KOKOZ INTERNATIONAL CORP. VS The DIRECTOR GENERAL, KARACHI, 2018 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 1032 (2016)

Customs Act (IV of 1969)---

----Ss. 25, 25-A, 25-D & 194-A---Determination of customs value of goods---Revision of the value---Appeal against order-in-revision---Director General of Customs Valuation, vide order-in-revision determined customs value of goods---Appellant contended that Director General had passed the impugned order without any lawful authority and had acted in excess of jurisdiction and powers conferred upon him by unlawfully fixing value---Director General, had the power or jurisdiction only in case of any conflict in customs value determined under subsections (1) & (3) of S.25-A of the Customs Act, 1969 and could determine the "applicable" customs value---In the present case, revision was filed before the Director General under S.25-D of the Customs Act, 1969; no application or reference in particular was pending before the Director General at the time of passing the order-in-revision---Said order was devoid of principle of statutory obligation---Valuation Ruling should contain sufficient details to show that S.25-D of the Customs At, 1969, had been properly applied and also make it necessary that the Valuating Ruling should be a speaking order---Purpose of administration of justice, was to hold and not to thwart appellants' rights---Department was directed, not to issue any fresh valuation ruling during---Order-in-revision having not adhered to the statutory requirements and being derogatory to the specific provisions of S.25-D of the Customs Act, 1969 was set aside.

Khyber Tractors (Pvt.) Ltd. v. Government of Pakistan PLD 2005 SC 482 ref.

Rana Zahid Hussain and Khalid Rajpar for Appellants.

Mehmood Rehman Khattak - D.C., Safdar Abbas - P.A., Hafiz Muhammad Jokhio - A.O., Ehtsham Paracha - A.O., present for Respondents.

Dates of hearing 16th and 23rd November, 2016.

JUDGMENT

MUHAMMAD NADEEM QURESHI, MEMBER JUDICIAL-I.---These appeals have been directed under section 194-A of the Customs Act, 1969, against Order-in-Revision No.254/2016, dated 13.10.2016, passed by the Director General of Customs Valuation, Custom House, Karachi. All appeals have identical issues of law and facts and are therefore being heard, dealt with and disposed of simultaneously through this single consolidated judgment in the light of judgment of the Hon'ble High Court of Sindh in Customs Reference No.157/2008 (S.M. Naqi son of Syed Muhammad Hussain, Karachi v. Collector of Customs (Adjudication-I) and others, Karachi).

02. Since, these eleven (11) appeals are based on similar facts and question of law, therefore, it is needless to reproduce facts of each case separately, hence for reference the fact of Appeal No. K-2062/2016 are taken into consideration for decision, wherein, facts of the case are that, the Appellant is aggrieved and dissatisfied with the subject Order-in-Revision No.254 of 2016 dated 13.10.2016, whereby the Respondent Director General has, inter alia, unlawfully fixed values for assessment of various Disposable Articles including PP Jelly Cups and Disposable Plastic Food Containers of Chinese origin as well as other sources around the world, which is not permissible under the law. The impugned Order-in-Revision has been passed by the Respondent Director General on receipt of a revision petition filed by some local manufacturer of plastic cups/food containers, namely M/s Synthetic Product Ent. Ltd., against Valuation Ruling No.882 of 2016 dated 1.07.2016. It is submitted at the outset that through the Valuation Ruling No.882 of 2016 values for assessment of various Disposable Articles including PP Jelly Cups and Disposable Plastic Food Containers had been determined such that although the actual price paid/payable therefore was still lower however the difference between such values was not detrimental/ destructive of the trade of the said items. As such, the instant appeal lies only against the Order-in-Revision No.254 of 2016. The operative part of the impugned Order-in-Revision is reproduced as under:

"I have gone through the case record as well as verbal and written submission by the petitioner. The arguments of the petitioners are considered. The customs value of the disposable plastic hold of the bosex, cases, containers, bowls, jelly cups and similar articles including disposable plastic house hold articles as mentioned in the valuation Ruling No.882/ 2016 are determined as under:

03.Being aggrieved and dis-satisfied with the impugned Order-in-Revision, the appellants filed these appeals on the grounds mentioned in the memo. of appeals. The respondents also filed counter objections.

04.On the date of hearing counsel appeared on behalf of the appellants and reiterated the contents of the appeal and contended that, the impugned order is illegal, arbitrary, unjust, ex parte and without any lawful authority and as such, is liable to be set aside with immediate effect. The Respondent Director General has passed the impugned Order without any lawful authority and has acted in excess of the jurisdiction and powers conferred upon him by unlawfully fixing values through the impugned Order. The Respondent Director General failed to appreciate the scheme of sections 25, 25A and 25D of the Act, 1969, wherein local manufacturers have no role. As such, it is submitted that the local manufacturer before the Respondent had no locus standi and, in fact, no sustainable or cogent evidences/arguments to challenge the Valuation Ruling under Section 25D of the Act, 1969. The powers and role of the Respondent Director General as envisaged in the Act, 1969, wherefrom the Respondent Director General draws all authority, are limited in terms of sections 25A and 25D of the Act, 1969. Under subsection (1) of Section 25A, only the Director of Customs Valuation or a Collector of Customs can determine values for application to import of goods or class of goods, whereas the Respondent Director General can only determine values under subsection (3) of Section 25A if two conflicting values have been determined under subsection (1) of Section 25A. Furthermore, under section 25D, the Respondent Director General is empowered only to entertain revision petitions against Valuation Ruling rulings issued under section 25A. However, in the present case, no legal basis for challenging the Valuation Ruling No.882 of 2016 was elucidated by the local manufacturer, who entirely relied upon local manufacturing costs and selling prices of locally manufactured goods to contravene the values contained in the Valuation Ruling No.882 of 2016. As submitted hereinabove, such a method of valuation is prohibited under the Rules, 2001, wherein Rule 110 explicitly states that values of imported goods, such as low end brands of baby diapers from China, cannot be determined on the basis of "the selling price of the identical goods produced in Pakistan". Under Rule 120 of the Rules, 2001, i.e. the rule which corresponds to the 'Computed Value' method under subsection (8) of the section 25 of the Act, 1969, the costs of production that may be considered for determining values of imported goods are those actual costs incurred in the Country of production. In fact, if local manufacturing costs were considered, an entirely absurd situation would arise where it would have to be assumed production costs across the world are at least equal to those in Pakistan and, therefore, imported goods can never be cheaper than those produced in Pakistan. As apparent from the foregoing, such a proposition is neither sustainable nor in conformance with any notion of logic. That in addition to the above, it is submitted that cost/price of similar goods being manufactured in Pakistan cannot be utilized for the purposes of determining price of imported goods of Chinese origin for the same reason that, while calculating value of sales under the Sales Tax Act, 1990, values of other countries are not considered. In light of the preceding, the Respondent Director General should have rejected the revision petition filed before it and upheld the Valuation Ruling. However, while acting in a patently unlawful fashion, the Respondent Director General, without any independent application of its mind, accepted the revision petition and the contentions raised therein. The local manufacturer made factually incorrect assertions in its revision petition before the Respondent Director General. The respondent, however, without assailing the incorrect assertions so-made, and without inviting/considering the submissions of the Appellant, as well as other stakeholders directly affected by the issuance of the illegal Order-in-Revision. As a result, the Respondent Director General has passed the impugned Order-in-Revision which, while being unlawful, illegal and without any lawful authority, has also been passed on an ex-parte basis and, therefore, liable to be set aside with immediate effect. The, as stated hereinabove, the arguments relied upon by the local manufacturer in the revision petition filed before the Respondent are misconceived, unsustainable and were fit to be rejected by the Respondent. However, the Respondent acted in contradiction to the facts and law by fixing values on the whims of the local manufacturer. The Rules, 2001, explicitly prohibit determination of values on the basis of "selling price of the identical goods produced in Pakistan" under Rule 110 ibid. The purpose of such prohibition is due to, inter alia, the reason that local costs of manufacturing, sale, etc. cannot be equated with those that are prevalent in the country of origin of imported goods. The Respondent Director General has not stated any reason or other justification for fixation of the values through the impugned Order. Although fixation of values is even otherwise prohibited under the law and, under the scheme of the Act, 1969, a proper determination of values needs to be conducted prior to the issuance of any values, and needs to be made after adhering to the provisions of Section 25 of the Act, 1969. Instead, however, the Respondent Director General has merely stated that the values are determined. Such fixation is unlawful, arbitrary, without any lawful authority and without invoking any provision of the Act, 1969. The Respondent has not even made any efforts to substantiate the fixation of such value. That such fixation by the Respondent Director General has been done in spite of the fact that the Director of Customs Valuation had rightly concluded that the value of baby diapers is much lower than what had earlier been determined, without prejudice to the fact that the decision of the Director of Customs Valuation was inaccurate in terms of exact price paid/payable for the goods at the time of import into Pakistan. At present, however, the Respondent has arbitrarily, unlawfully and without jurisdiction fixed an even higher value. As such, it is submitted that the impugned Order-in-Revision is liable to struck down / set aside in the interest of justice.

05. No Cross objections under subsection (4) of Section 194-A of the Customs Act, 1969 were submitted by, the department/respondents. However, D/Rs contended that, the order passed by the respondent is legal lawful having statutory force. He further contended that some of the companies are importing plastic disposable cups, plates, glasses on much higher prices. The import data shows that declared price of blue brand margarine cup is at US$ 4.70/ kg. M/s. Uni-Lever is importing at US$ 3.10/ kg. M/s. Pepsi imported plastic ice cream cups at US$ 5.00/kg. Similarly there are other companies also who are importing same products on higher side than value determined at US$ 2.00/kg fixed vide Valuation Ruling No.822/2016 dated 21-07-2016. The further requested to re-determine the customs value of plastic disposable item US$ 4.50/kg keeping in view the data. However the importers failed to counter the local manufacturers arguments and stick to prices determined in the valuation ruling and contended that same are correct and fair. The importer appeared informally and stated that local industry is not producing quality stuff so they are importing from China. The local manufacturers stated that they are exporting their products thereby means producing quality products and exporting around US 5/kg. They produced export documents also. On the basis of subject circumstances the value of the disposable plastic holds of the boxes, cases, containers, bowls, jelly cups and similar articles including disposable plastic household articles mentioned in the Valuation Ruling No.882/2016 are determined by the Director General well in accordance with law and jurisdiction assumed thereon. Relying on that he prayed for dismissal of appeals in the interest of justice.

06.Argument heard and concluded.

07.After gathering strength from arguments extended by both the parties before the Court, as well as written comments, it has been noticed and observed that the present appellants are been deprived of from their legally protected rights. Under these circumstances now specific question whether Director General has the power to invoke the jurisdiction under section 25-A subsection (3) of the Customs Act, 1969, at the time while sitting under the jurisdiction of Section 25-D of the Customs Act, 1969 or otherwise? Before giving any deliberation on the subject question it is also duty of the Court to examine the legal and statutory interpretation or rational envisaged in sections 25, 25-A and 25-D of the Customs Act, 1969. It is evident from the record of the case that M/s. Synthetic Products Enterprises Limited assailed subject Valuation Ruling No.882/2016 dated 01-07-2016 before the Director General Valuation under section 25-D of the Customs Act, 1969, on the grounds that earlier from the present Valuation Ruling the values of the subject goods are been determined under (previous) Valuation Ruling No.597/2013 dated 24-10-2013 where the values has been fixed @ US$ 2.35/kg which was acceptable to all the stakeholders and general importers but being the local manufacturer M/s. Synthetic Products Enterprises Limited, by taking the ground about the significant increase in cost of raw material and other allied expenses requires the re-determination of values, they have challenged the vires of new Valuation Ruling No.882/2016 dated 01-07-2016. In line of these grounds when the contents of Valuation Ruling No.882/2016 were observed, M/s. Synthetic Products Enterprises Limited are not been found their as party/stakeholder during activity conducted for preparation of subject Valuation Ruling. Evidentaly, there are other stakeholders mainly the importers along with the manufacturers namely M/s. Spell Packing and KM Food Industries and Pioneer Packing Pakistan Limited are present and participated in the hierarchy of the customs for determination of the values of the subject goods. According to the theme of the Valuation Ruling and perusal of the record case clearly reflected the fact that the subject Valuation Ruling No.882/2016 was acceptable to the main stakeholders like general importers, as such they had not challenged the same before the Director General Valuation, only M/s. Synthetic Products Enterprises Limited assailed the vires of the subject Valuation Ruling and after getting the satisfactory enhancement in the Valuation Ruling not filed any appeal against the subject Order-in-Review No.254/2016 before this Tribunal/Court, which causes the reasonable doubts about the proceedings conducted during hierarchy of the Customs.

8.Now, we as being the custodian of law prefers to observe that, whether the Director General Valuation has any warrant under the law to invoke the jurisdiction under section 25A, subsection (3) of the Customs Act, 1969 at the time, while sitting under the jurisdiction of section 25-D of the Customs Act, 1969. For clarification, the contents of both the sections reads as under:--

[25D. Revision of the value determined:---Where the customs value has been determined under section 25A by the Collector of Customs or Director of Valuation the revision petition may be filed before the Director General of Valuation within thirty days from the date of determination of customs value and any proceedings pending before any court, authority or tribunal shall be referred to the Director General for the decision]

[25A. Power to determine the Customs value:---(1) Notwithstanding the provisions contained in section 25, the Collector of Customs on his own motion, or the Director of Customs Valuation [on his own motion or] on a reference made to him by any person [or an officer of Customs], may determine the customs value of any goods or category of goods imported into or exported out of Pakistan, after following the methods laid down in section 25, whichever is applicable.

(2) The Customs value determined under subsection (1) shall be the applicable customs value for assessment of the relevant imported or exported goods.

(3) In case of any conflict in the customs value determined under subsection (1), the Director General of Customs Valuation shall determine the applicable customs value.]

(4) The customs value determined under subsection (1) or, as the case may be, under subsection (3), shall be applicable until and unless revised or rescinded by the competent authority.

09.It is clear from the contents of Section 25D that a revision petition may be filed before the Director General within thirty days from the date of determination of customs value and in case of jurisdiction of Director General under sections 25A(3) and (4) of the Customs Act, Collector of Customs or Director Customs Valuation on his own motion or on a reference made to him by any person or officer of customs may determine the customs value. The Director General only has the power or jurisdiction under subsection (3) of section 25A of the Customs Act, 1969, in case of any conflict in the customs values determined under sub-sections (1) and (3) of section 25A, shall determine the "applicable" Customs value. Wisdom behind the mind of legislature is evident from the interpretation of two terms, "applicable customs value" and "determination of customs value". Determination of customs value exclusively lie under the jurisdiction, invoked by the Director Valuation and Collector of Customs only. But, jurisdiction with reference to "applicable customs values" restricted with in case of any "conflict" about the application of customs value, to whom referred at the time of assessment or reflected/disputed from the valuation advice in case of any ambiguity which needs and requires clarification by the Director General, that should be specific through any reference or application made thereon by any person. In this particular case only revision petition was filed before the Director General under section 25D, no application or reference in particular was pending before the Director General at the time of passing the said impugned revision order. Significantly said order is devoid from structural principle of statutory obligations, as made and observed by the superior courts. Particularly the judgment authored by Mr. Justice Iftikhar Muhammad Chaudhery, in the case of Khyber Tractors (Pvt.) Ltd. v. Government of Pakistan published in PLD 2005 SC 482, while observing the issue of jurisdiction. It held that the question of jurisdiction in form is always considered to be very important and no order passed by a court or a forum having no jurisdiction, even if it is found to be correct on merits, is not sustainable. The jurisdiction of a court lays down a foundation stone for jurisdiction or as quasi judicial junctions to exercise its powers/authority and no sooner the question of jurisdiction is determined in negative. The whole edifice of such defective proceedings, is bound to crumble down. It is also an elementary principle of law that if the mandatory condition for exercising of jurisdiction by a Court, Tribunal or authority is not fulfill then the entire proceeding are follow become illegal and suffers from want of jurisdiction. Any order passed in continuation of these proceedings in built or revision equally suffer from illegalities and are without jurisdiction. It is one of the mandatory requirement if the statute enacts with certain action shall be taken in a certain manner and courts are required to do justice between the parties in accordance with the provisions of law, as the litigant who approach the court for the relief is bound to substitute with the procedure had been adopted by him in accordance with law, because it is elementary principle of law that if a particular thing is required to be done in a particular manner it must be done in that manner, otherwise it should not be done at all. In this present case the impugned Revision Order passed by the respondents to govern the procedure of the adjudication, have no warrant under the law, which is exclusively violative and derogatory from the statutory provisions of law, as envisaged in subsection (4) of section 25-A of the Customs Act, 1969.

10.It is also important to observe and note here that section 25A "Pre-determination of the customs value, the such determination can only apply in relation to goods not only imported at the time that the determination is issued". After years no Valuation Ruling that the goods are actually imported, it is only section 25 of the Customs Act which is applicable. The Valuation Ruling issued under section 25A, only apply for a certain period and no more, this expression has been defined in Chapter-XI of the Rules, (in Rule 107 meaning) "within 90 days prior to the importation or within 90 days after the importation of goods being valued". In our view Valuation Ruling must therefore ordinarily be regarded as well as for a period of 90 days from the date of issue. After the amendment of section 25A subsection (4) of the Customs Act through Finance Act, 2010 provides that a Valuation Ruling "shall be applicable until or unless revised or rescinded by the competent authority" while the Valuation Ruling will continue to hold in the filed unless revised or rescinded, any aggrieved importer has the right to approach the concerned officer after the 90 days period mentioned above and he would then have to give reasons why the Ruling has not been revised or rescinded and as such the observation made by the Director General Valuation are perverse from the evidence, ultra viral and without lawful authority.

11. Before further conclusion, general observation must also be made on section 25A, which is only an enabling section, it permits, but does not mandatorily require, a predetermination of customs value in terms as explained. The principle method of determining customs value is, and must remain, with section 25. Section 25A is not intended to be a substitute for Section 25, nor can it be resorted to, in such manner and with such frequency that, it marginalizes the latter provision. It is merely an adjunct to Section 25, to be resorted to in appropriate circumstances and for an appropriate period. In our view, in enacting Section 25A, the legislatives intent was not, nor could be for the reasons stated above, to create a statutory bypass to the Valuation Agreement. While issuance of valuation ruling under section 25A cannot be regarded as limited only to those cases where the Department concludes that there is group under-invoicing, the section also cannot be used for the wholesale determination of customs values. Such as an approach would, in effect, transform the "determination" permissible under section 25A to an impermissible "fixation" of value. This is an important point which must be kept in mind, and may be relevant in appropriate cases when considering the vires of a valuation ruling.

12.All observations and relevant references along with the Judgments passed by the Superior Courts are preferably to maintain and follow the proper interpretation of law, more importantly for the Customs officers having discretion in preparation of Valuation Ruling. It is not so difficult to follow the legal dictum prescribed under the law by the concerned authorities or officials at the time of preparation of valuation ruling. The words `look-in', provided the link, how principle of sequential application of subsections defined under structure of section 25 of the Customs Act, 1969. For example, if in any particular case, the Customs officers/authorities want to jump over from non-obstinate clause without referring any specific reasons that would amount to override the provisions of section 25. The concerned Customs officers are limited or restricted only to the methods set forth in Section 25 of the Customs Act, 1969, not to act otherwise. If, some method other than that specified in Section 25 is complied, that would clearly be ultra vires the powers conferred under Section 25A of the Customs Act, 1969. The Department has no justification about such increase which clearly reflected against the statutory obligations, prescribed under sections 25 and 25A of the Customs Act, 1969. The determination of value under section 25-A of the Customs Act, 1969, is not a thing. It is, therefore, appropriate that the ruling should contain sufficient details to show that section 25A has been properly applied and also make it necessary that the Valuation Ruling should be a peaking order, as per the mandatory requirement of Section 24-A of the General Clauses Act, 1987. In the present case, the authority/Director General, Customs Valuation ignored the directions of the Superior Courts and made observations in contradiction of provisions of section 25-A of the Customs Act, 1969. Such ignorance is violative from the law. Being custodian of law, purpose of administration of justice is to hold and not to thwart appellants' rights. We therefore, direct the respondents not to issue any fresh Valuation Ruling during the course of present judgment, (atort) wrongfully from the procedure laid down under Section 25 of the Customs Act, 1969 and observations, held by the superior courts, non-compliance shall deem to be infraction.

13.On the basis of ably deliberations, and by getting the strength, what has been stated and observed herein above particularly the interpretation of law and legal prepositions, in the light of prescribed law and to follow the ratio decidendi as observed by the superior courts, along with our additional observations made therein, we hereby pass the order and set aside the Order-in-Revision No. 254/2016 dated 13.10.2016, passed by the Director General, does not have any adherence with the statutory requirements, also derogatory from the specific provision of section 25-D of the Customs Act, 1969, therefore, declared without lawful authority and jurisdiction, void, infested with patent illegalities, hereby set aside. Appeals are accordingly allowed with no order as to cost.

14.Judgment passed and announced accordingly.

HBT/43/Tax(Trib.) Appeals allowed.