply choose whichever method he deems appropriate. He must apply his mind to all the methods, and first determine the ones which are applicable in relation to the goods or category of goods for which the customs value is being determined. If two or more methods are found applicable, he may then choose the one most appropriate in the facts and circumstances of the case, but while doing so, he must specify the reasons why (if at all) he is discarding or not applying any applicable method(s) that sequentially precede the method being adopted. In other words, the applicable methods must be arranged in the same order as in the Valuation Agreement. While the concerned officer is not limited to the first of these methods (as he would be if the principle of sequential application applied stricto sensu), and may move on to any other applicable method, he must give his reasons why the preceding method(s) are being abandoned. The method actually adopted must of course be applied in the manner set forth in section 25 read with the relevant rules under Chapter IX, subject to such adaptation (which must be expressly stated) as may be necessary to take into account the fact that there is no actual transaction value (since there are no actual imported goods). Furthermore, the valuation ruling must reflect that this exercise has been properly carried out in the manner aforesaid. The reasons why the particular method chosen was adopted and the reasons why the preceding applicable methods (if any) were not applied must be stated in the ruling, though not necessarily in full detail. (The concerned officer must of course, be prepared to provide the full details if so required.) As pointed out by learned counsel for the petitioners, the exercise carried out under section 25A is a "determination" and not a mere "fixation" (as was the case, e.g., under section 25B, or subsection (14) of section 25, both omitted from the Act in 2004 and 2005 respectively). The "determination" is a multistep exercise, at each stage of which there has to be a proper application of mind by the concerned officer. Itisthereforeappropriatethattherulingshouldcontain sufficient details to show that section 25A has been properly applied. Furthermore, the fact that the determination is subject to revision by the Director-General Valuation under section 25D, and the latter's decision is now appealable to the Appellate Tribunal (see section 194A(1)(e)), also make it necessary that the valuation ruling should be a speaking order. This is in any case, the requirement of section 24A of the General Clauses Act, 1897. As is clear from the foregoing, a determination under section 25A is no simple thing. It may therefore be helpful for FBR to consider issuing appropriate guidelines under section 223 of the Act to assist the concerned officer, without of course, affecting or usurping the powers statutorily vested in him by section 25A."

8.When the Valuation Ruling is examined, it will be seen that the Director, Valuation did state therein the reasons why the valuation methods contained in the various subsections of section 25 could not be applied, and therefore resort had to be taken to final method (fall back) in terms of subsection (9). The various subsections of section 25 and corresponding provisions of the WTO Valuation Agreement have been given in tabular form in para 11 of the Earlier Judgment. That table, to the extent of subsection (9), must also be reproduced herein:--

9.In our view, when subsection (9) is examined, it comprises of the following elements. Firstly, it is to apply only if it is determined that the valuation methods contained in subsections (1), (5), (6), (7) and (8) cannot be applied. Secondly, its application is subject to "rules", which at present means the Customs Rules, 2001 ("Rules"). Thirdly, the basic framework of how value is to be determined in terms of the subsection has also been specified. The value must be determined on a basis that is "derived" from among the valuation methods specified in subsections (1), (5), (6), (7) and (8). However, it is permissible to apply these subsections in a "flexible manner". Two points may be noted regarding the basic framework that has been laid down. Firstly, it does not permit a complete abandonment of the valuation methods specified in subsections (1), (5), (6), (7) and (8). These cannot simply be pushed aside and ignored altogether. Rather, what subsection (9) envisages is a value derived on the basis of any one of the other valuation methods, flexibly applied, or a suitable blending of elements from two or more of the other valuation methods, again applied flexibly. The fall-back method as contained in subsection (9) therefore envisages the application of a method that must recognizably be referable back to any one of the other valuation methods or to a combination of the elements of two or more of them. The second point to be noted with regard to the basic framework is that it ties subsection (9) much more closely and strictly to the other valuation methods than does Article 7 of the Valuation Agreement. The latter allows the use of "reasonable" means, which are required only to be "consistent" with the "principles" and "general provisions" of the Valuation Agreement and also of Article VII of GATT, 1994. (It is not necessary to consider Article VII in any detail.) Thus, Article 7 allows for greater latitude and may possibly make permissible a larger departure from the other valuation methods. This however, is not permissible under subsection (9). It is more rigidly structured. Rather than leaving the matter rather open-ended, for the value to be determined by customs authorities essentially at their discretion under loosely worded guidelines (as would have been the case had the language of Article 7 been used), the legislature has chosen to draw the boundaries more tightly. The requirement is not that of reasonableness or of consistency with principles and provisions generally. The procedure or method to be followed is laid down with much greater specificity and expressly tied to the other valuation methods.

10.The foregoing analysis applies of course, when subsection (9) is considered in terms of its application under section 25 itself. What however, of section 25A and how does subsection (9) relate to this provision? In our view, the answer to this question lies in what was said in paras. 18 and 19 of the Earlier Judgment (reproduced above). In particular, the portions of para. 19 that have been emphasized by underlining are of direct relevance and application. It is in terms as therein explained that subsection (9) interacts with and relates to section 25A.

11.Before proceeding further, we may note that the Valuation Agreement has appended to it certain interpretative notes in its Annex I. These provide guidance and assistance as to how the various Articles (i.e., the valuation methods therein contained)aretobeinterpretedand applied. Many, if not most, of thesenoteshavebeenincorporatedintheRules(in Chapter IX, which deals with valuation matters).Thisis of direct relevance because, as noted above, the application of subsection (9) is subject to the Rules. The following two Rules, which relate to the fall-back method need to be kept in mind:

"110. Prohibited methods.---Where the value of imported goods cannot be determined under subsections (1), (5), (6), (7) and (8) of section 25 of 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.

121. Fall back method.---(1) Value of imported goods determinedundersubsection (9)ofsection25oftheAct,shall, to the greatest extent possible be based on previously determined customs values of identical goods assessed within ninety days.

(2)The methods of valuation, to be employed under subsection (9) of section 25 of the Act may be inclusive of those laid down in subsections (1), (5), (6), (7) and (8) of the said section, but a reasonable flexibility in the application of such methods would be in conformity with the aims and provisions of subsection (9) of that section. ..."

Certain points may be noted with regard to the aforesaid Rules before proceeding further. The reference to "subsection (4) of section 25" in Rule 110(iv) is actually a typographical error; the reference ought to have been to subsection (14), which however was omitted by the Finance Act, 2005. Thus, it is impermissible, without exception, to establish minimum values. Secondly, Rule 110 clearly states that if the value cannot be determined in accordance with the valuation methods laid down in subsections (1), (5), (6), (7) and (8) (i.e., resort must be hadtothefall-back method under subsection (9)),thentheimportdata available with the Department must be used. Thirdly, sub-rule (1)of Rule 121 requires that "to the maximum extent", values under subsection (9) must be based on "previously determined customs values of identical goods assessed within ninety days". Lastly, the word "may" as used in sub-rule (2) of Rule 121 must be understood and applied contextually. The proper interpretation of subsection (9) has been stated in para. 9 above. The word "may" is to be understood in the context of the basic framework provided by the legislature for purposes of subsection (9). It certainly does not, and cannot, be regarded as conferring a discretion on the customs authorities to abandon the other valuation methods altogether.

12.The foregoing Rules are not, sensu stricto, applicable to section 25A. However, the manner in which that section interacts with the various subsections of section 25, as elaborated upon in the Earlier Judgment and in the paras herein above means, in our view, that whenever a valuation ruling is to be issued under section 25A with reference to the fall-back method, the concerned authority is duty bound also to keep in mind and take into consideration the relevant Rules. The valuation ruling must be issued in a manner that is not inconsistent with the Rules.

13.We now turn to consider the Valuation Ruling in light of the foregoing discussion. (We may note that a number of valuation rulings were also considered in the Earlier Judgment and found wanting in one respect or another: see paras 23 to 29 thereof.) We conclude that the Valuation Ruling is ultra vires section 25A. One obvious reason for this is that it states, at the end, that "if the declared/invoice value is higher the same shall be applied". In other words, the values determined by the Valuation Ruling are minimum customs values. This is flatly contrary to Rule 110(iv) and hence to subsection (9) of section 25. Secondly, and more importantly, it is clear from a reading of the Valuation Ruling as a whole that in applying the fall-back method, the Director, Valuation has completely abandoned the other valuation methods. Although he has given his reasons for doing so and has stated that the fallback method has been applied to arrive at "fair" values, this approach is contrary to law. It is directly in conflict with the method to be followed if at all subsection (9) is to be applied, as explained above. It also expressly ignores the import data available at Custom House, which is in contradiction of the Rules. It purports to be based on "market survey ... to analyze the prices available in the local market". This is also in express conflict with the Rules. Furthermore, nothing is stated in the Valuation Ruling that would indicate as to how or why the values actually used are "fair" values, even if (which in our view is not the case) it were legally permissible for the Director to determine value on such basis. In our view, the Valuation Ruling is based on a comprehensive misapplication and misunderstanding of the law. It cannot therefore be allowed to stand. It fails and must be set aside.

14.The submission by learned counsel for the Department that the petitioner had accepted the assessment based on an application of the Valuation Ruling is, with respect, of no avail. Section 25A confers a statutory power on the concerned authority. That power must be lawfully exercised. If it is not, then it is no answer to the importer's case that he brought in his goods by accepting the value given in the ruling. To hold otherwise would, e.g., make it permissible for the concerned authority to issue a valuation ruling on the basis of an understanding or agreement with one or more concerned importers or an association or other trade body. Such a ruling would be unlawful as it would be in negation of the mandate of law. Indeed, one of the valuation rulings considered in the Earlier Judgment was set aside for precisely this reason (see para 23 thereof). We also note that the petitioner has in fact contended that he never accepted the Valuation Ruling but protested its application throughout. Even if this had not been the case, in our view, it would not be open for the Department to apply a ruling issued in a manner contrary to law. The other submission, namely that the petitioner had certain statutory remedies available, which were not availed, is also of no consequence. The issues raised in this petition are of general importance and a determination of the same is a necessary extension of the analysis and discussion in the Earlier Judgment, which is itself of general application. The conclusions and observations apply generally to all manner of imports and valuation rulings issued, or to be issued, from time to time. This objection therefore also fails.

15.In view of the foregoing, this petition is allowed. The Valuation Ruling is set aside as being ultra virus section 25A and is declared to be without legal effect. The petitioner's consignments are therefore to be valued on the declared value and he is only liable to pay duty, taxes, etc. on such basis. If the petitioner availed the interim relief to ex-bond the goods, then the security furnished by him stands discharged. The amount deposited with the Nazir, as also the post-dated cheques, are to be returned forthwith subject to proper verification and confirmation. Furthermore, the indemnity bond(s) and post-dated cheque(s) given earlier to the customs authorities also stand discharged. There shall be no order as costs.

SAK/G-39/KPetition accepted.