DIRECTOR OF POST CLEARANCE AUDIT VS AL-FATEH ENTERPRISES, BAHAWALPUR, 2018 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 1565 (2017)

Customs Act (IV of 1969)---

----Ss. 25, 25-A, 32 & 79---Valuation Ruling---Assessment of imported goods---Directorate of Post Clearance Audit, during the scrutiny audit of import data found that the importer had declared the goods as 'TYRES and TUBES, with or without Flaps of Different Brands" of Indian origin under different sub heads of PCT heading---Transaction value was the value, which had actually been paid or payable in terms of S.25 of the Customs Act, 1969, required for computation of customs duty and other taxes---Transaction value of the subject imports, in circumstances, was the value declared to Indian Customs at the time of exports of subject consignments in view of such position, it revealed that under-invoicing had been done and correct information regarding transactional value had been suppressed by filing goods declaration at lower value than the actual transactional value paid by the importers in Pakistan to the exporter in India, therefore amount was short paid/evaded by the importer---Adjudicating Officer vide order-in-original, found that the charges against the importer, were established ordered recovery of legitimate amount of duty and taxes with penalty---Appellate Authority, on appeal set aside order-in-original---Importer had self-assessed the goods under S.79 of the Customs Act, 1969 and calculated the duty and taxes in view of prevailing Valuation Ruling---Clearance Collectorate, rightly, made "no objection/observation" and goods were accordingly released after payment of due amount of duty and taxes---Indian Official Website had no legal sanctity---Importer had assessed and paid the duty and taxes in the light of Valuation Ruling---Section 25-A of the Customs Act, 1969, whereby the said Valuation Ruling had been issued, opened with non-obstante clause, meaning thereby that it had over-rides S.25 of the Customs Act, 1969---If the department was so convinced about the legality and validity of process/values, as given on Indian Website, it would have told the Directorate General of Customs Valuation to re-visit said Valuation Ruling with a view to enhance values of goods in question---Both show-cause notice and impugned order-in-original were defective---Impugned order-in-original, was upheld to be lawful order and appeal of the department was dismissed having no merit; appeal of the importer was allowed on merit.

Azhar Abbas, Appraising Officer for Appellant.

Qamaruddin Samejo, P.A: for Appellant/Respondent.

Abdul Latif Chandio for Appellant/Respondent Party.

Date of hearing: 4th October, 2017.

JUDGMENT

MUHAMMAD NAZIM SALEEM, MEMBER TECHNICAL-II---This Judgment disposes of Customs Appeal No.K-401/2017 filed by the Appellant Department against Order-in-Appeal No.1566/2016 dated 03.02.2017, passed by the Collector of Customs (Appeals), Karachi. This Judgment also disposes of Customs Appeal No.K-2069/2016 filed by M/s. Al-Fateh Enterprises, Multan Road, Bahawalpur. As both the Appeals pertain to M/s. Al-Fateh Enterprises, Multan Road, Bahawalpur and also involve identical issues of law, therefore, the same were heard together and are being decided simultaneously through this common order 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).

2.Brief facts of the case relating to Customs Appeal No.401/2017 as reported in the impugned Order-in-Appeal (No.1566/2016 dated 03.02.2017) are that the Directorate of Post Clearance Audit, Karachi, during the scrutiny audit of import data found that the Respondent No.1 (M/s. Al-Fateh Enterprises Multan Road, Bahawalpur) imported a consignment and declared the same as "TYRES AND TUBES, WITH OR WITHOUT FLAPS OF DIFFERENT BRANDS", of Indian origin, under different sub-heads of PCT heading 4011 through MCC Appraisement (West), Custom House, Karachi, as detailed below.

In these cases, the assessment was made as per Valuation Ruling applicable at the time of import. However, in pursuance of an information that the group-under invoicing is being carried out, the matter was investigated taking into consideration the Indian official website (www.icegate.gov.in) called as "ICE GATE - e COMMERCE Portal Central Board of Excise and Customs". Since the bills of lading enclosed with the G.Ds. in the online WeBOC System mention the shipping bills numbers and dates filed with Indian Customs for export of impugned goods to Pakistan, therefore, the containers numbers and FOB value mentioned therein in Indian Rupees after addition of freight element and conversion into US $, retrieved from the aforesaid Indian Official Website, were matched with the corresponding particulars mentioned in the Good Declarations filed in Pakistan which revealed that the container numbers are matched, however, export price of the goods declared to the Indian Customs is on much higher side. It is relevant to add that transaction value is the value, which has been actually paid or payable in terms of section 25 of the Custom Act, 1969, required for computation of customs duty and other taxes. Therefore, the transaction value of the subject imports is the value declared to Indian Customs at the time of exports of subject consignments. In the subject case, FOB value in Indian rupees as is available on the above-mentioned portal is added with freight element as required in pursuance of section 25 subsection 2(a) i. of the Customs Act, 1969 and is calculated in US$ and in Pak Rupees (PKR). Keeping in view the aforestated position, it reveals that under-invoicing is being made and correct information regarding transactional value has been suppressed by filing Goods Declarations at lower values than the actual transactional value paid by the importers in Pakistan to the exporter in India. Therefore, an amount of Rs.416,093/-has been short paid/ evaded by the importers on account of customs duty, RD, sales tax, Addl. Sales Tax and withholding Income Tax.

3.The adjudicating officer vide Order-in-Original No.269/2016-17 dated 02.11.2016 held that the charges against the Respondent No.1 (M/s.Al-Fateh Enterprises, Multan Road, Bahawalpur) are established. The operative part of the impugned order reads as under:-

"I have gone through the record of the case. The importer imported a consignment of "TYRES AND TUBES, WITH OR WITHOUT FLAPS OF DIFFERENT BRANDS" of Indian origin under different sub-heads of PCT heading 4011 vide GD No. KAPW-HC-0029086 dated 19.08.2015. The department alleged that in pursuance of an information there is continuous recurrence of under invoicing. The department investigated the matter taking into consideration the official website (www.icegate.gov.in) named as "ICE GATE - e COMMERCE Portal of Indian Central Board of Excise and Customs'. The shipping bills numbers and dates filed with Indian Customs for export of impugned goods to Pakistan when matched with the data of the Goods Declaration filed in WeBOC system after addition of freight element and conversion into US$ revealed that the container numbers are matched but the export price of the goods declared to the Indian Customs is on much higher side then the declaration made in WeBOC system. The charges levelled against the importer were minutely examined and it transpired that the transaction value is the price actually paid or payable of the goods which is required for computation of duty and taxes. The vital information of data of the exports of the subject consignment from India shows the description of the goods, BL Number and the Container Numbers when matched with the goods declaration filed in WeBOC as identical. Moreover, FOB value in Indian rupees is available on the above mentioned portal and when the freight element is added as required in pursuance of section 25 subsection 2(a) of the Customs Act, 1969 and on conversion from US$ to Pak Rupees (PKR) would clean) reveal that the under invoicing is evident and correct information regarding transactional value has been suppressed by filing goods declarations at lower values than the actual transactional value paid by the importers in Pakistan to the exporter in India. Therefore, the charges levelled against the importer in show-cause notice stands fully established. The importer is directed to deposit the total evaded amount of customs duty, RD, Sales Tax, Addl. Sales Tax and Withholding Income Tax of total amounting to Rs.416,093/- immediately, along with a personal penalty of Rs.50,000/- (Rupees fifty thousand) is imposed. Moreover, the importer is also warned to be careful in future, if there is any recurrence in future the importer and his associates would be dealt with stern action. Furthermore, the assessing staff is required to finalize the assessment on the basis of this order and recover legitimate amount of duty and taxes and penalty imposed. The case is disposed of accordingly".

4.On an Appeal filed by the Respondent No.1 (M/s. Al-Fateh Enterprises, Multan Road, Bahawalpur) against the above Order, the Collector of Customs (Appeals), Karachi vide Order-in-Appeal No. 10128/2015 dated 20.05.2015, passed the following order:-

"I have examined the case record. The appellants have demonstrated that the impugned goods at the time of import were chargeable to duty and taxes in accordance with the Valuation Ruling 659/2014. The customs value of the goods was determined as per applicable Valuation Ruling. The impugned Valuation Ruling has been issued in exercise of powers conferred under section 25-A of the Customs Act, 1969. The section 25-A, opens with non-obstante clause which overrides section 25. The customs value determined under section 25-A shall be the applicable customs value for assessment of the relevant imported or exported goods. The respondents have travelled beyond scope of law to determine customs value under section 25(1) of the Act, by superseding the value determined under section 25A ibid. Accordingly the original order is set aside. The appeal is successful."

5.Feeling aggrieved and dissatisfied with the above Order-in-Appeal, the Appellant Department filed an Appeal before this Tribunal on the following grounds:-

A.That the impugned Order-in-Appeal is ab-initio illegal, unjust and with wrong/absurd interpretation of the case, hence, liable to be set aside forthwith.

B.That the impugned order is against the established facts and departmental practice

C.That without prejudice to above, even otherwise, the learned Collector, Customs (Appeals) has allowed the appeal on an irrelevant point that the customs value of the goods was determined as per applicable Valuation Ruling. The impugned Valuation Ruling has been issued in exercise of powers conferred under section 25-A shall be the applicable customs value of assessment of the relevant imported or exported goods. The respondents have travelled beyond scope of law to determined customs value under section 25(1) of the Act. The said observation of the learned Collector, Customs (Appeal) is totally against the relevant provisions of law under section 25(1).

D.That even otherwise, the learned Collector (Appeals) has failed to consider that the bill of ladings enclosed with the GD in the online WeBOC System mentions the shipping bills numbers and dates filed with Indian Customs for export of impugned goods to Pakistan, therefore, the containers numbers and FOB value mentioned therein in Indian Rupees after addition of freight element and conversion into US $, retrieved from the aforesaid Indian Official Website, were matched with the corresponding particulars mentioned in the Good Declaration filed in Pakistan. FOB value in Indian rupees as is available on the above mentioned portal is added with freight element as required in pursuance of section 25 sub section 2(a)i, of the Customs 1969, is calculated in US$ and in Pak Rupees (PKR) clearly reveals that under in is being made and correct information regarding transactional value has been suppressed by filing Goods Declaration at lower values than the actual transactional value paid by the importers in Pakistan to the exporter in India.

E.That the case of the Appellant is a clear case of lawful assessment of customs duty which was payable by the importer, therefore, invoking of provisions of Section 32(1) (2) & (3A) of the Customs Act, 1969 in the order-in-original under these provisions is quite legal, and with lawful authority.

F.That the learned Collector (Appeal) has failed to consider that as per impugned Valuation Ruling it is specifically mentioned that where the actual payable transaction value will be higher than the V.R., the declared value of the goods will prevail for assessment purposes.

G.That in view of the submissions elaborated above, the contents of Order-in-Appeal are illegal, void ab-initio and as such all subsequent proceedings are mala fide, illegal and has no sanctity in the eyes of law.

In the wake of aforesaid submissions it is respectfully prayed to kindly set aside the impugned Order-in-Appeal.

Prayed in the interest of justice, to avert the discrimination and in a bid to safe guard the government's revenue.

6.The Respondent Party (M/s. Al-Fateh Enterprises, Multan Road, Bahawalpur) has submitted counter-objections/para-wise comments on the Memo. of Appeal filed by the Appellant Department in terms of section 194-A(4) of the Customs Act, 1969, which are reproduced as under:-

A.That the Order in appeal has been passed on legal and correct tactual position of the matter and there is no illegality in the order dated 03.02.2017.

B.That the order in appeal has been passed on actual facts and the appellant department has completely failed to negate the facts presented by the appellant. The illegal and against the provisions of customs ad departmental practice cannot be got enforced through adjudicating processes.

C.That the appellant deportment could not produce any evidence regarding the payments made to the foreign supplier by the respondent but the respondent submitted the bank statement and proof of making payments to the foreign Indian Supplier in conformity with the value declared on goods declaration in respect of the consignment in question. There is no evidence available on the record regarding the value/ amount paid in excess of the value mentioned on GD regarding the goods imported by the respondent hence the whole case was actually made on the basis of presumption and assumption. There is no piece of evidence to negate the commercial invoice issued by the foreign/ Indian Supplier, it is therefore the value mentioned on goods declaration/ invoice has to be accepted or the value determined by the Directorate of Customs Valuation, Karachi through Valuation Ruling can only be mode basis for the assessment of duties and taxes on the imported goods.

D.That so far as the issue of some declaration, if any, is reflected on the Indian customs data, the some cannot be applied to other importing ports due to the reason that the said so called data has no legal sanctity and even there was no ground to disbelieve the invoices issued by the Indian Supplier. There is no provision in the customs act whereby the value of the imported goods con be assessed on the basis any sort of foreign data available on exporting country. The reason is obvious that there is no mechanism to check the sanctity of the data available on other country's website hence to correlate such imprecise, vague and sketchy, information with the actual import value of the importer is against the norms of natural justice. The appellant department has admitted that the assessment was done as per the valuation Ruling No.659/2014 dated 29.03.2014 which was applicable on the import of goods imported by the Appellant. The Valuation ruling doted 29.03.2014 was admittedly in the field at the time of import, and even till to and the PCA Department did not ever challenge the Valuation Ruling before any legal and appropriate forum available under the Customs Act, 1969.

E.That the appropriate officer of customs is required to make assessment on the basis of transactional value, the value available on Pakistan customs data PRAL and or on the valuation ruling but no assessment can be made on the basis of some imaginary data hence the assessment made at the time of import was legal and in accordance with the provisions of section 25 read with sections 79 and 80 of the Customs Act, 1969. The Respondent submitted all the required documents before the appropriate officer for the assessment of value of the consignments and most importantly the invoices issued by the Indian Manufacturers were available in the consignments and assessment of duties and taxes were made exactly as per the assessment of customs officer. The importer made the payments to the foreign suppliers through the scheduled Banks in Pakistan and the payments made to the Indian manufacturer exactly tally with the value mentioned on the G.D and Invoice of respective goods declaration. It therefore no violation of section 32(1)(2) and (3A) has been proved against the Respondent.

FThat the amount paid to the foreign supplier exactly tallies with the value mentioned on goods declaration and no excess amount was made to the foreign supplier. The allegation of making excess payment is mere a presumption and the department has completely and miserably failed to bring on record an iota of evidence to establish that the answering respondent mode more payment than the value mentioned on goods declaration during the proceedings before both the lower adjudicating and appellate forums. The intention of the authorities issuing the valuation ruling regarding the higher value is that the value, mentioned on the goods declaration or on the commercial invoice but not to apply the value of some unauthenticated source of other country website.

G.That in view of above narrated facts and law applicable in the instant matter, it is established that the order-in-appeal has been passed purely on legal and correct factual ascertainment and acceptation whereas the order-in-original was passed merely on imaginary and presumptive approach.

Under the facts and circumstances narrated hereinabove, it is most respectfully prayed that dismiss the titled appeal of the department and confirm the Order-In-Appeal passed by the learned Collector, Customs (Appeals).

7.I have heard both the contesting parties at some length and also examined the relevant record. The case of the Appellant Department is that the Respondent party/ importer (M/s. Al-Fateh Enterprises, Multan Road, Bahawalpur) imported a consignment of "Tyres and tubes, with or without Flaps of different Brands" from India and self-assessed duty and taxes against value as given in Valuation Ruling applicable at the time of import. However, the information gathered from the Indian official Website "ICE GATE - e Commerce Portal Central Board of Excise and Customs" revealed that the export price of the goods declared to the Indian Customs is on much higher side. They further argue that even the Valuation Ruling specifically mentions that where the actual payable transactional value is higher than the value as determined in the Valuation Ruling, such transactional value shall be taken for the purpose of assessment of duty and taxes. The Appellant Department calculates value of the imported consignment by adding element of freight in the FoB value declared in Indian rupee as is available on the aforestated Indian official Website and, thereafter, the said value is converted into U.S. dollars.

8.The stance of the Respondent Party, given in their para-wise comments and explained by the learned Counsel is that they made assessment of duty and taxes in the light of values determined under Valuation Ruling 659/2014 dated 29.03.2014. Accordingly, the goods were released by the Collectorate without raising any objection. Further section 25-A of the Customs Act, 1969 whereunder the aforestated Valuation Ruling was issued, starts with Non-Obstante clause which means the said provision of law has over-riding effect over section 25 (which mentions about the transactional value) ibid. He also stated that after Valuation Ruling is issued under section 25-A, the next relevant provision of law is section 25-D and cannot be reversed to section 25. Counsel also invited attention towards Disclaimer of ICE GATE. He emphasized that neither section 25 of the Customs Act, 1969 nor section 25-A ibid mention about the ICE GATE. Further, the Indian Customs has not certified the values given on their Website. According to the Counsel, the exporters in general, inflate value of their goods to obtain some legal benefit like rebate etc. The Counsel added that values given on Indian Website (ICE GATE) donot carry any legal sanctity. He added that had it been so, the Directorate General of Customs Value, could have revised its values upward as given in the Valuation Ruling No.659/2014 dated 29.03.2014. The Counsel added that they assessed their goods against value $ 104/ tyre, $ 210/ tyre and $ 221/ tyre compared to $ 143/ tyre, $ 342/ tyre and $ 342/ tyre respectively as given on the Indian Website.

9.I am not inclined to entertain arguments of the Appellant Department. The Respondent party self-assessed goods under section 79 of the Customs Act, 1969 and calculated duty and taxes keeping in view prevailing Valuation Ruling No.659/2014 dated 29.03.2014. Rightly so, the Clearance Collectorate made no objection/ observation and goods were accordingly released after payment of due amount of duty and taxes. I subscribe to the arguments of the learned Counsel of the Respondent party that there is no legal sanctity of the Indian official Website. They assessed and paid duty and taxes in the light of Valuation Ruling No.659/2014 dated 29.03.2014. There is weight in his argument that Section 25-A of the Customs Act, 1969 whereby the aforementioned Valuation Ruling has been issued, opens with Non-Obstante clause meaning thereby that it over-rides section 25 of the said Act. I find tremendous weight in the argument of the learned Counsel that if the department was so convinced about the legality and validity of process/ values as given in the Indian Website, they would have requested the Directorate General of Customs Valuation, Karachi to re-visit Valuation Ruling No.659/2014 dated 29.03.2014 with a view to enhance values of tyres already determined in the said Valuation Ruling. On this, the learned Departmental Representative of the Appellant Department was asked to offer comments on the aforestated point keeping in view the position on ground. He sought for some time to respond which was granted, however, till writing of this judgment, no rejoinder/ response has been received from the Appellant Department. I cannot restrain myself from highlighting that the Show-Cause Notice dated 30.06.2016 as well as the Order-in-Original No.269/2016-17 dated 02.11.2016 neither highlight values as declared by the Respondent party nor given on the Indian Website. The Show-Cause Notice indicates the same on an annexed table. Infact, the same should have been incorporated within the body of the Show-Cause Notice. Similarly, both the aforestated documents do not mention Valuation Ruling Number and its date. Therefore, I consider both Show-Cause Notice and the impugned order-in-original as legally defective documents.

9.In view of above, I do not find any reason/ ground to interfere with the impugned order-in-appeal, therefore, the same is held to be a lawful Order. The Appeal (No.K-401/2017) of the Appellant Department is dismissed being lacking on merit. However, the Appeal No.K-2069/ 2016 as filed by the present Respondent Party (M/s. Al-Fateh Enterprises, Multan Road, Bahawalpur) is allowed on its merits

10.Announced.

HBT/115/Tax(Trib.) Order accordingly.