IMK TRADERS VS The DIRECTOR GENERAL, DIRECTORATE GENERAL OF CUSTOMS VALUATION, CUSTOMS HOUSE, KARACHI, 2018 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 1860 (2017)

Customs Act (IV of 1969)---

----Ss.25 & 25-A---Determination of customs value of imported goods---Issuance of fresh valuation ruling---Goods in question were imported when Valuation Ruling No.665/2014, dated 31-3-2014, was in field and according to that ruling goods were being assessed and cleared by the customs---When the goods were on way, the Director Valuation, by issuing a new Valuation Ruling enhanced the value of the goods more than 300%---Said fresh valuation ruling was challenged by the importer by filing review application before the Director General of Valuation, which application was rejected---Validity---Customs Officers were limited or restricted only to the methods set forth in S.25 of the Customs Act, 1969, not to act otherwise---If, some method other than the one specified in S.25 of the Customs Act, 1969 was followed that would clearly be ultra vires the powers conferred under S.25-A of the Customs Act, 1969---Department had no justification about such increase which clearly reflected against the statutory obligations, prescribed under Ss.25 & 25-A of the Customs Act, 1969---In the present case, Director General, Customs Valuation acted in contradiction to the provisions of S.25-A of the Customs Act, 1969---Being custodian of law, purpose of administration of justice, was to hold and not to thwart importer's right---Authorities, were directed not to issue any fresh Valuation Ruling against the procedure laid down under S.25 of the Customs Act, 1969---Impugned Valuation Ruling lacked the warrant of law, and its issuance had no adherence to the statutory requirement as laid down in S.25 of the Customs Act, 1969---Said Valuation Ruling was declared as void, illegal and without lawful authority, and was set aside---Impugned order-in-review was illegal and was declared to be void and without lawful authority and set aside.

S.M. Naqi son of Syed Muhammad Hussain, Karachi v. Collector of Customs (Adjudication-I), Karachi and others Customs Reference No.157/2008 ref.

Ghulam Yasin, Consultant and Muhammad Siddiq Zia, Consultant for Appellant.

M. Aslam, Principal Appraiser for Respondents.

Date of hearing: 6th March, 2017.

JUDGMENT

MUHAMMAD NADEEM QURESHI, MEMBER JUDICIAL-I.---By this Judgment, we intend to dispose of above appeals filed by the appellants under section 194-A of the Customs Act, 1969, against, Order-in-Revision No.282/2016 dated 29.12.2016, passed under section 25-D of the Customs Act, 1969, against Valuation Ruling No.932/2016, dated 22.09.2016. These appeals have identical issues of law and facts and are therefore being heard, dealt with and disposed of simultaneously through this common order in the light of judgment passed by 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.Since these ten (10) 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 facts of Appeal No. K-226/2017 are taken into consideration for decision, wherein, facts of the case are that, the Importer M/s. IMK Traders, Lahore, is a regular importer of all sort of "Washing and Clearing Brushes etc" this and other related items from China and from other countries. The appellant is importing these goods from several years. It is pointed out that a Valuation Ruling bearing No. 665/2014 dated 31.03.2014 was in field and according to this ruling goods were being assessed and cleared by Customs. No dispute was arises in this regard to clear these goods. It is particular to mention here that previously a valuation Ruling bearing No.665/2014 dated 31.03.2014 was in field when we contacted our supplier for purchase of Clearing / Washing / Sweeping / Dusting Brushes, etc and the supplier issued us profarma invoice and accordingly goods were loaded for shipment. When the goods were on the way the respondent Director (valuation) in absence of any lawful justification enhanced the value by more than 300% by issuing a new valuation ruling wherein actual transactional Value was struck down of the above referred goods. The Customs Values of "Washing and Clearing brushes etc" (Classifiable under HS Code 9603.9000, 1200, 1300) were enhanced arbitrarily by the Respondent in absence of any lawful justification, legal basis. The detail of previous Valuation Ruling No.665/2014 dated 31.Mar.2014 is as under:--

Business of the appellant and other importers was running smoothly. Suddenly the customs values of cleaning and washing brushes were enhanced arbitrarily by the respondent, in absence of any lawful justification, legal basis, without considering the provisions of section 25 of the Customs Act 1969 by issuing a new Valuation Ruling Nos.932/933/2016 dated 22/09/2016. The detail of the same reads (per KG in US$) as under:--

The above noted Valuation Ruling was challenged by the Appellant by filing a Review Application before the Directorate General of (Valuation) on 14.10.2016. The Directorate General (Valuation) without considering the actual facts that the values of raw materials are decreasing day by day due to oil prices and subsequently the values of finished product i.e. washing and cleaning brushes which are mainly made of virgin as well as recycle plastic, are also decreasing in international market, rejected the review application without stating any justification.

3.Being aggrieved and dissatisfied with the Order-in-Revision, the appellants filed the instant appeals before this Tribunal on the grounds incorporated in the Memo. of Appeal.

4.On the date of hearing Mr. Ghulam Yasin, Consultant and Mr. Muhammad Siddiq Zia, Consultant, appeared on behalf of the appellants. They collectively and separately contended that, prior to the present impugned Valuation Ruling all stakeholders including the present appellants are satisfied with the prices determined under Valuation Ruling No.665/2014 dated 31.03.2016 and there is no dispute about the values of the subject goods/products. As being the regular importer some of the consignments when purchased by the present appellants from the supplier and the goods were loaded for shipment, during that period of time of Director Valuation in absence of any lawful justification enhanced the values of the subject goods more than 300% by issuing the present impugned Valuation Ruling. They further contended that, the Provisions of Section 25 of the Customs Act, 1969 are not been followed in sequential manner which is a clear violation of statutory obligation and no market inquiry however been conducted by the respondent/valuation department nor report of the same has been supplied to the stakeholders including the present appellants for the purpose to controvert the same or otherwise? The subject impugned Valuation Ruling was finalized under section 25 subsection (7) of the Customs Act, 1969 which is bar valuation of the procedure and method required to be adopted for determination of the values as prescribed in section 25 of the Customs Act, 1969. They further contended that, the said valuation ruling is nothing but bad, void, arbitrary attempt and deception with the facts and law of the case, which is in clear disregard to mandates of sections 25, 25-A of the Customs Act 1969, as well as enunciated principles of law under the mandate of Articles 189, 201 and 10-A of the constitution of Islamic Republic of Pakistan. Relying on the arguments they humbly prayed that, this Honorable Tribunal may be pleased to set-aside the impugned Order-in-Revision and annulled the impugned Valuation Ruling in the interest of justice.

5.No cross objections filed by the respondent in compliance of the subsection (4) of section 194-A of the Customs Act, 1969. However, learned representatives of the department/Respondents, contended that, the Directorate General of Customs Valuation has acted/performed his duties within its jurisdiction and no such action has been arbitrarily taken. The Directorate Generals of Customs Valuation always performed his duties to facilitate the trade and save interest of the national exchequer at the same time. In view of the above facts and legal position, the appeal is not maintainable and is prayed to be dismissed in the interest of justice.

6.Arguments heard and concluded. After perusal of the record and arguments extended by both the parties, it has been noticed an observed that the specific question required to be answered whether the Valuation Ruling Nos. 932/2016, 933/2016 and 934/2016 dated 22.09.2016 were expressly issued in accordance with statutory obligations and prescribed rules framed there under or otherwise? It has been noticed that the provisions of sections 25(1)(2), 25(7) of the Customs Act, 1969 were not invoked in sequential application and manner as embodied in the section 25 of the Customs Act, 1969. It is also observed from the record that Valuation Ruling No.665/2014 dated 31.3.2014 was in field prior to the present impugned Valuation Ruling and there is no dispute caused and created during the period upto the issuance of present impugned Valuation Ruling Nos. 932/2016, 933/2016 and 934/2016 dated 22.09.2016. The Director Valuation in exercise of the powers conferred under section 25-A of the Customs Act, 1969 determined the customs values of Cleaning/Washing/Sweeping/Dusting and similar kind of Brushes along with other goods mentioned in Valuation Ruling Nos. 932/2016, 933/2016 and 934/2016 dated 22.09.2016. By their own decision, wherein he decided the current valuation ruling required revision in line with prevailing prices in the international market. According to the Para-3 of the impugned valuation ruling, it is noticeable that on 20.09.2016 importers/stakeholders had been requested to furnish the relevant documents of import, without waiting such response and compliance from the importers/stakeholders the Director Valuation on 22.09.2016 issued the said impugned valuation ruling without conducting the proper procedure of law and determined the values in view of section 25(7) of the Customs Act, 1969.

7.It is also noticed and observed from the record of the case that during the proceedings pending before this Tribunal, the representative of the respondent Directorate of Customs Valuation attended the proceedings, and finally the subject appeals were collectively heard and reserved for judgment on 06.03.2017. On the next dated, 07.03.2017 the Director Valuation knowingly, having the full knowledge of proceedings pending before the Tribunal against the impugned Valuation Ruling Nos. 932/2016, 933/2016 and 934/2016 dated 22.09.2016 issued a fresh Valuation Ruling No. 1072/2017 dated 07.03.2017, such transgressional and derogatory act caused and created by the Director Valuation is actionable under the law. The relevant quarters, their affiliates and persons working under their behalf misconceived the facts from the court, about the pending procedure initiated for preparation of new valuation ruling. It is evident from the contents of the new Valuation Ruling No. 1072/2017 dated 07.03.2017 and values determined there under are gradually fixed on lesser side from the Valuation Ruling Nos.932/2016, 933/2016 and 934/2016 dated 22.09.2016 impugned under the present appeals. Such determination of the value clearly supported the stance of the present appellants, who challenged the present impugned Valuation Ruling before Director General Valuation under section 25-D of the Customs Act, 1969.

8.Now, specific question required tb be answer firstly, whether the Valuation Ruling 932/2016 dated 22.09.2016 was expressly issued in accordance with statutory obligations and prescribed rules thereon or otherwise? It has been noticed that the provision of sections 25(1) to 25(7) of the Customs Act, 1969, were not invoked in sequential application as embodied in section 25 of the Customs Act, 1969. The respondent himself placed the question before the Court relying on the available data, how the department can fix the value of imported impugned goods on the declared value when there are so many transactional values has been declared and majority of impugned goods with regard to the variety having vast difference in value, which are extremely on the lower side. Under such specific circumstances, ultimately the market inquiry is the only basis to be adopted for the determination of value in such kind of goods. If Respondent has applied clause (a) to section 25(7), then data of imported goods, or identical goods or similar imported goods (now being sold in Pakistan) has been used. If this data was available with respondent for the period at time of importation about the time of importation, then why he did not apply the method envisaged under section 25(5) or 25(6) of Customs Act, 1969, if he deliberately did not use the method envisaged above subsection, then he erred in law and in determination of customs value (whether under section 25 or under section 25(A) the rejection of any method in the sequence of use of methods cannot be made mechanically or without application of mind. Respondent failed to apply section 25(7)(b) which states that "If neither the imported goods nor identical nor similar imported goods are sold at or about the time of importation of the goods being valued, the customs value shall, subject otherwise to the provisions of clause (a) of this subsection, be based on the unit price at which the imported goods or identical or similar imported goods are sold in Pakistan in the conditions as imported at the earliest date after the importation of the goods being valued but before the expiry of ninety days after such importation." Even then the Respondent had to use the data of identical or similar goods as are sold in Pakistan in the conditions as imported at the earliest date after importation of goods being valued but before the expiry of (90) days after such importation.

9.It is also the duty of the department to follow the prescribed statutory obligations and rules, under the Finance Act, 2007, after the introduction of section 25A of the Customs Act, 1969, certain amendments were made to Section 25 and Section 25A, the Federal Board of Revenue as well as the subordinate affiliates and persons working under their command, designated with specific powers are required to follow the dictums of law as well as agreements executed and accepted thereon by the member countries including the Government of Pakistan. The important factor has been over ruled by the Director General, Valuation while declining the actual transaction value, it is the responsibility of the customs authorities to bring into light any direct evidence to controvert the transaction value of the importers. While preparing the impugned Valuation Ruling, he has not been able to provide any valid reason or justification as to why the other methods prescribed under section 25, subsections (1), (5), (6) and (7) were not found applicable, specially there is no traces available on record about the activity conducted thereon for market inquiry, as per SOP 01/05 and Rule 119 of Customs Rules, 2001. Although, the department emphasis on the point that, market inquiry has been conducted, but entirely on the basis of gospel truth, it is clear from the circumstances and facts of the case that no market inquiry was ever conducted, record shows that, because stakeholders involved in the said controversy were never been called upon or noticed to became the part of such market inquiry, if so conducted ever by the respondent, only a generalized and arbitrary values were taken into consideration, ignoring the fact that the variance in country of origin makes a marked difference in the actual cost of the goods in question and as such the values determined through the impugned Valuation Ruling are entirely unrepresentative of the international market and trade, as such provisions of section 25 (13)(a) of the Customs Act, 1969 were initially violated, where prices of commodities such as oil have decreased by almost 40% to 50% over the last one year and cost of raw materials have also dramatically decreased.

10.Under the World Trade Organization member states entered into the agreement, called "Valuation Agreement" on implementation of Article VII of the General Agreement on Tariffs and Trade, 1994. This agreement set for what was (at least for Pakistan) how the Customs value imported goods were to be determined. Although the World Trade Organization assessment came into the effect from 01-01-1995, and accordingly that was enforced in Pakistan w.e.f 01-01-2000. The Valuation Agreement can, for present purposes, be regarded as falling into two parts. One part comprises of the main articles, which contain the substantive rules for determining the customs value of goods. The second part comprises of interpretative notes to the various articles, contained in an annex to the agreement. Of course, the Valuation Agreement has to be construed as a whole, and Article 14 expressly provides that the notes in Annex I form an integral part of the Agreement and that "the Articles of this Agreement are to be read and applied in conjunction with their respective notes". The system enforced in Pakistan since 01-01-2000 reflects this divide. Section 25 was substituted in its entirely, and its various provisions primarily embody the main articles of the Valuation Agreement. Rules framed by the Central (now Federal) Board of Revenue primarily contain, in what is now Chapter IX of the Customs Rules, 2001 ("the Rules"), notified under SRO-450(I)/ 2001 dated 18.06.2001, the interpretative notes of Annex I of the Valuation Agreement, which describes the sequential application of law.

11.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 25-A of the Customs Act, 1969. The Department has no justification about such increase which clearly reflected against the statutory obligation, prescribed under sections 25 and 25-A of the Customs Act, 1969. The determination of value under section 25-A of the Customs Act, 1969, is not a simple thing. It is, therefore, appropriate that the ruling should contain sufficient details to show that section 25-A has been properly applied and also make it necessary that the Valuation Ruling should be a speaking 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 Supreme Courts and made observations in contradiction of provisions of section 25-A of the Customs Act, 1969. Such ignorance is violative front 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.

12.By getting the strength from the Judgments passed by the Superior Courts including the Hon'ble High Court of Sindh in the case of Sadia Jabbar and in conformity of the aforesaid observations along with our additions the subject impugned Valuation Ruling No.953/2016 dated 14.10.2016 lacks the warrant of law and its issuance has no adherence to the statutory requirements as laid down in section 25 of the Customs Act, 1969. Therefore, the said Valuation Ruling is declared as void, illegal and without lawful authority is hereby set aside accordingly. The impugned Order-in-Review passed within the hierarchy of the Customs infested with patent illegalities, is also declared void and without lawful authority is hereby set-aside. Appeals are accordingly allowed, no order as to cost.

13.Judgement passed and announced accordingly.

HBT/42/Tax(Trib.) Appeals allowed.