MR. ZIAULLAH KAYANI, CHAIRMAN/MEMBER (JUDICIAL).-(l). The Hon'ble High Court of Sindh at Karachi has decided Cus. Ref. Application No. 3 to 10 of 2009 on 10.12.2009 have remanded all these applications to CESTAT to decide the appeals after dilating upon following questions of law:- "1. Whether the department while dealing with the goods under , question has applied the provisions of Section 25 of the Act, read with Rule 109 of the Customs Rules in its true spirit by fulfilling all the legal requirement as envisaged under the law in this regard?.
2. Whether the department while dealing with the goods under question has applied the provisions of Section 81 of the act in true spirit by fulfilling all the legal requirement as envisaged under the law in this regard?"
2. As directed by the Hon'ble Sindh High Court at Karachi, a Division Bench consisting of Member (Judicial) and Member (Technical) of Customs Appellate Tribunal was constituted. The appeals were heard at length by giving proper opportunity of being 'heard to both the parties.
3. Before dilating on the specific issues as referred by the Hon'ble Sindh High Court at Karachi, brief facts of the case are summarized as under:- Brief facts of the case are that the appellants imported a consignment of Air-Conditioners (split type) from China vide IGM No. 398/2006 dated 10.05.2006 index No. 67 and sought release thereof under PCT Heading 8415.1000 . Through clearing agent M/s. Noor Corporation, Karachi (CHAL NO. 1137). The imported goods were accordingly released under section 81 of the Customs Act, 1969 against the PDC, and the case was referred to the Directorate General of Valuation & PC A for determination of normal customs value. Subsequently the Director General Valuation & PC A Customs House, Karachi vide its letter No. Misc/04/2006/NA/575 dated 12.02.2007 directed that the assessm ent be finalized in the light of PCA's letter No. Misc/01/2006-VA/2804. Dated 20.04.2006.
Accordingly the customs value of the subject imported goods declared at US $ 195.80/units was determined at US $ 221/unit under section 81(2) of the Customs Act, 1969. Accordingly the government revenue amounting to Rs. 454072/- as customs* duty, Rs. 340554/- as sales tax and rs. 156655/-,as income tax (Total Rs. 985336) was found payable by the importers under sub- section (3) of section 81 read with section 32(3) of the Customs Act, 1969. The appellants were charged under the relevant provisions of law as quoted in the Order- in-Original dated 16.05.2007 and rejected the contentions of the appellant. Appeal as filed before the Collector (Appeals) was also rejected on 16.01.2008. Thereafter, the appeal as filed before the Customs, Federal Excise & Sales Tax Appellate Tribunal was also rejected vide order dated 22.12.2008. The appellant went in reference before the Hon'ble Sindh High Court at Karachi and the appeals were remanded back to Customs, Federal Excise & Sales Tax Appellate Tribunal for consideration with particular reference to two questions of law as referred to the Customs, Federal Excise & Sales Tax Appellate Tribunal for adjudication afresh.
5. That the first issue as directed by the Hon'ble Sindh High Court at Karachi is to be examined in its true spirit by fulfilling all the legal requirements is while applying Section 25 of the Customs Act, 1969 read with Rule 109 of Customs Rules, 2001. The appellant and respondents were given ample opportunity of being heard and to explain their positions. The appellants arguments were repetition: of the previous arguments wherein it was argued that the order as passed by the Learned Collector (Appeals) and confirmed by Customs, Federal Excise & Sales Tax Appellate Tribunal has ignored the legal aspects of the case. It was further argued that the respondents have no justification while rejecting the transactional value in the absence of sequential manner application of Section 25 of the Customs Act, 1969. Emphasis was also laid on work back method calculations as made by the Director General valuation, as declared value by the appellant is the correct value and is liable to be accepted under section 25(1) of the qua Act. It was also argued that the final assessm ent as framed under Section 81(2) of qua Act is time barred. The A.R. Of the appellant has also relied upon a number of case laws:- a. 2008 SCM R 438 (Collector Customs Port Muhammad Bin Qasim V/s. Zymotic Diagnostic International, Faisalabad).
"Section 25 of the Customs Act authorizes an officer of the Customs Department to reject the declared value of a consignment imported in Pakistan and to assess the same. Section 25 lays down various modes in which the officials of the Customs Department are required to proceed in determining or assessing the value of the consignment after rejecting her declared value. However, for rejecting or refusing to accept the value declared by a consignee in respect of imported goods, the concerned officer is required to give cogent, plausible and satisfactory reasons for non- acceptance of the declared value and rejection thereof which cannot proceed on the whims or desire of the officer of the customs. He is required to point out some flaw or defect or such circumstances which create doubt with regard to the veracity and correctness of the declared value or that the same had been under invoiced. Similar in determining or assessing the fair value or normal price of such imported consignment the concerned officer is under an obligation to take into consideration all the necessary factors and circumstances enumerated in section 25 of the Customs Act, 1969 for such determination and assessment. From a perusal of order of the Collector of Customs, it transpires that neither satisfactory and convincing grounds for not accepting the declared value of the imported consignment were given nor the factors and grounds necessarily required to be taken into consideration for determining the fair or normal value of imported consignment were adhered to." b. 2006 PTD 909 (Rehan Umar V/s. Collector of Customs, Karachi & 2 others)
"The established principle of interpretation of the tax laws is that the plain language of the law is to be applied. A bare perusal of section 25 shows that it is specifically provided in sub-section (1) of Section 25 that the customs value of the imported---------- subject to the provisions of this section and rules shall be the transaction value i.e. The price actually paid or payable for the goods when sold for export to Pakistan. The detailed guidelines in this behalf are given in sub-sections (1), (2), (3) & (4). The provisions contained in section 25(1) to (4) contain primary method of valuation and in the first instance the primary method of valuation is required to be adopted in each case of valuation of the imported consignment which is mandatory. The detailed guidelines in this behalf are contained in section 25 and the rules reproduced above. Thus, it is the mandatory requirement of law that before resorting to the method provided in sub-section (5), the customs officials, shall make an exercise in accordance with the provisions contained in sub-section (1) to (4) of section 25 and if thereafter they find that the customs value of the imported goods cannot be determined under the provisions of sub-section (1) they shall resort to the method provided in sub-section (5) and not otherwise. It shall be an exercise duly reflecting on the record so that the appellate forums may examine whether the mandatory requirement of law has been carried out or not. We are further fortified in our views in this behalf with the provisions contained in sub-rule (3) of Rule 109 which provides that "when a final decision is made, the appropriate officer shall communicate to the importer in writing his decision and the grounds therefore" In addition to the specific provisions contained in sub-section (10) of section 25 to the effect that the methods of customs valuation are required to be applied in a sequential order we find that it is provided in sub-section (6) that, if the customs value of the imported goods cannot be determined under the provisions of sub-section
(5) the method provided in sub-section (7) shall be resorted to and similar provisions are contained in sub-section (7), (8) and (9).
For the foregoing reasons it is held that different methods of valuation provided in section 25 of the Customs Act, 1969 and the Customs Rules, 2001 are required to be applied in a sequential order and without visible exercise reflected on record no resort can be made to sub-section (5) and likewise without similar exercise under sub-section (5) no resort can be made to sub-section (6). In the same manner without an exercise in writing on record under sub-section (6) no resort can be made to subsection (7) and similarly to sub-section (8) & (9). This exercise is to be made in each case separately. On the basis of exercise in the case of earlier imports by other importers it cannot be applied to any sub subsequent import by another importer. The reason being that it is provided in Rule 109 that where appropriate officer has reason to doubt the truth or accuracy of the particulars or of documents produced in support of the declaration, such officer may ask the importer to provide further explanation, including documents or otherwise. Under subsection (1) of section 25, the customs value of the imported goods is to be determined subject to the provisions of section 25 and the rules. The rules envisage inquiry in case of each import giving right to each importer to provide explanation and produce documents or other evidence in support of his/her declaration. When the provisions contained under section 25(1) of the. Customs Act, and the rules, are read with sections 79 under the said Act, they lead to same conclusion. Under section 79, the owner of any imported goods is required to file a goods declaration containing correct and complete particulars of the goods and its assessment i.e. Valuation of the goods, its value and the duty, taxes and other charges payable thereon. Under section 80, on the receipt of goods declaration under section 79, an officer of the customs shall satisfy himself of the correctness of the import including declaration and assessment. It indicates that initially the valuation' of goods and assessm ent is to be given by the importer himself, which if found satisfactory, shall be accepted. However, if the appropriate officer is not satisfied with the said declaration, he shall make his own assessm ent in accordance with the law. This exercise cannot be done without examination of each consignment, declaration of goods examination of assessment given by importers and of the documents in this behalf.
It is further provided in section 81 that where it is not possible for the officer of customs during the checking of the goods declaration to satisfy himself of the correctness of the assessment of the goods made under section 79, for reasons that the goods required chemical or other test or a further inquiry, an officer, not below the rank of Assistant Collector of Customs, may order the duty, taxes and other charges payable on such goods be determined provisionally. Section 81 further prescribes the manner and method in which the goods shall be released on provisional assessm ent and thereafter shall make further inquiry as deemed necessary for the purpose of final determination of duty over the amount determined provisionally. The differential amount is to be paid through bank guarantee or post, dated cheque. This differential amount is to be determined by the officer of the customs which according to him is sufficient to meet the likely difference between the final determination of duty over the amount determined provisionally. Here the question arises as to how the duty, taxes and other charges payable on such goods are to be determined provisionally. The law is silent on the point as to what is meant by provisional determination and how it is to be made. So far, final determination is concerned there is no ambiguity, as it is to be made by officer of Customs either by accepting the declared valuation and assessm ent of after complete scrutiny, examination of documents, evidence and full-fledged inquiry. It is provided in sub-section (4) of section 81, that if final determination is not made within the period specified in sub-section (2), the provisional determination shall in the absence of any new evidence be deemed to be the final determination. In the explanation to section 81, the legislature has defined the expression provisional assessment to mean the amount of duties and taxes paid or secured against bank guarantee or post dated cheque. As already observed the expression provisional determination has not been defined by the legislature. There are two possibilities only. The first, that in the absence of any evidence in the possession of customs and in the wake of further enquiry ensued the declared valuation and assessment in terms of section 79 read with section 80 be taken as provisional determination and the State revenue be protected through the mechanism provided in section 81. The second, is that officers of Customs be allowed to make provisional determination by adhoc enhancement over the declared value." c. 2006 PTD 2807 (M/s. Khan Trade Internationals V/s. Assistant Collector Customs (Group-VII) Appraisement. Collector, Karachi and 4 others). d. 2006 PTD 674 (M/s. Pakistan Dry Battery Manufacturers Association V/s. Federation of Pakistan through Secretary, Revenue Division, Islamabad and 9 others). e. 2004 PTD 2592 (Karachi Bulk Storage and Terminal (Pvt.) Ltd.
V/s. Controller of Customs (Valuation), Karachi & others)
6. That the nut-shell of all the judgments as referred of Honorable Supreme Court of Pakistan and Hon'ble High Courts of Pakistan is in respect of application of Section 25 of the Customs Act, 1969 for valuation of imported consignments in order to arrive at transactional value which is the price actually paid or payable on the goods, when sold for export to Pakistan. The declared transactional value can only be rejected by the respondent, if there exists satisfactory and convincing grounds to reject the declared transactional value. However, the respondent is not bridled with unfettered discretionary powers but to follow Section 25 of the Customs Act, 1969 in sequential manner as pronounced by the superior courts of Pakistan.
7. The representative of the respondent argued as under:-
(i) That during the period of import of subject goods there were several complaints to the effect that the air-conditioners were being imported on gross under-invoiced value. Therefore, the customs value of air-conditioners at import stage was being determined in the light of agreed prices/indicative prices mechanism, a practice prevalent in the clearance Collectorates for many imported commodities which was circulated amongst all the clearance Collectorates.
(ii) That the declared prices of air-conditioners imported by the appellant was on lower side when compared with the indicative values.
(iii) The appellants were asked to justify their price, but they could not able to satisfy the assessing authorities under sub-section (11) of Section 25 of the Customs Act, 1969 read with Rule 109 of the Customs Rules, 2001, in respect of the declared transaction value. Therefore, the assessment could not be made under section 25(1) of the Customs Act, 1969.
(iv) That as there was no indication of related party on record, as far as import of appellant is concerned, therefore, sub-section (2), (3) & (4) of Section 25 of the act, has no relevance in the case.
(v) That as the goods under reference are being imported under group under invoiced value, therefore, the value of identical and similar goods could not be taken as reference under sub- section (5) & (6) of Sections 25 of the Act.
(vi) As stated under para, (v) above, there was group under invoicing phenomena involved, therefore, the value could also be not determined by applying "deductive value method" under sub-section (7) of Section 25 ibid, though a comprehensive work back analysis was carried out. It is pertinent to mention here that the market prices taken for work back were already based upon under invoiced value, therefore, same could not be relied upon and as such only the work back analysis could not made basis while issuing the impugned Valuation Ruling.
(vii) That a comprehensive product analysis was carried out and the Directorate computed the value on the basis of prices of raw materials including energy, steel/LME, aluminum, copper, plastic, etc. Under sub-section (8) of Section 25 ibid.
(viii) That in view of above, it is stated that the Directorate General of Customs Valuation had issued the impugned Valuation Ruling after taking into consideration all the parameters involved in the valuation of the goods and have applied the Section 25, in its true letter and spirit in sequential order.
(ix) That the Hon'ble Tribunal may also like to appreciate that the aforesaid exercise was not confirmed the case of appellant alone, but for all the importers of Split Air-Conditioners across the board. The fairness of the exercise carried out by the Director Valuation may kindly be visualized from the fact that all the stakeholders were taken on board and the prices so determined were apparently mutually agreed upon.
8. That the arguments of the appellant and the respondent have duly been considered. The basic issue regarding the application of Section 25 of the Customs Act, 1969 in a sequential manner has been challenged which process has not been completed by the respondent/department and unless the said sequence is completed, Section 25 of the Customs Act, 1969 application is not sustainable in the eyes of law. The respondent on the other hand has given a proper factual position in respect of application of Section 25 of the Customs Act, 1969 viz the period under reference there were number of complaints available with the respondent that the import of air- conditioners was being made in the country by grossly under invoiced values through mechanism of group under invoicing. The respondent, having responsibility to determine accurate/indicative prices mechanism while clearing different commodities and in order to ensure uniformity, the same inductive value is endorsed to different Collectorates to have uniformity, transparency and consistency in the assessm ent of subject goods. The respondent in this back ground asked the appellants to confirm the veracity of the transactional value in order to satisfy as per requirements of Section 25(11) of the Customs Act, 1969 read with Rule 109 of the Customs Rules, 2001. The respondents have also given a detailed analysis of their working while determining the value for the purposes of customs valuation and the sequential order of Section 25 of the Customs Act, 1969 has duly been taken into consideration. The respondents in order to have a proper compromise, all the stake holders were duly associated while the uniform import value was to be determined by the Director General Customs Valuation. The main factors having overall influence on the valuation of split Air conditioner such as increase in prices of raw-materials including energy, steel/LME, alumni, copper, plastic etc. Were taken into account as per Section 25(8) of the Customs Act, 1969.
The appellant was also duly associated while the inductive value was computed by the respondent. This revised price has been fixed keeping in view the factors which have led to increase in the over all prices in domestic as well as international market. The Director General (Valuation), has given his recommendations and after conscious application of mind has also proposed the valuation to be adopted under section 25 of the Customs Act, 1969 to be adopted as detailed in the letter circulated to all the Collectorates for implementation. The inductive value as fixed by the Director General Valuation is the same which was also adopted while releasing the goods U/s 81 of the Customs Act, 1969. The whole exercise has been made taking into consideration of the factors and also the opinion of the stake holders involved in this business. Section 25, 25-A and 25-D of the Customs Act, 1969 have duly been, applied in a sequential order and the inductive value/price as determined for the industry is a uniform value which is being applied on all the importers of different brands of the Split Air Conditioner industry. There is no discrimination which has been made with the appellant.
9. That the A.R. Of the respondent also relied upon Rule 109 of Customs Rule, 2001 wherein burden of proof lies upon the importer (appellant) to substantiate the accuracy and truth of the particular documents as submitted are true. The appellant has not supported their claim through certificate of manufacture, the certificate of Chamber of Commerce of China on which verification was also required from Pakistan High Commission.
10. That the A.R. Of the respondent repelled the contention of the appellant regarding non fulfillment of Rule 112 of the Customs Rule, 2001. Valuation as fixed is after conducting exercise evaluating different brands, quality, goodwill, standard, countries of origin, price variables of different raw material, steel/LME and cost of energy. The appellant was duly associated in exercise as a stake holder which was made for the whole industry of Air- conditioner split units of different brands including the brands of the appellant. The Director General Valuation has fixed the valuation prices of different brands after conscious application of mind and the price of 18000 BTU Split Air Conditioners per unit was suggested @ U.S. $ 221 to be applied uniformly.
11. That the above stated factual position and application of relevant law obtaining on record clearly reveals that the respondents have not only fulfilled the criteria of valuation as per Section 25 of the qua Act but have also determined the custom value of goods under section 25-A & 25-D of the Customs Act, 1969 in order to give uniform treatment to the total industry which is a prevalent practice.
12. That in the light of above, it is patently clear that the respondents has applied provision of Section 25 of the Customs Act, 1969 read with Rule 109 Of the Customs Rules, 2001 in its true spirit and all the legal requirements as envisaged appear to have rightly been applied and the answer to question No. 1 as referred to above by the Hon'ble Sindh High Court at Karachi is in affirmative.
13. That the second question as referred to above by the Hon'ble Sindh High Court at Karachi is regarding application of provisions of Section 81 of the Customs Act, 1969 in its true spirit after fulfilling all the legal requirements as envisaged under the law. The appellant argued that the final assessm ent which was to be made U/s 81(2) of the Customs Act, 1969 is barred by limitation as the same has not been finalized in the period as given in the Statute. Learned counsel for the appellant has also cited different case laws in respect of time barred assessments are not sustainable in the eyes of law. The Learned counsel for the appellant also stated that the provisions of Section 81(4) of the Customs Act, 1969 alongwith explanation is not binding upon the appellant in the presence of decisions of the Hon'ble Superior Courts. The declared transactional value is liable to be accepted by the respondent.
14. That the respondent in reply stated:- i. "The price declared by the appellant was not correct transaction value, the importer himself opted for provisional assessm ent under section 81, therefore, on a specific request of the appellant, the goods were released under section 81 of the Customs Act, 1969 against post-dated cheques and the case was referred to the Director General of Customs Valuation, Custom House, Karachi for determination of normal customs value; ii. As the case was under process by the Directorate General of Valuation and the time period prescribed for finalization of the case of provisional assessment was going to be expired. The Directorate Valuation had requested for extension for further 90 days, therefore, on 26.01.2007, the competent authority i.e. Collector of Customs has accordingly granted extension of 90 days for finalization of the case; iii. An exhaustive exercise was conducted by the Director General of Valuation wherein appellant also participated and remained all along in the proceedings. Subsequently, the Directorate Valuation vide its letter No. Misc/04/2006/VA/575 dated 12.02.2007 directed that assessment be finalized in the light of Directorate's letter No. Misc/01/2006-VA/2804 dated 20.04.2006 wherein it is specifically mentioned that the indicative values for split air-conditioners have been worked out keeping in view various factors affecting the prices like increase in value of raw materials, soaring energy prices and their percentage impot of the values as calculated by the section expert of IOCO. iv. However, the appellant filed C.P. No. D-329 of 2007 in the Hon'ble High Court of Sindh at Karachi, challenging the vires of the Directorate Valuation's aforesaid letter, which was disposed of by the Hon'ble Court vide order dated 21.02.2007 with the directions to the respondents not to encash the postdated cheques in question, before passing final order. However, in its order, the Hon'ble High Court did not strike down the findings of the Directorate Valuation. v. The Section 81 requires the "determination" of value within 9 months or the extended period of 90 days. Accordingly, the Customs value of the subject imported goods was "determined" during the stipulated time period by the department in view of the valuation advice under section 81(2) of the Customs Act, 1969 and demand-cum-show cause notices were issued to the appellant under sub- section (3) of Section 81 read with Section 32(3) ibid, wherein it was specifically mentioned that the value had been determined; vi. Regarding the time-barred issue, it is submitted that the value was determined within the stipulated period as required under section 81 as is evident from the demand-cum-show cause notices. As far as the ORDER is concerned the importer/appellant himself sought adjournments during proceedings for passing the order from time to time. Total adjournment for 60 days was granted in all cases. Therefore, delay in passing order if any, is on the part f the importer appellant; the appellant on the one hand had sought documents on pretext and other, and on the other hand blames for delay in passing the order.
Vii. Even otherwise, if for the sake of arguments, the contention of the appellant is accepted, then as the provisional assessm ent had attained its finality under section 81(2) of the Customs Act, 1969, the guarantee furnised/indemnity bond/post-dated cheque can nor be released as according to the explanation provided in Section 81 of the Customs Act, 1969. "Provisional assessment means the amount of duties and taxes paid or secured against bank guarantee or post dated cheque."
15. After hearing arguments of both the parties, it is observed that the appellant himself opted for provisional assessm ent under section 81 of the Customs Act, 1969 and goods were accordingly released after obtaining post dated cheques from the appellant. The cases were referred to Director General (Valuation), Customs House, Karachi for determination of assessable customs value of subject goods. The exercise undertaken by the Director General (Valuation) Customs House, Karachi was lengthy and proceedings could not be finalized in the stipulated period, hence, extension in time as provided in law was sought which was duly granted by the competent authority i.e. Collector Customs. Admittedly the appellant sought adjournment from the officer of original jurisdiction and total sixty days adjournments were sought by the appellant. The detail of adjournments sought by the appellant has also been filed by the respondents.
16. Apart from the factual position, regarding final determination U/s 81(2) of Customs Act, 1969, explanation of Section 81(4) states in clear terms that provisional assessment means, the amount of duties and taxes paid or secured against the bank guarantee and post dated cheques.
17. At the face of it, it is evident that provisions of Section 81(2) of the Customs Act, 1969 have been complied with and final assessm ent has accordingly been made. Even otherwise, Section 81(4) of the qua Act provides that provisional assessment is deemed to be final assessment, if final assessm ent is not made within the statutory time limit as provided in Section 81(2) of qua Act. It is a matter of coincidence that final and provisional value assessed is the same.
18. In the light of the above stated legal and factual position and after conscious application of mind and giving our anxious thoughts, we are of the opinion that both the questions as have been referred to this Tribunal by the Hon'ble Sindh High Court at Karachi relating to application of provisions of Section 25 and Section 81 of the Customs Act, 1969 in true letter and spirit by the respondents have been applied within the fore-comers of provisions of law and the valuation as determined has been made in consultation with all the stake holders as the valuation is applicable to all the split air-conditioner industry and uniformity is duly maintained.
19. Both the questions of law are answered in the affirmative.
20. There is no discrimination with the appellant. The appeal having no merits is dismissed.
21. This order shall also apply mutatis mutandis in the following identical appeals.
1.C.A.No.35/2010M/s. Dawlance Electronics (Pvt.) Ltd.
2.C.A.No.36/2010M/s. Dawlance Electronics (Pvt.) Ltd.
3.C.A.No.37/2010M/s. Dawlance Electronics (Pvt.) Ltd.
4.C.A.No.3 8/2010M/S. Dawlance Electronics (Pvt.) Ltd.
5.C.A.No.39/2010M/s. Dawlance Electronics (Pvt.) Ltd.
6.C.A.No.40/2010M/s. Dawlance Electronics (Pvt.) Ltd.
7.C.A.No.41/2010 M/s. Dawlance Electronics (Pvt.) Ltd.
8.C.A.No.42/2010M/s. Dawlance Electronics (Pvt.) Ltd.