INTERNATIONAL PETROCHEMICALS (PVT.) LTD. VS DEPUTY COLLECTOR OF CUSTOMS (PREVENTIVE) CUSTOM HOUSE, KARACHI, 2017 PTD-KARACHI-HIGH-COURT-SINDH 370 (2015)

Customs Act (IV of 1969)---

----S. 25----Customs Rules, 2001---Import of goods---Determination of, value of goods imported for the first time----Scope---Under S. 25 of Customs Act, 1969, it was not permissible to reject declared value simply on the ground that relevant goods had been imported for the first time and hence the values of any identical and/or similar goods were not available----Simply because the Department had no data it may consider relevant for comparative purposes, it could not for that reason alone reject the declared value on the ground that goods in question had been imported for the first time and it was not within contemplation and framework of S. 25 of Customs Act, 1969 either expresslyorevenimpliedlythatpricepaidorpayableberejectedonlyforsuchareason---Pricepaidorpayablecouldonlyberejected for a legally valid reason as set out in S. 25 of Customs Act, 1969 or in Customs Rules, 2001---Reference was answered accordingly.

Ziaul Hassan for Applicant.

Ghulam Haider Shaikh for Respondents.

Date of hearing: 16th September, 2015.

ORDER

MUNIB AKHTAR, J.---By means of a short order dated 16.09.2015, we had disposed off this Reference Application in favour of the Applicant and against the Respondent department. The following are our reasons for having done so.

2.Briefly stated, the facts are that the Applicant had imported certain goods, for which the value declared was USD 110 per metric ton (PMT). However, the goods were provisionally assessed at USD 360 PMT, and the matter was referred to the Directorate of Customs Valuation. That Directorate initially valued the goods at USD 650 PMT (and advised the Collectorate accordingly) ("first advice") but the matter being contested by the Applicant and on its representation, re-examined the case and advised the Collectorate to assess the goods at the declared value ("second advice"). Since there was a huge difference between the two advices, the Collectorate referred the matter back to the Directorate for further consideration. The Directorate, on such reconsideration, withdrew the second advice. However, it advised the Collecorate "to finalize the assessment following the laid down procedure for adjudication such as affording due opportunity to the importer and considering all the case documents including the import record, clearance of identical/similar goods, SGS report etc" (to quote from the impugned order of the Appellate Tribunal, pg. 3). The matter was therefore reconsidered by the Collectorate and the goods were finally assessed at USD 215 PMT. This assessment was made by applying section 25(8) of the Customs Act, 1969. Being aggrieved by this assessment, the Applicant preferred the statutory appeal, which was dismissed. That led toafurtherappealbefore the Appellate Tribunal,whichalsofailedand the Applicant then filed the present Reference Application in this Court.

3.Learned counsel for the Applicant had raised a number of questions in the Reference Application, said to be the questions of law arising out of the impugned order. At the hearing however, learned counsel stated that only questions (ii), (v) and (vi) would be pressed. We first heard learned counsel for the parties on question (v), which was as follows:--

"(v) Whether the respondents while dealing with the goods under question has applied the provisions of Section 25 of the Act, read with the Customs Rules contained in Customs Rules, 2001 in its true spirit by fulfilling the entire legal requirement as envisaged under the law in this regard?"

Learned counsel for the Applicant submitted that section 25 of the Customs Act lays down various methods for determining the value of goods. These methods have to be applied sequentially. The customs authorities are required firstly to accept the value declared (i.e., the price payable or paid) and it is only if this is not accepted that the matter can then be taken to the succeeding subsections of the section, which require application of various methods, starting with the value of identical goods, and then moving sequentially to the value of similar goods, etc. Learned counsel emphasized that it was only if the method at a particular stage was found wanting for legally valid reasons that the next method could be considered. In the present case, the very first "method", i.e., acceptance of the declared value (i.e., the price paid or payable) had been unlawfully rejected and the Collectorate had thereafter proceeded straight to subsection (8), which provided for the "computed value" method. Thus, there had been a clear violation of section 25 and the rejection of the declared value was unlawful. The Appellate Tribunal had erred in failing to appreciate this aspect of the matter.

4.Learned counsel for the respondent Department defended the impugned order and the departmental proceedings below and submitted that section 25 and the relevant provisions of the Customs Rules had been properly applied. However, the attention of learned counsel was drawn to the following statement to be found in the Order-in-Original:--

"11. I have gone through the record of the case and also considered written and verbal arguments of the representative. It is observed that Aromix 115 [i.e., the imported goods] have been imported first time in Pakistan, therefore, transaction value of identical goods and similar goods is not available on the record of this Collectorate."

We specifically asked learned counsel to address us on the question whether it was permissible in terms of section 25 (read with the relevant Customs Rules) to reject the declared value (i.e., the price paid or payable) simply on the ground that the relevant goods had been imported for the first time and hence the value(s) of any identical and/or similar goods were not available. It seemed to us that the goods had been assessed by the Collectorate by answering this question in the affirmative, which conclusion had been upheld by the Appellate Tribunal in the impugned order. Learned counsel supported the conclusions arrived by the forums below.

5.With all due respect to learned counsel, we cannot agree. There is no legal warrant, either in section 25 itself or when that section is read with the Customs Rules, for answering the question posed above in the affirmative. (We may emphasize that while we have referred to Customs Rules, the matter must of course in the first instance be tested on the anvil of section 25 itself.) Simply because the Collectorate concerned has no data (i.e., goods and values) that it may consider relevant for comparative purposes (whether on an identical or similar goods basis), it cannot for that reason alone reject the declared value (i.e., price paid or payable) on the ground that the goods in question have been imported for the first time. It is to be noted that the approach taken by the Collectorate is not specific to the facts and circumstances of the present case. It would, in principle, apply to each and every occasion when any goods are imported for the first time into Pakistan. In our view, this cannot be correct. It is not within the contemplation and framework of section 25, either expressly or even impliedly, that the price paid or payable (i.e., the declared value) be rejected only for this reason or on such a ground. The price paid or payable (i.e., the declared value) can only be rejected for a legally valid reason, as set out in section 25 or (to the extent made permissible by the statute itself) in the Customs Rules. We find nothing in either as would require answering the question posed in the last preceding para in the affirmative. The Collectorate was wrong in so answering the question, and the Appellate Tribunal was, with respect, equally wrong in upholding it. There was clearly a material breach of section 25 in the facts and circumstances of the present case and an error of law was made by the Appellate Tribunal. Hence question (v) posed by the Applicant had to be answered in its favour and against the Collrectorate/Department. Since this was dispositive of the Reference Application, there was no need for us to consider the other two questions that were pressed at the hearing by learned counsel for the Applicant.

6.For the foregoing reasons, the Reference Application presently under consideration was allowed by us by means of a short order made on 16.09.2015.

RR/I-20/SindhApplication allowed.