Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Petitioner: Messrs SKY OVERSEAS through Authorized Attorney VS Respondent: FEDERATION OF JUDGMENT
Court Name: Sindh High Court Judge(s): Aqeel Ahmed Abbasi, Zulfiqar Ahmad Khan Title:Messrs SKY OVERSEAS through Authorized Attorney vs FEDERATION OF
JUDGMENT
Reported As: 2020 P C T L R 834, PTCL 2020 CL. 492, 2019 PTD 1964 Result: Petitions allowed Judgment JUDGMENT ZULFIQAR AHMAD KHAN, J.---Petitioners have been importing various goods, and upon payment of appropriate custom duties and taxes etc., had released their respective imports in the past under the provisions of Section 79 of the Customs Act, 1969. While Petitioners were already aggrieved by various Valuation Rulings applicable to their goods, including Valuation Ruling No.1179/2017 dated 12.06.2017 alleging that those Valuation Rulings had been issued without taking direct input from the Petitioners and other interested parties, which was violative of the provisions of Section 25A of the Customs Act, 1969, and to redress this grievance, they had filed review applications under Section 25D of the Customs Act, 1969 before the Director General Valuations, which applications were pending, and since their consignments were arriving from time to time, the Petitioners got the same provisionally released under Section 81 of the Act, 1969 by securing the differential amount of duty and taxes etc., through various orders of this Court, however , lately when consignments arriving at port on the pretext of a circular bearing No.SI/Misc/13/2014-CC (Appr)/375 dated 22.11.2017 were held, additional petitions were filed challenging the impugned Circular in terms of which directions were issued that pursuant to an amendment brought in Rule 107 of the Customs Rules, 2001, the earlier practice of provisional release of consignments under Section
---
## Page 2
81 of the Act not to be continued in cases where the petitioners had challenged such Ruling by filing an appropriate Revision Application under Section 25D of the Customs Act. 2. Being posed with such unusual circumstances, the petitioners approached the department seeking release of the consignments provisionally under Section 81, but per learned counsel, all such attempts remained futile and the petitioners were forced to pay valuation assessed on the basis of challenged Valuation Rulings. Per learned counsel, Section 81 of the Customs Act, 1969 clearly provided a mechanism for the provisional release of consignments in cases where there was a dispute as to valuation of the consignments, and required goods to be released provisionally upon securing differential amount of duty and taxes. Learne d counsel further stated that the Circular in terms of which petitioners had been called upon to pay full and final valuation as determined by Valuation Rulings was unlawful, illegal, arbitrary and without jurisdiction. Petitioners through these petitions have sought declaration from this Court that the said Circular be declared without jurisdiction and of no legal effect and request is made that the respondents be directed to release the consignments of the petitioners provisionally by furnishing pay orders/bank guarantee of the differential amount. Amendments brought in Rule 107(a) through SRO 564(I)/2017 dated 01.07.2317 which gave birth to the said Circular are also challenged. 3. The respondents in their reply have stated that the amendment brought forward by SRO 564(1)/2017 changed definition of the expression "at or about the same time" under Rule 107(a) of the Customs Rules, 2001 and now the said expression is defined to mean "within ninety days prior to importation or within ninety days after the importation of goods being valued, except in cases where Valuation Ruling issued under Section 25A exists, the Valuation Ruling shall remain in field unless rescinded, modified or replaced with a new Valuation Ruling" . It is stated that after the said amendment, as well as, per para 21 of the Sadia Jabbar case (2018 PTD 1746 ), the department is trying to bring uniformity in its practice and the impugned Circular has been issued with such an objective. It was next stated that by mere filing of request of revision of any Valuation Ruling, or upon making an application of review under Section 25D of the Customs Act, the request itself does not entitle an importer for a provisional assessment under Section 81 of the Act, 1969 and that intent of the Circular is that the assessment in such cases must be made in accordance with the prevailing Valuation Rulings, until unless the said Valuation Ruling is rescinded, modified or repealed. It was also contended that in view of the overriding effect of Section 25A of the Customs Act over the provisions of Section 25, wherever a determination of customs valuation is to be made under Section 25A i.e. a value mentioned in a Valuation Ruling, the same has to be applied, save in the two instances of higher valuation given in the proviso to subsection (2) of Section 25A. It was also stated that the Custom Officer assessing the goods has no discretion whatsoever to ignore or disregard the determination of the custom valuation so made, as long as such Valuation Ruling holds field i.e. until and unless a Ruling has been revised, rescinded, modified or repealed. It was also contended that Section 81 of the 1969 Act provides for provisional assessment only in cases, where it is not possible for the Customs Officer to satisfy himself of the correctness of the assessment of goods for the reasons that the goods requiring chemical or other test(s) or where there is a case of further inquiry i.e. that goods can only be released provisionally under these limited circumstances and if there is valuation dispute and whilst a Valuation Ruling is in the field, the Assistant Collector in derogation of the Valuation Ruling cannot sit assuming that it was a case of further inquiry just because an importer has filed a representation for the revision of the Valuation Ruling. It was last contended that the persons aggrieved from any Valuation Ruling have right to seek revision under Section 25D of the Act, 1969 as well as by filing appeal against the order-in-original before the Appellate Tribunal, and the assessment made on the basis of the impugned valuation ruling could also be challenged before the Collector (Appeals) . under Section 193 of the Act, 1969, thus providing efficacious alternate remedies to the petitioners, hence invoking writ jurisdiction of the High Court's is not well suited. 4. Heard the counsel for the parties, learned Assistant Attorney General and Department's representatives. 5. Admittedly , petitioners' goods are not banned items and there is only a dispute as to valuation. While Section 25A of the Customs Act, 1969 empowers the custom authorities to determine valuation of imported goods after following the procedure prescribed under Section 25, Section 25D of the Act of 1969 does provide for the possibility of challenging any valuation determined under Section 25A by filing revision petition before the Director General of
---
## Page 3
Valuation. To safeguard the interest of commerce, Customs Act as well as the Rules made thereunder , in cases where valuation is in dispute, attempt to provide adequate mechanism for provisional release of goods. The most relevant provision of law is contained in Section 81 of the Act, 1969 which provid es that in cases when it is not possible for a Customs Officer during the checking of the goods' declaration to satisfy himself of the correctness of the assessment of the goods (made under Section 79) for reasons that the goods require chemical or other tests or a further inquiry , a competent officer in these circumstances could order release of such goods provisionally upon provisional assessment of duties and taxes and other payable charges by securing the differential between the final determination of the duty over the amount provisionally determined. Also of relevance are Rules 109, 125, 439 and 440 of the Customs Rules, 2001, relevant part of Rule 125(2) also provides that there shall be no bar on provisional release of goods under Section 81 of the Act, 1969 in case of any dispute between the importer and the appropriate officer in respect of valuation of the goods. Rule 439 of the Rules, 2001 also provides for the provisional release of the imported good by providing appropriate security when there are disputes regarding valuation, classification, exemption, or lab tests in respect of Valuation Rulings. Clause (a) of Rule 439, in case of Valuation Rulings made under Section 25A, requires the cases to be forwarded to the valuation department online, however mandates that in the interim, goods ought to be cleared provisionally . 6. As the controversy revolves around Circular dated 22.11.2017, we find it relevant to reproduce contents of the said Circular in the following : - "GOVERNMENT OF P AKIST AN OFFICE OF THE CHIEF COLLECT OR OF CUST OMS APPRAISEMENT (SOUTH) 8th FLOOR, CUST OM HOUSE, KARACHI No.SI/Misc/13/2014-CC (Appr)/375 Dated: 22.1 1.2017 CIRCULAR Subject: VALIDITY OF VALUA TION RULING AFTER AMENDMENT OF RULE, 107(A) OF CUST OMS RULES, 2001. Rule 107 (a) of Chapter IX of Customs Rules 2001 has been amended vide SRO 564(1)/2017 dated 01.07.2017 whereby the Valuation Ruling (VR) issue d under section 25A of the Customs Act, 1969 shall remain valid unless rescinded, modified or substitutes with a new V.R. As such mere filing of request for revision of an existing VR or an application of review under section 25D of the Act shall not entitle the applicant/importer for provisional assessment under Section 81 ibid. The assessment in such cases shall be made in accordan ce with the prevailing VR till the same is rescinded, modified or repealed, as stipulated above. This is for information of and compliance by all concerned. (Muhammad Saeed W attoo) Additional Collector SA to Chief Collector Copy to: 1. The Member (Customs), Federal Board of Revenue, Islamabad. 2. The Chief Collector of Customs (North/Central), Islamabad/ Lahore. 3. The Chief Collector of Customs, Appraisement/Enforcement (South), Custom House, Karachi. 4. The Director General, Directorate General of Customs (V aluation), Custom House, Karachi. 5. The Collector of Customs, MCC-Appraisement (East/W est/Port Qasim), Karachi 6. The President, Federation of Pakistan Karachi Chamber of Commerce and Industry (FPCCI), Clifton Karachi 7. The President, Karachi Chamber of Commerce and Industry , Nichole Road, Karachi 8. The President, Karachi Customs Agent Association. Burhani Chamber , Opp. Custom House, Karachi 9. Notice Board for information of all concerned." 7. As it could be seen from the text reproduced in the above paragraph, the said Circular is issued as an outcome of the amendment brought in Rule 107(a) of Chapter IX of Customs Rules, 2001 as amended through SRO
---
## Page 4
No.564(I)/2017. Rule 107(a) in its amended form is reproduced hereunder:- Rule 107....(a) "at or about the same time" means within ninety days prior to the importation or within ninety days after the importation of goods being valued except in cases where valuation rulings issued under Section 25A exists. The valuation rule remained in field unless rescinded, modified or repealed with the new valuation". 8. Its common knowledge that Section 25A , was added in the Customs Act, 1969 upon advent of the WTO (World Trade Organization) System, which completely overhauled the previous method of determining customs value of the imported goods around the globe. The said section was originally inserted in the national legislature through Finance Act, 2006, however was substantially amended through Finance Act, 2007 and later on continued to be so amended through Finance Acts of 2009, 2010 and 2017. Through WTO System, also known as the Multilateral Trading System, governments inter alia agreed to make the business environme nt stable and predictable. WTO thus became an intergovernmental organization poised to regulate international trade. The Organization officially commenced it business on 01.01.1995 under the Marrakesh Agreement, signed by 124 nations (including Pakistan) earlier on 15.04.1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. WTO is aimed to deal with regulation of trade between participating countr ies by providing a framework for negotiating trade agreements, and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements, which have been signed by representatives of member governments, and later on brought in respective countries' national legislations. Pakistan being no exception. 9. With regards customs, WTO set forth an entirely new globally unified system for the determination of the customs valuations for the goods imported into member countries. This model abolished the earlier concept of 'normal price' and a different conceptual framework was introduced, where valuations became matter of "determination" rather than "fixation". Developing countries including Pakistan were given five years to bring their national laws in conformity with the WTO model framework. Resultantly , the new system was enforced in Pakistan with effect from 01.01.2000, just after five years from 01.01.1995. Interestingly Section 25 was immediately inserted in the Customs Act, 1969 to take ef fect from WT O mandated commencement date of 01.01.2000. 10. WTO/GA TT Agreement has in total 38 Articles, of which, Article VII relates to "Valuation for Customs Purposes". The said Article being of paramount relevance, is reproduced hereunder:- "Article VII Valuation for Customs Purposes 1. The contracting parties recognize the validity of the general principles of valuation set forth in the following paragraphs of this Article, and they undertake to give effect to such principles, in respect of all products subject to duties or other charges* or restrictions on importation and exportation based upon or regulated in any manner by value. Moreover , they shall, upon a request by another contracting party review the operation of any of their laws or regulations relating to value for customs purposes in the light of these principles. The CONTRACTING PARTIES may request from contracting parties reports on steps taken by them in pursuance of the provisions of this Article. 2. (a) The value for customs purposes of imported merchandise should be based on the actual value of the imported merchandise on which duty is assessed, or of like merchandise, and should not be based on the value of merchandise of national origin or on arbitrary or fictitious values.* (b) "Actual value" should be the price at which, at a time and place determined by the legislation of the country of importation, such or like merchandise is sold or offered for sale in the ordinary course of trade under fully competitive conditions. To the extent to which the price of such or like merchandise is governed by the quantity in a particular transaction, the price to be considered should uniformly be related to either (i) comparable quantities, or (ii) quantities not less favourable to importers than those in which the greater volume of the merchandise is sold in the trade between the countries, of exportation and importation. * (c) When the actual value is not ascertainable in accordance with sub-paragraph (b) of this paragraph, the value for customs purposes should be based on the nearest ascertainable equivalent of such value. * 3. The value for customs purposes of any imported product should not include the amount of any internal tax, applicable within the country of origin or export, from which the imported product has been exempted or has been or will be relieved by means of refund.
---
## Page 5
4. (a) Except as otherwise provided for in this paragraph, where it is necessary for the purposes of paragraph 2 of this Article for a contracting party to convert into its own currency a price expressed in the currency of another country , the conversion rate of exchange to be used shall be based, for each curren cy involved, on the par value as established pursuant to the Articles of Agreement of the International Monetary Fund or on the rate of exchange recognized by the Fund, or on the par value established in accordance with a special exchange agreement entered into pursuant to Article XV of this Agreeme nt. (b) Where no such established par value and no such recognized rate of exchange exist, the conversion rate shall reflect effectively the current value of such currency in commercial transactions. (c) The CONTRACTING PARTIES, in agreement with the International Monetary Fund, shall formulate rules governing the conversion by contracting parties of any foreign currency in respect of which multiple rates of exchange are maintained consis tently with the Articles of Agreement of the International Monetary Fund. Any contracting party may apply such rules in respect of such foreign currencies for the purposes of paragraph 2 of this Article as an alternative to the use of par values. Until such rules are adopted by the CONTRACTING PARTIES, any contracting party may employ , in respect of any such foreign currency , rules of conversion for the purposes of paragraph 2 of this Article which are designed to reflect effectively the value of such foreign currency in commercial transactions. (d) Nothing in this paragraph shall be construed to require any contracting party to alter the method of converting currencies for customs purposes which is applicable in its territory on the date of this Agreement, if such alteration would have the ef fect of increasing generally the amounts of duty payable. 5. The bases and methods for determining the value of products subject to duties or other charges or restrictions based upon or regulated in any manner by value should be stable and should be given sufficient publicity to enable traders to estimate, with a reasonable degree of certainty , the value for customs purposes." 11. Contracting countries including Pakistan, for full implementation of the said Article VII, entered into an agreement called as "Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994" also. The said Implementation Agreement, comprises of 24 Articles, as well as, has a number of Notes appended to its various Articles. This Agreement exclusively applies to the valuation of imported goods for the purpose of levying ad valorem duties on such goods and stipulates that customs valuation shall, except in specified circumstances, be based on the actual price of the goods to be valued, which is generally shown on the invoice. This price, plus adjustments for certain elements listed in Article 8, creates the "transaction value", which constitutes the first and most important method of valuation referred to in the Agreement. 12. Part I of the said Agreement entitled "Rules on Customs Valuation" comprises of 17 articles. The carved-in- stone basis for customs valuation under GATT/WT O and the Implementation Agre ement is kept as "transactional value" method, which is defined under Article 1 and the same is embodied in Section 25(1) of the Customs Act, 1969 to mean "the price actually paid or payable for the goods when sold for export to the country of importation". The said Article (if need be) may be read with Article 8 of the Implementation Agree ment, which forms basis of sub- section (2) of Section 25 of the Customs Act, 1969. Article 8, to fully understand the extent of line items which could (or couldn't be) be adjusted in the price actually paid or payable (under Article 1), is reproduced hereunder:- Article - 8. In determining the customs value under the provisions of Article 1, there shall be added to the price actually paid or payable for the imported goods: (a) the following, to the extent that they are incurred by the buyer but are not included in the price actually paid or payable for the goods: (i) commissions and brokerage, except buying commissions; (ii) the cost of containers which are treated as being one for customs purposes with the goods in question; (iii) the cost of packing whether for labour or materials; (b) the value, apportioned as appropriate, of the following goods and services where supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for export of the imported goods, to the extent that such value has not been included in the price actually paid or payable: (i) materials, components, parts and similar items incorporated in the imported goods; (ii) tools, dies, moulds and similar items used in the production of the imported goods; (iii) materials consumed in the production of the imported goods;
---
## Page 6
(iv) engineering, development, artwork, design work, plans sketches, undertaken elsewhere than in the country of importation and necessary for the production of the imported goods; (c) royalties and licence fees related to the goods being valued that the buyer must pay, either directly or indirectly , as a condition of sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable; (d) the value of any part of the proceeds of any subsequent resale, disposal or use of the imported goods that accrues directly or indirectly to the seller . 2. In framing its legislation, each Member shall provide for the inclusion in or the exclusion from the customs value, in whole or in part, of the following: (a) the cost of transport of the imported goods to the port or place of importation; (b) loading, unloading and handling charges associated with the transport of the imported goods to the port or place of importation; and c) the cost of insurance. 3. Additions to the price actually paid or payable shall be made under this Article only on the basis of objective and quantifiable data. 4. No additions shall be made to the price actually paid or payable in determinin g the customs value except as provided in this Article. 13. As it could be seen, Article 1 when read along with Article 8, create the entire universe of method of determination of customs valuation through transactional value method. Customs valuation based on the transaction value method, as it could be seen from the above, is largely based on documentary input from the importer . Article 17 of the Implementatio n Agreement grants Customs administrations a right to challenge these values to satisfy themselves as to the truth or accuracy of any statement, docum ent or declaration. A "Decision Regarding Cases Where Customs Administrations Having Reasons To Doubt The Truth Or Accuracy of The Declared Value" taken by the Committee on Customs Valuation pursuant to a Ministerial Decision at Marrakesh spelled out the procedure to be followed in such cases As a first step, Customs may ask the importer to provide further explanation that the declared value represents the total amount actually paid or payable for the imported goods. If a reasonable doubt still exists after reception of further information (or in absence of a response) and Customs is of the opinion that the value cannot be determined according to the transaction value method, but before a final decision is taken, Customs must communicate its reasoning to the importer , who, in turn, must be given reasonable time to respond. In addition, the reasoning of the final decision must be communicated to the importer in writing. Full text of the said Decision is reproduced hereunder:- "When a declaration has been presented and where the customs administration has reason to doubt the truth or accuracy of the particulars or of documents produced in support of this declaration, the customs administration may ask the importer to provide further explanation, including documents or other evidence, that the declared value represents the total amount actually paid or payable for the imported goods, adjusted in accordance with the provisions of Article 8. If, after receiving further information, or in the absence of a response, the customs administration still has reasonable doubts about the truth or accuracy of the declared value, it may, bearing in mind the provisions of Article 11, be deemed that the customs value of the imported goods cannot be determined under the provisions of Article 1. Before taking a final decision, the customs administration shall communicate to the importer , in writing if requested, its grounds for doubting the truth or accuracy of the particulars or documents produced and the importer shall be given a reasonable opportunity to respond. When a final decision is made, the customs administration shall communicate to the importer in writing its decision and the grounds therefore." If a reasonable doubt still exists after reception of further information (or in absence of a response), customs may decide that the value according to the transaction value is not acceptable…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.