GLOBAL TRADE LINK VS FEDERATION OF PAKISTAN through Secretary Revenue Division Ministry of Finance
2019 P T D 1308
[Sindh High Court]
Before Aqeel Ahmed Abbasi and Zulfiqar Ahmad Khan, JJ
Messrs GLOBAL TRADE LINK and others
Versus
FEDERATION OF PAKISTAN through Secretary Revenue Division Ministry of Finance andothers
Constitution Petitions Nos.D-5410, D-5267, D-5268 and D-7015 of 2018, decided on 26/01/2019.
(a) Customs Act (IV of 1969)---
----S.25-C---Powertotakeoverimportedgoods--- Principle---Section 25-C of Customs Act, 1969 can not be used to takeover goods of an honest importer by accepting higher price of goods---Object of S. 25-C of Customs Act, 1969 is to curb tendency of under-invoicing by a dishonest importer.
(b) Customs Act (IV of 1969)---
----Ss. 25-A & 25-B---Constitution of Pakistan, Art. 18---Right to trade and business---Power to takeover imported goods---Scope---Provision of Art. 18 of the Constitution protects Fundamental Right of doing business---Importer is not to be penalized or deprived of his goods under S. 25-C of Customs Act, 1969 when he has not committed under-invoicing and is merely seeking clearance of his goods at actual transactional value as per law in particular at values so determined by customs authorities through valuation rulings under S. 25-A of Customs Act, 1969---Process of takeover of goods of importers under S. 25-C of Customs Act, 1969 can only set in motion after having first determined goods' actual transactional value and only where under-invoicing is found, such harsh act is permissible otherwise, it would lead to abuse of S. 25-C of Customs Act, 1969.
(c) Customs Act (IV of 1969)---
----Ss. 25-A, 25-C, 32 & 79---Takeover of Imported Goods Rules, 2002, R. 1(3)---Valuation Ruling No. 863 of 2016 dated 02-08-2016---Notification SRO No. 487(I)/2003 dated 07-06-2003---Bids for takeover imported goods---Customs authorities, duty of---Petitioners were private importers of products of a trading entity operating in Pakistan and were aggrieved of orders passed by customs authorities putting their imported products on hold---Customs authorities alleged that trading entity offered petitioners a buyout at lucrative price of said products as it claimed that said goods were undervalued---Validity---Valuation Ruling No. 863 of 2016 dated 02-08-2016 under S. 25-A of Customs Act, 1969 was already in field which only came into being after following methodology provided under S. 25 of Customs Act, 1969---When any importer had declared value of his consignments in accordance with Valuation Ruling No. 863 of 2016 dated 02-08-2016 then to allege that importer had committed under-invoicing was a self-contradictory argument vitiating sanctity of all valuation rulings---High Court declared that offer made by competitor to buy all consignments at a price thrice of what was declared by importer was nothing but an attempt of 'hostile takeover' of imported goods solely to defeat competition in market and to create his monopoly, constituting anti-competitive practice which Legislature and courts were bound to eradicate---If customs authorities had considered that a valuation ruling did not reflect current market or transactional values, options were always available to revise such valuation rulings rather than permitting such abhorring anti-competitive takeover practices---High Court set aside orders passed by customs authorities---Constitutional petition was allowed in accordingly.
Messrs Binaco Traders v. Federation of Pakistan and 3 others 2006 PTD 1491; Sadia Jabbar v. Federation of Pakistan and others 2018 PTD 1746; Kashif Naseem v. Federation of Pakistan and others 2007 PTD 2250 and 2008 PTD 1494 ref.
Kashif Nazeer and Obaidullah Nadeem for Petitioners.
Dr. Shah Nawaz along with Muhammad Asim Awan, Deputy Collector, MCC Appraisement (West) Karachi for Respondents.
Ms. Lubna Pervaiz, D.A.G. for Respondents.
Qazi Umair Ali for Proposed Intervenor (in C.P.No.D-5267 of 2018).
Date of hearing: 13th December, 2018.
JUDGMENT
ZULFIQAR AHMAD KHAN, J.---Facts leading to the institution of these petitions are that the petitioners in the normal course of their businesses imported consignments of Dove branded Toilet Soaps and Fair and Lovely branded whitening creams and filed appropriate G.Ds. under section 79 of the Customs Act, 1969 (hereinafter called "Customs Act") for home consumption. Assessment of the G.Ds was finalized by the Respondent No.3 as per the Valuation Ruling No.863 of 2016 dated 02.08.2016 (hereinafter called "Valuation Ruling 863"). Per counsel, instead of releasing the consignment upon payment of the required duty and taxes to the Petitioners, the goods were put on hold on the ground that an entity trading as Unilever Pakistan Limited (hereinafter called "Unilever") had made a request to buyout the Petitioners' consignments under Section 25C of the Customs Act, claiming to have monopoly in the local market over Dove Soaps and Fair and Lovely creams. Per counsel, Unilever initially filed a complaint alleging infringement of its trademark rights with the Directorate of I.P.R, which complaint was rejected as violative of the provisions of Enforcement of Intellectual Property Law embodied through SRO No.170(I)/2017 dated 16.03.2017. Per counsel, having been defeated in their bid to have the consignments declared infringing, Unilever filed the aforementioned request under Section 25C to takeover Petitioners' imported goods placing reliance of the provisions of SRO No.487(I)/2003 dated 07.06.2003 (hereinafter called "SRO 487"), however, per counsel, the Respondents without examining the legality andveracityoftherequestmade,initiatedproceedingsunder Section 25C. The Petitioners faced with delays, made representation to the Respondents praying that the mechanism provided under Section 25C read with SRO 487, as well as, the guidelines emanating from the judgments of the Hon'ble High Courts regarding taking over of consignments under Section 25C were not followed, rather alleging that the Respondents showed a tilt towards Unilever at the cost of the Petitioners. Per counsel, as per sub-clause (3) of clause-1 of SRO 487, takeover is only permitted in cases where there is a valuation dispute between an importer and the Customs Authorities, which did not exist in thecaseathandasthegoodswere declared as per the Valuation Ruling 863. Ironically, per counsel, Unilever itself had been importing such goods and paying duties as per the same Valuation Ruling No.863. In support of his arguments, learned counsel placed reliance on cases reported as 2006 PTD 1491 [Messrs Binaco Traders v. Federation of Pakistan and 3 others], 2018 PTD 1746 [Sadia Jabbar v. Federation of Pakistan and others] as well as 2007 PTD 2250 [Kashif Naseem v. Federation of Pakistan and others].
2.Learned counsel for the Respondents orally and through their written comments submitted that the offer made by Unilever was three times higher than the value declared by the Petitioner/Importer and upon receiving such an "attractive offer" and after conducting a market survey and clearance data, the respondents reached to the conclusion that the values declared by the importer were not the actual transactional value, thus proceedings under Section 25C were instituted and requisite approval of the Federal Board of Revenue was obtained in this regard. It is also stated that an offer was made to the Petitioners to have the goods cleared at the "attractive" rates offered by the bidder (Unilever), which was not accepted by the Petitioners, who rather opted to file the instant constitutional petitions. It is also stated that Valuation Rulings under Section 25A are merely a tool to counter under-invoicing, and issuance of a Valuation Ruling does not absolve an importer from the obligation of declaring actual transactional value of the imported goods. It is also stated that application of section 25C is not barred in the cases where values are determined under section 25A, and subsection (3) of section 25C is made applicable to the consignments assessed under valuation rulings issued under Section 25A. Resultantly, it was contended that every importer must declare actual transactional value of the imported goods, and in case of mis-declaration, the provisions of Section 32 would stand invoked and mere presence of Valuation Ruling does not allow an importer to mis-declare the transactional values.
3.Learned counsel for the Proposed Intervenor in C.P No.D-5267 of 2018 also appeared before this Court bringing to the Court the version of Unilever Pakistan Limited contending that law permits any party to offer a higher bid for any imported goods and to have the goods released in his favour.
4.Heard the learned counsel and representative for the parties and perused the material available on record.
5.Admittedly, Section 25 of the Customs Act pertains to determination of the customs values in respect of goods imported into Pakistan, where as a first step under subsection (1), customs values of the imported goods (subject to the provisions that Section and applicable rules) are to be taken at the price actually paid or payable for those goods. Through subsection (2), while determining the customs values, cost of transport, freight, loading, un-loading, handling charges and insurance etc. as well as commerce cost of packing could also be included. Subsections (3) and (4) deal with circumstances where buyers and sellers are inter related or carry a relationship. Subsection (5) caters for the possibility when customs values of the imported goods could not be determined under subsection (1) and provides that the same could be determined form the transactional value method of the identical good sold for export in Pakistan. While subsection (6) provides a mechanism where identical goods were not imported into Pakistan, and requires that transactional value of similar goods to be determined on the basis of the transactional value of identical goods sold for export in Pakistan. Subsection (7) provides the mechanism of deductive value determination. Whereas, subsection (8) provides a method known as "computed value" and subsection (9) considers fall back method for the determination of customs values.
6.Section 25A provides another method to determine customs values, where the Collectorate of Customs on his own motion or the Director of Customs Value on his own motion or on a Reference made to him, has been empowered to determine customs values of any goods or category of goods imported into Pakistan, after following the method laid down under Section 25. Subsection (2) of Section 25A provides sanctity to these values by providing that customs values determined under subsection (1) of Section 25A are to be taken as the applicable customs values for the assessment of the relevant imported goods, however, through a proviso added by the Finance Act, 2017 if any invoices were retrieved from the consignments showing higher than the values determined under subsection (1), then such higher values have to be considered as customs values. Subsection (3) caters for the possibility of when any conflict arises with regards determination of customs values under subsection (1), and by adding subsection (4) to Section 25A, sanctity is provided to the values determined under subsection (1) or subsection (3). The said subsection provides that customs values so determined and declared through valuation rulings shall hold the field until and unless they are revised or rescinded by the competent authority. Pertinent is to mention is that valuation rulings are only issued under section 25A.
7.Also of relevance is to refer Section 25AA, which creates possibility of using any information or data available under clause (b) of subsection (1) of Section 219A for the purpose of assessment including valuation.
8.As mentioned in the foregoing, Section 25C provides a mechanism for takeover of imported goods, by challenging the values declared by an importer. Since the matter solely pertains to takeover, we find it relevant to reproduce full text of the said section in the following:-
"25C. Power to takeover the imported goods.- (1) If any person makes an offer in writing to buy the imported goods sought to be cleared at value declared by an importer in the goods declaration, [and the Collector of Customs is satisfied that the declared value is not the actual transactional value, he may after approval of the Board] order the following without prejudice to any other action against the importer or his authorised agent, namely:-
(i)entertain offer by any other person to buy these goods at substantially higher value than the declared customs value in the goods declaration and payment of customs duties and other leviable taxes thereon, provided such offer is accompanied by a pay order equal to twenty-five per cent of the amount of such [such offer and duties and other taxes calculated in accordance with the offer];
(ii)give an option in writing to the importer of such goods for clearance of imported goods at the customs value equal to such highest offer for purchase of goods and payment of customs duties and other taxes chargeable thereon; and
(iii)in case the importer fails to clear the imported goods within seven days of the receipt of notice under clause (ii) above, the appropriate officer may take over the goods on payment of customs value declared in the goods declaration and an amount equal to five per cent of such declared value;
(2)The imported goods taken over under subsection (1) shall be delivered to the offerer on submission of two pay orders, one equal to the customs value declared in the goods declaration plus five per cent in the name of importer and the other pay order equal to the remaining amount of value of imported goods and the amount of customs duties and other taxes leviable on the imported goods in the name of Collector of Customs;
(3)In case the local buyer fails to take the delivery of the goods on payment of value and taxes as prescribed in subsection (2) above, the pay order equal to twenty-five per cent of the amount shall be forfeited in favour of the Federal Government and imported goods shall be released to the importer as per customs value determined under [sections 25 or 25A, as the case may be]."
9.As it could be seen, the hidden intent and purpose of Section 25C appears to curb un-invoicing by giving an option to a third party to reap the benefit by offering a higher value to the Customs Authorities. As a first step, Section 25C allows a third party to make an offer to the Customs Authorities, however such an offer has to be substantially higher than the value declared by the importer. SRO 487 prescribes such competitive values in respect of cosmetics and toiletries to be 20% or above. Also of relevance are the Takeover of Imported Goods Rules, 2003, which detail the procedure to be adopted under Section 25C. Clause (3) of Rule 1 has created a table, which lists ranges of under-invoiced values and provides that in cases where the takeover bid fails, goods should be released to the importer as per customs value determined under Section 25 or 25A. Sub-rule 3 provides the following procedure to be followed during takeover:-
(a)after receipt of an offer of higher value as provided in clause (i) of subsection (1) of section 25-A, [now to be read as 25-C] the appropriate officer may entertain offers of further higher values in respect of such goods by other persons;
(b)the finally accepted value of the offerer shall be deemed to be the customs value of the imported goods and the offerer shall be liable to pay duties and taxes and all other charges and dues related to the clearance of the goods from the port or warehouse on such value;
(c)afterreceiptoftheamountsstatedinsubsection(2) of section 25-A [now to be read as 25-C] and evidence of payment of charges in terms of sub-rule (2) of rule 5, the appropriate officer shall issue a delivery order annexed to these rules which shall be deemed to be a bill of entry or goods declaration filed under section 79 or 79A for all purposes:
Provided that, notwithstanding the date of the 1delivery order, the relevant date for determination of rate of duty shall be the date of manifestation of the bill of entry or filing of goods declaration as the case may be, under section 30 or 30A;
(d)there shall be five copies of the delivery order which shall be distributed as follows:-
(i) the original copy shall be retained in the file after payment of duties and taxes;
(ii) the duplicate copy shall be retained at the port-gate or by the warehouse keeper for onwards transmission for manifest clearance or audit;
(iii) the third copy shall be given to the offerer for his record;
(iv) the fourth copy shall be sent to the Valuation Department; and
(v) the fifth copy shall be given to the importer; and
(e) on presentation of the delivery order, duly issued by the appropriate officer, the custodian of the imported goods shall deliver the goods to the offerer;
10.It is worth noting that subsection (1) of Section 25A opens with a non-obstante clause, which overrides the provisions of Section 25. In Sadia Jabbar v. Federation of Pakistan and others (supra) case, the Apex Court considered this aspect in details and by referring to the text of Section 18, reached to the conclusion that Section 25A(1) speaks of "goods imported into Pakistan" as well as Section 18 of the Act (which is the charging section) levies customs duty on goods imported into Pakistan too. By relying on the principle of interpretation that words or expressions used in the same statute in different sections ought to be given the same meaning, unless the context otherwise requires, the Apex Court held that the expression relates to the goods "to be imported into Pakistan at any time, or from time to time", i.e. Section 25A permitted predetermination of the customs values of goods to be imported into Pakistan from time to time. It is pertinent to note that subsection (2) of Section 25A specifically provides that the value determined in terms of subsection (1) is to be taken as the customs values of the relevant imported goods. The Apex Court thus held that "if only section 25 was applicable or where there was no non-obstante clause, there could be no predetermination for the customs values". The determination of the customs value would have to start with the primary method i.e. the transactional value, meaning thereby the price actually paid or payable or which could only arise in the context of goods actually imported. Furthermore, the Apex Court held that if Section 25A was intended only to be applied to goods actually imported into Pakistan, then there would essentially be no point to it, since the exercise would in any case be carried out under Section 25, the Apex Court concluded that Section 25A was to apply to goods yet to be imported into Pakistan and the very intent of Section 25A was to permit the Customs Authority to predetermine the customs value of goods imported into Pakistan. In the case reported as 2008 PTD 1494 Court held that Section 25A is non-obstante clause thus supersedes the procedure provided in Section 25, so far as the formation of an advice is concerned. The same case also reaffirms that provisions of Section 25A(1) being a non-obstante clause supersedes those of Section 25.
11.In the case at hand, admittedly the goods were assessed as per the Valuation Ruling 863 issued under Section 25A of the Customs Act. Admittedly, Unilever itself has been importing those goods under the same Valuation Ruling, thus cannot take the stance that the consignments of the Petitioners have been under-invoiced. If that was the case, same would also apply to Unilever consignments as well. Subsection (2) of Section 25A gives sanctity to the valuation rulings and makes it mandatory for the Customs Authority that the values determined through valuation rulings under Section 25A are to be taken as applicable customs value for the assessment of the relevant imported goods. In the case reported as Kashif Naseem v. Federation of Pakistan and others (supra), a Divisional bench of this Court held that take-over of imported goods under section 25C was a possibility only in the cases where it was established that under-invoicing has been committed, which could only be established when resorting to the provisions of Section 25. The Court held that the vehicle ofSection 25C can never be used to takeover goods of an honest importer by accepting a higher price of the goods, as object of the said Section is to curb the tendency of under-invoicing by a dishonest importer. The right of an importer to clear his goods upon payment of duties and charges at the actual transactional value cannot be taken away merely because someone else is prepared to buy his goods at a higher value. Article 18 of the Constitution protects the fundamental right of doing business. No importer is to be penalized or deprived of his goods under Section 25C when he has not committed under-invoicing and is merely seeking clearance of his goods at the actual transactional value as per law in particular at the values so determined by Customs Authorities through Valuation Rulings under Section 25A of the Customs Act. It is an established position that the process of take-over of importer's goods under Section 25C can only set in motion after having first determined goods' actual transactional value and only where under-invoicing is found, such harsh act is permissible, otherwise it would lead to abuse of Section 25C. Such abuse could be on the part of a local businessman who, on the basis of prevailing market conditions at the time of import, or to create a monopoly in such goods, may be willing to offer price which could be substantially higher than the actual transactional value, just to keep the importer out of business. In such cases Courts have even held that such takeover bids, will convert Customs House into a trading house, which is not the intent of the legislature.
12.In the circumstances at hand where a Valuation Ruling under Section 25A is already in the field, which only came into being after following the methodology provided under Section 25, and when an importer has declared value of his consignments in accordance with the said Valuation Ruling, then to allege that the importer has committed under-invoicing, in our view, would be a self-defeating argument vitiating sanctity of all Valuation Rulings, and in the case at hand the offer made by the competitor to buy all consignments at a price thrice of what was declared by the importer is nothing but an attempt of "hostile take-over" of the imported goods solely to defeat competition in the market and to create his monopoly in the goods, constituting an anti-competitive practice, which the legislature and courts are bound to eradicate. In case the Customs Authorities consider that a valuation rulingdoesnotreflectthecurrentmarketortransactionalvalues, optionsarealwaysavailabletorevisesuchvaluationrulings,rather than permitting such abhorring anti-competitive takeover practices.
These were the reasons for allowing the petitions through our short order dated 13.12.2018.
MH/G-12/Sindh Petitions allowed.