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Petitioner: UNIVERSAL AUTO ENGINEERING VS Respondent: The DIRECTOR GENERAL and 2 others
Court Name: Customs Appellate Tribunal Judge(s): Muhammad Nadeem Qureshi, Zulfiqar A. Malik Title: UNIVERSAL AUTO ENGINEERING vs The DIRECTOR GENERAL and 2 others Case No.: Customs Appeal No,K-837 of 2018 Date of Judgment:2018-10-23 Reported As: 2019 PTD (Trib.) 800 Result: Appeal accepted
JUDGMENT
JUDGMENT MUHAMMAD NADEEM QURESHI, MEM BER (JUDICIAL-I).--- By this Judgment, we shall dispose of Appeal No,K- 837/2018, filed by the Appellant against Order-in-Revision No,25/2018 dated 26.6.2018, passed by the Director General Valuation, Karachi with reference to Valuation Ruling No,1230/17 dated 8.12.2017 issued by the Director , Customs V aluation, Karachi. 2. Facts of the case on record are that the Appellant is a sole proprietor concern namely Messrs Universal Auto Engineering which is engaged in the business of import of higer brand buses and is also a distributor of higer brand buses in Pakistan from China. A distribution agreement between higer bus company Limited China and the Appellant had been effected on 05.04.201 6 for distribution of (200) hundred higer brand buses within Pakistan at a promotional price of US$ @ 70,000/-per bus. The Copy of contract to this effect was produced by the Appellant and taken on record. (i) That the Appellant during the course of hearing provided below the statement for declared and assessed values for commercial buses imported by different importers in Pakistan which was taken on record. Name and Models Declared V alue Assessed Value Higher Model 6128 K 70,000 70,000 Higher Model 6121 YR 65,000 70,000 Yutong VIP LCD Bus 95,358 95,358 Daewoo Express Explorer Shape 75,000 75,000 Zhong T ong Navigator 57,600 70,000 Zhong T ong Elegance 55,600 70,000
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Sunlong 66,000 70,000 Yutong Master 6122 70,000 70,000 (ii) From the above table it transpires that various models of commercial buses are being imported into Pakistan and all the models are assessed @ US$ 70,000 except for one model Yutong VIP LCD Bus which is a luxury bus and only one unit of this model has so far been imported and that too by Messrs Master Motors Corporation (Pvt.) Limited (the complainant). It seems that this model was imported by the local assembler in CBU condition in order create evidence of higher value for unduly enhancing the value of the buses for Customs purposes. (iii) The Appellant further provided detail below the summary of the import data of import of Chinese origin commercial buses for the year 2016-17 in order to provide a correct perspective: S#Description of Goods Brand QtyOriginH.P. Declared ValueAssessed Value 1Bus Model KL Q6121YR Higher 2 China300 65,000 70.000 2Bus Model KLQ6128K Higher 34 China347 70,000 70,000 3Intercity Coach Bus. Model Sunlong 6 China340 66,000 70,000 4Bus in CBU Condition Model ZK6I22HL Yutong 11 China340 70,000 70.000 5Bus LCK 6125 H Elegance Zhongtong 1 China340 55,600 70,000 6Bus LCK 6129 H Navigator Zhongtong 1 China340 57,00 70,000 7Luxury Coach Model XML. 6139 with latest exclusive European explorer shapeGolden Dragon 40 China380 75,000 75,000 8New Yutong Luxury AC Bus T ype ZK6121HL with individual LCD fitted to all seatsYutong 1 China340 95,358 95,358 9City Bus Model No, ZK 6852HG Yutong 38 China 52,700 52,700 10City Bus Model No, ZK61 18HGA Yutong 162 China 65,000 65,000 (iv) A bare perusal of the above statement reveals that value of import of intercity buses mentioned at serial Nos, 1 to 6 ranges from US$ 55,600 to 70,000. The Customs has all along been assessing the Chinese origin buses irrespective of their brand and HP @ US$ 70,000. (v) Model mentioned at Serial No, 7 i,e, Golden Dragon has been imported by Daewoo Express under a contract with Premaval (Ltd.) Limited a subsidiary of VPL Limited @ US$ 75,000. This model contained some additional features like European explorer shape, 280 HP Yuchal 10.5 L Euro III compliant, 12.7 meter in length with 45 seats fitted therein. Number of units imported are 40. Import data along with news item was produced by the Appellant and taken on record. (vi) Only one unit of model Yutong mentioned at Serial No 8 above had been imported by Messrs Master Motors (a 95,358 which is a luxury bus and individual LCD fitted to all seats. Taking its price as reference prices and enhancing the values arbitrarily is quite unjustified and against the very spirit of Sections 25 and 25-A of the Customs Act, 1969. (vii) In fact, the buses imported by the Appellant cannot be compared with the models mentioned at Serials Nos, 7 and 8. Buses at Serials 9 and 10 are not comparable as they are operated within a city . (viii) It is pertinent to refer the online prices of various models of buses to check the veracity of the transaction values of the Appellant: Description Online Price Range Higher V92 KLQ 6129 Coach Bus US$ 25,000-65,000
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Euro 4 China 50 Seats 13 M Bus VIP Coach US$ 45,000-47,000 High Quality China 50 Seats bus VIP Coach US$ 45,000-47,000 12M China Luxury Coach 50 seats luxury bus US$ 65,000-68,000 60 seats luxury bus rear engine 12 M length large bus 6 cylinder engineUS$ 50,000-60,000 12 M length Bus US$ 65,000 12 M 60 seats luxury coach bus US$ 37,200-38,000 Combine Engine 12 M 50 seats passenger bus long distance coach US$ 50,000-60,000 11 Meter European Passenger Coach bus ZK 61 160 with free parts US$ 30,000 Luxury 1 1 M long coach 50 seats new passenger bus US$ 58,000-68,000 10.5 M coach bus 50 seats VIP bus US$ 43,500-56,000 12 M long luxury coach intercity bus US$ 50,000-63,000 12 Meters 50 seats passenger bus King Long US$ 60,000-65,000 Durable 50 seats luxury 12 M long tour bus US$ 68,000-72,000 Public transport diesel 12 M long 50 seats coach bus US$ 68,000-72,000 9.5 M strong quality tourist coach bus US$ 30,000-38,000 10 Meter Euro III emission luxury intercity coach bus US$ 34,000-38,000 (ix) It is crystal clear from above chart that the online offer prices in respect of all the models are below the transaction values of the Appellant which inversely support the transaction values since online prices are quotations and not negotiated prices. This further lends support to the argument of the Appellant that their transaction values are correct and are, therefore, acceptable under the provisions of Section 25(1) of the Customs Act, 1969. Therefore, determining a value of US$ 80,000 to US$ 82,000 per unit is unjustified and much higher than the prevailing prices of Chinese origin buses. Online printouts were produced by the Appellant and taken on record. (x) Master Motors and Daewoo Express had imported 16 units of CKD buses from China @ 60,856 per unit and 20 units of CKD buses from Korea @ 64,746 per unit respectively . The landed cost after payment of duty taxes comes to around Rs, 8,502,330 and Rs, 8,977,272/- respectively whereas they are selling the buses @ Rs, 14,000,000 to Rs, 14,500,000/- with exorbitant profit margins. The perusal of CKD price of Chinese buses at imports was also provided by the Appellant and taken on record. (xi) It is important to mention here that Master Motors had imported ZK6122HL model Yutong buses in CBU condition vide GD's Nos, KAPW -HC-0141 12-2701206, KAPW -HC-025068-2 1062016, KAPW -HC-025069- 21062016 and KAPW -HC-007905 dated: 24.10.2016 and declared the same @ US$ 70,000. The Customs had also assessed the same @ US$ 70,000. This fact is very crucial while referring to the complaint lodged by Masters Motors for the allegation of under invoicing of values of buses as the company itself has declared the value @ US$ 70,000 at which other the Appellant is importing and that too under a valid contrac t with the Chinese supplier and all transactions were made through banking channels. Thus the allegation of Master Motors for under invoicing is unwarranted as narrated above. (xii) That the Appellant would like to highl ight the fact that a number of other importers had imported similar buses from china at prices ranging between US$ 44,490 and 66,000 per unit whereas the Customs had assessed the same @ US$ 70,000-71,000 per unit. This evidence, too, corroborates the correctness of Appellant's declared transaction value. The same was produced by the Appellant and taken on record. (xiii) That it is important to point out here that the local selling price of Higher brand bus in Pakistan is around 14,040,000/-. Calculation sheet containing detailed costing of the Higher Brand Bus Model No, KLQ 6128K which was produced by the Appellant and taken on record in order to check the veracity of the profit margins of the Appellants as well as the declared transaction values. (xiv) That it is important to note that rate of duty on CBU buses is 20% and Sales Tax @ 20% whereas the rate of duty on CKD buses is 5% and reduced rate of Sales Tax @ 17% is applicable which give them market edge as well
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as higher profit margins as compared to the importers of CBU buses. In fact, there is no harm to the local industry in the present scenario where the assessed value is determined a the transaction value i,e, @ US$ 70,000. However , if the prices are set at @ US$ 80,000-82,000 it would severely harm the importers as the same would be translated into their cost and ultimately into their selling prices which would reduce their market share. (xv) The Appellant would like to refer the LC document of one of the imports in Oman from Higher Bus Company Limited, China (the supplier of Appellant) whereby the four units of Higher Bus KLQ6123 (H92K) were imported into Oman @ US$ 291,200 (US$ 72,800/unit CFR). This also substantiates the argument of the Appellant with regard to correct transaction value of the buses and also rebuts the allegation of under valuation. Copy of Letter of Credit was produced by the Appellant and taken on record. (xvi) That in order to substantiate the transaction value, the Appellant submitted a commercial invoice dated: 11.08.2016 with the proof of payment made through HBL where payment against import of two buses was made @ US$ 140,000 (US$ 70,000 per bus). Thus there remains no iota of doubt that transaction values are true and correct in all respects. Other evidence of proof of payment against imports effected in July 2018 and October 2018 were produced by the Appellants and taken on record. (xvii) That the Valuation Ruling is vague in the sense that it is based only on 2 different categories of length of the vehicle whereas the following specifications are more important but haven't been taken into account. a) Engine horsepower for each type b) Seating capacity for each bus length c) Intercity buses length is from 9-13 mete rs but the Valuation Ruling does not cover all ranges so it is not compre- hensive. (xviii) That the Valuation Ruling has not followed the various methods of valuation and completely ignored the substantial import data of various models in CBU condition imported into Pakistan at a range below US$ 70,000. (xix) That the provisions of Section 25(7) have not been followed stricto sensu for determining of value on aggregate quantity basis which is a major flaw in the impugned Ruling. (xx) That the no basis whatsoever has been mentioned in the impugned Valuation ruling for determination of values @ US$ 80,000 and 82,000, which renders this V aluation Ruling void and inapplicable. (xxi) That the Valuation Ruling does not discuss any of the points that were made by the Appellants during the meeting with the Director Customs (Valuation). In fact, all the information / data referred to above was furnished before the learned Director Valuation, however none of the substantive arguments / evidence presented to him was incorporated in the subject Valuation. Ruling. The Ruling has been issued without taking into account the viewpoint of the Appellant who too were the major stakeholder in the subject matter . (xxii) That the customs authorities rejected the declared transactional value of US$ 70,000/- of each bus declared by the Petitioner . They have instead applied the Valuation Ruling on the Appellant consignments and have assessed each bus to have a transactional value of US$ 82,000/-. (xxiii) That the Appellant vehemently contested the subject review Petition dated 19.11.2017 filed before the Director General of Customs Valuation and also vide their letters dated: 26.12 .2017, 02.03.2018, 07.03.2018, 22.03.2018 and 02.04.2018 along with various supporting documents and relevant import data which was not taken into consideration by the Director General of Customs Valuation who issued in haste the Impugned Order in Revision No, 25/2018 dated: 26.06.2018. Copies of various letters dated: 26.12.2017, 02.03.2018, 07.03.2018, 22.03.2018 and 02.04.2018 addressed to Director General of Customs Valuation were provided during the course of hearing by the Appellant and also taken on record. (xxiv) That the Appellant's main contention before Respondent No, 1 was that Valuation Department did not follow the valuation methods properly and also objected to the market inquiry conducted by the department and stated that the values determined vide impugned Valuation Ruling in respect of Rear Engine Intercity Buses do not reflect the prevalent market prices. They insisted on accepting their declared values as correct transaction value. On the other hand the Respondent No 1 has malafidely stated in Impugned Order in Revision that no supportive documentary evidence was produced by the Appellant to substantiate their conten tion. The Respondent No, 1 has also mis-stated that the Departmental representative explained in detail the valuation methodologies adopted by
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them to arrive at the Customs values determined vide the impugned Valuation Ruling and in support of departmental contention, the Departmental Representative presented various details of the valuation exercise and working. 3. The final hearing in this case was conducted on 16.10.2018. The Appellant was represented by Mr. Muhammad Arif Moton (Advocate). Mr. Muhammad Aslam Principle Appraiser appeared on behalf of the Respondents. During the course of hearing for a better sense of comprehension, the Appellant's Advocate in the first instance initiated the arguments outlining the difference between the concept of Normal Value envisaged by Brussels Definition of Value BDV and concept of Transaction Value under GATT (General Agreement on Tariff and Trade). Under the notional concept of BDV the price of one commodity was determined in relation to another and the highest price of the import from the country of origin/exportation was determined as normal value for a particular commodity after allowing admissible deductions/ additions. Under the GATT System of Real Value or Transaction Value, every transaction is viewed separately on its own merits and until and unless Customs Administration has enough tangible evidence to prove the imported transaction value as tainted or colorable the transaction value of the imported commodity is accepted as such. Hence, under the GATT System there can be more than one transaction values for similar commodities imported from the same origin and the lower of such prices may be taken for assessment purposes. 4. That the transaction values of the subject imported "Chinese Inter City Buses" of different brands were never a bone of contention between the importers and Customs Administration in the past. Mostly these buses were being imported in the price range of US $ 56000/- to US$ 66000/- per Passenger Bus, the seating capacity being 35 to 49 Passengers and Horse Power differing from 300 HP to 350 HP. The transaction value of the Appellants Buses was the highest being US$ 70000/- per passenger bus capacity being from 44 to 49 passengers for this category of intercity passenger buses imported from China. The controversy started when one of the previous commercial importers of CBU BUSES now turned a manufacturer namely Messrs Master Motor Corporation (Pvt.) Ltd., filed a complaint / representation with Directorate General of Customs Valuation Custom House Karachi about general phenomenon of under valuation by the commercial importers of these buses from China. 5. That to lend credence to his claim regarding rampant under valuation the Complainant enclosed an invoice of physical import of one single luxury model VIP Intercity Passenger Bus fitted with luxury seats, LCD TVs on every seat @US$95358/-. 6. That the Director Customs Valuation in his wisdom against the express and clear, cut statutory provisions of Section 25 of the Customs Act, 1969 made the above referred to singular import of Luxury Model Bus as the basis for determination of Customs Value of other imported Inter City Buses after deducting the assumed values of passenger seats and LCD TVs which they thought were distinguishing features between the luxury Model and other normal Inter City Passenger Buses thereby ignoring other salient features of the V .I.P luxury models. 7. The above proceedings show that apprehensions by the Appellants are ill founded. The local manufacturers were not only invited to participate in the preparatory meetings but also their point of view was given precedence over the submissions made by the present Appellants. It has been held by the Honourable High Court of Sindh vide order in SCRA 744/2016 dated 19.3.2018 [2019 PTD 301] that local manufacturers cannot ask for determination or enhancement of custom value of any goods and that they have no standing to be involved in exercise of determining the customs value or to ask for any enhancement thereof. The local manufactures have no standing to ask for determination and /or enhancement of the customs value of any goods under Section 25A or Section 25D and for this purpose to file an application or petition under either section or intervene or be allowed or asked to particulate in any pending proceedings or to be made a party thereto, whether as "stakeholders", or otherwise. The interest of the local manufacturers is to have the value set at as high level as possible on the ground that the transaction value or the value set in the valuation ruling (as the case may be) is otherwise too low and is causing them injury . As correctly submitted by learned counsel for the importers, this matter is exclusively in the domain of the Anti Dumping Duties Act, 2015. The local manufacturers cannot be allowed to be circumvent and evade the requirements of the Anti Dumping Duties Act, 2015, by asking for a customs valued under Section 25A or any enhancement therein or being involved in the determination of the same. The position is likewise in relation to
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Section 25D. Any ruling or order determining or enhancing customs value under these sections. on such basis or with such involvement must be regarded as fatally and irremediably tainted with illegality and cannot be allowed to stand. Questions stands answered accordingly . Now coming to the methodology adopted for preparation of the impugned ruling, para (7), reproduced hereunder needs perusal:-- "Valuation methods given in Section 25 of the Customs Act, 1969 were applied sequentially to address the valuation issue at hand. Transaction value method provided in Section 25(1) of the. Act ibid was found inapplicable because the required information was not available. Identical and Similar goods valuation methods provided in subsections (5) and (6) of Section 25 of the Customs Act, 1969 was examined for applicability to the issue in the instant case which provided some refere nce values of the subject goods. As the market of the subject goods is asymmetrical as only few specific sellers and buyers are engaged in the transaction of the goods. However , market inquires as envisaged under Section 25(7) of the Customs Act, 1969 were conducted as well. Computed method as provided in Section 25(8) could not be applied for valuation of the aforementioned goods as the cost of raw material and fabrication charges under Clause (a) and amount of profit and general expenses under clause (b) of Section 25(8) of the Customs Act, 1969, in the country of exportation could not be ascertained. Input and feed back by the importers and the manufacturers in the meetings was also considered. Online Prices were also obtained. All information so gathered was evaluated and analyzed for the purpose of determination of customs values. Consequently , the customs values of Rear Engine Intercity CBU Buses are determined under subsection (9) of Section 25 of the Customs Act, 1969. Para 8 to be inserted". Para(8). Customs values for Rear Engine Intercity CBU Buses: Rear Engine Intercity CBU Buses of Chinese origin hereinafter specified shall be assessed to duty / taxes at the following Customs V alues:- Description of Goods PCT Code Proposed PCT for WeBOCOrigin Customs V alues C&F US$/Pc (2) (3) (4) (5) (6) Rear Engine Intercity CBU Bus with standard seats/accessories Length: 11.80 Meter to 13 Meters8702.1090 8702.1090.1000 China 82,000 Rear Engine Intercity CBU Bus with Standard seats/accessories Length: 10.81 Meter but not exceeding 1 1 .79 Meter8702.1090 8702.1090.1 100 China 80,000 Note: a. If imported with luxury seats without LCD on each seats up to 35 seats per bus, value to be enhanced by 06% of assessed value. b. If imported with installed LCD on each seat, value to be enhanced by another 06% of the assessed value. c. If imported with bathroom fitted in the bus further 03% may be added in the assessed value. 8. The Valuation Ruling was challenged before Director General Customs Valuation in terms of Section 25-D of the Customs Act, 1969. The Director General rejected the revision petition vide Order No, 25/ 2018, dated 22.6.2018. The operative paras reads as un The operative part of the impugned Order in Revision is reproduce below for ease of reference and better understanding of the Honourable High Court Sindh at Karachi:-- "After listening to the detailed discussion/arguments of respondents and perusal of the case record; it is evident that the Valuation Department had duly taken the stakeholders on board at the time of issuance of the impugned Valuation Ruling. They were given sufficient time and opportunity to give their inputs including documentary proof / evidence to substantiate their transaction value but they failed to provide any such proof or fact in support of their declared values which were low. The onus to prove that they have made correct declarations viz. their transaction
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values lies with the applicants which they failed to discharge. On the other hand, the DR presented details of comprehensive market inquiry reports as available on record to support the values determined by them. As the Petitioners have not put forward any solid argument, therefore, I do not find any reason to interfere with the Customs values determined by the depar tment vide Valuation Ruling No, 1230/201 7 dated: 08.12.2017. Hence the revision petitions are hereby rejected". 9. That the impugned valuation ruling No,1230/2017 dated 8.12.2017 issued by Director of Customs Valuation Customs House Karachi is illegal, void and without any legal force thereby defying the law, procedure and principle of quasi judicial proceedings:-- (a) That by formulating the impugned valuation ruling the learned Director of Customs Valuation Custom House Karachi did not consider the reasons for revision of Valuation as well as did not bring forth any values of physical imports on record. (b) That without any proper alignment with prices of Inter City Buses in International Market for export to Pakistan the subject Values @US$82,000/- and US$80,000/- were determined under Section 25(9) of the Customs Act, 1969 being (Fall Back Method) thereby not citing any justifiable criteria for rejecting the values under Section 25 of the Customs Act, 1969. (c) That the impugned valuation ruling No,1230/2017 dated 8.12.2017 is wrongly based on the premise that value could not be determined under Section 25(1) of the Customs Act, 1969, whereas the Appellant provided Letter of Credit of similar (4) four buses imported into Oman @US$72800/- per passenger bus, Oman being a duty/tax free Middle Eastern Country . Ignoring of this hard core, irrefutable and internationally admissible evidence is contrary to basic principles of Customs Valuation incorporated in Section 25 of the Customs Act, 1969 and the Customs Valuation Rules. (d) That the concept of transaction value as envisaged in Article VII to Agreement of Implementation of GATT is not bound by any influence of fair or normal value considerations by Respondents. In addition Sections 25 and 25-A of the Customs Act, 1969 both are replica of WTO Customs Valuation Agreement. Therefore, the basic spirit of Section 25 of the Customs Act, 1969 has been ordered to be followed while implementing Section 25 of the Customs Act, 1969. (e) That the scheme of arriving at Custom s Valuation through Section 25A of the Customs Act, 1969 is not based on any concept of "fixation of…
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