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Petitioner: Messrs CAPITAL SPORTS CORPORATION, SIALKOT VS Respondent: GOVERNMENT OF JUDGMENT
Court Name: Lahore High Court Judge(s): Rustam S. Sidhwa Title:Messrs CAPITAL SPORTS CORPORATION, SIALKOT vs GOVERNMENT OF
JUDGMENT
Reported As: 1989 MLD 999 Result: Petitions allowed Judgment JUDGMENT This judgment will dispose of three constitutional petitions W.P. No.1252 of 1988. W.P. No.1253 of 1988 and W.P. No.1254 of 1988 filed by M/s. Capital Sports Corporation, Sialkot, petitioner, challenging the orders of the Customs Authorities enhancing the declared value of job lot/stock lot quality artificial leather imported by it to three different years. 2. In respect of W.P. No.1254 of 1988 the petitioner imported stock lot/job lot quality artificial leather from USA at the rate of US $ 1.15 per kg. Vide Import Licence No.A-365787 and filed a bill of entry for inbonding on 9th June, 1982. 3. On 11th February, 1986 the Deputy Collector (Customs) Lahore, issued a notice to the petitioner to show cause why the value of the goods should not be enhanced to US $ 1.50 per kg. As the same appeared to be correct value on the basis of physical examination of the goods. 4. On 16th February, 1986 the petitioner replied to the said notice by stating that the value declared was that which they had actually paid to the exporter in USA and that the value which the Customs desired to enhance was fanciful and arbitrary. The petitioner also contended that the Controller (Valuation), Customs Department, Karachi, had not collected any rates from foreign countries to determine the normal price of the artificial leather of stock lot/job lot quality at US $.1.50 per kg. And assuming there was any evidence to that effect, the Department had not provided any opportunity to it to rebut that evidence. The petitioner lastly contended that the enhanced value proposed was not acceptable to it and invoked section 25-A of the Customs Act, 1969, and requested the Customs to take the goods against payment of the enhanced value.
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5. On 23rd February, 1986 the Deputy Collector (Customs), Lahore, heard the petitioner and after going through the record came to the conclusion that the enhanced price of US $ 1.50 per kg. Which had been determined after physical examination of the subject goods was correct. As regards the prayer of the petitioner that the goods may be taken over by the Customs under section 25-A of the Customs Act, 1969, the Deputy Collector refused to exercise that option. 6. Being aggrieved by the said order, the petitioner preferred an appeal before the Collector (Appeals), Northern Zone, Lahore. The said appeal was heard on 27th October, 1986. The Collector (Appeals) whilst narrating the facts of the case, stated that the enhanced value had been ascertained at US $ 1.50 per kg. In consultation with the Deputy Collector of Customs (Appraisment) Karachi, which value had been taken into consideration by the Deputy Collector. Lahore, when enhancing the value of the goods. With regard to the petitioner's contention that the enhanced value which was determined was unfair and that the Customs had arbitrarily enhanced the value without disclosing any evidence, the Collector (Appeals) stated that the value declared by the petitioner was not in conformity with the principle laid down by section 25 of the Customs Act, 1969, because all over the country, the subject goods were being assessed to duty at the enhanced rate of US $ 1.50 per kg. And that the method of appraisement of value adopted by the Customs was quite expressing of the norms postulated in the said section. As regards the prayer of the petitioner that the Customs should purchase goods under section 25-A of the Customs Act, 1969, the learned Collector (Appeals) declined to excercise that option. 7. Being aggrieved by the above order, the petitioner preferred a revision petition before the Central Board of Revenue. The same was heard by the Additional Secretary to the Government of Pakistan, Ministry of Finance, on 20th July, 1987. On behalf of the petitioner it was asserted that the value of the goods had been enhanced by the Customs arbitrarily and on whimsical basis. On behalf of the Customs Department it was submitted that the enhanced value had been determined by the Customs Authorities in consultation with the Valuation Department and the representatives of the trade. The learned Additional Secretary held that the value of the goods had been enhanced by the Customs Authorities after physical examination of the goods in consultation with the Valuation Department and-1'hc representatives of the trade and since all the points raised by the petitioner had been considered and convincingly rebutted by the Appellate Authority, he saw no reasons to interfere with the orders passed by the officers below. He, therefore, rejected revision petition. 8. Being aggrieved by the orders of the Customs Authorities, the petitioner preferred a writ petition W.P. No.1254 of 1988), which is now before me for disposal. 9. In respect of W.P. No.1253 of 1988 the petitioner imported stock lot/job lot quality of artificial leather from USA at the rate of US $ 0.82 per kg. Vide Import Licence No. A-525889 and filed a bill of entry for inbondtng on 29th September, 1984. 10. On 11th February, 1986 the Deputy Collector, Customs, Lahore, issued a notice to the petitioner to show cause why the value of the goods should not be enhanced to US $ 1.50 per kg. As the same appeared to be the correct value on the basis of physical examination of the goods m the light of price valuation fixed by the Karachi Customs House on 27th June, 1984. 11. On 16th February, 1986 the petitioner replied to the said notice by stating that the value declared was that which they had actually paid to the exporter in U.S.A. And that the value which the Customs desired to enhance was fanciful and arbitrary. The petitioner also contended that the Controller (Valuation), Customs Department, Karachi, had neither collected any rates from foreign countries to determine the normal price of the artificial leather of stock lot/job lot quality to determine the value at US $1.50 per kg. And assuming there was any evidence to that effect, the Department had not provided any opportunity to it to rebut that evidence. The petitioner lastly contended that the enhanced value proposed was not acceptable to it and invoked section 25-A
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of the Customs Act, 1969, and requested the Customs to take the goods against payment of enhanced value. 12. On 23rd February, 1986 the Deputy Collector (Customs) Lahore, heard the petitioner and, after going through the record, came to the conclusion that the enhanced price of US $ 1.50 per kg. Which had been determined after physical examination of the subject goods, was correct. As regards the prayer of the petitioner that the goods may be taken over by the Customs under section 25-A of the Customs Act, 1969, the Deputy Collector refused to exercise the option. 13. Being aggrieved by the, said order, the petitioner preferred an appeal before the Collector (Appeals), Northern Zone, Lahore. The said appeal was heard on 27th October, 1986. The Collector (Appeals), whilst narrating the facts of the case, stated that the enhanced value had been ascertained at US $ 1.50 per kg. In consultation with the Deputy Collector of Customs (Appraisement) Karachi, which value had been taken into consideration by the Deputy Collector, Lahore, when enhancing the value of the goods. With regard to the petitioner's contention that the enhanced value which was determined was unfair and that the Sports Corporation, Sialkot, petitioner, challenging the orders of the Customs Authorities enhancing the declared value of job lot/stock lot quality artificial leather imported by it to three different years. 2. In respect of W.P. No.1254 of 1988 the petitioner imported stock lot/job lot quality artificial leather from USA at the rate of US $ 1.15 per kg. Vide Import Licence No.A-365787 and filed a bill of entry for inbonding on 9th June, 1982. 3. On 11th February, 1986 the Deputy Collector (Customs) Lahore, issued a notice to the petitioner to show cause why the value of the goods should not be enhanced to US $ 1.50 per kg. As the same appeared to be correct value on the basis of physical examination of the goods. 4. On 16th February, 1986 the petitioner replied to the said notice by stating that the value declared was that which they had actually paid to the exporter in USA and that the value which the Customs desired to enhance was fanciful and arbitrary. The petitioner also contended that the Controller (Valuation), Customs Department, Karachi, had not collected any rates from foreign countries to determine the normal price of the artificial leather of stock lot/job lot quality at US $.1.50 per kg. And assuming there was any evidence to that effect, the Department had not provided any opportunity to it to rebut that evidence. The petitioner lastly contended that the enhanced value proposed was not acceptable to it and invoked section 25-A of the Customs Act, 1969, and requested the Customs to take the goods against payment of the enhanced value. 5. On 23rd February, 1986 the Deputy Collector (Customs), Lahore, heard the petitioner and after going through the record came to the conclusion that the enhanced price of US $ 1.50 per kg. Which had been determined after physical examination of the subject goods was correct. As regards the prayer of the petitioner that the goods may be taken over by the Customs under section 25-A of the Customs Act, 1969, the Deputy Collector refused to exercise that option. 6. Being aggrieved by the said order, the petitioner preferred an appeal before the Collector (Appeals), Northern Zone, Lahore. The said appeal was heard on 27th October, 1986. The Collector (Appeals) whilst narrating the facts of the case, stated that the enhanced value had been ascertained at US $ 1.50 per kg. In consultation with the Deputy Collector of Customs (Appraisment) Karachi, which value had been taken into consideration by the Deputy Collector. Lahore, when enhancing the value of the goods. With regard to the petitioner's contention that the enhanced value which was determined was unfair and that the Customs had arbitrarily enhanced the value without disclosing any evidence, the Collector (Appeals) stated that the value declared by the petitioner was not in conformity with the principle laid down by section 25 of the Customs Act, 1969, because all over the country, the subject goods were being assessed to duty at the enhanced rate of US $ 1.50 per kg. And that the method of appraisement of value adopted by the Customs was quite expressing of the norms postulated in the said section. As regards the prayer of the petitioner
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that the Customs should purchase goods under section 25-A of the Customs Act, 1969, the learned Collector (Appeals) declined to excercise that option. 7. Being aggrieved by the above order, the petitioner preferred a revision petition before the Central Board of Revenue. The same was heard by the Additional Secretary to the Government of Pakistan, Ministry of Finance, on 20th July, 1987. On behalf of the petitioner it was asserted that the value of the goods had been enhanced by the Customs arbitrarily and on whimsical basis. On behalf of the Customs Department it was submitted that the enhanced value had been determined by the Customs Authorities in consultation with the Valuation Department and the representatives of the trade. The learned Additional Secretary held that the value of the goods had been enhanced by the Customs Authorities after physical examination of the goods in consultation with the Valuation Department and the representatives of the trade and since all the points raised by the petitioner had been considered and convincingly rebutted by the Appellate Authority, he saw no reasons to interfere with the orders passed by the officers below. He, therefore, rejected revision petition. 8. Being aggrieved by the orders of the Customs Authorities, the petitioner preferred a writ petition W.P. No.1254 of 1988), which is now before me for disposal. 9. In respect of W.P. No.1253 of 1988 the petitioner imported stock lot/job lot quality of artificial leather from USA at the rate of US $ 0.82 per kg. Vide Import Licence No. -A-525889 and filed a bill of entry for inbonding on 29th September, 1984. 10. On 11th February, 1986 the Deputy Collector, Customs, Lahore, issued a notice to the petitioner to show cause why the value of the goods should not be enhanced to US $ 1.50 per kg. As the same appeared to be the correct value on the basis of physical examination of the goods m the light of price valuation fixed by the Karachi Customs House on 27th June, 1984. 11. On 16th February, 1986 the petitioner replied to the said notice by stating that the value declared was that which they had actually paid to the exporter in U.S.A. And that the value which the Customs desired to enhance was fanciful and arbitrary. The petitioner also contended that the Controller (Valuation), Customs Department, Karachi, had neither collected any rates from foreign countries to determine the normal price of the artificial leather of stock lot/job lot quality to determine the value at US $1.50 per kg. And assuming there was any evidence to that effect, the Department had not provided any opportunity to it to rebut that evidence. The petitioner lastly contended that the enhanced value proposed was not acceptable to it and invoked section 25-A of the Customs Act, 1969, and requested the Customs to take the goods against payment of enhanced value. 12. On 23rd February, 1986 the Deputy Collector (Customs) Lahore, heard the petitioner and, after going through the record, came to the conclusion that the enhanced price of US $ 1.50 per kg. Which had been determined after physical examination of the subject goods, was correct. As regards the prayer of the petitioner that the goods may be taken over by the Customs under section 25-A of the Customs Act, 1969, the Deputy Collector refused to exercise the option. 13. Being aggrieved by the, said order, the petitioner preferred an appeal before the Collector (Appeals), Northern Zone, Lahore. The said appeal was heard on 27th October, 1986. The Collector (Appeals), whilst narrating the facts of the case, stated that the enhanced value had been ascertained at US $ 1.50 per kg. In consultation with the Deputy Collector of Customs (Appraisement) Karachi, which value had been taken into consideration by the Deputy Collector, Lahore, when enhancing the value of the goods. With regard to the petitioner's contention that the enhanced value which was determined was unfair and that the Customs had arbitrarily enhanced the value without disclosing any evidence, the Collector (Appeals) stated that the value declared by the petitioner was in conformity with the principle laid down by section 25 of the Customs Act, 1969, because all over the country the subject goods were being assessed to duty at the enhanced rate of US $1.50 per kg. And that the method of appraisement of value adopted by the Customs
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was quite expressive of the norms in the said section. As regards the prayer of the petitioner that the Customs should purchase goods under section 25-A of the Customs Act, 1969, the learned Collector (Appeals) declined to exercise that option. 14. Being aggrieved by the above order, the petitioner preferred a revision petition before the Central Board of Revenue. The same was heard by an Additional Secretary to the Government of Pakistan, Ministry of Finance, on 20th July, 1987. On behalf of the petitioner it was asserted that the value of the goods had been enhanced by the Customs arbitrary and on whimsical basis. On behalf of the Customs Department it was submitted that the enhanced value had been determined by the Customs Authorities in consultation with the Valuation Department and the representatives of the trade. The learned Additional Secretary held that the value of the goods had been enhanced by the Customs Authorities after physical examination of the goods in consultation with the Valuation Department and the representatives of the trade and since all the points raised by the petitioner had been considered and convincingly rebutted by the Appellate Authority, he saw no reasons to interfere with the orders passed by the officers below. He, therefore, rejected revision petition. 15. Being aggrieved by the orders of the Customs Authorities, the petitioner preferred a writ petition (W.P. No.1253 of 1988) which is now before me for disposal. 16. In respect of W.P. No.1252 of 1988, the petitioner imported stock lot/job quality of artificial leather from USA at the rate of US $ 0.70 per kg. Vide Import Licence No. A-525889 and filed a bill of entry for inbonding on 10th April, 1985. 17. On 17th December, 1985 the Assistant Collector (Customs), Lahore issued a notice to the petitioner to show cause why the value of the goods should not be enhanced to US $ 2.00 per kg. In the light of the price valuation fixed by the Karachi Customs House on 23rd February, 1985. 18. On 9th January, 1986 the petitioner replied to the said notice by stating that the value declared was that which they had actually paid to the exporter in USA and that the value which the Customs desired to enhance was fanciful and arbitrary. The petitioner also contended that the Controller (Valuation), Customs Department, Karachi, had neither collected any rates from foreign countries to determine the normal price of the artificial leather of stock lot/job lot quality at US $ 2.00 per kg. And assuming there was any evidence to that effect, the Department had not provided any opportunity to it to rebut that evidence. The petitioner lastly contended that the enhanced value proposed was not acceptable to it and invoked section 25-A of the Customs Act, 1969, and requested the Customs Authorities to take the goods against payment at the enhanced value. 19. On 11th January, 1986 the Assistant Collector (Customs) heard the petitioner and after going through the record, came to the conclusion that the valuation of the subject goods was reviewed/fixed after consultation with the representatives of local manufacturers of artificial leather products and the representatives of artificial leather importers, in a meeting held on 13th February, 1985 at the Custom House, Karachi, and the value so assessed was correct. The Assistant Collector (Customs) also referred to consignments relating to similar goods cleared at enhanced value, the evidence of which he showed to the learned counsel for the petitioner. The Assistant Collector (Customs) refused to exercise the option to purchase the goods under section 25-A of the Customs Act, 1969. 20. Being aggrieved by the said order, the petitioner preferred an appeal before the Collector (Appeals), Northern Zone, Lahore. The said appeal was heard on 6th April, 1986. The learned Collector, whilst narrating the facts of the case, stated that the value of $ 0.70 per kg. Declared by the petitioner was on the lower side, in view of the advice tendered by the Controller of Valuation, Karachi. With regard to the petitioner's contention that the enhanced value was based on no evidence and no opportunity had been provided to the petitioner to rebut the same, if there was any, the learned Collector (Appeals) felt that the enhancement of value was made on the basis of
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the advice received from the Controller of Valuation, Karachi, who in turn had fixed the prices in consultation with the representatives of importers and traders engaged in the business of artificial leather and, therefore, the enhanced price assessed was correct in law and facts. The learned Collector (Appeals) also mentioned that evidence of consignment of similar goods cleared at the enhanced value were also shown to the learned counsel for the petitioner by him, as also by the adjudicating Officer. The Collector (Appeals) also referred to the fact that in respect of Bill of Entry. No.12031 dated 1st March, 1986 relating to the same goods, another importer had declared the price at US $ 1.40 per kg. The Collector (Customs) declined to exercise option-to purchase the goods under section 25-A of the Customs Act, 1969. 21. Being aggrieved by the above order, the petitioner preferred a revision petition before the Central Board of Revenue. The same was heard by an Additional Secretary to the Government of Pakistan, Ministry of Finance, on 20th July, 1987. On behalf of the petitioner it was asserted that the value of the goods had been enhanced by the Customs arbitrarily and on whimsical basis. On behalf of the Customs Department it was submitted that the enhanced value had been determined by the Customs Authorities in consultation with the Valuation Department and the representatives of the trade. The learned Additional Secretary held that the value of the goods had been enhanced by the Customs Authorities after physical examination 'of the goods in consultation with the Valuation Department and the representatives of the trade and since all the points raised by the petitioner had been considered and convincingly rebutted by the Appellate Authority, he saw no reasons to interfere with the orders passed by the officers below. He, therefore, rejected the revision petition. 22. Being aggrieved by the orders of the Customs Authorities, the petitioner preferred writ petition W.P. No.1252 of 1988, which is now before me for disposal. 23. I have heard the arguments of the learned counsel for the appellant and the Customs Authorities and have perused the record. This case has been argued at length and in accordance with the agreement of the learned counsel for the parties, the same is admitted and will be disposed of as a notice case. 24. Before dealing with these cases, it is necessary to refer to section 25 of the Customs Act, 1969, on the basis of which the Customs Authorities fixed the normal price of imported goods, assuming they find the same to be under invoiced or under assessed. Under this section, the normal price of any imported goods is the price which they would fetch on the date referred to in section 30 on a sale in open market between a buyer and a seller independent of each other. The "price" means C.I.F. Price (cost, insurance and freight price) plus commission, but excluding duties and taxes. In assessing the normal price, the Customs Authorities have to take into consideration the prices of similar or comparable goods from the same or comparable country imported within the same or comparably close period. Without addressing themselves to such matters, the Customs Authorities cannot fairly fix the normal price, as required by section 25 of the Act. See Eastern Rice Syndicate v. Central Board of Revenue PLD 1959 SC 364 at page 373-74. t is not possible to fix normal price by mere observation or physical examination of the goods. 25. With regard to the goods relating to W.P. 1254 of 1988, the only basis for enhancement of value adopted by the Customs Authorities is physical examination of the goods. As stated in para.24 above, normal price cannot be fixed under section 25 of the Customs Act, 1969, by mere physical examination of the goods. The action of the Customs Authorities in this particular case in enhancing the value of the goods on the basis of mere physical examination is not only illegal, but also not warranted by law. The orders of the Customs Authorities having been passed without lawful authority, deserve to be set aside. 26. With regard to the goods relating to W.P. No.1253 of 1988, the only basis for enhancement of value, as is clear from the operative parts of the orders of the Deputy Collector, the Collector
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(Appeals) and Additional Finance Secretary, is the physical examination of the goods, though in the show-cause notice issued to the, petitioner it was mentioned that the value was enhanced on the basis of the circular issued by the Karachi Custom House dated 27th June, 1984, in the appellate order of the Collector (Appeals) it was referred in passing to the fact that the value had been enhanced in consultation with the Deputy Collector of Customs (Appraisement), Karachi, and in the revisional order of the Additional Finance Secretary it was referred in passing that the value had been assessed in consultation with the Valuation Department and the representatives of the trade. It may be mentioned here that m the reply to the show-cause notice, the petitioner did take up the objection that the Controller (Valuation), Karachi Customs, had not collected any prices from the foreign countries to determine the normal price of the artificial leather of stock lot/job lot quality to show it was US $ 1.50 per kg. And assuming that there was any such evidence, that the Department had not provided any opportunity to it to rebut the same. But neither during…
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