SYED SARDAR HUSSAIN SHAH, CHAIRMAN MEMBER JUDICIAL .----This order will dispose of Customs Appeals Nos. K-544 to 588 of 2016 as all these appeals arise out of similar facts and involve identical questions of law.
2. The above mentioned appeal have been filed by the appellant before this Tribunal against the Order-in-Appeals Nos. 5331 to 5377 dated 30.05.201 1 passed by Collector Customs (Appeals) Kara chi against Order-in-Original No. 05 of 201 1 dated 14.03.201 1 passed by Deputy Collector of Customs MCC Preventive, AFU/JIAP , Karachi.
3. The brief facts of the case are that, the appellant imported forty six (46) consignments of USB Flash Drive and MCC Card and filed various Goods Declaration (GDS) during the years 2007 and 2008 for clearance thereof. The goods were assessed in terms of section 80 of the Customs Act, 1969 (hereinaf ter referred to as "the Act") and released under PCT heading 8523.5120 where under customs duty @ 5% was chargeable. However , the amount of customs duty was not charged on the ground that the appellant would obtain an exemption notification from the Federal Board of Revenue and submit the same to the Collectorate. The appellant submitted undertakings along with post dated cheques (PDCs) to the effect that if he failed to submit the requisite exemption notification he would make the payment to the Government. Thus, the payment of Government taxes was effectively deferred and the foretasted practice, though patently illegal, continued for a long time. Resultantly , the Exchequer was deprived of its legitimate revenue amounting to Rs.6,41 1,042/- However , when the appellant was asked to make payment of the aforesaid deferred amount of duty/taxes he refused to do so and the PDCs which he had submitted at the time of clearance of the goods were dishonored vide the impugned order that the above mentioned amount was held recoverable from appellants. The operative part of the same is reproduced: "I have gone through the record of the case and the reply submitted by Messrs Masood Aziz and Associates on behalf of the Importer . They also put forward similar contention during course of hearings. In Finance Bill, 2007- 2008, the Customs Tariff was amended and the USB Flash driver was classified under PCT hearing 8523 attracting 5% Customs duty while some other computer accessories classified in HS Code 8473 were exempted by putting 0% duty under customs tariff and subsequently the computer accessories were removed from SRO 567(I)/2006.
The representative of importer had made plea to the Customs authorities that for computer item such as USB, processor cards etc they have taken up matter for exemption with the Federal Board of Revenue, therefore, they will provide the clarification from Board in their favour . The department did not agree with PCT is attracting Customs Duty @ 5% however , importer insisted that they will during the clarification in their favour , in support of M/s. Silicon Technologies submitted undertaking dated 23.03.2009 stating that "Kindle release our consignment, we will provide required SRO which released in current Budget and implementing on 31st December , 2007. When we able clarify out position then kindly released above mentioned cheques". However , the payment of duty and taxes were deferred against undertaking and to secure government revenue Post Dated Cheques covering duty and taxes were also received from importer . The importer did not submit any clarification or justification in favour of their claim despite lapse of more than two years. The record of case show that the clearance of subject goods were not made under section 81 of Customs Act, 1969. For provisional assessment the basic condition is that the assessment of goods could not be made due to reasons that goods require further information or other test or further enquiry required by the department. Whereas in instant case department was clear on the levy of Customs Duty @ 5% on USB Flash classified under PCT. Therefore, the assessment was made under section 80 of Customs Act, 1969 as per declaration of item under PCT attracting CD @ 5%. The payment of duty and taxes were deferred against the undertaking submitted by importer that they will provide the exemption / clarification in favour of their contention. However , to secure government revenue Post Dated Cheques were received from them. In view of above position it is clear that the item imported by Messrs Silicon Technologies are dutiable attracting 5% of Customs Duty, 19% Sales Tax and 5% Income Tax and importer has failed to disch arge their responsibility , neither he submitted any clarification / exemption in his favour nor paid the amount of duty and taxes. Therefore, I order recovery of amount of Rs.263,723/- on account of duties and taxes on import of goods in subject Goods Declaration."
4. Being aggrieved by the impugned Order-in-Original, the appellant filed the instant appeals before this Appellate Tribunal mainly on the following grounds: a) That the computer gadgets were under concessionary regime in consonance with the government's policy of promoting computer literacy; b) That under the Finance Act of 2007 certain changes were made in the Customs Act and schedule to the Act bringing changes in classification of computer related headings (in consonance with revision of harmonized code by WCO). Through changes certain rates of duty were made applicable on headings so created. c) That the computer gadgets attracted exemption under 567(1)/2006. However under the Budget 2007, the said notification was withdrawn, resulting into the anomaly that said gadgets was against express policy of the government. d) That to address the situation Board itself through its letter No.C.No.6 (1)/2007/CB dated 15.06.2009 advised the clearance Collectorates to continue allowing benefit of exemption to the aforesaid computer related goods so that the Board could address the situation. e) That in the meantime the goods were assessed provisionally under section 81 of the Act allowing benefit of exemption; f) That finalization was to be made unde r section 81 of the Act within a period stipulate under subsection (2) of section 81 of the Act. g) In case of failure to finalize the assessment, by default the provisional assessment becomes under subsection
(4) of section 81 of the Act after lapse of the stipulated period. h) That Board did not advise for long and after finalization the issue should have been decided keeping in view finalization of assessment the assessment, by default the provisional assessment becomes under subsection (4) of section 81 of the Act.
5. We have given anxious consideration to the contentions of both the parties.
6. The appellant contended that under Board's Letter No.C.No.6(I)/2007/CB dated 15.06.2009 to the Collectorates were provisionally releasing the consignments under exemption of sub-para. (sic) (ii) of the said letter . The Board also communicated to the field formations to allow the exemption and imperatively the previous SRO 567(1)/2006 did not exist. Keeping in view of the Government policy the assessments were made provisionally . The different facts of the controversies involved in the case are : a. Finalization through a formal order to the ef fect final order where the provisionally assessments were made ; and b. Finalization of assessment by default in terms of subsection (4) of section 81 of the Customs Act, 1969.
For ease of reference relevant portion of section 81 of the Customs Act, 1969 quoted below:- "Section 81 Provisional determination of liability .---(1) Where it is not possible for an 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 require chemical or other test or a further inquiry , an officer, not below the rank of Assistant Collector of Customs, may order that the duty, taxes and other charges payable on such goods, be determined provisionally: THE CUST OMS ACT, 1969, 70 provided that the importer , save in the case of good entered for warehousing, pays such additional amount on the basis of provisional assessment or furnishes bank guarantee [or pay order] of a sched uled bank along with an indemnity bond for the payment thereof as the said officer deems sufficient to meet the likely differential between the final determination of duty [, taxes and other charges] over the amount determined provisionally: Provided further that there shall be no provisional assessment under this section as no differential amount of duty and 18 [taxes and other charges] is paid or secured against bank guarantee [or pay order]
2. Where any goods are allowed to be cleared or delivered on the basis of such provisional determination, the amount of duty, taxes and charges correct payable on those goods shall be determined within six months of the date of provisional determination: Provided that the Collector of Customs or, as the case may be, Director of Valuation; may in circumstances of exceptional nature and after recording such circumstances, extend the period for final determination which shall in no case exceed ninety days [:] [Provided further that any period, during which the proceedings are adjourned on account of a stay order or for want of clarification from the Board or the time taken through adjournment by the importer , shall be excluded for the computation of aforesaid periods.]
(3) On completion of final determination, the amount already paid or guaranteed shall be adjusted against the amount payable on the basis of final determination, and the difference between the two amounts shall be paid forthwith to or by the importer , as the case may be.
(4) If the final determination is not made with the period specified in subsection (2), the provisional determination shall, in the absence of any new evidence, be deemed to be the final determination.
(5) On completion of final determination under subsection (3) or (4), the appropriate officer shall issue an order for adjustment, refund or recovery amount determined, as the case may be.] Explanation. - Provisional assessment means the amount of duties and taxes paid or secured against bank guarantee or pay order ."
7. It is evident that field formations including the respondents allowed clearance of goods in pursuance to the Board's Letter No.C.No.6(1)/2007/CB dated 15.06.2009 addressed to the Collectorates The Board allowed provisional release with exemption cover as existed prior to budget 2007. Apparently it was in line with policy of encouraging computer literacy by keeping computer gadget at low taxation. If the good had been assessed to duty/taxes under section 80 of the Act, the release of the same would have been allowed under section 83 of the Act after payment of such assessment. However if the assessment was "provisional as was in the instant cases it cannot be termed as "deferment" of duty. It ought to have been finalized unde r section 81(2) of the Act. The alternative course would be finalization through default under section 81(4) of the Act. Had the department taken C action timely within the stipulated period of 6 months under section 81(2) of the Act, the matter would have attained finality .
8. The provisionally assessment was not finalized. Hence the under subsection (4) section 81, the assessment made provisionally is deemed final. There is no merit in the contentions of departmental representative that the provisional assessment was made on the request of the Importers soliciting exemption/clarification from the Board.
When the responded failed so to do expeditiously and later on Boards issued a letter C.No.1(42)/Mach./52/143984 dated 15.10.2010, there was a lapse, of over three years ( when normal period of finalization under 81(4) stood finalized being "deemed finalization". Thus the demand raised by the department is unlawful.
9. In view of the above foregoing facts, the balance of probability weighs in favour of the appellants. We accordingly allow these appeals and set aside the impugned Orders.