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Petitioner: Messrs A.F.U. INTERNATIONAL, KARACHI VS Respondent: DIRECTOR GENERAL and another
Court Name: Customs Appellate Tribunal Judge(s): Muhammad Nadeem Qureshi, Muhammad Yahya Title: Messrs A.F.U. INTERNATIONAL, KARACHI vs DIRECTOR GENERAL and another Case No.: Customs Appeal No,K-445 of 2014 Date of Judgment:2015-12-16 Reported As: 2016 PTD (Trib.) 1305 Result: Order accordingly
JUDGMENT
JUDGMENT MUHAMMAD NADEEM QURESHI, (MEMBER JUDICIAL-I).--By this order, we dispose off Customs Appeal No, K-445/2014 filed by the appellant against Order-in- Review No, 40/2014 dated 16.04.2014 passed by Director General, Directorate General of Valuation (here-in-after to be referred as respondent No, 1), rejecting the review application and maintained Valuation Ruling No, 625/2013 dated 23.12.2013 through which value was determined for compound Chocolate of Turkey origin. 2. The Director, Directorate General of Valuation issued Valuation Ruling No, 625/2013 dated 23.12.2013 under Section 25A(1) of the Customs Act, 1969, fixing value at Serial No, 3 of compound Chocolate of Turkey origin at US$ 2.15/kg C&F under subsections (7) & (9) of Section 25 ibid. As against actual US$.1.00/kg. Being aggrieved with the determination of Compound Chocolate of Turkey through Valuation Ruling No, 625/2013 dated 23.12.2013. The appellant being aggrieved with the determination of value of Compound Chocolate filed Review Application No, DG(V)/Val.Rev/28/2014 dated 21.01.2014 under Section 25D of the Customs Act, 1969 before the respondent, through which the determination of value of Compound Chocolate of Turkey Origin was disputed and the respondent No,1 was prayed to declare the said Ruling to the extent of Compound Chocolate contrary to the provision of Section 25 of the Customs Act, 1969, Section 46(d) and (g) of the Sales Tax Act, 1990 and Section 148(6)&(9) of the Income Tax Ordinance, 2001. The respondent disagreed with the contention of the appellant and passed Order-in-Review dated 16.04.2014, through which review application was rejected on the basis of formed opinion in Paras 4 and 5 are relevant which are reproduced as under:-- "4. The record of the case has been examined and the arguments put forward by the petitioner have been considered. In the contents of afore cited memo. Of petition, impugned ruling has been
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challenged with particular reference to the valuation of compound chocolate from Turkey determined @ $. 2.15/kg on the following main points namely:- That the customs value determined in the impugned ruling is nullity to the actual cost of the imported goods contracted with the seller for bulk import and supported their statement with the documents namely, copy of GD, invoice, B/L, Packing. b) That the decision was held without following sequential method of valuation as provided under the rules. That the goods are sold in bulk packing in the market and when converted as per the calculation drawn in the memo, the transaction value represents the correct price within the meaning of section 25(1) of the Customs Act, 1969. 5. The Department's rebuttal is based upon the findings of enquiry conducted under section 25(7) of the Customs Act, 1969. Otherwise, for the in applicability of preliminary methods of valuation, it has been asserted that due non-availability of sufficient information and absence of competitive import evidences under section 25(5) & (6) of the Customs Act, 1969, these methods were held invalid for application in this case. Resultantly, reliance was made upon the deductive method and as per findings of enquiry under section 25(7) of the Customs Act, 1969, customs value was fairly determined in accordance with law. It has been observed that these findings were based upon substantive enquiry and admissible margin of deduction margin of deduction were duly considered in the working drawn by the department. In this regard, the calculation given by the petitioner reflects abnormal retail price margin, which is apparently the main cause of difference between the calculation drawn by the department and the petitioner. Otherwise there seems to be a lenient and fair conclusion_ drawn by the Department after having a detailed analysis. In the impugned valuation ruling, convincing reasoning has been given to justify issuance of the same, which was based upon scrutiny of data and findings in terms of section 25(7) of the Customs Act, 1969, as referred above. The working drawn under the aforesaid provision of law seems to have been aptly equated in the reply objection/comments given by the respondents. The petitioner has since not been able to demonstrate that the incidence of actual duty and taxes was not passed on to the consumer, it renders rejection of revision petition also in terms of section 19A of the Customs Act, 1969. 3. Being aggrieved and dis-satisfied with the impugned Order-in-Revision, the appellant Messrs A.F.O International, Karachi filed the instant appeal before this Tribunal against the respondent No, 2 on the grounds in corporate in the Memo. Of Appeal. 4. On the date of hearing Mr. Nadeem Ahmed Mirza, Consultant along with Mr. Obayd Mirza, Advocate, appeared on behalf of the appellant, reiterated the contents of grounds of Appeal and further contended that, the Director, Directorate General of Valuation is not designated as "Officer of Inland Revenue" under any provision of Sales Tax Act, 1990 or Income Tax Ordinance, 2001, resultant is not empowered to determine the value for levy of Sales Tax and Income Tax at import stage under the provision of Section 25A(1) of the Customs Act, 1969. The competent authority to determine the value for the levy of Sales Tax and Income Tax is "Officer of Inland Revenue" under clause (d) of Section 2(46) of the Sales Tax Act, 1990 which specifically state that for levy of sales tax the value has to be determined under section 25 of the Customs Act, 1969 and in case the notification is desired to be issued, it is for the Board in terms of clause (g) ibid. Likewise, under Section 148 of the Income Tax Ordinance, 2001 value for levy of income tax has to be determined under section 25 of the Customs Act, 1969 and by the authorities enunciated in subsection (9) ibid. The Director, Directorate General of Valuation usurped the power of the Board and appropriate officer defined in clause (g) of Section 2(46) of the Sales Tax Act, 1990 and subsection (9) of Section 148 of the Income Tax Ordinance, 2001. By laying hand on the power of authority given in
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sections 2(46) and 148 of the Act/Ordinance, she acted without power/jurisdiction, rendering the Valuation Ruling 520/2012 dated 28.12.2012 for fixation of value for levy of Sales Tax and Income Tax at import stage, therefore is null, void and ab-initio, hence coram non judice as held in reported judgments Major Syed Walayat Shah v. Muzaffar Khan and 2 others (PLD 1971 SC 184), Omer and Company v. Controller of Customs, (Valuation): (1992 ALD 449 (1) Karachi AAA Steel Mills Ltd v. Collector of Sales Tax and Central Excise Collectorate of Sales Tax (2004 PTD 624), PLD 2004 Supreme Court 600 All Pakistan Newspaper Society and others v FOP, PLD 2005 Supreme Court 842 Khyber Tractor (Pvt.) Ltd., v. FOP, PLD 1976 Supreme Court 514 Ali Muhammad v. Hussain Buksh and others and PLD 2001 Supreme Court 514 Land Acquisition Collector, Noshehra and Others v. Swfraz Khan and others, 2005 PTD 2237 Pak Suzuki Motors Company Ltd., Karachi v. Collector of Customs, Karachi, 2009 PTD (Trib.) 1996, 2010 PTD (Trib) 832 and Order of Tribunal in Custom Appeal No, 695/2013. He further contended that, when the appellant in the column of (financial information) of the GD transmitted clearly that the import of his goods is against firm contract, its number and date, he discharged the burden laid upon him under Section 25(1) of the Customs Act, 1969 and Rule 109 of the Customs Rules, 2001. For disputing the said value it was mandated upon the respondent No, 1 to supply reasoning for non-acceptance of the value as per expression of Sub- Rule (3) of Rule 109 of Chapter IX of Custom Rules, 2001 and then only to determine the value. Non compliance of the mandated requirement render the valuation ruling nullity to the provision of Section 25 and Rule 109 ibid hence of no legal effect and cannot be applied on the goods to be imported. He also contended that, the provision of Section 25 of the Customs Act, 1969 are to be followed in sequential manner baring certain exceptional cases where massive group under invoices is rampant. However, resort to subsequent method is not permissible without exhausting the sequence indicated in Section 25 as it would annihilate and terminate the spirit and essence of the transaction value which in the first instance has to be established as colorable and tainted. Section 25(13)(a) does not give unbridled and un fettered authority to customs administrations to play havoc with the provision of Section 25 ibid., thereby making them in-effective and redundant. Discretion has to be exercised within limits based on reason, rationale and fair play. It is specifically provided by the legislature in Subsection (10) of Section 25 that Subsections (1) (5), (6), (7), (8), (9) define how the customs value of the imported goods is to be determined by the customs. The method of custom valuation are normally required to be applied in a sequential order except reversal of the order of subsections (7) and (8) at the importers request, if so agreed by the Collector of Customs as held in judgments 2008 PTD 1494 Messrs Toyo International Motorcycle v. Federation of Pakistan and 3 others, Order in C. P. No, 2673 of 2009 reported at PTCL 2014 CL 537 of M/s. Sadia Traders v. FOP, 2013 PTD 825 Messrs Faco Trading and 45 others v. Member Customs, FBR and 2014 PTD 176 Goodwill Trader , Karachi v. FOP and others The Director, Directorate General of Valuation has stated in the ruling that identical/similar transaction value available in data maintained under Rule 110 of the period expressed in Rule 107 of the Customs Rules, 2001 is not applicable because of non availability of sufficient information , this is completely absurd and provide no reason or power to her to ignore the method prescribed in subsections (5) and (6) of the Customs Act, 1969 and Rules 117 and 118 of Chapter IX of Customs Rules, 2001 which are applicable with full vigor. Only the said fact is sufficient to declare the Valuation ruling nullity to the Section 25 of the Customs Act, 1969 and the law laid down by the Superior Judicial Fora in the judgment referred in ground (iv) to the extent of appellant goods. The Director, Directorate General of Valuation has directly determined the value in terms of subsection (7) of Section 25 of the Customs Act, 1969, which state that if the customs value of the imported goods could not be determined under Subsection (6) of S.25 of the Customs Act, 1969 , same shall be determined under subsection (7) and defined formula in Rule 119 on the basis of Customs Value of the imported goods of identical or similar goods relying upon the unit price at which such imported goods were
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sold in greatest aggregate quantity at or about the time of importation to a person, who is not related to the person from whom an importer buy such goods, subject to certain specified deduction. Deductive method is primarily a work back method based on the Analytic basis of valuation prevalent under defunct/rest while concept of Normal Price or Notional Value under Brussels Definition of Value (BDV) market inquiry has to be conducted by the subordinate of respondent on the pararileter that the goods employed for determination of customs value should comprise the impugned imported goods or identical/similar goods which were sold in Pakistan in the same state and the inquiry should had been based on unit price at which the impugned imported goods or identical or similar imported goods were sold in the greatest aggregate quantity and that the words "at" or "about" the time of importation of goods being valued denotes 90 days valuation data maintained under Rule 110 in terms of S.25(1) of the Customs Act, 1969 for the period expressed in Rule 107(a) of the Customs Rules, 2002. Amongst other The above two ingredients in respect of the imported goods to be so valued one relating to the quantity and other relating to the period during which the impugned goods or identical or similar goods were sold in the greatest "aggregate quantity". The valuation ruling and the order-in review illustrate the irresponsible indifferent careless attitude of the official of the DGV, including director and respondent No, 1 who are supposed to be expert in their field. Rendering the valuation ruling in derogation with the provision of the relevant subsection (7) of S.25 of the Customs Act, 1969 and Rule 119 of Customs Rules, 2001, as such null and void ab-initio. Notwithstanding, to the illegalities, committed by the subordinate of respondent while determining the value through valuation ruling and respondent himself, who rejected the review application without taking into consideration the provision of Section 25 of the Act and rule embodied in Chapter IX of the Customs Rules, 2001, the appellant felt appropriate to add further for the sake of arguments without conceding that the determination made in the ruling under subsection (7) is not correct and least portray the fair value of appellant goods, therefore appellant states that it is nullity to the fact and the expression of subsection (7) and formula defined in Rule 119 and this stood validated from the working of valuation for determination of appellant to be imported compound chocolate, as under: Sold in bulk packing by the in the market:Rs. 500/kg Less: Retailer Margin 35% Rs. 175.00 Whole seller Margin 10% Rs. 32.00 Distributor Margin 10% Rs. 29.00 Applicant Margin 10% Rs. 26.00 Income Tax 5.5% Rs. 13.00 Sales Tax 20% Rs. 44.00 Custom Duty 30% Rs. 53.00 Shipping and Port Expenses 10%Rs. 12.00 Miscellaneous Expenses 5% Rs. 6.00 Rs. 395/kg Rs. 105/kg ======== Converted into US$ @ of Rs. 105/- US$. 1/kg That the above calculation is without bulk packing, which the appellant has to bear prior to selling the goods, rendering the contracted price as transaction value within the meaning of Section 25(1) of the Customs Act, 1969.
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5. Learned consultant further contended that, the respondent in the order-in-review has not uttered a single word on the veracity of the appellant import value, instead stated that, the retail price margin is abnormal as against adopted by his subordinate. No cogent or plausible reason were given for the formed opinion, neither reasoning for the percentage adopted for retail profit has been substantiated in the order nor the detail of expenses shown by the appellant has been negated, rendering the valuation ruling dated 23.12.2013 based on fishing inquiry and his opinion based on presumption, surmises and conjectures, which is not permissible under law and as such of no legal effect as held in reported judgment (1957) 32 ITR 89, (1967) 64 ITR 516, I.T.As. 2400/2401/KB/91-92,(1995) PTD (Trib.) 580, (1995) PTD (Trib.) 1152, (1982) 1381 ITR 742, 1993 PTD 206,1997 PTD (Trib.) 2209 and 2013 PTD (Trib.) 353. The respondent No, 1 in the last para of the order has relied upon section 19A of the Customs Act, 1969, which has no nexus with the case of appellant nor with the provision of Sections 25, 25A and 25D of the Customs Act, 1969 as evident from its expression which read as "every person who has paid custom duty and other levies on any goods under this Act shall unless the contrary is proved by him, be deem to have passed on the full incidence of such customs duties and other levies to the buyer as a part of the price of such goods." Therefore, when the appellant obtained the clearance of the goods on the basis of assessm ent made by the subordinates of respondent No, 2 with the application of valuation ruling, he paid the duty and levies on the assessed value, obviously upon sale the same shall be passed by him to the buyer as against his declared value despite rendering the product expensive and out of reach of the end consumer. No question of claiming any refund exist in the said circumstances. Therefore, reliance on Section 19A by the respondent No, 1 for rejecting the review application proves his inability in nullifying the import price of the appellant goods, which is transaction value within the meaning of section 25(1) ibid. Hence, the order is based on erroneous consideration, hence null and void and ab-initio. When the appellant challenged the virus of valuation ruling before the respondent No, 1, the valuation ruling stood abated and is not applicable on the appellant forthcoming consignment by virtue of the fact that the impugned valuation ruling is not final to the extent of appellant, unless it crosses all the forums set up under the law in which it can be challenged and the order of the last forum would become final, as held by the Hon'ble Superior Court of Pakistan in reported Judgment 1993 SCMR 39 CBR v. Chanda Motors and 2013 PTD 581 Ghulam Nabi v. FOP. It is right of the appellant to obtain the clearance of his goods on the basis of provisional assessm ent under the provision of Section 81 of the Customs Act, 1969 till the time the virus of ruling is not decided by the last judicial fora given in the Act i,e, Sections 25D, 194A and 196 of the Customs Act, 1969 as the same is not applicable on the appellant goods and he has every right to avail the said facility and the authority defined in Section 81 of the Customs Act, 1969 i,e, respondent No, 2 are legally bound to accede to the request without any exception and the stance of appellant stood validated from the reported judgments 2014 PTD 525 Waseem Radio Trader v FOP and PTCL 2014 CL 103 Alpha Chemical (Pvt.) Ltd. v. FOP and 4 others. He prayed that the Valuation Ruling No,625/2013 and Order-in-Review may be declared null and void. 6. No cross objection were submitted within the stipulated period given in subsection (4) of Section 194A of the Customs Act, 1969. The representatives of the department/respondent argued that, the case in accordance with the grounds incorporated in para supra. During the course of hearing query was made in regards to determination of value for Sales Tax by the Board that as to whether Board has ever issued notification to the said effect, to the consultant/advocate of the appellant. He stated that although it is the job of the respondent but he will place the copies of notification on record for perusal of the Hon'ble Member of the Bench. The consultant/advocate further argued in line with the argument adopted in the Memo. Of Appeal and place on record of the Tribunal copies of the relied upon judgment. Although, it was ordered by the Tribunal to proceed ex parte, the representative of the respondent appeared, the appellant consultant/advocate raise no objection,
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resultant, the Tribunal allowed the representative to rebut the arguments. The representative of respondent No, 1 stated that the value of the compound chocolate was determined after proper market inquiry and the value so determined thereafter through Valuation Ruling is correct in law and therefore be maintained. Whereas the subordinate of respondent No, 2 stated that the importer and importers are getting their goods cleared on the determined value by the Director, Directorate General Valuation. A question was put to him that how many consignment has been cleared since the issuance of Valuation Ruling in reply he said only 4, another question was put to him that as to whether those importer were having any other option to get their goods cleared either on declared value or on the basis of import prices available in the data maintained by the Collectorate in terms of Rule 110 of Chapter IX of Customs Rules, 2001, in the presence of the impugned valuation ruling dated 23.12.2013, the answer was in negative. Another query was made with the representative of the respondent that as to whether in case of dispute of value or upon filing of review against the Valuation Ruling, either the respondent No, 1 direct the respondent No, 2 to complete the assessm ent under section 81 of the Customs Act, 1969, till the decision in the review application or the subordinate of respondent No, 2 allowed the clearance under the provision of Section 81 subject of determination of value by the official of respondent No, 1, the answer was negative. Hence, the Tribunal ask why the provision of Section 81 is not exercised despite availability, the answer was shocking that Collector of Clearance Collectorate has either issued verbal or written order not to allow clearance of the consignment under section 81 of the Customs Act, 1969, unless allowed by either Additional Collector or the Collector. 7. Rival parties heard and case records perused. Firstly it is of vital importance to take up the issue raised in regards to powers/jurisdiction of the Director, Directorate General of Valuation for determining of value for levy of Sales Tax and Income Tax through Valuation Rulings as the Advocate/Consultants has strongly contended that determination of value for levy of Sales Tax and Income Tax does not falls within the powers/jurisdiction of the Director, Directorate General of Valuation. For reaching at just conclusion it is beneficial to reproduce the respective Section 2(46) of the Sales Tax Act, 1990 and 148 of the Income Tax Ordinance, 2001. Section 2(46) : "Value of supply" means ; - In case of imported goods the value determined under Section 25 of the Customs Act, 1969 including the amount of Customs duties and Central excise duties levied here-on. (a) In case of taxable supplies, with reference to retail tax, the price of taxable goods excluding the amount of retail tax, which a supplier will charge at the time of making taxable supply by him or such other price as the Board may by a notification in the official of Gazette, specify. Provided that where the Board deems it necessary it may by notification in the official Gazette fix the value of any imported goods or taxable supplies or class of supplies and for that purpose fix different values for different classes or description of same type of imported goods or supplies. 148 Imports :- (b) The Collector of customs shall collect advance tax from every importer of goods on the value of the goods at the rate specified in Part II of the First Schedule. (2) -------------- (3) -------------- (4) -------------- (5) Advance tax shall be collected in the same manner and at the same time as the customs duty payable in respect of the import or, if the goods are exempt from customs duty, at the time customs duty would be payable if the goods were dutiable. (6) The provisions of the Customs Act, 1969 (IV of 1969), in so far as relevant, shall apply to the collection of tax under this section. (7) ---------------------
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(8) -------------------- (9) In this Section:- "Collector of customs" means the person appointed as Collector of Customs under section 3 of the Customs Act, 1969 (IV of 1969) , includes a Deputy Collector of customs , an Additional Collector of customs, or an officer of customs appointed as such under the aforesaid section; "value of goods" means the value of the goods as determined under section 25 of the Customs Act, 1969 (IV of 1969), as if the goods were subject to add valorem duty increased by the customs duty Federal Excise duty and sales tax if any payable in respect of the import of the goods and; " 8. Upon scrupulous study of sections 6 and 148 of the Sales Tax Act, 1990 and Income Tax Ordinance, 2001, it has been observed that the value of the imported goods has to be determined by the Custom under Section 25 of the Customs Act, 1969 as expressed in Section 46(d) of the Sales Tax Act, 1990 and Subsection (6) of Section 148 of the Income Tax Ordinance, 2001 by the Authorities given in subsection (9) ibid., which are Collector of Customs, Additional Collector of Customs, Deputy Collector of Customs, Assistant Collector of Customs, or an Officer of Customs appointed under section 3 ibid. Notwithstanding, in case the Board is desirous of determining the value of the imported goods, for levy of Sales Tax, it issues notifications in terms of 1st proviso of subsection (g) of Section 46 of the Sales Tax Act, 1990 as has been done in the followings: (i) S.R.O. 494(1)/2004 dated 12.06.2004 for phosphoric acid. (ii) S.R.O. 103(1)/2005 dated 03.02.2005 Potassium Fertilizer. (iii) S.R.O. 563(1)/2006 dated 05.06.2006 Crystalline Sugar and (iv) 732(1)/2006 dated 13.07.2006 for certain goods. 9. That in terms of above proviso, the Director, Directorate General Valuation is not empowered to fix the value of imported goods through valuation ruling in exercise of power vested under section 25A(1) of the Customs Act, 1969. It is for…
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