ZAHOOR ENTERPRISES VS DEPUTY COLLECTOR (II), 2015 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 2460 (2014)

Customs Act (IV of 1969)---

----Ss. 25, 81, 82 & 194-A---S.R.O. No. 494(I)/2007 dated 9-6-2007---Determination of customs value of imported goods---Provisional assessment of duty---Importer filed Goods Declaration for clearance of imported goods---Declared description of goods was confirmed by the department, but declared value of the same was found on lower side than the normal value---Goods were released provisionally under S.81 of the Customs Act, 1969 at total enhanced value and matter was referred to the Directorate General of Customs Valuation for investigation and determination of fair value as per law---Importer was found to have short paid/recoverable duty and taxes---Adjudicating Authority finalized the provisional assessment as per enhanced value determined by Directorate General of Customs Valuation; and ordered the importer to pay off the balance amount---Appellate Authority, having dismissed appeal of the importer against order-in-original of the Adjudicating Authority---Validity---Contention of the importer was that the declared value of the consignment was the transaction value, which was higher, but even then the value was enhanced arbitrarily without disclosing the evidence or giving reasons for such enhancement---Powers to convert the provisional determination into final determination, was vested with the appropriate Officers of the clearance/Executive Collectorate---S.R.O. No. 494(I)/2007, dated 9-6-2007 which had prescribed the function of the Directorate General of Customs Valuation, did not envisage any role for the said Officer under S.81 of the Customs Act, 1969---Exchange of information/data, or provision of advice by the Directorate General of Valuation to the concerned Collectorate, upon latter's initiative, was an internal activity between the two formations of the department---Mere posting of certain advice electronically on the system by Valuation Officer, would not meet the requirement of final determination of duty and taxes---Such power was only to be exercised by the appropriate Officer in the manner as outlined under S.81 of the Customs Act, 1969; and within stipulated period of six months---Final determination in the present case, was made after expiry of stipulated period of six months, even though the extention of 30 days had been sought by the Authority/department---Final determination, in circumstances, was hopelessly time barred, which was void and unlawful---Order passed by the hierarchy of customs, which was patently infested with legal infirmities, had no legal warrant under the law which was set aside.

Messrs Hassan Trading Company v. Central Board of Revenue, Government of Pakistan, Islamabad and others 2004 PTD 1979; Messrs Dewan Farooque Motors Ltd. Karachi v. Customs, Excise and Sales Tax Appellate Tribunal Karachi and others 2006 PTD 1276; Collector of Customs (Appraisement), Karachi v. Auto Mobile Corporation of Pakistan, Karachi 2005 PTD 2116; 2007 PTD 2092; Collector of Customs, Lahore and others Messrs Shafiq Traders and another 2011 SCMR 967; SUS Motors (Pvt.) Ltd., v. Federation of Pakistan 2011 PTD 235; Messrs Salman Tin Merchant, Karachi v. Collector of Customs, Karachi 2014 PTD 438 and Messrs Wall Master v. The Collector of Customs Appraisement Karachi 2005 PTD 2573 ref.

M.H. Awan for Appellants.

Shamim, P.A. for Respondents.

Date of hearing: 30th October, 2014.

ORDER

MUHAMMAD NADEEM QURESHI, MEMBER JUDICIAL-I.---This appeal under section 194-A of the Customs Act, 1969, is filed by Messrs Zahoor Enterprises, Karachi, against the Order-in-Appeals Nos.7226 to 7227 of 2013, dated 19-4-2013, passed by the Collector of Customs (Appeals), Karachi.

2. Brief facts of the case are that the appellant imported a consignment of Toiletries from Korea and filed Goods Declaration for clearance of the same at a declared value at US$ 5,630, 25. The goods were got examined under 1st Appraisement System. The shed staff confirmed the declared description of goods. As the declared values of these items appeared to the Appraising Group to be on lower side than the normal values of the same items as per available data/evidences of the last 90 days, the Group sought to load these values. However; since the appellant contested such loading the goods were released provisionally under section 81 of the Customs Act, 1969 at a total enhanced value of US$ 7,460,29, on 19-5-2011 and the matter was referred to the Directorate General of Customs Valuation for investigation and determination of fair value as per law. The Directorate General of Customs Valuation determined item wise fair values of the referred items and advised the same to the Group vide their letter No.1/444/2011-II/4122 dated 16-11-2011. Accordingly, the Group has calculated the total fair value of the consignment to be US$ 7,460,29 and after deduction of provisionally assessed value US$ 7,460,29 the difference of value comes to US$ 41,143,97 (Pak Rs.3,559,138) which means that the total impact of short paid / recoverable duty and taxes comes out to be Rs.3,919,956. The adjudicating officer held that the charges against the appellant had been proved. The operative part of the impugned order reads as under:--

"In view of the aforesaid position and in exercise of the powers conferred under Section 82 subsection (3) of the Customs Act, 1969 I hereby finalize the provisional assessment in the instant case as per value determined by the Directorate General of Customs Valuation. In this regard I order the Group to encash the security deposited in this case, that is, the Pay Order amounting to Rs.1,066,190 forthwith, and further order the named importer to pay off to the balance recoverable amount of Government dues Government Exchequer on most immediate basis. I further Order the Group that in case the noted recoverable dues are not paid within 15 days of issuance of this order; recovery proceedings against the importer under section 202 of the Customs Act, 1969 may be initiated and appropriate action against the Clearing Agent may also be taken up per law."

3. Being aggrieved and dis-satisfied with the Order-in-Original, the appellant filed appeal before the Collector of Customs (Appeals), who vide impugned Order-in-Appeal observed as follows:--

"5. I have carefully considered the written as well as verbal submissions made by the rivals. In the instant case the appellants imported "Cosmetics" and sought clearance under the 1st Appraisement system. The assessable value of the impugned goods was found to be on a lower side. Hence as per prevailing practice in the Custom House the impugned goods were provisionally assessed by Customs under section 81 of the Customs Act, 1969 and the case was referred to the Valuation Department for determination of correct and fair value of the goods under section 25 of the Customs Act, 1969. Accordingly, a Valuation Advice was issued by the Valuation Department vide C. No. 1/44/ 2011-II/4122 dated 16-11-2011 in respect of the impugned goods, which was accepted by Customs and the goods were finally assessed on the basis of the said. Valuation Advice whose copy is placed on record. An examination of the Valuation Advice reveals that the appellants were accorded several opportunities to present their case therefore the Valuation Department; however, they failed to even appear before the concerned Valuation officer. The Valuation Department finalized the assessment of the Cosmetics in terms of section 25(7) of the Customs Act, 1969.

6. The learned counsel for the appellants has firmed up his defense of the case mainly by challenging the monetary powers delegated to the adjudicating officer and that the final value of the goods was incorrectly and unfairly assessed by the Valuation Department under section 25(7) ibid. He has placed reliance and quoted several judgments of the Superior Courts to strengthen his case however, these, arguments in my view do not establish his viewpoint of rejecting the assessed value determined and applied by the Customs functionaries. Therefore, in order to meet the ends of justice the counsel was accorded ample time to come up with some compelling evidence which could disprove the bona fides of the final assessable values determined and applied by these Customs functionaries and to establish his viewpoint. However, despite this leverage, he failed to do so. Thus I hold that the final assessable values for imported Cosmetics, determined and applied by Customs functionaries, are fair and correct. I therefore, find no reason to interfere with the impugned assessment Order No. 21 of 2011 dated 17-11-2011. The same is accordingly endorsed and the appeal being devoid of merit is not accepted.

7. This order shall apply mutatis mutandis to another appeal bearing No. Cus/3412/2012/A filed by the Messrs Zahoor Enterprises, Karachi vide Assessment. Order No. 6 of 2011 dated 14-2-2012 involving the same facts, circumstances and the points of law."

4. On date of hearing the advocate appearing on behalf of the appellant reiterated the grounds of appeal and further argued that the declared value of the consignment was the transaction value which was higher than value mentioned in the Ruling No.301/2011 dated 18-3-2011, even then the value was enhanced arbitrarily without disclosing the evidence or giving reasons for such enhancement. Evidentially the goods are unbranded and are of inferior quality as compared to branded goods. Therefore the transactional value as declared does not have any interchanged with the applied ruling and enhancement made thereon. He further argued that the Goods Declaration was processed provisionally under Section 81 of the Customs Act, 1969 by applying 150% loading with Valuation Ruling and the case was sent to Directorate General of Valuation for fair value assessment of goods. The goods were provisionally assessed on 20-7-2011 but on the contrary valuation advice was issued on 7-2-2012 after the expiry of stipulated period of 06 months. Hence, the said advice is not applicable on appellants' goods. He further contended and argued that since the stipulated period of

6 months had lapsed, the final determination being time barred the provisional determination made under subsection (1) of section 81 at the final stage would be deemed final determination in the appellants present case. He reiterated and argued that the provisions of section 25 of the Customs Act, 1969, have not been followed while fixing the value of the goods. He also referred the subsection (4) of section 81 of the Customs Act, 1969, which says:--

"(4) If the final determination is not made within the period specified in subsection (2), the provisional determination shall, in the absence of any new evidence, be deemed to be the final determination.

Explanation:- Provisional assessment means the amount of duties and taxes paid or secured against bank guarantee or pay order)"

5. Along with that he further cited a number of judgments passed by the Superior Courts wherein the issue of provisional determination under Section 81 and final determination of duties and taxes have been deliberated upon, i.e., Messrs Hassan Trading Company v. Central Board of Revenue, Government of Pakistan, Islamabad and others 2004 PTD 1979; Messrs Dewan Farooque Motors Ltd. Karachi v. Customs, Excise and Sales Tax Appellate Tribunal Karachi and others 2006 PTD 1276; and Collector of Customs (Appraisement), Karachi v. Auto Mobile Corporation of Pakistan, Karachi 2005 PTD 2116; 2007 PTD 2092 and 2011 SCMR 967 (Collector of Customs, Lahore and others v. Messrs Shafiq Traders and another).

6. The respondent has not filed any counter objection in compliance of subsection (4) of Section 194-A of the Customs Act, 1969. In spite of that the representative of the respondent argued and supported the provisions of subsection (2) of section 81 of the Customs Act, 1969. On 19-1-2012 the competent authority extended the period for 30 days for final determination and as such the Directorate General of Customs Valuation has issued an advise under subsection (7) of section 25 of the Customs Act, 1969 vide No.01/06/2011-II dated 7-2-2012 and after that assessment Order No.06-A/2011 was passed by the competent authority and provisional assessment was finalized under subsection (3) of section 81 of Customs Act, 1969 at value determined by the Director General Valuation. He further stated that in case of non payment, recovery proceedings were directed to be initiated against the appellant by the competent authority

7. Arguments heard, record perused.

8. By taking into consideration the grounds of appeal as well as the oral arguments extended by both the parties before the Court, I prefer to deliberate upon the issue in the light of interpretation of statutes as available in the orders of the Superior Courts on the legal position as regard the Director General Valuation, and its officers and affiliates as been acted in wake of clarification issued by Federal Board of Revenue (FBR). The powers to convert the provisional determination into final determination is vested with the appropriate officers of the clearance/executive Collectorate S.R.O. 494(I)/2007 dated 9-6-2007 that prescribes the functions of the Directorate General of Customs Valuation does not envisage any role for the said office under Section 81. That being the position; on the jurisdictional dimension, the issue is further elucidated by the Federal Board of Revenues clarification referred to above. As a corollary, I tend to believe that the exchange of information/ data or provision of advice by the Directorate General of Valuation to the concerned Collectorate, upon latter's initiative, is an internal activity between the two formations of the department and the mere posting of certain advice electronically on the system by a valuation officer does not meet the requirement of final determination of duty and taxes. It has only to be exercised by the appropriate officer in the manner as outlined under section 81 of the Customs Act, 1969 and within the stipulated period of six months. In SUS Motors (Pvt.) Ltd., v. Federation of Pakistan 2011 PTD 235 the Hon'ble Sindh High Court held:--

'The case was electronically retrieved by the Collectorate for encashment of PDC [post dated cheque] to avoid the case from becoming time barred. Assessment was therefore finalized under section 81(4) of the Customs Act 1969". It is quite clear from this description that the Department failed to carry out the exercise under section 81 as required by law, and in particular" in terms as described in para 18 supra (The Department had its own 'assessment' that the petitioner's self-assessment was incorrect. Since the stipulated period was about to expire, it then made a "final determination" on this basis. For the reasons already given, this approach was legally incorrect and impermissible.')

9. Now I come to the question of the validity of 'final determination' in terms of the time limit provided under subsection (2) of Section 81, read with the requirement prescribed under subsection (4) thereof, which reads:--

"(2) Where any goods are allowed to be cleared or delivered on the basis of such provisional determination, the amount of duty, taxes and charges correctly payable on those goods shall be determined within six months of the date of provisional determination:

Provided that the Collector of Customs or, as the case may be, Director of Valuation, may in circumstances of exceptional nature and after recording such circumstances, extended the period for final determination which shall in no case exceed ninety days:

Provided further that any period, during which the proceedings are adjourned on account of a stay order or for want of clarification from the Board or the time taken through adjournment by the importer, shall be excluded for the computation of aforesaid periods."

(3) - - -

(4) If the final determination is not made within the period specified in subsection (2) the provisional determination shall, in the absence of any new evidence, be deemed to be the final determination."

10. It is evident from the record of the case as well as the documents provided and referred by the respondent that final determination was made after expiry of stipulated period of 6 months even though the extension of 30 days has been sought by the authority. In all circumstances the final determination hopelessly time barred. In number of judgments, Superior Courts have held such assessment as void and unlawful. The Hon'ble Sindh High Court in the judgment referred to in para 8 supra has further held:--

"If the final determination is not completed within the stipulated period, then the provisional determination becomes final, and this does not include the "additional amount", the facts and circumstances of the present case, we hold that the stipulated period was not extended in terms of the proviso to subsection (2), and hence expired at the end of nine months. Since there was no final determination within the nine months; the provisional determination became final. Furthermore, since the petitioner had discharged its liability in terms of the provisional determination, no other amount was payable by it, with the result that any cheques given by the petitioner for securing the "additional amount" cannot be encashed and must be forthwith returned to it by the Department."

11. In Messrs Salman Tin Merchant, Karachi v. Collector of Customs, Karachi (2014 PTD 438) the Hon'ble Sindh High Court observed:--

"Consequently, as stated earlier we are of the opinion that the initial assessment was made under section 81 of the Act, but was not finalized within the stipulated period as required under subsection (2) of section 81 of the Act, therefore, the provisional assessment made on the basis of the declaration made by the applicant, has attained finality---"

12. Similar view has been held in a number of judgments passed by the Hon'ble Supreme Court of Pakistan, Hon'ble Sindh High Court and the Hon'ble Lahore High Court on the issue of determination of duty and taxes finalized, after the expiry of stipulated period. In Messrs Wall Master v. The Collector of Customs Appraisement, Karachi 2005 PTD 2573, the Hon'ble Sindh High Court has observed. "No final assessment order has been made under section 80 of the Customs Act and, therefore, by virtue of the provisions contained in section 81(4) of the Customs Act, the provisional assessment made under section 81(1) has attained finality. There is no dispute on the fact that the period of one year (reduced to six months under Finance Act, 2005) specified in sub-section (2) of section 81, from the date of provisional assessment has expired and there is no order extending the period of final assessment by 30 days by the Collector of Customs. Thus all the provisional assessment orders have attained finality". In the light of the above, I hold the final determination of duty and taxes in this case as time barred.

13. By getting strength from the aforesaid observations and ratio decidendi observed by the Superior Courts in above referred judgments, I am of the considered view that the order passed during the hierarchy of customs, is patently infested with legal infirmities and has no legal warrant under the law, as such, hereby set aside up to the extent of GD No.KAPR-HC-107372 dated 17-6-2011 only and the appeal is accordingly allowed with no order as to cost.

14. Order passed and announced accordingly.

HBT/161/Tax(Trib.)Appeal allowed.