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Petitioner: Messrs Sun Diplomatic Bonded Warehouse (PVT.) LTD. VS Respondent: Customs JUDGMENT
Court Name: Islamabad High Court Judge(s): Babar Sattar, Saman Rafat Imtiaz Title:Messrs Sun Diplomatic Bonded Warehouse (PVT.) LTD. vs Customs
JUDGMENT
Reported As: 2023 PTD 206 Result: Reference Application allowed Judgment JUDGMENT SAMAN RAFAT IMTIAZ, J. The present Custom Reference Application has been filed by the Applicant [M/s. Sun Diplomatic Bonded Warehouse (Pvt.) Ltd.] against the Judgment dated 14-03- 2016 ("Impugned Judgement") passed in Appeal No. 107/CUS-/IB/2015 by the Respondent No. 1/the learned Customs Appellate Tribunal ("the Tribunal"). 2. Brief facts as per the Memo of Reference are that the Applicant is a private limited company incorporated under the Companies Ordinance, 1984 that is running and operating a Diplomatic Bonded Warehouse duly licensed by the Respondent No. 2 [Collector of Customs, Model Customs Collectorate, Islamabad] vide license No. 02/2005 dated 06-03-2005. The Applicant imported consignments of diplomatic goods consisting of various qualities of liquor and beer as per details mentioned in the respective invoices. On the grant of the import permission the Applicant filed the following Goods Declarations: GD Nos.IDRY-IB-56 dated 16-12-2013, IDRY-IB-59 dated 20-12-2013, IDRY-IB-60 dated 20-12-2013, IDRY-IB-8 dated 26-02-2014, IDRY-IB84 dated 27-02-2014 and IDRY- IB-119 dated 17-06-2014 ("Subject GDs") claiming assessm ent on the basis of transaction value in terms of Section 25(1) of the Customs Act, 1969 ("the Act") read with Rule 113 of the Customs Rules, 2001 ("the Rules"). The transactional value of goods was disputed by the Respondents and the goods were released in terms of Section 81 of the Act. 3. The following table as per the Memo of Reference shows the dates of filing of each of the Subject GDs, the dates on which provisional determination was made in respect thereto and the dates on which the statutory period of six months expired in each case which according to the Applicant is
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when the provisional determination attained finality in terms of sub-clauses (2) and (4) of section 81 of the Act. GD No. Date of filingDate of provisional assessm entDate on which provisional assessm ent attained finality IDRY-IB-5616-12-201307-01-2014 07-07-2014 IDRY-LB-5920-12-201322-01-2014 22-07-2014 IDRY-IB-6020-12-201310-01-2014 10-07-2014 IDRY-IB-8026-02-201419-03-2014 17-09-2014 IDRY-IB-8427-02-201405-04-2014 05-10-2014 IDRY-IB-11917-06-201408-07-2014 08-01-2015 4. Despite passage of the statutory time frame mentioned in sub-clauses (2) and (4) of Section 81 of the Act in respect of half of the Subject GDs, the Respondent No.3 [Deputy Collector of Customs] failed to make the final determination. The Applicant filed Writ Petition No.3692/2014 in the Honorable Islamabad High Court, Islamabad seeking declaration that disputing the value declared by the Applicant was mala fide and contrary to the Section 25 of the Act and the said petition was disposed of vide order dated 11-08-2014 whereby the Respondent No.2 [Collector of Customs, MCC] was directed to treat the petition as a representation. However, neither the declared value was accepted nor provisional determination that had attained finality in terms of Section 81(4) of the Act accepted nor was the provisional determination of the remaining GDs finalized 5. Instead a committee consisting of Additional Collector (AF), Additional Collector (HQ) and Deputy Collector (Import AFU) (the "Committee") was constituted to give its recommendations/findings with regard to the valuation of the liquor, which were the subject matter of the aforesaid GDs. The Committee, ultimately formulated its Inquiry Report dated 19-12- 2014 and submitted the same to Respondent No. 3 who provided a copy thereof to the Applicant for submission of comments thereon. According to the Applicant, although the report of the Committee had no validity in the eyes of the law yet the Applicant submitted comments vide letter dated 19-01-2015. On receipt of report from the Committee and comments Of the Applicant, Respondent No.2 passed the Order Na. 12 of 2015 dated 08-07-2015 directing Respondent No. 3 to finalize all the aforesaid provisionally assessed cases of imported liquor in light of evidential data of identical goods in term of Section 25(5) of the Act and value of similar goods iii, terms of Section 25(6) of the Act duly recommended by the Committee in its report. An appeal was filed by the Applicant against the order passed by Respondent No.2 before the learned Tribunal who upheld the decision, hence the instant reference petition, which raises the following questions of law: a. Whether under the facts and circumstances of the case the learned Customs Appellate Tribunal was justified in confirming the order passed by respondent No.2? b. Whether provisional determination made under subsection (1) of Section 81 of the Customs Act, 1969 attains finality upon expiry of period specified under subsection (2) of Section 81 of the Customs Act, 1969 by operation of law in terms of subsection (4) of Section 81 of the Customs Act, 1969 as held in Collector of Customs Lahore v. Messrs Fazal Illahi and Sons (2015 SCMR 1488)? c. Whether respondent No.2 has the necessary jurisdiction or authority to order for re- finalization of provisional determination which has already attained finality in terms of subsections (2) and (4) of Section 81? d. Whether the impugned order is violative of the mandatory provisions contained in Section 81 of the Customs Act, 1969? e. Whether transactional value of the customs value of goods under subsection (1) of Section 25 can be rejected in utter disregard of the mandatory provisions contained in subsection (4) of
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Section 25 of the Customs Act, 1969? f. Whether the respondents were duly bound to pass an order in writing before rejecting the transactional value under subsection (1) of Section 25 and communicate the same to the applicant in terms of sub-rule (3) of Rule 109 of the Custom Rules of 2001? g. Whether the respondents are under a legal obligation while determining value under section 25 to exhaust the entire procedure prescribed under subsections (1) to (4) of Section 25 before resorting to secondary methods of valuation under subsections (5) and (6) of Section 25? h. Whether the so called determination of value in terms of subsections (5) and (6) of Section 25 is illegal and violative of the mandatory provisions of Section 25 as held in "Messrs Rehan Umar v. Collector of Customs and 2 others (2006 PTD 909) and Sadia Jabbar v. Federation of Pakistan and another (2018 PTD 1746)? i. Whether setting minimum values is prohibited both under the valuation Agreement (GATT) and Rule 110 of Chapter IX of the Customs Rules, 2001? j. Whether assessment can be made on the basis of working of a committee constituted for the purpose of determining the valuation under subsections (5) and (6) of Section 25 without associating importer or his representative? k. Whether there is any provision for constitution of committee contained in subsection (1) through to (4) of 25 of the Customs Act, 1969 or the same can only be constituted when resort is made to methods of valuations under subsections (7) and (8) of Section 25? l. Whether the illegal and void order was passed by the Collector of Customs and the entire superstructure constructed on the said order is maintainable in the eyes of law and learned Customs Appellate Tribunal was justified in confirming the same? m. Whether the impugned judgment has rendered the provisions of Section 81 read with Section 25 further read with Chapter IX of the Customs Rules, 2001 redundant and superfluous? n. Whether the impugned order is a summary judgment which is violative of Section 194 of the Customs Act read with the General Clauses Act? 6. The learned counsel for the Applicant submitted that it is a settled proposition of law that if any assessm ent is not completed within the period specified in Section 81(2) of the Act the provisional determination shall be treated as final pursuant to Section 81(4) of the Act; that therefore, the acts of the Respondents after expiry of the statutory period are in violation of Section 81; that there was no stay order passed by this Court in W.P. No.3692/2014 restraining the Respondents from finalizing the determination nor was any extension passed and as such the benefit of the proviso contained in Section 81(2) of the Act is not available to the Respondents. He submitted that the learned Tribunal concluded that by virtue of Section 25(10) of the Act, method of sequence is not mandatory, which conclusion is in violation of Sadia Jabbar v. Federation of Pakistan, 2012 SCMR 617. He further submitted that the Applicant opted for transactional value but the mandatory Rule 109 was not applied in rejecting it. He submitted that the invoices submitted by the Applicant were attested by the High Commission of Pakistan. The Inquiry Report shows that out of 51 invoices 32 invoices were verified by the supplier while 21 were not, whereas, the Applicant only provided 32 invoices to begin with. This contention of the Applicant was not addressed by the learned Tribunal. Furthermore, the seller and importer are not related in this case and as such Section 25(3) of the Act was not attracted; that the Committee constituted was not under the framework of the law; that Section 25(5) of the Act was violated by the Respondents as the value used for comparison was beyond the time period provided therein; that under Section 25(a) of the Act the commercial level must be the same but in this case quantity was 2000% more; that no exercise as prescribed in Section 25(c) of the Act was carried out and fictitious value was used under Section 25(6) of the Act.
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7. On the other hand the Respondents submitted that the inquiry Committee was formed with the consent of the Petitioner and that the Collector has wide powers under Section 179 of the Act and that while the market survey may not be covered by the law but there is case law to such effect. 8. We have heard the arguments of the learned counsel for the parties and perused the record. Effect of failure to make final determination within the statutory period provided under subsection (2) of Section 81 of the Act 9. Section 81(1) of the Act deals with release of goods on the basis of a "provisional determination" where it is not possible for the customs officer to satisfy himself of the correctness of the assessm ent of such goods under Section 79 of the Act. In case of such release, according to the proviso to Section 81(1) of the Act such additional amount is to be paid or secured through a bank guarantee or pay order which represents the likely differential between the final determination of duty over the amount determined provisionally on the basis of a "provisional assessment". The Explanation in subsection (4) of Section 81 provides that "provisional assessment" means the amount of duties and taxes paid or secured against bank guarantee or post-dated cheque. Subsection (2) of Section 81 of the Act provides that in case of release on the basis of a provisional determination, the amount of duty, taxes and charges correctly payable on those goods shall be determined within six months of the date of provisional determination. The provisos to the said subsection allow for an extension for a maximum period of ninety days and exclusion from the computation of limitation the period during which the proceedings are adjourned on account of, inter alia, a stay order. Subsection (4) of Section 81 of the Act further provides that where the final determination is not made within the time period specified in subsection (2), the "provisional determination" shall be deemed to be the "final determination" except in the case of new evidence. 10. The effect of failure to make the final determination within the statutory period as-stipulated in Section 81(4) of the Act has been settled by various pronouncements' of the Honourable Supreme Court and other High Courts of the country. Reference may be made to The Collector of Customs v. Messrs Faco Industries, 2017 PTD 2474 wherein the Honourable Sindh High Court at Karachi held that "Admittedly, in the instant case, the provisional assessment made by the department has not been finalized, which reflects that in terms of subsection (4) of section 81 of the, Customs Act, 1969, the provisional determination as per goods declaration stood finalized". Similarly in the case of Sus Motors (Pvt.) Ltd., Karachi v. Federation of Pakistan, 2011 PTD 235, the Honorable Sindh High Court at Karachi held that since there was no final determination within the stipulated period and the same was not extended in terms of the proviso to subsection (2) the provisional determination became final. In a more recent case reported as Messrs Faiz Chemical Industries (Pvt.) Ltd. v. Collector of Customs, Model Customs Collectorate of Appraisement, 2022 PTD 1183, the Honorable Sindh High Court at Karachi was pleased to hold as follows: "6. It is clear that we need to determine import and scope of section 81 of the Act and its impact on controversy in hand. We may remind that this court in an order dated 02.02.2021 in C.P. No.D- 5674/2020 discussed the said provision of law, in a background albeit slightly different from the one in hand, and rejected the case of the department objecting to release of securities furnished by the importer at the time of provisional release of his goods under section 81 of the Act to meet differential amounts of duties, etc. if any, at the time of final assessment. We, keeping in view peculiar background of these cases, may further add that section 81 stipulates, in the main, that where it is not possible for an officer of the Customs, checking GD under section 80, to satisfy himself of correctness of assessment of the goods made by the importer in terms of section 79. Then, an officer not below the rank of Assistant Collector of Customs may determine such goods for the duty, taxes and other charges provisionally and release them against the bank guarantee, etc. to be furnished by the importer to meet a likely disparity at the time of final determination of duty, etc. In terms of section 81 (2), then, final determination, within 6 months of such provisional
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release of the goods, is required to be made. That period, for the reasons exceptional in nature, can be extended for further 3 months by the Collector of Customs or the Director of Valuation. But, irrespective of whether such course has been followed or not, when final determination is not made within specified period, the framework under subsection (4) of the said provision irrepressibly rolls out requiring provisional determination to be deemed, an inevitable effect, as final determination. It is settled that failure to finalize provisional determination of value of the goods within specified time shall translate into clearing of the goods on the value declared by the assesse, and, therefore the provisional assessment as final. It is not disputed either that the department has the power to take up necessary investigation to find out true value of the goods to finalize assessment after provisional assessment thereof for duty, etc. But this authority, it is to be understood, is subject to the framework provided under section 81(2) of the Act, and which unambiguously lays down, for this purpose, a period of 9 months, maximally. For favour of this view, the case law reported in 2007 PTD 1519, 2008 PTD 1950, 2010 PTD 343, and 2010 PTD 900 can be relied upon. .............. 8. For what has been stated above, the question is replied in affirmative in favour of the applicant and against the department. It is held that the provisional determination of duty, tax, etc. made under section 81 (1) of the Act for release of the goods shall attain finality, and has attained finality in these cases, if final determination is not made by the department within stipulated time of 9 months maximally, in the circumstances as explained above, under section 81(2) of the Act. The applications in hand are allowed in the terms as above and disposed of accordingly. A copy of this decision may be sent under the seal of this court and signature of the Registrar to the learned Custom Appellate Tribunal as required under section 196(5) of the Customs Act, 1969." [Emphasis added]. 11. In the case of Collector of Customs, Lahore v. Messrs S. Fazal Ilahi and Sons reported as 2015 SCMR 1488, the Honorable Supreme Court held that where there was no final determination within the stipulated period of time and no extension thereof, the provisional assessment could not be treated as final assessm ent. The relevant portion of the said judgment is reproduced as follows: "Admittedly, in this case no final assessment has been made by the Customs department and' the matter is lingering on for quite some time without there being any adjudication or final assessment even after a lapse of one year and neither the appellants have been able to place on record any notice or demand being made by them to the respondent in seeking corroboration or clarification with regard to the same nor they have been confronted with any material to substantiate the higher value claimed by the Customs Department as propounded under subsection (4) of section 25 of the Act. It is being further observed that the Customs department has also failed to pass an appropriate order to reinforce the same as required under the provisions of rule-109 of the Customs Rules, 2001. 7. Subsection (4) of section 81 of the Act provides that if the final assessment is not completed within the period specified therein, then the provisional assessment shall become final. The same has been provided as a safeguard to the benefit of the assessee/importer/exporter to save them from unnecessary harassment by Customs authorities by unnecessarily delaying their cases for an indefinite period on the pretext of, making a final assessment. But in the instant case, the Customs authorities after making a provisional assessment did not proceed in the matter for the determination of final assessment which is apparent from the fact that neither a notice of demand to prove any document from the respondent has been sought nor any corroboration or clarification had been sought, which were to be made under section 25(4) of the Act nor any order under rule-109 of the Customs Rules, 2001 has been passed to determine the custom value of the imported goods, in the absence whereof the appellant could not be afforded a clean chit
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to use section 81(4) as a tool to delay the making of final assessment upon proper assessment of the value by affording the assessee proper opportunity of contesting the same, thus, depriving him of fair trial, therefore, in the above facts and circumstances of the case to consider the provisional assessment as a final assessment cannot be justified." [Emphasis added]. 12. What emerges from the above pronouncements is that the "provisional determination" is the declared value of the goods under Section 79 of the Act whereas the "provisional assessment" pursuant to the proviso to subsection (1) of Section 81 of the Act is the likely differential between the "provisional determination" and the "final determination" which is either paid or secured through a bank guarantee or pay order. In case of failure to make the "final determination" within the stipulated period of time and in the absence of an extension or stay order or any other circumstance on account of which time may be excluded from the computation of the stipulated period, the "provisional determination" shall be deemed to be the "final determination", which would result in refund of the amount secured in terms of subsection (5) of Section 81 of the Act. In the wake of Collector of Customs, Lahore (Supra) there is no room for argument that a final determination can be made beyond the statutory period of six months without the availability of the stipulated exceptions. 13. In the instant case there was admittedly no stay order in the field. The reason given by the Respondent No. 1 in the Impugned Judgment that the matter was subjudice provides no defense to the Respondents in the absence of a stay order preventing them from final determination. Nor was the stipulated period extended but even if it is assumed to have been extended for the sake of argument, the proviso to Section 81(2) of the Act makes it clear that. such extension cannot exceed 90 days. Therefore, even if the stipulated period had been extended as per law, such extended period in respect of the last GD out of the six Subject GDs would have expired on 08-04-2015 whereas the direction to finalize the subject cases in light of evidential data of identical/similar goods was given on 08-07-2015. Therefore, even if the period had been extended such extension would have already expired in respect of all the Subject GDs prior to the finalization order passed by Respondent No.2. Sequential order of the method of valuation. 14. The next important question that arises in the instant reference is whether the sequential order of the method of valuation is mandatory under Section 25(10) of the Act. This too has been settled by past case law. The Honorable Sindh High Court at Karachi opined in the case of Sadia Jabbar v. Federation of Pakistan, 2018 PTD 1746 as follows: "Three points may be noted. Firstly, the primary method of determining the customs value is the transaction value, i.e., the price actually paid or payable for the imported goods. (The price actually paid or payable may be subject to certain adjustments, but this aspect of the matter need not be considered in detail.) This is duly recognized in terms of both Article I of the Valuation Agreement, and subsection (1) of section 25. Secondly, if the transaction value cannot be determined, then the subsequent methods are to be applied sequentially, in the order set forth in the Valuation Agreement. As is clear from the table above, the relevant subsections of section 25 are arranged in the same sequence. Thirdly, and this is of crucial importance for present purposes, the exercise must stop at the first method which is found applicable. It is neither permissible nor necessary to go on to, or to consider, any of the succeeding methods. In this context, it will be noted that the opening words of each of subsections (5), (6), (7), (8) and (9) expressly provide that the subsection is to apply only if "the customs value of the imported goods cannot be determined under" the preceding applicable subsection. In other words, it is not permissible to resort to a particular subsection unless it is first concluded that the previous subsection referred to does not apply, and it is not permissible to apply the latter unless it is first
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concluded that the subsection preceding it does not apply, and so on. Thus, all the elements of the principle of sequential application are clearly embedded in section 25. The primary method of determining this value is the transaction value, i.e., the price actually paid or payable for the goods in question. Such a price can arise only in relation to goods actually imported. Section 25A (1), on the other hand, spoke of "goods imported into... Pakistan". As pointed out by learned counsel for the Respondents, section 18 of the Act, which is the charging section, levies customs duty on "goods imported into Pakistan". It is a well-settled principle of interpretation that words or expressions used in the same statute in different sections should be given the same meaning unless the context otherwise requires. Obviously, as used in section 18, the expression relates to goods to be imported into Pakistan. The same meaning was, in our view, intended in section 25A(1). Therefore, as used therein, this expression applied to goods that could be, or were to be, imported into Pakistan at any time or front time to time. In other words, section 25A permitted a predetermination of the customs value of goods to be imported into Pakistan. It is also pertinent to note that subsection (2) of section, 25A specifically provided that the value determined in terms of subsection (1) was to be the customs value of the "relevant imported... goods". This is the reason why subsection (1) opened with a non-obstante clause. If only section 25 was applicable, or there were no non-obstante clause, there could be no predetermination of the customs value. The determination of the customs value would have to start with the primary method, the transaction value, i.e., the price actually paid or payable, which could only arise in the context of goods actually imported. Furthermore, if section 25A were intended only to apply to goods actually imported into Pakistan, then there would essentially be no point…
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