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Petitioner: REHAN UMAR VS Respondent: COLLECTOR OF CUSTOMS, KARACHI and 2 others
Court Name: Sindh High Court Judge(s): Sajjad Ali Shah, Muhammad Mujeebullah Siddiqui Title: REHAN UMAR vs COLLECTOR OF CUSTOMS, KARACHI and 2 others Case No.: Constitutional Petition No, 1483 of 2005 Date of Judgment:2005-11-30 Reported As: 2006 PTD 909 Result: Petition allowed
JUDGMENT
JUDGMENT MUHAMMAD MUJEEBULLAH SIDDIQUI, J.---The relevant facts giving rise to this petition are that, the petitioner imported Electrical Products namely Energy Saving Lamps and Bulbs in Pakistan from China. He filed Goods Declaration on line, vide CRN (Customs Reference Number) I-HC-21280- 241005, dated 24-10-2005, and deposited the assessed amount through the payment challan in the National Bank of Pakistan. On 26-10-2005 the petitioner was informed through "view message" to deposit an additional duty of Rs,2,61,724 for the clearance of consignment. The petitioner was further asked to refer to assessm ent module for further details. The petitioner being dissatisfied with the demand of additional duty filed a review with the respondent No,1, the Collector of Customs (Model Collectorate), Customs House, Karachi. In reply the petitioner received another 'view messageon 27-10-2005 intimating that the Respondent No,1 has found differences and he disagrees with the view of petitioner. The petitioner was again called upon to deposit the additional duty for clearance of consignment. The representative of the petitioner thereafter appeared before Collector along with all required documents. The petitioner again received a view message on 1-11- 2005 delivered at 1.39 p.m. Intimating that the assessment was as per valuation advice Nos.1/22/2004/5469 to 5479, dated 6-10-2005 and that the GD (goods declaration) was completed accordingly. 2. The petitioner thereafter submitted an application to the Respondent No, 1 and 2-11-2005 requesting for assessm ent under section 81 of the Customs Act, 1969. It was stated that the GD was filed to be processed under CARE System. The GD was completed by enhancing the value on the basis of some valuation advice/ruling thereby demanding additional duty on enhanced value. The petitioner informed that he was not aware of the method adopted by the Valuation Department for
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arriving at the enhanced value. It was submitted that dispute will take some time to resolve, therefore, the GD may be ordered to be processed provisionally under section 81 of the Customs Act, to avoid unnecessary demurrage and detention charges. It was replied by a Deputy Collector on behalf of respondent vide letter, dated November 8th 2005, stating as follows:-- "It is pertinently mentioned that several cases of Chinese origin Energy Severs, Bulbs, Tube lights etc., were referred to Valuation Department from time to time by this Collectorate as well as Collectorate of Customs, Appraisement, Karachi. The Valuation Department, has lately issued Valuation Advice No,1/22/2004/VD4/5464 to 5479, dated 6-10-2005 under section 25(7) of the Customs Act, 1969. (Copy enclosed). The CRN I-HC-21280-241005, dated 24-10-2005 has been accordingly assessed under section 25(7) of the Customs Act, 1969. The request for provisional assessm ent under section 81 cannot be acceded to in the light of assessment already made under aforementioned provisions of the Customs Act, 1969." 3. It is contended on behalf of petitioner that the valuation advice on the basis whereof the consignment imported by the petitioner was valued is in no manner a document of legal status and the method adopted for determination of the value of imported consignment on the basis of valuation advice/assessm ent module is illegal and without any legal authority. The petitioner further stated that on account of delaying tactics on the part of respondents Nos.1 and 2, he was facing great hardship and hence the petition on the following grounds:-- (1) By denying the clearance of consignment under section 81 of the Customs Act, the respondents Nos.1 and 2 have committed gross illegality, when the petitioner was prepared to furnish the guarantee in respect of differential amount under protest. (2) The customs valuation of the imported consignment was required to be taken at transaction value, i,e,, the price actually paid or payable on the goods when sold for export to Pakistan. Unless it is proved that the transaction value. Is based on fake documents or it is the result of any relationship between the buyer and seller the Customs Authority is under legal obligation to accept transaction value under section 25(1) of the Customs Act, 1969, for the assessment of duties and taxes. (3) The C.B.R. Has framed the Customs Rules, 2001 by S.R.O. 450(1)/2001 which are binding on the respondents Nos.1 and 2. According to the rules, an importer or his agent is required to furnish a declaration disclosing full and accurate details of the value of the imported goods and on perusal of any statement, information or document as considered necessary by the appropriate officer for determination of the value of the imported goods, the valuation is to be determined (4) If the appropriate officer is of the opinion that the value of imported goods cannot be determined under section 25(1) of the Customs Act, 1969, thereafter the consignment shall be assessed according to the methods specified in subsections (5), (6), (7), (8) or (9) of section 25 of the Customs Act, 1969, but these methods are to be applied in a sequential order as per subsection (10) of section 25 of the Customs Act. (5) The Respondents Nos.1 and 2 committed error in resorting to subsection (7) of section 25 directly on the basis of so-called assessment module without resorting to the earlier subsections and thereby committed an illegality. (6) The Respondent No,1, had no lawful authority to determine the value of imported consignment on the basis of alleged advice, dated 6-10-2005. This advice has .No legal value and consequently the assessm ent on the basis thereof is unlawful. (7) The valuation advice, whatever its status may be in law cannot override the provisions contained in section 81 of the Customs Act. In terms of this provision the petitioner offered to deposit the differential value and was still prepare to do so. The Respondent No,1, by declining the privilege of provisional assessm ent has violated the mandatory provisions of law contained in section 81.
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4. The petitioner has sought a direction to the Respondent No,1 to release the consignment imported by him immediately on payment of disputed additional duties, to the Nazir of this Court. Further declaration has been sought to the effect that assessment module/valuation advice, dated 6-10-2005, is illegal and the demand of additional duty on the basis thereof is also illegal and unlawful. 5. Para-wise comments and counter-affidavits have been filed on behalf of Respondents Nos.1 and 2. In the reply filed on behalf of Respondent No,1, it is stated that the assessment of the petitioner's consignment has been made in accordance with the provisions of section 25 read with section 80 of the Customs Act, 1969 and Chapter IX of the Customs Rules, 2001. It is further stated that number of consignments of identical goods have been cleared by the other importers at the values determined by the appropriate officers and the petitioner wants to get undue benefit and extra edge over rest of the importers to distort the local market. It is further stated that the imported goods are to be valued in terms of section 25 of Customs Act, 1969, and the provisions of section 81 deals with only exceptional cases where it is not possible to check the correctness of the assessm ent in respect of a Goods Declaration, for the reason that the goods require chemical or other test or further inquiry. In the instant case, there was no such situation in presence of the valuation/finding conveyed by the Director of Customs Valuation through its letter, dated 6-10- 2005, which has been issued under section 25(7) of the Customs Act, 1969 read with S.R.O. 917(1)/2004, dated 11-11-2004, after detailed inquiry and consultation with the stakeholders. According to Respondent No,1, the dispute of valuation of Energy Saver Lamps and Bulbs finally stands resolved through valuation advice, dated 6-10-2005. It is also contended that it is not a case of provisional assessm ent in terms of section 81 of the Customs Act, 1969, and in fact the assessm ent has been completed under section 80 of the Customs Act, and if the importer/petitioner has any grievance, he may file an appeal under sections 193 and 194-A of the Customs Act. It is averred that where GD is filed on Customs Computerized System, the importer is required to first pay duty and taxes. The petitioner had not paid the duties and taxes and the assessm ent was finalized under section 25 of the Customs Act, 1969, therefore, the petitioner was required to pay the additional duties and taxes. It is further contended that section 25(7) and section 81 of the Customs Act, 1969 are independent of each other and have to be applied on specific situation meant for the aforesaid provisions. It is averred that since the issue pertaining to valuation of Energy Saver Lamps and Bulbs already stands resolved by Respondent No,2, through it ruling, dated 6-10-2005 therefore, the duty is to be determined accordingly and resort is not required to be made to the provisional assessment in terms of section 81 of the Customs Act. The payment of duties and taxes on the basis of GD are not denied but it is pleaded that the petitioner has not deposited the duties and taxes as per assessment made by the Department. It is contended that as per provisions of section 80 of the Customs Act, 1969, where GD is filed on Customs Computerized System, importer is required to first pay duty and taxes. It is stated that they have adopted the procedure provided in the rules for Pakistan Customs Computerized System, 2005. It is specifically stated that every declared value cannot be considered as true transactional value for assessm ent purposes. The customs officials wherever find that the declared value is not in line with the transactional value, can reject the value and assess the goods are per laid down procedure under section 25 of the Customs Act, 1969. It is very important to note that in reply to ground No,3, in the petition the Respondent No,1, has stated that, "provisions of section 25 are to be followed in the sequential manner." It has been explained that the identical/similar transactional values cannot be applied in case where . There is "Group under invoicing". In such circumstances, the Customs makes recourse to other valuation methods in the sequence envisaged in section 25 of the Customs Act, 1969. Referring to the facts of the present case, it is stated in this case the documents produced by the petitioner do not correspond with the
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prevailing prices of the imported goods of the same origin. According to Respondent No,1, the circumstantial evidence and detailed inquiry conducted by the Director (Valuation PCA) and the similar goods imported by the other importers dives credence to the fact that the importer has failed to declare the correct value of the consignment. It is further stated that the petitioner has imported goods through, 'Group under-invoicing", and therefore, the appropriate method for determination of value in such cases was to advert to method envisaged under subsection (7) of section 25 of the Customs Act, 1969. 6. In the reply filed on behalf of Respondent No,2, the Director of Customs Valuation, it is stated that the Collector of Customs, Appraisement, Karachi, made specific case references of imported goods namely Energy Saving Lamps, Colour Bulbs, Florescent Lights under section 81 of the Customs Act, 1969, for determination of assessable customs value. There were complaints from the local manufacturers and consequently a meeting was held with all the stakeholders namely representatives of the importers Association, local manufacturers, FPCC&I and thereafter a joint market inquiry was decided to be conducted by a team comprising one representative from each stakeholder. The Committee comprised the following:-- (a) Deputy Director of Customs Valuation and PCA. (b) Representative of FPCC&I Valuation Sub-Committee. (c) Appraising Officer, Collector of Customs Appraisement, Karachi and (d) Valuation Officer, Directorate of Valuation, Customs House, Karachi. 7. It is further stated that representative of the importers was also invited but did not participate in the market inquiry. Subsequently in the meeting held with the representatives of the FPCC&I and importers on 22-9-2005 it was decided to work out the assessable/dutiable values of the referred imported goods as per the guidelines adopted by the Customs Valuation Directorate vide Standing Operative Procedure (S.O.P) 1/2005, dated 13-9-2005. The above SOP after referring to the contents of subsection (7) of section 25 of the Customs Act, has prescribed the operating procedure for conducting market inquiry in pursuance of deductive method valuation under section 25(7) of the Customs Act, 1969. The relevant paras are as under:- "(1) No market enquiry shall be conducted without prior approval of the Director. (2) A committee headed by a Deputy Director Valuation comprising the following stakeholders shall, invariably, be constituted with the approval of the Director for conducting market enquiry; (a) Importer or his Representative; (b) Nominee of the FPCC&I/relevant Chamber of Commerce and Industry or Nominee of the concerned traders (importers) association if any; (c) Nominee of the clearing Collectorate; and (d) Concerned Principal Appraiser/Senior Valuation Officer of "Directorate of Valuation." (4) All prices obtained in the shape of cash memo. Or quotation shall be signed by all members of the Committee; (5) The customs value of goods shall be ascertained using deductive method by applying the following formula: (1) Declared value = $ (2) Assessable Value = $ Rs, (3) Customs Duty @ -- (4) Sales Tax @ = (5) With Holding Tax (6) Incidental Charges @ 5% of D.V. (7) Landed JK Cost = D.V. + Taxes + Incidental Charges (8) Profit of Importer = (9) Profit of Whole seller =
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(10) Profit of Retailer = (11) Total Price as per above Calculation = (12) Actual Selling Price = (13) Difference = Actual Selling Price = Rs, (12) --- (11) (14) Actual Import price = D.V. + Difference (1) + (13) (6) The calculation sheet shall compulsorily be signed by all members of the Committee with date and year." 8. It is stated that in terms of above guidelines, the valuation was worked out under section 25(7). While explaining the points of law and the procedure prescribed therefor, it is stated that the provisions of section 81 of the Customs Act, refers the situation where there is dispute of valuation and when the Assessing Officer is not satisfied with the declaration of imported goods, provisional clearance of the goods is allowed to facilitate the importer. This provisional assessment is subjected to detailed verification at later stage for determination of correct customs dutiable value under the rules. The value of imported goods is determined by the concerned Assessing Officer and the Respondent No,2 in exercise of the powers conferred under section 25 of the Customs Act, 1969. It is explained that the assessable value of the imported goods is determined in terms of the law as defined under section 25 of the Customs Act, 1969, while determining the dutiable value of the imported goods the Assessing Officer had duly examined the provisions of subsection (1) of section 25 of the Customs Act, 1969. It is stated that in this case, the burden was on the importer to substantiate the declared value, which burden was not discharged and therefore, the Assessing Officer discarded the declared value. It is further stated that the Assessing Officer may have the additional reasons to reject the transaction value and to determine the assessable value under the subsequent valuation method defined under the law. The position in respect of valuation advice, dated 6-10-2005 issued by the Respondent No,2, has been explained to the effect that the decision was taken after detailed investigation and verification. All the stakeholders were taken into confidence and valuation by deductive method under section 25(7) of the Customs Act was made after examining the fact that the sequential method under sections 25(5) and (6) was not logically applicable for the reasons that all the import transactions were under dispute and until verification of imports under identical goods (section 25(5)) and similar goods (section 25(6)), could not be made applicable. For these reasons the Assessing Officer had to resort to apply the next valuation method i,e, section 25(7). It is further explained that the transaction value of the imported goods is taken to be price actually paid or payable by the buyer to the seller. In the petitioner's case it was not disclosed as to what amount was paid by them to the foreign supplier. No letter of credit was established and no document was provided to disclose the remittance sent by them to the seller and therefore, the actual transaction amount could not be disclosed. It is pleaded that the Respondent No,1, was justified in resorting to the assessment of imported goods as per determination on record. It is also stated that the importer could not satisfy the Assessing Officer about the correctness of the declared value and therefore, the method of valuation under subsection (1) was not relevant with the result that the resort was made to subsection (7). It is further stated that where the appropriate officer has reason to doubt, the truth of the declaration, the importer is required to provide further declaration including documents and evidence. It is further stated that since method of transaction value was not applicable and the evidences as required for the method prescribed under subsections (5) and (6) of section 25 of the Customs Act, were doubtful and were subject to provisional assessment under section 81 of the Custom Act, therefore, these methods were not applied and direct resort was made to subsection (7) of section 25. It is further stated that the Respondent No,2, is authorized to exercise jurisdiction under subsection (7) of section 25 but in this case, the assessment has been made by the Assessing
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Officer, viz.; Respondent No.1, and the said authority has exercised powers by applying the sequential method of valuation. 9. We have heard Mr. Ali Bin A,dam Jafri, learned counsel for the petitioner, Mr. Haider Iqbal Wahniwal, learned Advocate for Respondent No,1, Mr. Raja M. Iqbal, learned counsel for Respondent Mr. Azhar Majeed Khalid Collector of Customs (Model Collectorate of Customs) Karachi, Mr. Fazal Qadir Qalbani, Director Customs Valuation and PCA, Karachi, Mr. Muhammad Iqbal Munib, Additional Collector of Customs, Ms. Lubna Jaffer, Deputy Collector of Customs (Model Collectorate) Customs House Karachi, Mr. Muhammad Ashfaq, Deputy Director Valuation and PCA, Customs House Karachi, Mr. Altaf Ahmed, Principal. Appraiser, Custom Valuation Department and Mr. Ilyas Ahsan, the Appraising Officer (Assessing Officer). 10. Mr. Ali Bin Adam Jafri learned counsel for petitioner has reiterated the facts already reproduced above and we need not to repeat the same. The main contentions raised by Mr. Ali Bin Adam Jafri, are that the value of the imported goods are to be determined for the purpose of customs duties and taxes under the provisions of section 25 of the Customs Act, read with the provisions contained in Chapter (IX) of S.R.O. 450(1)/2001, (Customs Rules 2001). He has laid emphasis that in terms of subsection (1) of section 25, the methods of customs value are required to be applied in a sequential order and therefore, the customs officials could not have direct resort to subsection (7) of section 25 without having recourse to the provisions contained in subsections (1), (5) and (6). He has further submitted that if the valuation declared by the importer is not acceptable to the Assessing Officer and he decides to hold inquiry which is likely to consume time then, it is the right of an importer to get the consignment released by provisional assessment in terms of section 81 of the Customs Act, 1969. According to Mr. Jafri, the release of imported consignment in terms of provisional assessm ent under section 81 shall save the importer from the liability of demurrage and shall be conducive to the continuous process of trade and industry and at the same time the interest of Revenue shall be fully protected on furnishing of security or guarantee of a schedule bank for payment of the differential amount and the Assessing Officer shall get sufficient time for determination of the duty and taxes payable. Mr. Jafri, has submitted that in case, the Assessing Officer is not satisfied with the correctness of the assessment of the goods under section 79 for the reason that a further inquiry is required, which includes the inquiry for the purpose of subsection (1) of, section 25 or resort to the other methods specified in subsequent subsections to section 25, then it is not a matter of concession in the discretion of the Assessing Officer but it is right of an importer to get the goods released on provisional assessment under section 81 of the Customs Act, 1969. He contended that in this case, the respondents while rejecting the declared value have committed gross illegalities by ignoring the relevant provisions contained in section 25 of the Customs Act, and the rules and have further acted in violation of lawby rejecting the request for release of the consignment under section 81 of the Customs Act. He submitted that the impugned acts of the respondents may be declared to be vaiolative of the law and they be directed to release the goods imported by the petitioner in terms of section 81 of the Customs Act and the concerned officials of the Customs Department may be directed to determine the value of the imported goods in accordance with the provisions contained in section- 25 of the Customs Act and the Customs Rules, 2001. 11. On the other hand, Mr. Raja Muhammad Iqbal, learned counsel for Respondent No,2, has submitted that prior to the issuance of Notification S.R.O. 917(1)/2004, dated 11-11-2004 the Valuation Department had no authority to determine the value of imported goods under subsection (7) of section 25. However, under the above S.R.O. The Valuation Department has been duly empowered to exercise and discharge duties of the officers of customs in respect of provisions contained in section 25 of the Customs Act, 1969 and further the C.B.R. Vide C. No,1/(19)S/Va1/2004, dated 19-4- 2005 has been pleased to delineate the valuation work amongst the Collectorate of Customs
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(Appraisement), Model Customs Collectorate Karachi and Directorate General of Customs Valuation with respect to cases released under section 81 of the Customs Act, 1969 for finalization in terms of the provisions of the Customs Act, by the Directorate General of Customs Valuation:-- Model Customs Collectorate Sections 25(1), (2), (3), (4), (5) & (6) Appraisement Collectorate, Custom House, Karachi. Section 25(7), (8) & (9) Directorate General of Customs Valuation He has further submitted that in pursuance of the decision taken in the meeting of all the stakeholders constituted on reference received from Collectorate of Customs, Appraisement, Karachi, the valuation advice, dated 6-10-2005 was tendered. He has taken us through this advice which contains that cases were received from Collectorate of Customs, Appraisement Karachi, under section 81 of the Customs Act, 1969 for determination of the customs value. The valuation in the cases referred to Respondent No, 2 were to be determined in accordance with the formula adopted by the Directorate of Customs, Valuation vide SOP 1/2005, dated 13-9-2005. 12. Mr. Muhammad Ashfaq, Deputy Director Valuation and Mr. Altaf Ahmed, Principal Appraiser Customs Valuation Department have stated that they have not tendered any valuation advice in the case of petitioner. They have stated that the valuation ruling was given in the case of other importers, the details whereof have been given in the ruling, dated 6-10-2005. They have further stated that the petitioner imported the consignment after 6-10-2005 and filed the goods declaration on 24-10-2005 therefore, the valuation ruling, dated 6-10-2005 issued by them on which the Respondent No,1, has placed reliance is not in respect of the consignment imported by the petitioner. Mr. Haider Iqbal Wahniwal, has supported the impugned orders passed by the Respondent No, 1 . Mr. Azhar Majeed Khalid, Collector of Customs (Model Collectorate of Customs) Karachi, stated that the Appraisement…
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