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Petitioner: SUS MOTORS (PVT.) LTD., KARACHI VS Respondent: FEDERATION OF PAKISTAN through Secretary Revenue Division/Chairman, Islamabad and 2 others
Court Name: Sindh High Court Judge(s): Munib Akhtar, Muhammad Ather Saeed Title:SUS MOTORS (PVT.) LTD., KARACHI vs FEDERATION OF PAKISTAN through
Secretary Revenue Division/Chairman, Islamabad and 2 others Case No.: C.P. No, D-1285 and C.M.A. No, 6260 of 2008 Date of Judgment:2010-11-12 Reported As: 2011 PTD 235 Result: Order accordingly Judgment ORDER ' MUNIB AKHTAR, J.---This petition arises under the Customs. Act, 1969 ("the Act"), and raises important questions regarding the proper interpretation and application of section 81 thereof. On 16-9-2010, learned counsel for the parties were put on notice that the petition would be heard and disposed of at katcha peshi stage. The petitioner is the importer of the "Geely" brand of motor vehicles from China. It appears that it started to import these vehicles from around December, 2006 onwards. The first consignment consisted of four vehicles. The petitioner filed the relevant goods declaration under section 79 of the Act and declared the value of the vehicles at what it claimed was the transactional value under section 25(1) of the Act. However, the Customs Department did not accept the declared value and sought to assess the imported vehicles at a significantly higher price. The petitioner objected to this and was allowed the provisional release of the vehicles under section 81 of the Act. The duty and taxes payable were provisionally determined on the basis of the declared value, with the differential amount being secured by a post-dated cheque. In the meanwhile, the petitioner's other consignments of the same motor vehicle also started arriving such that, insofar as this petition is concerned, a total of 86 vehicles were imported and declared in four different consignments. Each consignment met the same fate, i,e,, the declared value, which according to the petitioner was the transactional value, was not accepted by the Department, but the petitioner was allowed provisional release under section 81 on provisional determination of duty and taxes, with the differential amount being secured by one or more postdated cheques. It may be noted that the petitioner's consignments were released under PACCS, the Pakistan Customs Computerized System.
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2. Learned counsel for the petitioner submitted that thereafter, the petitioner diligently pursued the matter to have it finalized under section 81. According to him, although some hearings did take place, no final decision was ever arrived at, with the result that eventually, the period stipulated in section 81 passed without a final determination being made. Learned counsel submitted, and this issue lies at the heart of the present petition, that since no final determination was made, the provisional determination (on the basis of the declared value) was deemed to have become final, and the petitioner's liability to pay duty and other taxes had crystallized on that basis. Thus, according to him, the post-dated cheques cannot be encashed and the. Department is liable to return them to the petitioner. The relevant dates in respect of the four consignments, as shown in the petition, are set forth below:- Consignment No, and unitsDeclared value; customs value (per unit (USD))Goods provisionally cleared onExpiry of period under S.81 of the Act 1;4 units 3555;4714 30-12-2006 29-9-2007 2;16 units 4055;7000 26-4-2007 19-1-2008 3;34 units 3555;4714 10-5-2007 6-2-2008 4;32 units 3555;5705 4-4-2008 ' Learned counsel submitted that after the expiry of the limitation period, the petitioner was shocked to discover that the Department had issued some sort of valuation advice/letter dated 19- 4-2008, which purported to state that since the Department was not satisfied with the values declared by the petitioner, it had requested Pakistan's commercial consular in China to provide the correct prices of the subject vehicles, and the data obtained from the latter showed that the prices were much higher than those that had been declared. The advice/letter also noted that the Department had examined the data regarding Chinese vehicles exported to Pakistan and even on that basis, the declared value was much lower than the actual price. The advice/letter concluded that since the prices declared by the petitioner were "untrue", action be initiated against it under section 32 of the Act, and other applicable provisions thereof. It appears that on the basis of this advice/letter, the post-dated cheques were sought to be encashed, but were dishonored on presentation. 3. Learned counsel for the petitioner submitted that the entire exercise, which had culminated in the advice/letter aforementioned, was unlawful since it had been undertaken behind the petitioner's back and without joining the latter and enabling it to present its case. Learned counsel emphasized that the petitioner had sent repeated reminders to the Department and had participated in all the proceedings and hearings that had taken place under section 81, but the Department, instead of finalizing the matter thereunder had instead chosen to take recourse to a completely unlawful method, which was liable to be set wide. Thus, the petitioner's grievance is twofold. Firstly, and most fundamentally, the petitioner claims that its goods were released on a provisional determination under section 81 and since no final determination was made within the stipulated period, the provisional determination has attained finality arid it is only liable to pay duty and other taxes in terms thereof (i,e,, on the basis of the declared value). Since that amount has already been paid, the petitioner claims that it has no further liability in this regard. Secondly, the entire exercise relating to the final determination of valuation was unlawful since it was violative of the principles of natural justice, had been carried out without notice to the petitioner, or confronting it with the material/evidence being used against it. Thus, the action proposed to be taken by the Department, and in particular the retention and attempted encashment the post-dated cheques, was entirely without lawful authority and liable to be so declared and quashed.
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4. As regards section 81, learned counsel for the petitioner submitted that it was well settled that if the matter thereunder was not finalized within the stipulated period, then the provisional determination was deemed to have become final. He placed reliance on a number of decisions of this Court, including Hassan Trading Company v. C.B.R. And others 2004 PTD 1979, Colgate Palmolive (Pakistan) Ltd. v. Federation of Pakistan 2004 PTD 2516, Collector of Customs v. H. M. Abdullah and others 2004 PTD 2993, Habib-ur-Rehman and Company-v. Collector (Appraisement) and others 2005 PTD 69, Collector of Customs (Appraisement) and others v. Auto Mobile Corporation of Pakistan 2005 PTD 2116, Wall Master v. Collector of Customs and others 2005 PTD 2573 and Dewan Farooque Motors Ltd. v. Customs Excise and Sales Tax Appellate Tribunal and others 2006 PTO 1276. Learned counsel submitted that although section 81 had been substituted in its entirety with new provisions in 2005 (which included in particular, an explanation that had not been part of the section previously), the ' section as substituted had been interpreted and applied by this Court in Rehan Umar v. Collector of Customs and others 2006 PTD 909. This Court had, according to learned counsel, come to the same conclusion as before, namely that if the matter under section 81 was not finalized within the stipulated period, the provisional determination attained finality. Learned counsel pointed out that since the Rehan Umar case was decided by a Division Bench, the matter of the proper interpretation of section 81, as presently relevant, stood decided as regards the present petition. He also referred in particular to the Dewan Farooque case (supra) and to Collector of Customs v. Pak Arab Refinery 2010 PTO 900. As regards the finalization of the value by means of the advice/letter of 9-4-2008, learned counsel relied on the Habib ur Rehman case (supra) and Sohrab Global Marketing (Pvt.) Ltd. v Deputy Collector of Customs 2005 PTD 67 (Lah.) to submit that since the petitioner had not been confronted with the evidence used against it, the entire exercise in this regard was a riullity. 5. Learned counsel for the respondent No 2 (the Model Collectorate (PACCS)), ably assisted by the learned representative for the Department, submitted that on a proper interpretation of section 81, as substituted in 2005, the provisional determination thereunder included the differential amount, so that even if the final determination came about simply as a result of a lapse of the stipulated period, the differential amount was payable. Learned counsel submitted that this followed directly from the explanation that had been included in the substituted provisions. His case was that the Rehan Umar case did not decide this issue, especially as to the proper interpretation and effect of the explanation, and did not constitute any binding authority in this regard. He had prepared a useful chart which, according to him, showed exactly what was decided in the Rehan Umar case. He therefore submitted that this was an issue that remained open to be decided in the present petition, and according to him, the correct interpretation was as noted above. As to the effect and proper interpretation of an explanation in the context of fiscal statutes, he placed reliance on Commissioner of Income Tax v. Asbestos Cement Industries Ltd. 1993 PTD 459 (SC) and Bismillah and Co. And others v. Secretary, Ministry of Finance, GOP 2005 PTD 1942 (SC). Learned counsel also submitted that section 81 could not be read in isolation, but had to be interpreted and applied along with the preceding two sections. He also placed reliance on two decisions of this Court reported as Collector Sales Tax and Central Excise v. Al Hadi Industries (Pvt.) Ltd. 2002 PTD 2457 and Noble (Pvt.) Ltd. v. Federal Board of Revenue and others 2009 PTD 844 to highlight the correct principles to be applied in the interpretation of fiscal statutes. According to learned counsel, although the substituted provisions of section 81 used both the words "determination" and "assessm ent", on a proper interpretation thereof, the terms were interchangeable and were being used in the same sense throughout the section. Thus, according to him, when the section was read as a whole and in particular, the explanation thereto was taken into account, the only proper and reasonable interpretation possible was that the, differential amount calculated on the basis of the provisional assessm ent stood included in the provisional determination, and hence, if the latter
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became the final determination through lapse of time, the differential amount became part of the duty and taxes payable by the importer. Learned counsel also submitted that the period stipulated in section 81 for final determination was nine months (at the relevant time), but this was extendable by a further period of 90 days by the concerned authority. According to him, this power had been properly exercised in the present case with respect to the second, third and fourth consignments, with the result that the period of limitation ended at, or extended beyond, 19-4-2008, when the advice/letter aforementioned was issued. It was also his submission that the final determination in the case of the first consignment was made on the last day of the stipulated period. Thus, according to him, on any view of the matter, the petitioner was liable to pay the differential amount in respect of all the consignments. Insofar as the exercise carried out which resulted in the issuance. Of the advice/letter aforementioned, the learned counsel submitted that this had been done strictly in accordance with law and was therefore proper and binding on all concerned, including the petitioner. Learned counsel for the respondent No, 3 challenged the maintainability of the petition and submitted that since an adequate alternate remedy was available to the petitioner, the petition ought to be dismissed on this ground alone. The learned standing council adopted the submissions of the other counsel appearing for the respondents. 6. We have heard learned counsel for the parties, examined the relevant record with their assistance and carefully considered the case law and statutory provisions referred to and relied upon by them. As noted above, the petitioner's consignments started arriving from December, 2006 onwards. The relevant provisions of the Act, being sections 79 to 81, were each substituted in their entirety by the Finance Act, 2005, and it is therefore the substituted provisions that apply in the present case. We will have occasion later in this judgment to consider these sections, both as they stood prior to 2005, and after being substituted by the Finance Act of that year. (It may be noted that when reference is made in this judgment to changes and/or amendments being made in a stated year without anything more, the reference is to the Finance Act of that year.) It is not in dispute that section 81, as interpreted by this Court as it stood prior to 2005, provided that if the provisional assessm ent was not finalized within the stipulated period, then the said assessment (which was invariably made on the basis of the declared value) became final. The question, and this is the crucial point requiring determination, is whether that is still the position post-2005. Learned counsel for respondent No, 2 would answer this question in the negative, and places strong reliance on the explanation in the substituted provisions--an explanation that was not to be found in the earlier provisions. Learned counsel for the petitioner would give an answer in the affirmative, and submits that in fact, this question has been so answered in the Rehan Umar case, and is part of the ratio decidendi of that decision. The first order of business is therefore to see whether and if so, to what extent, learned counsel for the petitioner is correct 'in this regard. 7. The goods declaration for the consignment imported in the Rehan Umar case was filed on 24-10- 2005, and it was therefore the substituted section 81 that applied. It appears that the value declared by the importer was not accepted by the Department, and he was asked to deposit an additional amount by way of duty payable. The importer thereupon asked that his goods be provisionally released under section 81. He was however informed that his goods had already been assessed on the basis of a valuation advice, and his request for provisional release under section 81 was turned down. It was in these circumstances that the petitioner filed a petition before this Court. The Division Bench seized of the matter framed four questions that required determination, and it is only the third question that is presently relevant. This was framed in the following terms:- "If the declared value in Bill of Entry/Goods Declaration is not acceptable to the appropriate officer and he is of the view that customs value cannot be determined under the provisions of subsection (1) of section 25 and resort is to be made to the methods provided in subsections (5), (6), (7), (8) or (9) and for that purpose further inquiry is required, an importer is entitled for release of goods
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under section 81 of the Customs Act, by provisional determination of liability, as a matter of right and not as a matter of concession within the discretion of the appropriate officer of the customs?" (pg. 923) ' It will be seen that the question is narrowly focused. In essence, the question is whether, if the declared value is not accepted by the appropriate officer, the importer is entitled as of right to have recourse to section 81 and not merely as a matter of concession and at the discretion of the said officer. It was to answer this question that section 81 was considered. The Court examined in detail its various provisions, and also referred to the explanation. It then answered the question posed in the following terms:-- "It is therefore, held that if the declared value in the Bill of Entry/goods declaration is not acceptable to the appropriate officer of the customs department and the value cannot be determined under the provisions of subsection (1) of section 25 and resort is to be made to the other methods provided in section 25 of the Customs Act, then the importer is entitled for the release of goods under section 81 of the Customs Act, by provisional determination of the liability. The release of goods in such manner is a matter of right of importer and not a matter of concession within the discretion of appropriate officer of the customs." (pg 950) ' In our view, it is quite clear that the question that falls for determination in the present case was not in issue in the Rehan Umar case and in particular, did not fall within the ambit of the third question with reference to which section 81 was analyzed and interpreted. The reason is simple. In the present case, the question raised is post-provisional determination-how and in what manner does the provisional determination become the final determination on lapse of the stipulated period? The question posed and answered in Rehan Umar is pre-provisional determination-is an importer entitled as of right to have section 81 applied to his case if there is a valuation dispute? It is the answer to this question, and this question alone, which is the ratio decidendi of the decision (as presently relevant) and binding on subsequent Division Benches. Any other finding is only in the nature of an orbiter dictum, which does not have binding effect. This is a well settled principle, and reference may be made to Irshad Ahmad Shaikh v. The State 2000 SCM R 814, where it was observed as follows: "Now, every case is an authority, to the extent the same decides the legal controversy encompassed in it. In other words, the declaration of law has to be confined to the four corners of the dispute agitated before the Court. The rest, if any, is obiter and obiter, except of this Court or before it, of the Privy Council is not/has not been binding." (pg. 822) ' Accordingly, we are of the view that any observations made by the learned Division Bench in the Rehan Umar case with regard to the interpretation of section 81 once it has been applied, and goods are released in terms thereof, are only dicta and do not constitute binding authority. In the present context, we would also note in passing that the learned Judge (Mujeebullah Siddiqui, J.) who was the author of the decision in the Rehan Umar case was also party to, and author of the decision in, another Division Bench case reported as Khairpur Textile Mills Ltd. And others v. National Bank of Pakistan and another 2003 ' CLD 326. The Division Bench examined in detail the rules applicable to precedents, and in the course of the judgment, observed as follows:-- ...The law of precedent is a delicate one and before following a decision it is necessary to see as to what were the facts of the case in which the decision was given and what was the point which was to be decided. Too rigid observations to the precedent may lead to injustice in a particular case and also unduly restrict the proper development of the law. As it has been very aptly observed by Sir Henry Slessar, in his classical book 'The Art of Judgment', that the good Judges and lawyers should never be slave of the precedent, the precedent should be a guide and not a dictator." (para 39, pg 346)
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' We therefore now turn to consider the important questions of interpretation raised in the present petition with regard to section 81 and other applicable provisions. 8. As noted above, learned counsel for respondent No, 2 and the learned departmental representative, submitted that section 81 could not be read in isolation; it had to be understood and interpreted in conjunction with sections 79 and 80. We agree that these three sections need to be considered together. We propose to first examine these sections as they stood before the Finance Act, 2005, and then consider the post-2005 position. It is only in this way that the correct meaning will emerge, and the questions raised in the present petition be properly answered. 9. Section 79 of the Act, as presently relevant, was in the following terms prior to the Finance Act, 2005:-- (79) Entry for home-consumption or warehousing.---(1) The owner of any imported goods shall make entry of such goods for home-consumption or warehousing or for any other approved purpose by delivering to the appropriate officer a bill of entry or goods declaration thereof in such form and manner and containing such particulars as the Board may direct ' It will be seen that section 79 merely required that the importer file the bill of entry or goods declaration for the imported goods. In particular, section 79 did not in any manner deal with the assessm ent of the goods, which was covered by section 80. This section (as presently relevant) was in the following terms:-- (80) Assessm ent of duty.---(1) On the delivery of such bill, the goods or such part thereof as may be necessary may, without undue delay, be examined or tested, and thereafter the goods shall be assessed to duty, if any, and the owner of such goods may then proceed to clear the same for home-consumption or warehouse them, subject to the provisions thereinafter contained ' The important point to note is that under section 80, it was for the appropriate officer to assess the goods to duty. This assessm ent was done on the filing of the necessary documents and an examination and/or testing of the goods. If however, the goods could not be immediately assessed to duty because some test or further inquiry was required in relation thereto, they could be provisionally assessed under section 81. This section provided in its material terms as follows: (81) Provisional Assessm ent of .Duty.---(1) Where it is not possible immediately to assess the customs-duty that may be payable on any imported goods entered for home-consumption for reason that the goods require chemical or other test or a further enquiry for purposes of assessm ent, or that all the documents of complete documents or full information pertaining to those goods have not been furnished, an officer not below the rank of Assistant Collector or Deputy Collector of Customs may order that the duty payable on such goods be assessed provisionally: ' Provided that the importer ... Pays such additional amount as security or furnishes such guarantee of a scheduled bank for the payment thereof as the said officer deems sufficient to meet the excess of the final assessm ent of duty over the provisional assessment. (2) Where any goods are allowed to be cleared or delivered on the basis of such provisional assessm ent, the amount of duty actually payable on those goods shall be finally assessed within one year of the date of provisional assessment: ' Provided that the Collector of Customs may, under circumstances of exceptional nature, extend the period for final assessm ent by not more than ninety days, after recording such circumstances. (4) If the final assessm ent is not completed within the period specified in subsection (2), the provisional assessm ent shall become final. ' Thus, goods were either assessed under section 80, or under section 81. Two points need to be kept in mind. Firstly, in either case, the assessment was by the appropriate officer concerned. Secondly, goods could be cleared only after there had been an assessment, either under section 80 or under section 81. The assessm ent under section 81 was in two stages. In the first instance, there was a provisional assessm ent (and the goods could be cleared after such an assessment). It is important
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to keep in mind that prior to this assessment, the goods had not been assessed at all. In addition to provisionally assessing the goods, the appropriate officer was also required, in terms of the proviso to subsection (1), to determine the additional amount which the officer deemed would be sufficient to meet any excess of the final assessment over the provisional assessment. This amount was to be secured by the importer, either by way of payment of the said amount or the furnishing of a bank guarantee. Subsection (2) provided that the final assessment had to be completed within one year from the date of the provisional assessment and crucially, subsection stated that if the final assessm ent were not completed within the stipulated period, the provisional assessment would become final. 10. Two further points need to be made before we proceed to consider sections 79 to 81 after their 2005 substitutions. Firstly, it appears that a departmental practice evolved of releasing the goods under…
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