' MUHAMMAD NADEEM QURESHI, (MEMBER (JUDICIAL-I)).-We intend to dispose of the instant- appeal filed by Messrs United Auto Industries (Pvt.) Ltd., against the Order-in-Review No,307 of 2012 dated 24-10-2012, passed by the Director General, Directorate General of Customs Valuation, Customs House, Karachi.
' Brief facts of the case are that the customs values of Motorcycles Parts were determined through two different Rulings of shock absorber and other motorcycles parts. Model Customs Collectorate Appraisement sent a reference for revision of valuation ruling of motorcycles components and accessories of Shock Absorbers in order to reflect the current price trends in the international market. This prompted an exercise to re-determine the customs values of motorcycles parts and to consolidate the above two ruling into one, Meetings were held on 15-1-2012, 2-3-2012 and 15-3- 2012, with the member of All Pakistan Automobile Spare Parts Importers and Dealers Association (APMSPIDA), Pakistan Association of Automotive Parts and Accessories Manufacturers (PAPAAM), Messrs Al-Badar Engineering Company, Messrs Balochistan Engineering, Multan, Messrs Agriauto Industries Ltd., and Original Equipment Manufacturers (OEMs). The Associations of manufacturers and venders argued for maintaining the previously determined customs values for motorcycles parts, however, the importers of motorcycle parts asked to lower the customs values to reflect current price trend in the international market. Valuation methods given in section 25 of the Customs Act, 1969 were examined to ascertain which method was applicable to the valuation issue in hand in terms of section 25(A)(1) of the Act. Transactional value method provided in section 25(1) was found inapplicable because the requisite information with respect to adjustments to be made to the transactional value in terms of section 25(2) was not available. The record of customs values of identical and similar goods in terms of sections 25(5) and (6) was examined to gain an insight into the subject matter. These declared values reflected a downward price trend in the international market. A market enquiry under the deductive valuation method provided in section 25(7) of the Act was also conducted to in order to gain further insight into the prevailing price trend of motorcycle parts. The findings under the Identical Goods Valuation Method, Similar Goods Valuation Method and the Deductive Valuation Method were synthesized into the Fall Back Valuation Method provided in section 25(9) of the Customs Act, 1969. The method for valuation of imported goods was found to be the most appropriate and applicable method for the valuation issue. Accordingly Valuation Ruling No, 458 of 2012 dated 24-5-2012 was issued.
3. Being aggrieved from the subject Ruling which was assailed before the Director General of Customs Valuation, Karachi and filed Review Application, wherein the impugned Order was passed.
Being aggrieved with the Order in Review passed by the Director General of Customs Valuation, Karachi, appellant filed the instant appeal before this Tribunal on the grounds along with the prayer mentioned in the Memo. Of Appeal which were taken on record.
4. Mian Abdul Ghaffar, Advocate, appeared on behalf of the appellant and Mr. Shamim Ahmed, Principle Appraiser, appeared on behalf of the respondents. The advocate for the appellant endorsed the pleadings of appeal already submitted along with the prayer and contended that the appellant being the manufacturer of Motorcycle Parts duly certified and approved as Vendor by the Engineering Development Board (E.D.B) and used to import various parts/components/kits for their production and manufacturing of parts including Shock Absorbers from China and other parts of the world and the subject imported material/goods were legally cleared on the values declared at the time of import and there was no incident of any dispute and all transactional values were accepted in terms of section 25(1) of the Customs Act, 1969. He also submitted that the previous valuation Ruling No, 307 of 2012 dated 24-10-2012 whereby the value was fixed and in compliance of that ruling several consignments were cleared in accordance with the procedure.
However, on the complaint of one private person, who was ready to purchase the imported material at enhanced values by getting that substantive pressure the Director Valuation without following mandatory provision of law issued a new valuation Ruling No, 458 of 2012 dated 24-5- 2012 exclusively on the whims and desires of the complainant. The subject ruling was assailed before the competent authority in terms of section 25-D of the Customs Act, 1969. Wherein it was agitated that the subject ruling is totally against the previous Valuation Rulings No,333 of V11 dated 7-6-2011 and Valuation Ruling No,394 of 2011 dated 27-10-2011. He pointed out that the previous ruling was issued after arriving at a consensus between all the stake holders including local manufacturer, commercial importers, trade bodies etc. Which covers all the motorcycle parts and the said valuation ruling was smoothly applied all the assessing officers all over Pakistan and there was no complaint from any side.
5. He contended that the second previous ruling dated 27-10-2011 was issued for the determination of customs value of Shock Absorbers components/parts was determined @ US$ 1.71/kg, whereas in the impugned ruling the value has been enhanced to @ US$ 3.00/kg (for OEM) and @ US$ 2.10/kg (for commercial importers) without any evidence. Likewise for other items if the comparison is made with the first previous ruling dated 7-6-2011 the customs values mentioned in the impugned ruling. Dated 24-5-2012 are not practicable/applicable due to arbitrary enhancement and disparity for levy of duties and taxes on OEM importers and the commercial importers. According to the impugned ruling the commercial importers are very much at advantageous position. He further contended that the reference made by the Appraisement Collectorate was only with regard to the components of Shock Absorbers and as per subsection (1) of section 25-A of the Act, the Director (Valuation) can only determine the customs value for those items for which any reference has been received by him, therefore, considering the contents of the reference forwarded by the Collector (Appraisement) to the Director (Valuation) the value determined by the respondent for other 38 items is even otherwise illegal and without jurisdiction. This is also confirmed from the fact that the Valuation Department vide their "Meeting Notice" dated 20-12-2011 has called the stakeholders, including the applicant, for hearing held on 5-1-2012. In the said meeting no dispute between any of the stakeholder about the valuation of motorcycle parts and hence agreed that same values should be maintained. He further contended that as far as the parts, other than the Shock Absorber, are concerned the applicant has been condemned unheard and no meeting was called after 5-1-2012 hence this ruling was made at their own. The respondent, prior to passing the impugned ruling, has not afforded any opportunity of hearing to the applicant before determining the customs values of "Motorcycle Parts". It is one of the basic principles of natural justice as laid down by the superior Courts 'that every person must be given reasonable opportunity of being heard, hence, the learned respondent was obliged to give a proper and reasonable opportunity of personal hearing enabling the applicant to establish. That the transaction values declared by the applicant were the true customs values. It has been recorded by the respondent in the impugned ruling that meetings were held on 25-1-2012, 2-3-2012 and 15-3-2012 but the applicant, which is one of the main stakeholder in the instant case, has neither invited in the meeting hence not attended any of the aforesaid meeting, however, during the meeting held on 5-1-2012 for determination of value of the Shock Absorber, the applicant has produced all the evidences and proved that the said goods were cleared @ US$ 1,71 /kg.
6. He further argued and contended that while determining the customs value through the impugned ruling, the respondent has failed to make any reference to the guidelines issued by the Honourable High Court in the case of Sadia Jabar v. Federation of Pakistan. The Honourable High Court in its order had specifically mentioned that the provisions of section 25 of the Act are to be followed/ construed strictly and in a sequential manner. The Honourable High Court has held that the officer, as per the provisions of section 25 of the Act, cannot jump to a subsequent methods, prescribed in a particular subsection of section 25, while determining the customs values and cannot jumped without explaining why the preceding subsection and the methods enumerated therein was not applicable. It has been further held that all customs values are to be determined initially on the basis of declared transaction value and in case the same cannot be determined the appropriate officer shall apply the other methods as envisaged in section 25, in sequential order.
The impugned ruling of the respondent does not stand of judicial scrutiny. While determining the customs value of Motorcycle Parts in terms of section 25-A of the Act, the respondent was obliged to follow the methods of determination of value laid down in section 25 and further in line with the guidelines provided by the Honourable High Court, section 25 of the Customs Act, 1969, inter-alia prescribes:-
(i) the customs value shall be the transaction value, that is the price actually paid or payable for the goods when imported into Pakistan, - subsection (1) of section 25.
(ii) where the appropriate officer of customs is of the opinion that declared price does not closely approximate to one of the test values, the officer shall inform the importer of his reservations in writing and give the importer an opportunity to justify, the price difference ---subsection (4) of section 25.
(iii) the officer shall proceed further if the importer fails to justify the price difference and customs value shall be the value of identical goods sold for export to Pakistan at or about same time (within 90-days prior to the importation or within 90-days after the importation of goods being valued), - subsection (5) read with Rule 107(a) of the Rules.
(iv) in case value is still not determined, the customs value shall be the value of similar goods sold for export to Pakistan at or about same time, --- subsection (6) of section 25.
(v) if customs value cannot be determined through methods referred to above paras it shall be deductive value, -- subsection (7) of section 25.
(vi) if customs value cannot still be determined, it shall be the computed value---subsection (8) of section 25.
(vii) if customs value cannot be determined through any of methods, it shall be determined on the basis of previously determined customs value of identical goods assessed within 90 days, - all back methods prescribed in subsection (9) of section 25.
7. The Advocate for the appellant further contended that while determining the values through the mechanism of market survey, the authority preferred to apply method prescribed in subsection (7) of section 25 of the Act and failed to observe that there was no ground or plausible reason to reject the declared value of the applicant. Even otherwise, the results of market survey were discussed with the applicant as was directed by the Honourable High Court. Further in the Honourable High Court has very categorically observed that while making such an inquiry the information must be obtained from the producer of the goods, it seems that no such exercise has been carried out for the impugned ruling also and once again the method was applied essentially on the basis of purported information supplied by the local manufacturers. He further contended that the respondent has also failed to appreciate the provisions pertaining to "Prohibited Method" contained in Rule 110 of the Rules, which prescribes that where the value of imported goods cannot be determined under subsections (1), (5), (6), (7) and (8) of section 25 of the Act, the customs value shall be determine on the basis of data of imports available with the customs department.
The learned respondent was obliged to apply deductive method after exhausting the methods prescribed in preceding subsections. The learned respondent has fallen into error of law by directly applying the method prescribed in subsection (9) rendering the whole exercise nullity in the eyes of law.
8. He further contended and argued that the respondent deliberately and knowingly acting discriminatively against the appellant while passing the Review Order and deny the relief and allowed the same to the others. He also contended that the respondent has no jurisdiction of section 19A of the Customs Act, 1969 to determine as to whether any incidence of tax has been passed on to the buyer or not and observations made thereon are without the warrant of any law.
9. The representative of the respondents reiterated the arguments already filed through comments and prayed that the Review Order No,307 of 2012 dated 24-10-2012 is well within the four corners of the law and the subject appeal may kindly be dismissed on the ground of lacking merits.
10. We have examined the case record and given due consideration to the arguments extended by both the parties, the important contention raised that the Director Valuation perverse from the contention of the statutory obligation as prescribed under sections 25 and 25A of the Customs Act, 1969 issued the said impugned Ruling and the efforts made by the Director Valuation can only be appreciated when the same were conducted in accordance with the law. In this regard the Supreme Court of Pakistan in the case of Messrs gymotic Diagnostic International C.P. No,434-K of 2005, has held that the fixation of value must be done by following the provisions of law in a sequential order and that too in line with the spirit of section 25 as well as GATT Rules. Operative para of the said decision of the Supreme Court is as under:-- "Section 25 of the Customs Act Authorizes and 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 the 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?"
' The Sindh High Court in its recent order has observed that; "Language of section 25 is mandatory and it requires the department to follow step by step for the purpose of determining value and if there is no result coming out then they may avail the remedy under section 25A.... The language of section 25 of the Customs Act is mandatory and it requires the department to follow step by step for the purpose of determining the value of the imported goods and if there is no result coming out then they may avail the remedy under section 25A, as per language of the above section the domination of the import value should be on the basis of transaction value, provided that conditions provided in subsection (1)(a) of section 25 are not available. If an importer is crossing subsection (1)(a) then other subsection (25) of the Act to be followed.
' Where the Customs Authorities have given valuation ruling without reasoning, without mentioning as to how they reached that conclusion and without giving opportunity of being heard, the ruling cannot be sustained...The customs authorities have given-the ruling without any reasoning nor it has been mentioned as to how they have reached that conclusion or do they have evidence of other imports on more value nor the affected persons have been given any opportunity to be heard.
' In such a situation, ruling relied upon by the department cannot be sustained and assessment on its basis is set aside."
' This view is further supported by the directions of the superior courts held in the cases reported in 2006 PTD 1635, 2006 PTD 2142, (sic) SCMR 1446, 2007 PTD 523 and 2007 SCM R 1357.
11. As such, when the subject mandatory requirements were not opted by the person having the jurisdiction to issue a Valuation Ruling in violation thereon prescribed and defined in section 25 of the Customs Act. It is well settled law that no time limitation would run against the illegal Valuation Ruling which was neither observed by the Director Valuation nor follows the dictum of law as defined by the Superior Courts.
12. It is also important to observe and note here that section 25A is "Pre-determination of the customs value, the determination can only apply in relation to goods not only imported at the time that the determination is issued". After years no Valuation Ruling that the goods are actually imported; it is only section 25 of the Customs Act which is applicable. The Valuation Ruling issued under section 25A, only apply for a certain period and no more, this expression has been defined in Chapter-XI of the Rules. (in Rule 107 meaning) within 90 days prior to the importation or within 90 days after the importation of goods being valued". In our view Valuation Ruling must therefore ordinarily be regarded as well as for a period of 90 days from the date of issue. After the amendment of section 25A subsection (4) of the Customs Act through Finance Act, 2010 provides that a Valuation Ruling "shall be applicable until or unless revised or rescinded by the competent authority" while the Valuation Ruling will continue to hold in the filed unless revised or rescinded,.
Any aggrieved importer has the right to approach the concerned officer after the 90 days period mentioned above and he would then have to give reasons why the Ruling has not been revised or rescinded and as such the observation made by the Director General Valuation are perverse from the evidence, ultra viral and without lawful authority.
13. Before further conclusion, general observation must also been made in section 25A which is only an enabling section, it permits, but does not mandatorily require, a predetermination of customs value in terms as explained above. The principle method of determining customs value is, and must remain, section 25. Section 25A is not intended to be a substitute for section 25, nor can it be resorted to, in such manner and with such frequency that, it marginalizes the latter provision. It is merely an adjunct to section 25, to be resorted to in appropriate circumstances and for an appropriate period. In our view, in enacting section 25A, the legislatives intent was not, nor could be for the reasons stated above, to create a statutory bypass to the Valuation Agreement. While issuance of valuation ruling under section 25A cannot be regarded as limited only to those cases where the Department concludes that there is group under-invoicing, the section also cannot be used for the wholesale determination of customs values. Such as an approach would, in effect, transform the "determination" permissible under section 25A to an impermissible "fixation" of value.
This is an important point which must be kept in mind, and may be relevant in appropriate cases when considering the vires of a valuation ruling.
14. It is also important to observe that the valuation ruling must be determined using one of the methods of section 25 of the Act and the valuation agreement at least three of those methods the identical goods method, the similar goods method and the detective value method, required the value to be determined "as or about the same time" as the goods being valued. Importantly, in this case one can readily agree that if the said impugned ruling has not lawfully been prepared and no case can be reopened or revised on the basis thereof specially, when the Valuation Ruling No,333 of 2011 dated 7-3-2011 which lost its origin as well as life, cannot be followed for any purpose. It is also evident from the record that the said impugned ruling was replaced with a new Valuation Ruling No, 394 of 2011 dated 27-10-2011, which was subsequently revised through Valuation Ruling No, 458 of 2012 dated 24-5-2012 and as such the observation made by the learned Director General while passing the Order-in-Review, significantly, devoid from the structural principle of statutory obligations as made and observed by the superior courts and arbitrarily restored the Valuation Ruling No,333 of 2011 dated 7-3-2011 which already lost its sanctity and continuation of its implementation shall rises the question whether the Valuation Ruling which lost its sanctity and rescinded can be revised subsequently or re-issued under section 25A subsection (3) of the Customs Act, 1969 by the Director General, Valuation. According to the above referred discussions/ observations and details given thereon. Such jurisdiction has no warrant under the law.
15. The important question which could also be addressed in the line of arguments and required to be observed is that the Valuation Department revised the values of Shock Absorbers for original equipment manufacturer (O.E.M) through impugned Valuation Ruling No, 458 of 2012 dated 24-5- 2012 and increased the value 58% without describing any criteria and test of any rational. The Department has no justification about such increase which clearly reflected that, the statutory obligations as prescribed under sections 25 and 25A of the Customs Act, 1969 are evidently violated. The determination of value under section 25-A of the Act is not a simple thing, it is, therefore, appropriate that, the ruling should contain sufficient detail 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, 1897. In this present case the authority/Director General Valuation ignored the directions of the Superior Courts and made the subsequent observations in contradiction of provision of section 25-A of the Customs Act, 1969, such ignorance is violative under the law.
16. On the strength of the judgment passed by the Honourable High Court of Sindh in the case of Sadia Jabbar and in conformity of the aforesaid observations made by the Honourable Supreme Court of Pakistan along with our additions, the subject impugned Valuation Ruling No, 458 of 2012 dated 24-5-2012 lacks the warrants of law and its issuance does not have any adherence with the statutory requirements and also derogate the specific provisions of section 25 of the Customs Act, 1969, therefore, declared without lawful authority, void; illegal and set aside accordingly. The impugned Order in Review passed during the hierarchy of the Customs also infested with patent illegalities which is held to be null and void and accordingly set aside. Under the circumstances the respondent is directed to assess the impugned goods of the appellant in accordance with the domain of Valuation Ruling No,394 of 2011 dated 27-10-2011. In the meantime the department should take appropriate measures and issue a fresh Valuation Ruling for Shock Absorbers and its components after given the opportunity being heard to all stake holders within one month from the receipt of this order. Appeal is allowed accordingly with no order as to cost.
17. Order passed accordingly.