' MUHAMMAD ARIF MOTON (MEMBER (JUDICIAL-III)).--This order will dispose of aforesaid (3) Customs Appeals filed by the appellants against common Order-in-Appeals Nos.3750 to 3752/2010 dated 4- 5-2010 passed by the Collector of Customs (Appeals), Karachi. These appeals have identical issues of law and fact and are, therefore, being heard, dealt with and disposed off simultaneously thorough this common order.
2. Brief facts of the case are that the appellant imported consignment consisting of the following:-
(i) Used Dredger (Tomimaru 22GD). One Unit.
(ii) Used Dredger Pontoon (Zhong Guo Shuidian B03). One Unit
(iii) Used Dredger Pontoon (Zhong. Guo Shuidian B04). One Unit
(iv) Used Dredger Pontoon (Zhong Guo Shuidian Z02). One Unit
(v) Used Tug Boat (Zhong Guo Shui T03). One Unit ' The appellant filed Goods Declaration No, KAPR-HC-87886 dated 19-6-2009 for release thereof at the declared value of the whole consignment at US$ 19,463,059 and furnished invoices Nos. CWE- PKGH0903 and CWE-PK-GH0903A both dated 22-5-2009 purportedly issued by the China International Water and Electric Corporation in China. Since the appellant had already got cleared a consignment of dredger that (sic).Boat, anchor boat and pontoons at a very high value under IGM No,2024/08 dated 12-11-2008 Index No, 01 the department, had reason to doubt the accuracy of the import documents submitted by the appellant. Therefore a notice under section 26 of the Customs Act, 1969 dated 30-6-2009 was issued to the appellant for submitting the following documents:--
(i) Proforma Invoice.
(ii) Contract.
(iii) Letter of Credit if any.
(iv) Details of Proof of Transaction
(v) Name and Account Number through which the Transaction taken place.
(vi) Lloyd certificate/Survey certificate showing price of the dredger.
(vii) Registry price i,e, (a) Dredger Price on 17-5-2006.
(viii) LP.C. Certificate
(ix) Insurance Certificate with all related documents.
(x) Any other documents relating to the import of subject goods.
' In response the appellant provided the following documents vide his letter dated 1-7-2009:-
(i) Last Port Declaration Documents.
(ii) Insurance Trade Invoice.
(iii) Special Invoice for International Shipping.
(iv) Commercial Invoice of TOMI MARU 22G0.
(v) Detail of Proof of Transaction.
(vi) Name and Account Number through which Transaction took place.
(vii) Purchasing Contract.
(viii) Registration Certificate.
' The documents provided by the appellant were not sufficient to ascertain correctness of the declared transaction value. Therefore, the goods were provisionally assessed under section 81 of the Customs Act, 1969 read with Rule 217 of S.R.O. 450(1)/01 dated 18-6-2001 being the temporary import for the project namely Pakistan Deep Water Container Port Dredging and Reclamation Works on 27-7-2009 by enhancing the declared value of the whole consignment up to US$ 41,082,893 by securing the differential amount of duty and taxes between the declared value and assessed value in the form of bank guarantees. The case was referred to the Directorate General for determination of fair value of the consignment so as to finalize the assessment. However, the Directorate General vide letter No, 1/15/2009-VIA/2115 dated 23-7-2009 had already regretted its inability to determine the value of impugned goods in similar cases of the same importers and advised the Collectorate to finalize the assessment at its own end and not to refer the cases of valuation of dredgers to the Directorate General in future. In the light of the documents, registration/inspection certificates submitted by the importers as well as the examination report, the particulars and specification of each item were checked. The following discrepancies were noted:
(i) Used grab dredger (Zhone Guo Shui Dian Z02) gross tonnage 954, net tonnage 803, built in Japan in the year, 1994 as per registration certificate of Ship No, 020009000062, ship inspection certificate No, 200905000090 and certificate of ship nationality No, 020009000062 (mis-declared as China origin).
(ii) Used Tug Boat (Zong Guo Shui T03) gross tonnage 185, net tonnage 55, built in Japan in the year, 1991 as per registration certificate of ship No, 02000900006 I, coast boat inspection certificate No, 20090500089 and certificate of ship nationality No, 020009000061 (mis-declared as China origin).
' Certificate of Origin No, CEPT 093200927 dated 9-6-2009 provided pay the appellant showed Chinese origin of aforementioned two items whereas factually the origin of goods was that of Japan as given in the other documents provided by the appellant prima facie, this was done with a motive to declare lower value to evade import levies. Since, the appellant mis-declared the origin of the goods resulting in lower declaration of value a show cause notice was issued and the case adjudicated vide Order-in-Original No, 0312009 dated 6-8-2009 passed by the Additional Collector
(MCC) Appraisement while imposing fine equal to 20% of the customs value in lieu of confiscation.
The order-in-original was challenged before the Collector of Customs (Appeals) which was upheld by him vide Order-in-Appeal No, 3135 of 2009 dated 4-1-2010. Since the matter of finalization of value under section 81 of the Customs Act, 1969 could not be kept pending for indefinite period, the past records of the appellant available with the Collectorate were examined. An internet based inquiry was also conducted to go through the prices or dredgers, pontoons and tug boats available for sale in the international market. The declared value of the impugned dredgers was compared with the two dredgers of China origin previously imported by the same importer and got cleared vide IGM No, 2024/08 dated 12-11-2008 Index No,
01. Vis-a-Vis the above values of dredgers of similar sizes and specifications, the values declared in the instant consignment against each item appeared extremely low, It was further noted that dredger imported vide IGM No, 2024/08 dated 12-11-2008 Index No,01 was of Chinese origin whereas the dredger, pontoon and tug boat imported in this case are of Japan origin which must be of high value keeping in view the quality of material used, the precision in manufacturing process and the technology. Therefore, the appellant was issued show cause notice for mis-declaration of origin.
3. Adjudication proceedings were initiated against the appellant and the Deputy Collector (Appraisement) passed the Order-in-Original No,1 of 2010 dated 12-1-2010. The relevant extract is as under:-- "I have carefully gone through the record of the case, written and verbal submissions of the importer and their legal counsel and given due consideration to them. It is observed that there is an elaborate system of valuation of goods under section 25 the Customs Act, 1969. In case the declared value is not acceptable to the assessing officer and a further inquiry is required, the goods are assessed to duty and taxes provisionally under section 81 of the Customs Act, 1969 and the assessm ent is finalized within six months or the extended period of three months in addition to the original period. Therefore, the citation given by the importer and their Legal Counsel (PLD 1992 SC 485) is not attracted in the instant case. Since the documents provided by the importer are not sufficient to arrive at the transaction value and the information available could not be relied upon to verify the same, the One-Customs database was consulted to check the value of identical or similar goods.. But no precedent was found out which could verify or confirm the value or impugned dredger. The deductive value method has also been gone through but the same cannot ~be applied due to the reason that dredgers are not sold in Pakistan in aggregate quantity.
Therefore the value of the impugned goods cannot be derived on the basis of unit price out of identical or similar goods sold in the greatest aggregate quantity as prescribed under the deductive value method. The computed value method has also been found inapplicable because there is a lot of variety in the quality of materials and enormous variation in the quantity of the materials used in the manufacture of dredgers of various sizes and specifications. As a result the fall back method has been relied upon to arrive at the fair value of the impugned goods with the help of reference prices of dredger of China origin on the internet of similar sizes and weight besides the erstwhile transaction value of the consignment of dredgers and other items of China origin as indicated at para 3 above. I therefore, finalize the value of the impugned consignment as given below. Customs duty and taxes shall be adjusted accordingly by the appraising group."
4. The order was challenged before Collector (Appeals) who also rejected the appeal and passed order-in-appeal. Hence the instant appeal on the following grounds incorporated in the memo of appeal:--
(i) That respondent No,2 has passed a perfunctory Order without disclosing the evidence to the appellants which he relied upon while passing 'his orders. His orders are hence void and required to be quashed.
(ii) That respondent No, 1 had determined the prices of dredgers and other imported equipment without disclosing the basis thereof in the form of a Show-Cause Notice, which is against the norms of natural justice, therefore, all Orders passed in such a case are void ab initio without any legal authority.
(iii) That the learned respondents have not taken into account the documents submitted by the appellants including commercial invoice, port clearance certificate, insurance trade policy and invoice, special invoice for international shipping, details/proof of transaction including the name and account number through which the transaction took place, purchasing contract, registration certificate and the evaluation report of Mausea Marine and Undersea Consultants (Pvt.) Limited.
The impugned orders are absolutely silent about the factual evidence stated hereinbefore and placed reliance on some so called internet indicated prices which were never disclosed to us. Any inquiry conducted on the back of the concerned party is a nullity in the eyes of law as held by the superior courts in numerous cases. Reliance is placed is 1985 CLC 1781.
(iv) That respondent No,2 in Para-6 of the order-in-appeal states that evidence in terms of the main methods of valuation, as laid down in section 25 of the Customs Act, 1969 namely Identical Goods Method, Similar Goods Method, Deductive Method and Computed Value Method was not available, therefore, the Fall Back Method of Valuation was used to determine value of the impugned goods. However, he has not given any basis for applying this method of valuation. It would be useful to refer to the provisions of section 25(9) and Rule 121 of the Customs Rules.
' Clearly the Customs law on application of fall back method stipulates that no independent method of valuation has been prescribed therein and it only allows flexible interpretation/ application of the main methods of valuation mentioned above. A careful perusal of the operative part of the order-in-original viz. Paras. 13 and 14 would reveal that no such exercise had been undertaken by the respondent No,
1. Thus value determined in violation of the provisions of section 25 read with the Customs Rules is unlawful, void and illegal and the order-in-original accordingly liable to be set aside.
(v) That neither the order-in-original nor the order-in-appeal mention the internet values pressed into service for determining the value of impugned goods. In any case values, if any, indicated on a website accessible through internet are only indicative prices and unless some transaction actually takes place in respect of goods, the same cannot be relied upon as an evidence of value.
All such prices are subject to negotiation. Besides these values differ depending upon various specifications of dredging equipment including the type of dredgers, their specifications, model capacity, size etc. None of, these factors were either discussed in the order-in-original while applying some mysterious evidence of value available on the internet. Moreover the order-in- appeal mentions presentation of certain worksheets before Collector (Appeals). Strangely such worksheets were never presented in our presence before the worthy Collector during hearings and such evidence cannot be made the basis of an order. There is this whole mystery about the evidence relied upon, which is never disclosed to-us nor discussed in the orders. That in similar circumstances where a matter relating to the reliability of internet prices came before an Indian Appellate Tribunal in the case quoted as Aggarwal Distributors (Pvt.) Limited [2000 (117) E.L.T. 49] the Tribunal held that there was no evidence of contemporary importation of higher value and reliance on internet prices was totally misplaced and hence ordered acceptance of the transaction value in that case. This decision was later on upheld by the Indian Supreme Court.
(vi) That the appellants have reasons to believe that no meaningful inquiry was at all carried out after the provisional release of goods in question. In fact, the provisional value ascertained at the time of provisional assessm ent viz. US$ 41,082,893.57 was finally applied to the last digit. It is not understandable as to' why more than five months were consumed if the same provisional value had to be applied without placing on record anything substantive by way of 'an inquiry' by the Customs authorities. Needless to mention that the specialized wing of Valuation Department had informed the customs authorities at the very beginning that they were not in a position to advise about the values of dredgers perhaps on account of the fact that no two used dredgers were alike for the purposes of valuation and hence, their values cannot be established through a guess work.
Nevertheless the Customs authorities chose to just complete the formalities by passing a perfunctory order to formalize the provisional assessment and the learned Collector (Appeals) has tried to protect the order-in-original in a very clumsy manner. That the Supreme Court of Pakistan and High Courts have on more than one occasion laid down elaborate principles for the determination of Customs value which have been utterly disregarded in the instant case.
(vii) The advocate referred to the judgments reported as 2007 PTD 2623 Collector of Customs Port Muhammad Bin Qasim v. Messrs Zymotic Diagnostic International and Rehan Umar v. Collector of Customs, Karachi and 2 others reported as 2006 PTD 909.
(viii) Lastly the appellants prayed to set-aside the order-in-original as well as the impugned order- in-appeal.
Grounds in Customs Appeals Nos.683-684 of 2010
(i) That the impugned order passed by the respondent No,1 is illegal and bad in the eyes of law as such it is not maintainable in law and is liable to be set aside.
(ii) That firstly the respondent No,2 and then respondent No,1 in the absence of any lawful and cogent reasons and on the basis of assumptions and conjectures considered the documents which were irrelevant and could not have been relied upon for the purposes of determination of value of the Temporarily Imported Consignment and also having failed to collect any evidence in relation to the similar consignment having been temporarily imported in Pakistan for approved project in Pakistan and illegally without due process of law and contrary to the Customs Act, 1969 and Customs Rules, determined the value of the consignment on the exaggerated value.
(iii) That the respondent No,1 has failed to substantiate and share the computing method and/or the documents relied upon in order to finalize the value of temporarily imported consignment of the appellant prior to passing the impugned order.
(iv) That respondent No,1 without appreciating the merits of the case has upheld the decision of the respondent No,2.
(v) That although it was clearly described in the Goods Declaration that the appellant's consignment is imported on temporary basis and is to be re-exported after completion of project, besides that ' the consignment was secondhand and was not purchased in the recent past by the appellant for the purposes of sale in Pakistan, even then the respondent No,1 without any lawful reasons upheld the value of the consignment on a higher side and in fanciful manner treating the same as a normal import.
(vi) That as provided in the Customs Act the respondent No,2 for reasons best known did not provide any proof for assessm ent of the similar nature of consignment. In the letter dated February 11, 2009 the respondent No,2 specifically referred to the consignment of similar nature from same origin on much higher value and has determined the value of the appellant's consignment on that basis. That the respondent No,1 also failed to provide any proof, evidence and/or details such as the specification of the similar Dredgers and or Anchor Boats to substantiate the allegation of misdeclaration, by appellant, consequently the onus to prove the allegation of misdeclaration, if any, lies upon the respondent No,2 and simultaneously upon respondent No,1 and as such the impugned order is not maintainable in law.
(vii) That the appellant's consignment is of China origin and not of Japan as discussed in the impugned order-in-appeal and without considering the documents as filed in the appeal before the respondent No,1 has passed the impugned order.
(viii) That the proceedings before the respondent No,2 was also not maintainable in law in so far as::-
(i) Since the consignment was temporarily imported for the purposes of execution of works in terms of the contract dated October 27, 2008 with KPT and is to be re-exported as declared in the Goods Declaration, therefore, provisions of section 25 of the Customs Act could not have been attracted.
(ii) The value declared by appellant was strictly in accordance with the provisions of Customs Laws and supported by the documents furnished by appellant as and when required by the respondent No,2 therefore, the value assessed by the respondent No, 2 in excess to the same is in violation of the relevant provisions and proceedings.
(ix) Lastly they prayed to set-aside the impugned order-in-appeal.
5. The respondent filed para wise comments which reads as under:--
(i) No comments can be offered on this para because the same does not relate to Customs Act, 1969.
(ii) Admitted to the extent that the said goods were imported.
(iii) Contents of this para are admitted.
(iv) The declared value was not considered due to misdeclaration of origin. The origin of goods is Japan whereas, they had declared origin as China. Hence, true value was not declared.
(v) Same comment as per Para-4.
(vi) Contents of this para are not correct. In fact goods were assessed provisionally under section 81 of the Customs Act, 1969 pending final determination of the value.
(vii) The appellant has tried to differentiate and convince about functioning of dredgers. However, reply to this para is same as for para (4) that value was assessed provisionally under section 81 pending final determination.
(viii) The contents of this para are not correct. It is stated that issuance of show cause notice is not necessary in cases assessed provisionally and subsequently final determination is made under sections 81(3) and (4) which provides for adjustment between provisional and final determination.
The provisions of section 81 are very clear and do not require issuance of show-cause notice. Yet opportunity of personal hearing was afforded to them to represent their arguments if any. Simple procedure is laid down in section 81 i,e, on final determination of value adjustment has to be made for payment of mount payable by or to importer. For this purpose assessment order vide Order-in- Original appealed against was issued.
(ix) This a new point added in this appeal. The appellant is fully aware that information technology has become fast tracking. Every kind of information is available on Internet. Collector (Appeal) has discussed about this in Order-in-Appeal and upheld the orders of respondent as the same were legal, correct and maintainable under the law. There is no force in this argument which does not deserve consideration.
GROUNDS OF APPEAL
(x) Contents of this para are not admitted because the action was taken strictly as provided under the law.
(xi) Contents of this para are not admitted. As stated in comments on facts of the case, assessm ent was made under section 81 of the Customs, Act, 1969. Section 81 does not provide for issuance of show-cause notice. It lays down for adjustment on final determination of provisional determination: The argument is uncalled for.
(xii) The contents of this para have been embodied in the order-in-appeal and duly considered. It is, however, submitted that all aspects were duly considered for final determination.
(xiii) Same comments as per para (iii) above.
(xiv) The arguments in this para cannot be accepted. Access on Internet is available to all. They could check the 'Internet. This argument is not tenable and liable to be struck down.
(xv) In the absence of evidence cited in this para, no comments can be offered.
(xvi) It is submitted that if any person is aggrieved by determination of value by Custom House or Directorate of Valuation, he is at liberty to file review application under section 25-D before the Directorate General of Customs Valuation. It is not understood why they did not do so.
(xvii) It is submitted that while final determination of value, all aspects were duly considered.
(xviii) Same comments as per para (VIII) above.
(xix) Lastly he prayed to reject appeals.
6. Rival submissions heard. Case record examined. Following issues are framed by this Tribunal for consideration:--
(i) Whether issuance of show-cause notice is a mandatory prerequisite for conducting adjudication proceedings in terms of various judgments of the honorable Supreme Court?
(ii) Whether provisions enumerated in subsection (1) of section 25 of the Customs Act, 1969 read with Rule 107(a) of Customs Rules 2001 have been followed while determining the assessed value of the subject goods by the respondents?
(iii) Whether appellant or their representatives were associated by the Collectorate of Custom House (Appraisement) during the exercise undertaken for finalizing customs assessed values in these cases?
(iv) Whether the values of the currently imported grab type Dredgers can be compared with previously imported cutter suction type Dredgers?
(v) Whether Fall Back Method as incorporated in subsection (9) of section 25 of the Customs Act, 1969 has been followed by the respondent as per provisions enumerated therein and read with relevant Rule 121 of Customs Rules, 2001?
(vi) Whether the prices of similar goods procured by the respondent on Internet are a valid piece of evidence for determination of Customs assessed value in terms of section 25 of the Customs Act, 1969?
(vii) Whether comparison of old and used secondhand machinery is permissible with non-identical old and used secondhand machinery for valuation purposes?
(viii)Whether the legal or ultimate burden of proof lies on the Customs Administration in terms of section 25(11) of the Customs Act, 1969?
(ix) Whether the order-in-original and order-in-appeal are nonspeaking, non-judicial and perfunctory orders based on non-reading/miss-reading of the documents on record?
7. As regards Issue No,(i), the Order-in-Original No,1 of 2010. Dated 12-1-2010 has been passed by Deputy Collector of Customs MCC (Appraisement) without issuance of any show cause notice to the appellant. A scrutiny of the case record revealed that no show-cause notice has been issued to the appellant by the Adjudicating Authority while finalizing their declared values in terms of section 25 of the Customs Act, 1969. Issuance of show-cause notice is a mandatory requirement for the adjudicating officers while adjudicating issues before them. This is also in violation of the principle of natural justice since the appellants were not afforded any opportunity to put any meaningful defence at the time of hearing. In this respect it is also observed that:--
(i) It is the first principle of natural justice to issue .a show-cause notice to the person concerned. It is a mandatory requirement for crystallization of monetary liability against the taxpayer through stating of material particulars of the case along with applicable provisions of the relevant law.
(ii) Demand notice in absence of statutory notice is without legal and lawful foundation. It is a well settled proposition of law that if a thing is required by law to be done in certain specific manner must be done in the same manner as prescribed by law or not at all as per maxim "Expression Fact Cesar taciturn" as observed by the Apex Court in their Judgments reported as PLD 1964 SC 536, 2003 SCM R 1505, 2006 SCM R 129.
(iii) Violations of principle of natural justice can be equated with violations of provisions of statutory instruments.
(iv) It is the common principle which governs the administration of justice in Islam that in case of liability with penal or quasi penal consequences and/or deprivation of basic rights, a notice as well opportunity of hearing is absolutely necessary. This by itself has to be recognized as a basic right as observed by honourable Supreme Court, Shariat Appellate Bench in the case of Pakistan v.
Public at large reported as PLD 1987 Supreme Court 304.
(v) Even issuance of a proper show cause notice to a person is an essential ingredient of the expression "audi alterm partem" which literally means that no man shall be condemned unheard.
The right of being issued with a show cause notice and the right of being personally heard are inseparable and inalienable rights of the defendant and cannot be denied to the person concerned under any circumstances.
(vi) In one case, the suspension without issuance of a show cause notice was quashed by Dhaka High Court and was later confirmed by the Supreme Court that the rule of natural justice applies though there may not be any positive words in the statute, for such requirements and such rules are minimum requirements of fairness as reported in the case of University of Dhaka v. Zakir Ahmed (PLD 1965 SC 90). This has also been followed by the honourable Supreme Court of Pakistan in their judgment reported 1994 SCM R 2232. As observed by the honourable Supreme Court in the judgment M.D the Bank of Punjab v. Syed Shahzad Hussain reported as 2006 SCM R 1023, it is also a settled principle of law that principle of natural justice must be read in each and every statute unless and until it was prohibited by the wording of the statute itself as the law laid down by this Court in Sir Edward Snelson's case PLD 1961 SC 237, Fazal-ur-Reham's case PLD 1964 SC 410, Zakir Ahmed's case PLD 1965 SC 90, Pakistan Crime Mines' case 1983 SCM R 1208 and Pakistan's case PLD 1987 SC 304 ' In view of the above judgments of the superior Courts the order-in-original issued by the Deputy Collector of Customs is ab initio,, null and void and the structure build upon this order has no legal value. As such Issue No,(i) is answered in the affirmative.
8. As regards Issue No,(ii), it is an admitted position that valuation data for enhancement of declared price in terms of section 25 of the Customs Act, 1969 read with Rule 107(a) of the Customs Rules, 1991 was not brought on record by two forums below as well as before this forum by the respondents. No visible exercise has been conducted and brought on record to show that all methods of determination of transaction value has been exhausted in the manner laid down in section 25 of the Customs Act, 1969. Simply mentioning the position that in view of the peculiar nature of the goods, resort has been made to Fall Back Method does not suffice the requirements laid down in this respect. Reasons have to be recorded in writing with admissible evidence has to be given by the Revenue in the first instance. Such view has been taken by the Supreme Court of India in the judgments reported as [2004] 163 ELT 289 (SC). As such the enhancement of the transaction value of the appellant without any supporting data in the form of evidential, invoices of contemporaneous imports pertaining to ninety days valuation data is arbitrary and unlawful and against the laws settled down in the judgments of superior judicial fora reported as 2002 PTD 2957, 2005 PTD 21, 2004 PTD 2993, 2006 PTD 1876, 2006 PTD 232, 2007 SCM R 1357 = 2007 PTD 1858, 2008 PTD 1250 and 2009 SCMR 438. As such Issue No,(ii) is answered in negative.
9. As regards Issue No, (iii), it has been vehemently contested by the appellant that in such a case of colossal enhancement of declared transaction value enquiry conducted by the officers of respondent No,1 was without their knowledge, without making them party and behind their back. It makes such investigation/enquiry unlawful and coram non judice. Such order which is passed against the appellant particularly based on such enquiry upon and behind the back of the appellant without giving them opportunity to look into it and rebut is unlawful and against the principles of natural justice and equity. In other words it is well settled principle of law that no party can be condemned on the basis of enquiry made behind the back and without his knowledge. This legal position was enunciated in the case of Messrs Farooq International v Chief Controller Imports and Exports and 4 others by the Honourable Sindh High Court- at Karachi reported as 1985 CLC 1781. The relevant extract therefrom being reproduced as under:-- "It is a well-settled principle that no party can be condemned on the basis of inquiry made behind his back and without his knowledge. In the present case the Deputy Collector of Customs had referred the matter to Ministry of Commerce for seeking their opinion about the nature of the goods. Relying on their opinion the order was passed against the petitioners. As the order is passed partly on the evidence obtained or inquiries made behind the back of the petitioner without giving him. An opportunity to even look into it or, rebut it, the order is completely vitiated."
' The same principle was followed by the honourable High Court of Sindh in the case of S.M.
Abdullah and Sons v. Government of Pakistan, etc. Reported as 1986 M LD 1508 whereby the proceedings were declared to be null and void as no factual enquiry was made with the participation of the importer thereby vitiating the basic principle of natural justice. This position has been reinforced in the case of Amjad Atta Muhammad v. Deputy Collector of Customs reported as 1994 CLC 1797 and followed by Hon'ble Lahore High Court in the case of Messrs Muhammad Farooq v. Muhammad Mubeen Akhtar, Inspector of Customs, Custom House, Multan reported as 2004 PCr.LJ 1958. As such issue No (iii) is answered in the negative.
10. As regards Issue No,(iv) it is observed that respondent has compared the values of the subject imported dredgers with previously imported dredgers which are neither identical nor similar but completely dissimilar dredgers in terms of their age, specifications and usage. The year of manufacture, size, gross tonnage, net tonnage, capacity and G purpose of the previously imported dredgers are totally different from the specifications of the subject imported dredgers. The price of cutting suction dredgers is far higher than the prices of subject grab type dredgers in the international market and even otherwise dependent upon a number of other factors. As such Issue No,(iv) is answered in the negative.
11. As regards Issue No,(v), incorporated in section 25(9) of the Customs Act, 1969, the Fall Back Method, comes to the rescue of customs authorities where it is not possible to determine the value on the basis of six methods earlier incorporated under various subsections in section 25 of the Customs Act, 1969. In this case the goods have been temporarily imported and Special Rules have been issued for determination of their value as well as duty in terms of Rule 121 further read with Rule 217 of S.R.O. 450(1)/2001 dated June 18, 2001. Section 25(9) states that if the customs values of the imported goods cannot be determined under section 25(1), (5), (6), (7) and (8), then it shall subject to the rules, be determined on the basis of a value derived from among the methods of valuation set out in the said provisions, that, when applied in the flexible manner to the extent necessary to arrive at a customs value. Rule 121 of the Customs Rules, 2001 pertaining to Fall sack Method is reproduced below for ease of reference.
(121) Fall back method. ---(1) Value of imported goods determined under subsection (9) of section 25 of the Act, shall, to the greatest extent possible be based on previously determined customs values of ,identical goods assessed within ninety days.
(2) The methods of valuation, to be employed under subsection (9) of section 25 of the Act may be inclusive of those laid down in subsections (1), (5), (6), (7) and (8) of the said section, but a reasonable flexibility in the application of such methods would be in conformity with the aims an provisions of subsection (9) of that section.
' Explanation.---Some examples of reasonable flexibility are as follows, namely:-
(i) Identical goods-
(a) the requirement that the identical goods shall be imported at or about the same time as the goods being valued, could be flexibly interpreted.
(b) identical imported goods produced in a country other than the country of exportation of the goods being valued could be the basis for customs valuation; and
(c) customs-values of identical imported goods already determined under subsections (7) and (8) of section 25 could be used.
(ii) Similar goods--
(a) the requirement that the similar goods shall be imported at or about the same time as the goods being valued could be flexibly interpreted;
(b) similar imported goods produced in a country other than the country of exportation of the goods being valued could be the basis for customs valuation; and
(c) custom-values of similar imported goods already determined under subsections (7) and (8) of section 25 of the Act could be used.
(iii) Deductive method- ' The requirement that the goods shall have been sold in the "condition as imported" as provided in clause
(a) of subsection (7) of section 25 of the Act could be flexibly interpreted, and the ninety days requirement could be administered flexibly.
The above rule lays down the principle that value of imported goods be determined under subsection (9) of section 25 of the Customs Act to the greatest extent possible basing it on the previously determined customs value of identical goods assessed within ninety days. It further states that a reasonable flexibility is admissible for reliance on evidential imports of identical/similar goods regarding ninety day valuation data as well as identical and similar goods of other origins. The main point to be noted is that Fall Back Method can only be resorted to if evidential invoices can be shown to form reasonable basis for adopting these methods. Such evidential invoices either of identical or similar goods whether of the same origin or not to be relied upon by the department in support of higher valuation must be contemporaneous. In other words in order to determine the customs value under the Residuary Rules it must be shown by the customs authorities that the prices indicated in the invoices relied upon by them can form reasonable basis with due adjustment. The objections regarding year of manufacture, age, period of actual usage, specifications etc. Raised by the appellant need to be taken into consideration and suitably replied to by the adjudicating officer. The contemporaneity is the key factor, the basic criterion, and the main yardstick for invoking Fall Back Method as envisaged in subsection (9) of section 25 of the. Customs Act, 1969 read with Rue 121 of the Customs Rules, 2001. This has been held in a similar case of enhancement of transaction value under Fall Back Method by the Appellate Tribunal Customs in the case of Premier Auto Industries v. Commissioner of Income Tax reported as 1998 (104) E.L.T 770. The same principle for reliance on contemporaneous evidence while applying Fall Back Method or Best Judgment Method has been emphasized by the Supreme Court of India in the case of Commissioner of Customs (Gen) Mumbai v. Abdullah Koyloth reported as SCI 29 October 10 as well as in two other cases reported as 6(2007)6 SCC 273 and 7(2005) 3SCC 265. As such Issue No, (v) is answered in the negative.
12. As regards Issue No,(vi) the prices obtained through Internet are not relevant in this case since they pertain to goods of different specifications. Even otherwise the prices obtained from Internet are not negotiated prices and in this case are not supported by any independent evidence of contemporaneous physical imports. In this respect it is felt essential to reproduce here a judgment of the honourable Supreme Court of India regarding reliability of Internet prices reported as [2000(117) E.L.T.49]. The relevant extract is as follow s:-- "where there was no evidence of contemporary importation of higher value, and where the department relied upon the price given in Internet and a baggage price the Tribunal ordered for acceptance of transaction value which was supported by manufacturer's price list:-
(4) We have carefully considered the pleas advanced from both sides. We agree with the submission of the learned Advocate that department's reliance on the document displayed on the internet is totally misplaced for the reasons advanced by the learned Advocate, as mentioned above, namely:-
(1) The document is unsigned.
(2) It is not known as to who had introduced the said document on the internet, and
(3) What is the nature of price indicated in the said document whether it is a retail price or a whole sale price.
' In short, the document displayed on the internet is not worthy of reliance. It is doubtful whether this document can at all be taken as the "computer printout" fulfilling the conditions of subsection (2) of section 138C of the Customs Act. It cannot be considered to be "Computer printout" merely because it has been displayed on internet. Similarly, the baggage price relied on the show-cause notice has no evidentiary value for import of goods in the curse of international trade. Further, as is rightly pointed out by the learned advocate these prices are merely assertion of the customs authorities in the show-cause notice without any documentary evidence in support of the assertion.....
' In the aforesaid facts and circumstances, the adjudicating authority has totally misdirected itself to discard the value declared by the appellants. Consequently, we set-aside the impugned order and allow the appeal with resultant relief to the appellants."
' In an another case regarding the validity of and reliability of such quotations, as obtained it was found that the argument that "Quotation of Messrs Agents Private International (A.P.I) is concerned, the same does not bear any signature and it has not been mentioned to whom the quotation has been given. Such unsigned and unauthenticated quotation, even without mentioning to whom the quotation has been sent, cannot have any evidentiary value. On the basis of such quotation, no conclusion can be arrived at. The notice refers to the decision of Hon'ble Tribunal in the case of Laxmi Color Lab. v. Collector of Customs reported in 1992 (62) E.L.T.613 wherein it has been held that the enhancement of transaction value on the basis of merely telex quotation of offer is not permissible. It stated that "The telex message cannot be relied upon for the purpose of enhancing the value of goods imported not only because the model is different, but also there is a difference of 4 months between telex message and the impugned goods. We may also point out that there is no evidence of actual import of goods in pursuance of the said telex message. Telex message is only a quotation and in the absence of actual imports in pursuance of quotation, it is in the nature of an offer. In the absence of concluded' contracts and actual imports in pursuance of telex quotation, no reliance can be placed on such quotations." [Laxmi Colour Lab v. Collector of Customs 1992 (62) E.L.T. 613 (Tribunal)".
' Unauthenticated quotations, E-Mails, telex quotations and pro forma invoices obtained by the investigating agency cannot be the legal basis for holding, that the transaction value is not genuine. In order to prove, that the sales invoices were fraudulent, the department must prove that the importers had passed on the consideration separately to the supplier (Overseas International v. CC 2000 127 ELT 599). It is a common commercial phenomenon that the manufacturers/suppliers, save certain exceptions, have a leaning of mutual bargaining, depending upon the market trends, quantity on record or, on being confronted with other offers from their competitors.
' In Print International v. CC 2001 (137) ELT 184 (T) the legal value of the price quotations was considered in some depth and it was ruled as follows:--
(a) The price quotations and published price lists per se are negotiations preliminary to offer without contractual intent and certainly essential to operative offer and these cannot form the basis for valuation, for the purposes of assessment.
(b) The price quotations by the seller, in response to buyer's requests for citing rock bottom prices, in respect of the stated quantity of specifically described goods constitutes offer to sell and can form the basis for valuation, for the purpose of assessment.
(c) Prices quotations invited by the department cannot form the basis for valuation without providing an opportunity to the importers to cross-examine the departmental officers.
(d) Price quotations addressed to a non-existing party, cannot be considered as bona fide offer in accordance with the requirements of section 14 of the Indian Customs Act, 1962 [Section 25 of this Act].
(e) Price quotations regarding goods for which the department has no data of price at which such goods are sold at the port of delivery, cannot be relied for valuation under section 14 of the Indian Customs Act, 1962 [section 25 of the Act].
' Similarly telex quotations also could not be treated as conclusive evidence. In the case of Collector of Customs v. Nippon Bearings (P) Ltd. 1991 (55) E.L.T. 68 (Tribunal) it was held, that the Collector had failed to prove, that telex quotations as seized from the importers, had resulted in concluded contracts or there were any actual imports, in pursuance of the said quotations or, that these could be considered as prices, of contemporaneous imports.
Same decision of the Hon'ble Tribunal has been confirmed by the Supreme Court 1997 (90) E.L.T.
A183. I find that the evidentiary value of the Internet quotation and/or offer cannot be equated with that of the Telex or Fax message, Internet is a medium through which prices are offered to one and all The level of transaction is the only parameter which will make a price offered for retail different from price offered for wholesale. The Commissioner therefore proceeded to reject the invoice K value of the impugned goods under Rule, 10A of the Customs Valuation Rules, 1988 and finding that the correct value could not be determined under Rules 5, 6, 6A, 7 and 7A applied for and of the Valuation Rules, after recording that the notice have not questioned that the goods being compared and in actual import are different. As such Issue No,(vi) is answered in the negative.
13. As regards Issue No, (vii), it is the established of Valuation for determination of value of old and used/secondhand machinery that comparison of secondhand machinery is legally permissible only with the identical old machinery. In other words the secondhand machines or equipment's are not comparable to one another for the purpose of valuation unless the condition of the machine manufacturer, age, uses and extent of period of which the machine has been used are shown to be identical. This view was taken in the case of Commissioner of Customs Mumbai v. J.K. Industries Ltd.. Reported as E.L.T. 2002 (137) 1286. It has been emphasized in a similar case of Collector of Customs Lahore v. A.A. International Lahore reported as 2000 PTD (Trib.) 1584 that the physical condition of goods have to be discussed threadbare in the adjudication proceedings and which is not possible without their physical examination by the naked eye. The Determination of value without physical examination by a machinery shed Appraiser would make the assessment arbitrary and against the parameters/criteria fixed by the superior judicial fora in this respect.
Reference is made to the case of Assistant Collector of Customs Dry Port Lahore v. Nagina Engineering Works Gujranwala reported as 2004 PTD (Trib.) 2438. As such Issue No,(vii) is answered in the negative.
14. As regards Issues, No,(viii), a reading of subsection (11) of section 25 of the Customs Act, 1969 shows that it merely, provides for the right of the customs administration to requisition certain documents. This right is even otherwise also available to, the customs officer in terms of section 26 ibid. It is felt imperative the text of subsection (11) of section 25 as under:-- "Nothing contained in this section or the rules, shall be construed as restricting or calling into question the rights of the appropriate officer of customs to satisfy himself as to the truth or accuracy of any statement, information, document or declaration presented for customs valuation purposes."
From reading of the above provisions it transpires that the legal position in respect of burden of proof remains the same and continuous on the shoulder of the Customs Administration. In case of section 156(2) read with section 187 of the Customs Act, 1969, the burden initially lies on the importer who has in the first instance, to discharge the initial or the 0 persuasive burden of proof and once the importer has been able to convince the Court or Tribunal to a degree where the forum so persuaded is satisfied with the Explanation or Documents produced, the burden of proof shifts on to the prosecution. It is a case of shifting of burdens. The same has been elaborately discussed in the case of Messrs Kamran Industries reported as PLD 1996 Kar. 68 where the honourable High Court of Sindh has ruled that these provisions cannot be interpreted to mean that for every offence for which the accused is charged under the Customs Act, he shall have to disprove the allegations of the customs authorities in entirety, without any obligation upon the customs department to adduce evidence. For otherwise, according to the court: "it would amount to affording unfettered, naked and arbitrary discretion to the authorities, who may at their sweet will, make out false cases, against the importers, without the need of proving the sanctity of their actions. Such cannot be the intention of the parliament, while the courts are under an obligation to place such construction on statues, which would be beneficial to the widest extent and which would make the legislation operate fairly, justly and equitable and not unreasonably". This principle has also been followed in a number of cases reported as 1969 SCM R 708, 1986 M LD 790, 1988 MLD 2420, 1988 MLD 2507, 1988 Kar. 99, 1989 CLC 1639, 1989 M LD 1451, 1990 ALD 125, 1990 CLC 834, 1990 ALD 138, 1993 CLC 1838, 1998 (75) ECR (SC), AIT 2008 124 SC, 2002 PTD 2957, 2004 PTD (Trib.) 2898 and 2004 PTD 2592. As such issue No,(viii) is answered in the affirmative.
15. As regards Issue No, (ix) a plain reading of the impugned order-in-original and order-in-appeal issued by the adjudicating and appellate authorities shows that these are not speaking orders in which all issues raised by- the appellant have not been discussed and dealt with properly. Such orders have been a deemed to be without jurisdiction in which the competent authorities have not discussed questions of fact and questions of law addressed by the taxpayer. This position has been discussed at length in the case of National Bottlers decided by the Hon'ble Lahore High Court reported as 1994 CLC 2181 wherein it has been ruled that orders passed by the authorities were not only laconic and sketchy but there was no application of mind by either of the two authorities. It was further observed that it is now a well settled law that authority exercising statutory powers of appeal and revision affecting valuable rights of the parties act in quasi-judicial if not judicial capacity and it must pass a speaking order duly supported by reasoning showing due application to facts and law applicable while disposing of the case before it. Orders lacking this criteria have been declared to be without lawful authority and of no legal effect and hence beyond jurisdiction and corem non judice. The operational portion of the order-in-original 6/209 dated 11-11-2009 in paras 11 and 12 does not address all the issues of facts and law raised by the advocate of the appellant before the Deputy Collector of Customs who is the adjudicating officer. The arguments put forth before the adjudicating officer in respect of non-issuance of the show cause notice and non-observance of the modus operandi incorporated in section 25 of the Customs Act, 1969 for determination of the assessed customs value have been brought on record through a visible exercise. The impugned order-in-appeal simply confirms the order-in-original stating that the different methods of valuation incorporated in section 25 including the Fall Back Method have been followed as per law to arrive at the customs assessed value of the subject goods. The failure to exercise, judicial mind and address all the issues raised by the advocate for the appellant by the both lower forums portray the position which is in violation and derogation of the judgments of the superior courts reported as 2004 PTD 1973, 2005 YLR 1719, 2003 PTD 777, 2003 PTD (Trib.) 2369, 2002 M LD 357, 1983 CLC 2882, 2005 PTD 2519, 2005 PTD 1189, 2003 PTD 2369. As regards non-speaking orders the Hon'ble Supreme Court of Pakistan has time and again disapproved the passing of such perfunctory orders in the cases invoking valuable rights of the parties. It is settled law that the judicial order must be a speaking order manifesting by itself that the Court has applied its judicial mind to the issues and the points of controversy invoked in the causes. Furthermore, when the reasons would not be forthcoming, obviously the Appellate Court would be deprived of the views of the subordinate Court. In any way the impugned order, which is not a speaking order and devoid of reasons is not sustainable in law being in contravention of law declared by the Hon'ble Supreme Court of Pakistan in various cases reported as PLD 1995 SC (Pak) 272, PLD 1970 SC 158, PLD 1970 SC 173 and 1984 SCM R 1014. As such issue No, (ix) is answered in the affirmative.
16. The above narration and analysis of factual and legal issues confronting the subject cases amply demonstrate that Customs Authorities have indulged into violation of mandatory provisions enumerated in the relevant statues. The judgments of the superior judicial fora regarding determination of the customs assessed values have been completely ignored. The basic principles of natural justice necessitating the issuance- of show cause notice to the appellants for inflicting such a colossal pecuniary burden have been overlooked. The whole proceedings are devoid of reasoning and legal substance, rather based on assumptions and presumptions, conjectures and surmises. In all fact and fairness these acts of gross injustice and palpable inequity have precipitated due to existence of wide and unfettered powers in the hands of Customs Authorities who made it .a handle of financial strangulation of taxpayers by arbitrary and whimsical of this authority alien to judicial process. The internet prices not duly supported by invoices contemporaneous evidential imports have been relied upon for enhancement of the declared transaction values. The customs authorities in between the period of more than five months at their disposal after the provisional release of the goods never felt the need of associating the appellants or their advocates during the process of investigation and enquiry for determining the customs assessed values of the goods in question. The basic principle which governs the determination of customs assessed value on the basis of internet prices and Fall Back Method lies in contemporaneity, of the evidential imports and the same has been flouted by the respondents which makes the whole exercise of enhancement of the declared transaction values unlawful, illegal and ab initio null and void. The orders passed by the forums below are, therefore, set aside and the subject (3) appeals are accordingly allowed.