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Petitioner: Messrs MALIK VETRO DESIGNI and 25 others VS Respondent: COLLECTOR OF CUSTOMS (APPEALS), KARACHI and 3 others
Court Name: Customs, Excise and Sales Tax Appellate Tribunal Judge(s): Muhammad Arshad, Muhammad Arif Moton Title:Messrs MALIK VETRO DESIGNI and 25 others vs COLLECTOR OF CUSTOMS
(APPEALS), KARACHI and 3 others Case No.: Customs Appeals Nos.K-638 to K-659, K-724 to K-727 of 2010 Date of Judgment:2010-11-30 Reported As: 2011 PTD (Trib.) 2480 Result: Appeals accepted Judgment ORDER ' MUHAMMAD ARIF MOTON (MEMBER (JUDICIAL)). --This order will dispose of aforesaid Customs Appeals filed by the above named appellants against Orders-in-Appeals Nos. 3853 to 3857 of 2010 dated 28-5-2010 and 3710 to 3731 of 2010 dated 26-4-2010 passed by the Collector of Customs (Appeals), Karachi. These appeals have identical issues of law and fact and are, therefore, being heard, dealt with and disposed off simultaneously this common order. 2. Brief facts of the case are that the appellants had imported five consignments of various types of float glass vide various CRN Nos. Which were cleared at grossly under- assessed values in violation of Valuation Ruling No, Misc/10/70-III-C/1029/1037 dated 14-2-2008 and No .Misc/13/2006-IVA-Part- 111/2611 dated 22-5-2008 wherein assessable values of the goods had been duly determined by the Directorate General of Customs Valuation, Karachi in terms of section 25A of the Customs Act, 1969 (hereinafter the Act). The appellants were accordingly issued show-cause for recovery of the short levied amount under the relevant provisions of law and the adjudicating officers passed two identical orders in all the cases. The relevant operative part of the two orders (Order-in-Original No,23 of 2010 dated 1-2-2010) is as follows:--- "I have -gone through the record of the case and arguments advanced by the learned counsel of the importers. It is an admitted fact that neither the importer, at the time of self-assessment in terms of section 79(1)(b) of the Customs Act, 1969, nor the customs authorities /PaCCS system at the time of assessm ent under section 80 of the Customs Act, 1969 have applied the customs value determined under section 25A(1) of the Act, which are/were mandatory assessment in duty/taxes of section 25A of the Customs Act, 1969. It is clearly a case where duty/taxes were chargeable at
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the customs values determined under section 25(1) of the Act, hence it is a case where short payment/assessm ent has been made, hence duty and taxes are recoverable under sections 32(3) and 32(3A) of the Act. The respondent importers have no plausible rebuttal to the aforesaid legal position. The respondent importers are only taking refuge behind the honourable High Courts Judgments, whereas not in a single judgment cited by the learned counsel, the honourable High Court has passed any orders to make the, provision of section 25A of the Act as redundant. The law is very loud and clear that in terms of section 25A(1) of the Act, in order to make the assessment uniform and transparent and to combat the menace of group under invoicing the Director (Valuation) is empowered to determine the customs value of any class of goods and in terms of section 25(2) of the Act, it is mandatory for the Government to collect the revenue as per determined customs value. In the presence of section 25A(2) and amended provision of section 25(10) of the Customs Act, 1969, the application of valuation methods is sequential order are no more mandatory. In the case of customs value determined under section 25(1) the same can only be changed through an order from. Director General Valuation in terms of section 25A(3) or 25D, as the case may be and not otherwise. The arguments advanced by the learned counsel are devoid of any merits and against the provision of law referred to above, hence no force of law. The importers are, therefore directed to make payment of short levied amount, as stated below, within 30 days hereof along with surcharge in terms of section 83(2) of the Act, failing which the short levied amount will be recovered in terms of section 202 of the Customs Act, 1969." Order-in-Original No,18 of 2010 (Manual (05) Case) is as follows:- (6) The show-cause notice in this case was issued on 14-9-2009. The period of 120 days as provided in subsection (3) of section 179 of the Customs Act, 1969, for conclusion of adjudication proceedings expired on 12-1-2010. The Collector, Model Customs Collectorate of PaCCS, was pleased to allow an extension of sixty days, up to 13-3-2010, to decide the case in exercise of powers conferred under the said subsection (3). However, the same period stood extended by thirty days, in terms of proviso to the said subsection by thirty days, up to 12-4-2010, in view of the adjournments of more than thirty days sought by the respondents as mentioned in the preceding para. 14 In view of the findings above, in the cases under reference, duty/taxes were chargeable at the customs values determined under sections 25A(1) and 25D of the Customs Act, 1969 but the same were not assessed. Therefore, these are all cases where short payment/assessment of duties and taxes has been made, hence duty and taxes, as per specified in show-cause notice in each of fine cases, are recoverable under sections 32(2) and 32A of the Customs Act, 1969 and other relevant provisions as mentioned in the show-cause notices. The respondent importers have no plausible rebuttal to the aforesaid legal position. Accordingly, the importers involved are ordered to make payment of short levied amount, as stated below, within 30 days hereof along with surcharge in terms of section 83(2) of the Act, failing which the short levied amount will be recovered in terms of section 202 of the Customs Act, 1969. In each of the cases, a penalty of Rs,25,000 is also imposed on each of, the respondents (i,e, importers and the clearing agents) involved under Clause 14A of section 156(1) of the Customs Act, 1969. 3. The orders-in-original were challenged before the Collector (Appeals) who also rejected the appeal vide Order-in-Appeals Nos.3710 to 3731 of 2010 dated 26-4-2010. Hence these appeals on the following grounds incorporated in the memos. Of appeal:--- (i) That the learned respondent has passed the impugned order-in-appeal contrary to the facts and law points involved in the case, hence the same is not maintainable at law. (ii) That is was held in Para 5 of the order-in-appeal that the said Valuation Rulings are valid until the same are either revised by the Director General of Customs Valuation under section 25-D of the Act or revised by the issuing authority. It is submitted in this regard that the Valuation Ruling No,Misc/10/07-III-C/ 1029/1037 dated 14-2-2008 fixing value of Float Glass under section 25A of the
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Customs Act, 1969 was challenged by the Glass Merchants Association under section 25D ibid. Resultantly the Assistant Director, Directorate General of Valuation advised A.D.0 (Appraisement) and ADC (PaCCS) for provisional release of the goods against some security. (iii) That the learned respondent No, 1, has failed to consider that the aforesaid advice was issued by the Assistant Director Valuation on 27-2-2008 for and on-behalf of the Director General Valuation, on the basis and strength of the Review Petition filed by Glass Merchants Association. In consideration there-of the Additional Collectors of Appraisement and MCC/ PaCCS, in exercise of their statutory powers released the goods either under section 80 or 81 of the Customs Act, 1969. In other words, the application of Valuation Ruling No,Misc.10/07-III-C/ 1029 dated 14-2-2008 was with-held and the Collectorates were allowed to clear the goods on transaction value or under section 81 of the Customs Act, 1969. Thus, it is abundantly clear that the application of Valuation Ruling was the function of the Collectorates and for any deviation there-from by the Collectorates the appellants cannot be charged for miss-declaration or filing of an untrue statement. (iv) That it is a well-settled principle that where the Directorate General of Valuation, withholds the application of Valuation Ruling through a written Order and such advice is acted upon by Collectorates (and goods are cleared under sections 80 and 81 with the knowledge of the Department), in such situations the importers cannot be charged for miss-declaration or short payment. Furthermore, the values given in the Valuation Ruling cannot be applied to goods which were cleared earlier by accepting the transaction value. The Directorate General of Valuation should have undertaken the re-valuation and such revaluation should have been effective from the date the Department issued the revised Valuation Ruling. Therefore, the Department is precluded from demanding the differential amounts of duties. Thus, the show- cause notice issued for short-recovery is void and of no legal consequences. (v) That the contention of the learned respondent No, 1, regarding mandatory application of the Ruling prices is misplaced. In this regard, it is submitted at the very out-set that the Directorate General Intelligence and Investigation, F.B.R., have no jurisdiction and powers in-terms of S.R.O. 486(1)/2007 to investigate cases of post-importation scrutiny, thus they have acted beyond the scope of their jurisdiction and powers. Hence, these acts are void and of no legal consequences which may best-aside. Reliance in this regard is placed on the findings of the honourable High Court in the case reported Messrs Shahzad Ahmed. Corporation v. Federation of Pakistan (2005 PTD 23). (vi) That it is further submitted that appellants transactions were past and closed transactions, which could not be re-opened at this stage. In similar circumstances the honorable Lahore High Court in case. Messrs S.T. Enterprises v. Federation of Pakistan 2009 PTD 467 had held as under:-- (vii) "10. Once a consignment is out of charge after due consideration of relevant facts it becomes a past and closed transaction to the extent of its value etc. The same, therefore, should not be invoked only on the basis of the mere estimate gossips personal whims or feelings that the value could have been enhanced or it could fetch more taxes etc. The opening of an appraisement for the purposes of re-valuation of an earlier estimate or adopted figure would require 'reason to believe' and not 'reasons to suspect. " (vii) That the learned respondents have failed to consider that show-cause notice in this case had been issued under section 32(1) and (2) whereas the impugned order-in-original and order-in- appeal have invoked the provisions of sections 32(3) and (3-A) which amounts to travelling beyond the scope of the show- cause notice. As the impugned orders are based on the provisions of law which do not exist in the. Show-Cause Notice, therefore, these orders are void and without jurisdiction hence are required to be set aside. (viii)That the learned respondent has failed to consider that the Show-Cause Notice was issued on 8-10-2009 whereas Order-in-Original was passed on 16-2-2010 and received on 18-2-2010.
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However, the date shown is 1-2-2010 and as such the same is barred by time by 10 days in-terms of section 179(3) of the. Customs Act, 1969, read with section 215(a) ibid. (ix) That the learned respondents Nos. 1 and 2 have failed to apply their judicious mind to address and rebut the appellants submissions to the effect that the concept of Agreed Values is alien to the Valuation Law as envisaged in the Customs Act, 1969 read with the Rules notified by the Federal Board of Revenue under section 219 of the Customs Act. These were in fact minimum prices of float glass fixed in violation of provisions of Rule 110 of Customs Rules which prohibits fixation of minimum Customs Values. It is now a known fact that these values were fixed on the behest of Messrs Ghani Glass Limited, Lahore, manufacturers of Float Glass in Pakistan, who have all along been trying to obtain non-tariff protection by pressurizing the Customs authorities to notify artificially high prices of Float Glass of various varieties to the detriment of genuine importers of Float Glass. (x) That Customs value declared by the appellants actually represents the price paid to their suppliers and no evidence whatsoever has been plated on record to prove that any additional payment was ever made to the said supplier; nor is there any other lawful basis to reject the subject transaction values. In fact the appellants were never informed as to why transaction value as declared on the GD was not acceptable to the Customs and in this regard the provisions of Rule 109 of the Valuation Rule were never followed. (xi) That a careful perusal of the Valuation Ruling dated 14-2-2009 indicates that a local market inquiry was conducted to determine the Customs value in terms of the Deductive Method of Valuation as prescribed under section 25(7) of the Customs Act, 1969. However, quite strangely, the ruling was notified in terms of section 25(9) of the Customs Act. Mandatory provisions as laid down under sections 25(7) and 25(9) of the Customs Act, 1969 read with the Rules as laid down under Rules 119 and 121 of the Customs Rules for the determination of Customs Value of imported goods were not followed by the Director Customs Valuation. Thus the Valuation Ruling in question was void and unlawful ab initio having been issued in violation of the Customs Law and Rules applicable on this subject. (xii) That DG Valuation issued a revised ruling under section 25(7) of the Customs Act, - 1969, vide C. No, Misc/13/2006-IVA Part 111/2611 dated 22-5-2008 in exercise of the powers conferred upon him under section 25Dof the Act ibid. A careful perusal of the said Ruling highlights the following important points: (i) The values were determined on the basis of Deductive method of Valuation after giving discount on the wholesaler's and retailer's margin. ' The input provided by Messrs Ghani Glass, the local manufacturers, was also used without disclosing any basis for the fixation of values on a higher side and disregarding the evidence of transaction values available in the data bank of Customs authorities. (iii) The notified prices were made applicable to only the Chinese origin Float Glass of different description/sizes as mentioned in the said ruling. (iii) That section 25(7) of the Customs Act, 1969 clearly states that the Customs value of imported goods under the said subsection shall be determined, subject to Rules on the basis of a specified criterion: Clearly, section 25(7) and Rule-119 warrant the determination of Customs Value on the basis of data pertaining to the greatest aggregate quantity at the post sale level after importation of goods at or about the time of the importation of the goods being valued. Apparently none of the provision of Customs law for the determination of value under the Deductive method of valuation as quoted above was followed (the Ruling dated 22-5-2008 specifically mentions the data based on retail sales after importation was taken into account --- which is not admissible in terms of the aforementioned Customs Law). Further the appellants were never associated in any meaningful
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way with the exercise undertaken by the DG Valuation thereby flouting the principles of natural justice. (xiv) That without prejudice to what has been stated above, the goods imported vide CRN No, 1- HC-601075-050408 consisted of Dark Green Float Glass 4MM which was not covered under the Valuation Ruling. Clearly the allegation mentioned in the show-cause notice that Valuation Ruling was deliberately not applied to the two consignments in question was factually miss-leading and incorrect. (xv) That attention is also invited to Valuation Directorate's letter No,Misc/10/2007-III-C dated 4-9- 2008 wherein Valuation Department after conducting detailed investigation concluded that there was no higher evidence of values of float glass of 5, 8 and 12 MM thicknesses of Middle East and. Far East origin and that prices of Chinese origin goods are not applicable to the aforementioned goods. The Valuation Department had directed that in the absence of any higher value evidence, the transaction value is fair and the Collectorate was advised to finalize the assessment on the declared values after allowing quantity discount as mentioned in the Commercial Invoices. (xvi)That in the light of factual and legal position state above, no additional amount of Sales Tax, Withholding Tax and Special Excise Duty was recoverable. Hence, the provisions of Sales Tax Act, 1990, Income Tax Ordinance, 2001 and Federal Excise Act, 2005 as cited in the Show-Cause Notice are not applicable at all. (xvii) That the Goods Declarations in question have been filed electronically in terms of the prevalent PaCCS e-filing system. The relevant entries regarding values contained only two columns viz. The Declared Value an assessed Value. There was no provision for declaring the values fixed under the Valuation Ruling. Thus, non-declaration of value fixed through Valuation Ruling does not amount to miss-declaration. (xviii) That without prejudice to what has been stated above it is submitted that the learned respondent No, 3 has fixed the values of Float Glass in an unlawful manner whereas under the provisions of section 25A of the Customs Act, 1969 he can only determine the value of imported and exported goods. The provisions of section 25A are reproduced below as ready reference: "25A. Power to determine the customs value.---(1) Notwithstanding the provisions contained in section 25, the Collector of Customs on his own motion, or the Director of Customs Valuation 88 [on his own motion or on a reference made to him by any person 88 [or an officer of Customs], may determine the customs value of any goods or category of goods imported into or exported out of Pakistan, after following the methods laid down in section 25, whichever is applicable (2) The Customs value determined under subsection (1) shall be the applicable customs value for assessm ent of the relevant imported or exported goods. ' In case of any conflict in the customs value determined under subsection (1), the Director-General of Customs Valuation shall determine the applicable customs value. (xix)The aforesaid provisions of section 25A do not authorize respondent No, 4 to fix the value for future imports also. Factually the impugned Valuation Rulings are applied to imports which are yet to be made, usually stretching to months. The provisions of section 25A. Of the Act only allow the respondent to determine the value of goods or category of goods imported. (Goods already imported not covering future imports). In this regard reference is made to the provisions of section 25B as they existed before their omission by the Finance Act, 2004. At the time of omission section 25B read as under: "25B-Fixation of Value for Imports and Exports:-- (1) Notwithstanding anything contained in section 25, the Board or such officer as is authorized by the Board in this behalf may, from time to time, by notification in the official gazette, for the purposes of levying Customs duties under this Act or any other law for the time being in force, fix
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the value of the goods specified in the First Schedule and the Second Schedule at such rates as it may deem fit and subject to such conditions or limitations as it may impose. (2) Different values may be fixed for different classes or descriptions of the same type of goods. (3) A notification issued under subsection (1) shall be effective from the day specified therein, notwithstanding that the official gazette in which such notification appears is published at any time after that day." (xx)Now interestingly the learned respondent No,4 without the backing of any statutory provisions issues Valuation Rulings which have the effect of fixed values as under the aforesaid omitted section 25B and such Valuation Rulings are actually issued under the provisions of section 25A of the Act which allows a limited jurisdiction for determining the value of goods imported and exported only meaning thereby that once a consignment is imported and the Customs assessing authorities somehow find it difficult to accept the declared value, then they can have recourse to the determination of value under the provisions of section 25A. But in effect the provisions of section 25A of the Customs Act, 1969 are being continuously misused in the aforesaid manner by way of fixing of values for future imports. Such powers have not been extended to the learned respondents and such fixation is even otherwise in clear violation of the WTO Agreement on Valuation, to which Pakistan is a signatory: Such fixation of values is even otherwise against the concept of Transactional Value, as embodied in the provisions of section 25 of the Act and in violation of Rule 110(iv) of the Customs Rules (S.R.O. 450(1)/2001, dated 18-6-2001) which specifically prohibit the fixation of such minimum values. (xxi) That the Honorable Supreme Court of Pakistan in the case 2007 PTD 2623 Collector of Customs Port Muhammad Bin Qasim v. Messrs Zymotic Diagnostic International, Faisalabad while discussing the valuation matter in similar circumstances has held as under:-- "6. Section 25 of Customs Act authorizes an officer of the Customs Department to reject the declared value of a consignment imported in Pakistan and to assess the same. Section 25 lays down various modes in which the officials of the Customs Department are required to proceed in determining or assessing the value of the consignment after rejecting her declared value. However, for rejecting or refusing to accept the value declared by a consignee in respect of imported goods, the concerned officer is required to give cogent, plausible and satisfactory reasons for non- acceptance of the declared value and rejection thereof which cannot proceed on the whims or desires of the officer of the customs. He is required to point out some flaw or defect or such circumstances which create doubt with regard to the veracity and correctness of the declared value or that the same had been under invoiced. Similarly in determining or assessing the fair value or normal price of such imported consignment the concerned officer.Is under an obligation to take into consideration all the necessary factors and circumstances enumerated in section 25 of the Customs Act for such determination and assessment. From a perusal of order of the Collector of Customs it transpires that neither satisfactory and convincing grounds for not accepting the declared value of the imported consignment were given nor the factors and grounds necessarily required to be taken into consideration for determining the fair or normal value of imported consignment were adhered to. The Customs Officer was required to obtain identity of the country of origin of the consignment. Thereafter attempt should have been made to find out the prevailing price of the consignment in the country of origin. There is nothing on record to indicate that the Customs Department had secured or had attempted to secure invoices from other importers who had imported identical or similar consignment in Pakistan with a view to show that the price declared by such other importers greatly varied from the price declared by the respondent. In absence of such an exercise action in rejecting the declared value of -consignment would amount to an arbitrary and capricious exercise. Resort to subsection (7) of section 25 of the. Customs Act is to be made only when the Customs Officer who has to make assessment or determination of the
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fair or normal value of the consignment is of the view that the same cannot be determined otherwise in view of impossibility of procuring evidence as referred to above. ' The order of the Collector of Customs is absolutely silent in this regard which is an important factor for drawing an interference that no such attempt was made before passing the order. The Customs Officer dealing with the case proceeded in a perfunctory, whimsical and arbitrary manner and the Customs, Excise Sales Tax Appellate Tribunal was justified in setting aside the same." (xxii) That High Court of Sindh in the Case of Rehan Umar v. Collector of Customs, Karachi and 2 others (2006 PTD 909) held as follows: (xxiii) "The established principle of interpretation of the tax laws 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 provisos 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. The detailed guidelines in this behalf are given in subsections (1), (2), (3) and (4). The provisions contained in section 25(1) to (4) contain primary…
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