I.T. IMPEX, KARACHI VS The DIRECTOR GENERAL
2019 P T D (Trib.) 36
[Customs Appellate Tribunal]
Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Muhammad Nazim Saleem, Member (Technical-II)
Messrs I.T. IMPEX, KARACHI
versus
The DIRECTOR GENERAL and another
Customs Appeal No.K-24 of 2016, decided on 01/04/2018.
(a) Customs Act (IV of 1969)---
----Ss. 25, 25-A & 25-D---Valuation Ruling---Determination of customs value of goods---Value of imported goods, had to be determined by the Customs Authorities under S.25 of the Customs Act, 1969---Director, Directorate General of valuation, was not empowered to fix the valueof imported goods through Ruling in exercise of power vested under S.25-A(1) of the Customs Act, 1969; Board was to issue a notification on the subject---If a mandatory condition for exercise of jurisdiction was not fulfilled, the entire proceedings, would become illegal and suffering from want of jurisdiction---If an action had been taken or order had been passed without having competency under the respective provisions of law, same was to be declared illegal and without jurisdiction---Goods of the importer , in the present case, were assessed on declared value till the issuance of impugned Ruling and there was no cause available with the Director of the Directorate of Valuation to issue fresh Ruling as the facts and circumstances remained the same and no surge in import was notified in the subsequent period---Representative of the department, had failed to negate the argument of the importer---Provisions of S.25 of the Customs Act, 1969 were to be followed in sequential manner barring certain exceptional cases where massive group under invoices was rampant, which was not visible in the present case---Resort to subsequent method was not permissible without any exception that was without exhausting the sequence indicated in S.25 of the Customs Act, 1969 as it would annihilate and terminate the spirit and essence of the transactions value, which in the first instance had to be established as colourable and tainted---Valuation Ruling was coram non judice, ab initio void and of no legal effect---Order-in-Revision passed by Director General of valuation was set aside, in circumstances.
Mansab Ali's case PLD 1971 SC 124; Chittaranjan Cotton Mills Ltd. v. Staff Union PLD 1971 SC 197; Raunaq Ali's case PLD 1973 SC 236; Messrs Shahid Impex v. Director General of Valuation 2014 PTD (Trib.) 674; Messrs AFU International v. Director General of Valuation 2016 PTD (Trib.) 1305; Rehan Omer v. Collector of Customs Karachi 2006 PTD 909; Messrs Toyo International Motorcycle v. Federation of Pakistan and 3 others 2008 PTD 1494; Najam Impex Lhr v Assistant Collector of Customs, Karachi and others 2008 PTD 1250; Sadia Traders v. FOP PTCL 2014 CL 537; Faco Trading Company v. Members Custom, Federal Board of Revenue and others 2013 PTD 825 and Goodwill Traders, Karachi v. FOP 2014 PTD 176 ref.
(b) Interpretation of statutes---
----Plain language of the law was to be applied.
Nadeem Ahmed Mirza for Appellant.
Shahdad Mari, Appraiser, P.A. for Respondents.
Date of hearing: 15th March, 2018.
JUDGMENT
MUHAMMADNADEEMQURESHI,MEMBER(JUDICIAL-I).---By this order, we dispose off Customs Appeal No. K-24/ 2016 filed by the appellant against Order-in- Revision No. 142/2015 dated 30.11.2015 passed by Director General, Directorate General of Valuation (here-in-after to be referred as respondent No. 2), rejecting the revision application, while maintaining Valuation Ruling No. 758/2015 dated 08.09.2015 issued by Director, Directorate General of Valuation, (here-in-after to be referred as respondent No. 1) through which value of Iran origin Ceramic and Porcelain Tiles of different type and sizes were determined.
2.The respondent No. 1 issued Valuation Ruling No. 758/2015 dated 08.09.2015 under Section 25A(1) of the Customs Act, 1969,(here-in-after to be referred as Act.) fixing value of Ceramic and Porcelain Tiles of different type and sizes of Iran origin under subsection (7) of Section 25 of the Customs Act, 1969. Being aggrieved applicant filed Revision Application No. DG(V)/Val.Rev/257/2015 dated 08.10.2015 under Section 25D of the C Act, before the respondent No. 2, through which the determination of value of Ceramic and Porcelain Tiles of Iran Origin was disputed and the respondent No.2 was requested by the appellant, to declare the said Ruling to the extent of Iran origin Tiles contrary to the provision of Section 25 of the Act, Section 46(d) & (g) of the Sales Tax Act, 1990 and Section 148(6)&(9) of the Income Tax Ordinance, 2001. The respondent No. 2 disagreed with the contention of the appellant and passed Order in Revision dated 30.11.2015, through which revision application was rejected on the basis of formed opinion in paras 11 to 13, which are:--
"11. I have examined the case record and consider the written as well as verbal argument put forward by all the petitioner and respondents. There are two types of petitions filed against Valuation Ruling No. 758/2015 dated 08.09.2015 , one by the importer of tiles and the other by the local manufacturers. Both parties have presented very different and opposing arguments in support of their contentions. All the contention of the importers as claimed in their written as well as oral submissions have duly been controverted by the departmental representative. Petitioner also claimed that the respondent have not invited Stakeholders in the hearings/meetings and had failed to provide calculation based upon the new Valuation Ruling. The DR, however, submitted that all Stakeholder were involved during the process. The Respondent Department stated in written submission that Valuation Ruling No. 758/2015 dated 08.09.2015 was issued after holding meetings with Stakeholder on 07.04.2015, 13.05.2015, 26.05.2015 and 02.07.2015 to get input and view point of the Stakeholders. The petitioner also tried to cast aspersions on the gaminess of the market inquiry, which was, however, duly defended by the DRs. The arguments regarding fewer profit margins during calculation of value was also rebutted by the DR, stating that 5% margin at each stage comes to 15% margin total of all stages. Importers of Chinese origin tiles alleged that value for China origin were higher, while other expressed concerns about value of particular sizes. All the arguments were effectively rebutted by the department."
12. On the other hand, Pakistan Ceramic Manufacturers Association challenged the argument put forth by the import stating that over the last 05 years the valuation of tiles from China was reduced by more than 25%, whereas, all the input cost in China regarding labour costs, energy costs and the currency valuation against the US$. Had actually increased by more than 35%. Moreover, inflation in China over the last 10 years had cumulatively gone up by 26% whereas, in the same period the valuation of tile has been reduced gradually. They stated that the import value could not be based on local price of imported tiles, alleging that market was manipulated by the vested Importers. They also presented calculation reflecting that some values fixed in the impugned ruling were less than the manufacturing cost. However, they could not substantiate their claim through verifiable documentary evidence. Respondent Department stated that the Valuation Ruling No. 538/2013 dated 16.01.2013 was more than 02 years old and there were continuous request from the importer requesting for revision on the plea that the prices of Chinese and Iranian origin tiles had gone down. The department submitted that the customs values of tiles were determined under section 25(7) of the Customs Act, 1969 after due diligence and were in accordance with the law. In the nut shell both the parties presented demand to suit their needs, which were not found tenable.
13. Keeping in view the above discussion, written and verbal pleading of the parties, I have reached to the conclusion that the impugned Valuation Ruling is reflecting reasonable basis for the determination of customs values. It was issued after due process and consultation with the Stakeholders and in accordance with law. The same is, therefore upheld and the revision petition is rejected."
3.The appellant filed the appeal on the basis of grounds enumerated therein. No cross objection under subsection (4) of Section 194A has been filed within the stipulated period of 30 days by either of the respondents, instead comments have been filed, which are placed on record of the case for consideration and perusal.
4.Rival parities heard and case record perused along with relied upon citations. Upon conscientious study of Sections 6 and 148 of the Sales Tax Act, 1990 and Income Tax Ordinance, 2001, it has been observed that the value of the imported goods has to be determined by the Custom under Section 25 of the Act, as expressed in Section 46(d) of the Sales Tax Act, 1990 and subsection (6) of Section 148 of the Income Tax Ordinance, 2001 by the Authorities given in subsection (9) ibid., which are Collector of Customs, Additional Collector of Customs, Deputy Collector of Customs, Assistant Collector of Customs, or an Officer of Customs appointed under section 3 ibid. Notwithstanding, in case the Board is desirous of determining the value of the imported goods, for levy of Sales Tax, it issues notifications in terms of 1st proviso of subsection (g) of Section 46 of the Sales Tax Act, 1990 as has been done in the followings:--
(i)S.R.O. 494(I)/2004 dated 12.06.2004 for phosphoric acid.
(ii)S.R.O. 103(I)/2005 dated 03.02.2005 Potassium Fertilizer.
(iii)S.R.O. 563(I)/2006 dated 05.06.2006 Crystalline Sugar and
(iv)732(I)/2006 dated 13.07.2006 for certain goods.
5.That in terms of above proviso, the Respondent No. 1 is not empowered to fix the value of imported goods through valuation ruling in exercise of power vested under section 25A(1) of the Customs Act, 1969. It is for the Board to issue a notification, similarly, determination of value for levy/collection of Income Tax at import stage, respondent No. 1 is not empowered as evident from the expression of subsection (9) of Section 148 of the Income Tax Ordinance, 2001, rendering the determination of value for levy of Sales Tax and Income Tax under the provision of Section 25A(1) of the Customs Act, 1969 without power/jurisdiction, resultant, the plea of the respondent stood negated as the same is being in derogation of 1st proviso of subsection (g) of Section 46 of the Sales Tax Act, 1990 and subsection (9) of Section 148 of the Income Tax Ordinance, 2001.
6.It is basic principle that if a mandatory condition for exercise of jurisdiction is not fulfilled then the entire proceeding which follows become illegal and suffer from want of jurisdiction as laid down by the Hon'ble Apex Court in Mansab Ali's (PLD 1971 SC 124) and in the case of Chittaranjan Cotton Mills Ltd. v. Staff Union reported at PLD 1971 SC 197, it was held that "Whereas the court is not properly constituted at all the proceeding must be held to be coram non judice and, therefore, non-existent in the eyes of law. There can also be no doubt that in such circumstances "it could never be too late to admit and give effect to the plea that order was a nullity", as was observed by the Privy Council in the case of Chief Kwame Asante, Treahon v. Chief Kwame Tawia " and in the case of Raunaq Ali's [PLD 1973 SC 236], it was held that "It is now well established that where an inferior tribunal or Court has acted wholly without jurisdiction or taken any action beyond the sphere allotted to the tribunal by law and, therefore, outside the area within which the law recognizes a privilege or err", then such action amounts to a "usurpation of power unwarranted by law" and such an act is a nullity; i.e. to say, "the result of a prescribed exercise of authority which has no legal effect whatsoever". In such a case, it is well established that a superior court is not bound to give effect to it, particularly where the appeal is to the later discretionary jurisdiction. The courts would refused to perpetuate, in such circumstances, something which would be patently unjust or unlawful". No deviation from the notified jurisdiction could be made, if an action has been taken or order has been passed without having competency under the respective provision of Act/Ordinance, same is to be declared illegal and without jurisdiction and this has been already held in many reported/unreported judgment by this Tribunal, latestly in reported judgment 2014 PTD (Trib.) 674 Messrs Shahid Impex v. Director General of Valuation and 2016 PTD (Trib.) 1305 Messrs AFU International v. Director General of Valuation. In the light of dictum laid down by the Superior Judicial Fora in above referred judgments and countless more, we hold that the determination of value for levy/collection of Sales Tax and Income Tax at import stage by the respondent No. 1 Valuation Ruling No. 758/2015 dated 08.09.2015 is coram non judice, hence ab-initio, null and void and of no legal effect.
7.Additionally, the case of the appellant revolves around the Order-in-Revision No. 62/2014 dated 18.07.2014, wherein the respondent No. 2 set aside the valuation ruling No. 538/2013 dated 16.01.2013 and addendum dated 29.03.2014 issued by respondent No.1 for Porcelain and Ceramic Tiles of Iran origin, while observing that determination of value for Iran origin was not warranted as there least exist remotest chance of over valuation due to low import, verbatim of which is given here-in-under;
"4. It has been observed that during the proceeding of valuation of tiles, neither any participation of MCC, Quetta was sought for consideration of a fair value determination nor the main stakeholders i.e. the representatives of Chamber of Commerce, Quetta, were called for their value input. It therefore appears that the subject petitioner and the main stakeholders were not associated in the proceedings of impugned ruling, in such a situation where disputed valuation is observed to have been decided in the absence of the petitioner/real stakeholders, the case suffers from procedural impropriety in as much as that the petitioner's view point was not considered which is in violation of the principles of natural justice."
"5. It has transpired from the perusal of case record that there is no substantial basis to support the arbitrary enhancement of value of Ceramic tiles of Iran origin, which appears to be an unfair and unjustified decision. The petitioner's stance that drawing out a comparison of Iran origin goods with Europe and other origin remained a completely ignored analysis and this contention also seems to be more fragile and inferior in quality than other origin goods and have thus been wrongly equated with goods of other origin. The aspect concerning the freight difference of transaction between sea and land route also holds material strength in the petitioner's arguments against higher valuation of imported goods."
"6. Relying upon the foregoing factual position, I am convinced with the arguments put forward by the petitioner and as such an inclined to accept the petition and to set aside the impugned valuation on the aforesaid basis."
It has been contended by the appellant that after issuance of aforesaid Revision Order, their goods were assessed on declared value till the issuance of the impugned ruling, and there was no cause or reason available with the respondent No. 1 to issue fresh Ruling No. 758/2015 dated 08.09.2015 as the facts and circumstances remained the same and no surge in import was noticed in the subsequent period of tiles of Iran origin. The representative of the respondents miserably failed to negate the argument of the appellant consultant/advocate either through comment's or during the course of hearing. It seems that the respondent No.1 issued the valuation ruling dated 08.09.2015 while ignoring the 18.07.2014 and the trend of import and the data maintained by the PRAL of the period expressed in Rule 107(a) of Chapter XI of Custom Rules,2001 (here-in-after to be referred as Rules) of identical/similar goods transaction value, falling under the provisions of Section 25(5) and (6) of the Customs Act, 1969 and Rules 117 and 118 ibid. The data provided by the representative of the respondents supports the contention of the appellant's and nullify the stance taken by respondent No.1 in para 4 of the ruling that due to wide variation in the values of identical/similar goods provided subsections (5) and (6) could not be relied upon, the import from Iran ranges from US$2 to 4.27/Kg depending upon specification, quality, design and sizes, there exist no rationale to treat all tiles of similar nature and fix a single value, values of the tiles differ on the strength of their designs, quality, sizes and quantity. Keeping in view the trend of import, it is our considered opinion that the respondent No.2 has passed a correct and judicious order in Revision Application vide dated 18.07.2014 and that should have maintained by the respondents, and had the import of Iran origin tiles to be assessed on the basis of their declared value or in case of doubt after providing evidential invoice of the similar/identical goods of the same time and period and the country of export as directed in para 78 of the CGO.12/2002 dated 15.06.2002 by the clearance Collectorates. The respondent No.1 was not within his right to ignore the settled proposition of law, while determining the values of Iran origin tiles and should had not acted in arbitrary/unilateral manner in fixing of fake/fictitious value not permitted under any subsection of Section 25 of the Act, and Rule 110 of the Rules, only for generating revenue, which is not otherwise payable by the importer/appellant. This type of inapt interpretation of the provision Section 25 of the Act, and Chapter XI of the Rules, render the goods expensive beside encourage the maniac of smuggling, which is detrimental for the economy of the Country. The Respondent No.2 should had addressed the grievances of the appellant, which is quite genuine and just. To the Contrary the respondent No.2 gave the appellant a very raw treatment as evident from the Order-in-Revision, which does not contain a single ground of the appellants Revision Application, this type of attitude has never ever been appreciated by the superior judicial fora. The order so passed by the respondent No.2 is not at all a speaking or judicious order and as such fail the test of judicial scrutiny.
8.Notwithstanding, to what has been deliberated above, we feel appropriate and just to inscribe that the provision of Section 25 of the Act, are to be followed in sequential manner baring certain exceptional cases where massive group under invoices is rampant which is not visible in this case. Resort to subsequent method is not permissible without any exception that is without exhausting the sequence indicated in section 25 as it would annihilate and terminate the spirit and essence of the transaction value, which in the first instance has to be established as colorable and tainted. The mere insertion of the word "may" or "may not" in place of "are required to" in subsection (10) of Section 25 of the Act, through Finance Ordinance, 2007 does not extend unfettered powers to customs administrations to maneuver the provision of Section 25 ibid, and thereby making them in-effective and redundant. Discretion has to be exercised judicially based on reason, rationale and fairplay. It is specifically provided by the legislature in subsection (10) of Section 25 that subsections (1) (5) (6)(7)(8) and (9) define how the customs value of the imported goods is to be determined by the customs. The methods of custom valuation are normally required to be applied in a sequential order except reversal of the order of subsections (7) and (8) at the importer's, request, if so agreed by the Collector of Customs/ Respondent No.1. This aspect has been examined countless times bythe Superior Judicial Fora and held that the Provision of Section 25 of the Act, has to be followed in sequential manner without any exception, reference is placed to reported/unreported judgments listed below:--
(i)2006 PTD 909 Rehan Omer v. Collector of Customs Karachi,
(ii) 2008 PTD 1494 Messrs Toyo International Motorcycle v. Federation of Pakistan and 3 others,
(iii) 2008 PTD 1250 Najam Impex Lhr v Assistant Collector of Customs, Karachi and others,
(iv) PTCL 2014 CL 537 Sadia Traders v. FOP
(v) 2013 PTD 825 Faco Trading Company v. Members Custom, Federal Board of Revenue and others.
(vi)2014 PTD 176 Goodwill Traders, Karachi v. FOP
In the cited judgment and the question under consideration was as to how the Section 25 of the Act, is to be applied by the Respondent No.1 for determining the value of the imported and exported goods for issuance of ruling under Section 25-A(1) of the Act.
9.The established principle of interpretation of the tax law is that the plain language of the law is to be applied. A bare perusal of Section 25 shows that it is specifically provided in subsection (1) of Section 25 that the customs value of the imported goods, subject to the Provisions of this Section and Rules shall be the transaction value i.e.the price actually paid or payable for the goods when sold for export to Pakistan.Thedetailed guidelinesinthisbehalfaregiveninsub-sections (1), (2), (3), (4) and Rules 107 to 116 of Chapter IX of the Rules. The provisions contained in Section 25 (1) to (4) and Rules 107 to 116 of Chapter IX of the Rules, contain primary methods of valuation and in the first instance the primary method of valuation is required to be adopted in each case of the valuation of the imported consignment which is mandatory. Thus, it is very important requirement of law that before resorting to the method provided in subsection (5) the customs officials shall make an exercise in accordance with the provisions contained in subsections (1) to (4) of section 25 and if thereafter they find that the customs value of the imported goods cannot be determined under the provisions of sub-section (1) they shall resort to the method provided in subsection (5) and not otherwise. It shall be an exercise duly reflecting on the record so that the appellate forums may examine whether the mandatory requirement of law has been carried out or not. We are fortified in our views in this behalf with the provisions contained in sub-rule (3) of Rule 109 which provides that "when a final decision is made, the appropriate officer shall communicate to the importer in writing his decision and the grounds therefore." In addition to the specific provisions contained in subsection (10) of section 25 to the effect that the methods of customs valuation are required to be applied in a sequential order, we find that it is provided in subsection (6) that, if the customs value of the imported goods cannot be determined under the provisions of subsection (5) the method provided in subsection (7) shall be resorted to and similar provisions are contained in subsections (7), (8) and (9). For the said reason, it is held that different method of valuation provided in section 25 of the Act, and Rules, are required to be applied in a sequential order. Upon examination of the data, we have observed that the value of Iran origin tiles could had been determined under the provision subsection (5) of the Act, if there was need to do so, which our opinion was not available with the respondent No.1. It has also been observed and visible from the record that no proper and just exercise has been conducted by the respondent No.1 or his subordinate, and this stood validated from the fact that despite of the fact that there value could had been determined under the provision of subsection (5) of Section 25 of the Act, the respondent summarily ignored the set provision of law and directly jumped to subsection (7) for determining the value, which is not permissible beside without lawful authority and jurisdiction. We have also observed that the determination of value by the respondent No.1 of the Iran origin tiles had been made on the basis of presumption and assumption having no nexus with the import value available in the data. Therefore, it is not in accordance with law. Rendering it without lawful authority and jurisdiction, being patently, in derogation of the provision of Sections 25, 25A of the Act, and Chapter IX of Rules. Hence, void and ab initio and cannot allowed to hold field for the purpose of assessment of imported Porcelain and Ceramic Tiles of Iran origin.
10.On the basis of deliberation made in paras supra, we set aside the Order-in-Revision No. 142 of 2015 dated 30.11.2015 in totality and Valuation Ruling No. 758/2015 dated 08.09.2015 for determination of value for levy of Sales Tax and Income Tax and to the extent of value determined for levy of customs duty of Ceramic and Porcelain Tiles of Iran origin.
11.Judgment passed and announced accordingly.
HBT/34/Tax(Trib.)Appeal allowed.