MUHAMMAD ZAHOORUL HAQ, J.--1. This petition is directed against the orders passed by respondents Nos. 1, 2 and 3 respectively on 4-5-1983, 16-1-1983 and 17-11-1982.
2. The petitioner had imported certain dyes from Germany of U.S.A, origin at 4.95 and 9.10 $ per Kg.
And the same reached in Pakistan in 1982.
3. The respondent No. 3 issued show-cause notice to the petitioner on 4-7-1982 to show cause as to why action should not be taken against him under clause (14) of section 156(1) of Customs Act for false declaration as the goods had been found to be of the value of $ 8 and $ 10.50 per Kg.
Worth and that the misdeclaration would have resulted in loss of Rs. 26,426 and the import licence was also short of $ 37,752. The show cause notice was amended at $ 8 and $ 23 respectively and as it had been found that the dyes were product of M/s. Eastman Kodak U.S.A, who did not manufacture "Dorosperse" dyes and the drums were found with printed labels of description "Blue BNN" and "Polyester Red BST". It was also stated that the samples from consignment were tested and dyes gave same result as that of "Blue BNN" and "Polyester Red BST".
4. After hearing the petitioner the respondent No. 3 came to the conclusion that petitioner had imported very expensive dyes of U.S.A, origin manufactured by M/s. Eastman Chemical International Company but tried to pass the goods on the basis of fake labels of "Dorosperse" dyes to evade custom duty. The price list and offers made by M/s. Eastman Chemical International Company U.S.A, were considered and on the basis of statement made by M/s. Khajoo Sons of Eastman Chemical International Company the value of the two type of dyes imported by the petitioner were determined at U.S.A. $ 7.15 and $ 18 respectively. The goods were confiscated but allowed to be redeemed on payment of fine equal to 25 per cent of the value of the goods. As personal penalty 25 per cent of the duty and taxes sought to be evaded was also imposed. The appeal of the petitioner was dismissed by respondent No. 2 and the revision was dismissed by respondent No. 1.
5. The main grievance of the petitioner is that the basis of the finding of misdeclaration of the value of the. Goods is not in accordance with section 25 of the Customs Act, the same reads as under:-- "25. Value of imported and exported goods.-(1) The value of any imported goods shall be taken to be the normal price, that is to say, the price which they would fetch on the date referred to in section 30, on a sale in open market between a buyer and a seller independent of each other.
(2) The normal price of any imported goods shall be determined on the following assumptions, namely:--
(a) that the goods brought by sea or land are treated as having been delivered to the buyer at the port or place of importation as the case may be, and that goods brought by air are treated as having been delivered to the buyer at the airport or place where they are unloaded in Pakistan or, if the aircraft first lands in Pakistan at some other airport or place without unloading the goods, at such other airport or place;
(b) that the seller will bear freight, insurance commission and all other costs, charges and expenses incidental to the sale and the delivery of the goods at that port, airport or place which will be included in the normal price:
(c) that the buyer will bear any duties or taxes applicable in Pakistan which will not be included in the normal price.
(3) Where the imported goods to be valued:--
(a) are manufactured in accordance with the patented invention or any goods to which any protected design has been applied; or
(b) are imported (***) under a foreign trade mark or are imported for sale, other disposal or use (whether or not after further manufacture) under a foreign trade mark: the normal price shall be determined on the "assumption that it includes the value of the right to use the patent, design or trade mark in respect of the goods.
(4) .........................................................................................................................
(5) ...........................................................................................
(a) ..............................................................................................................
(b) ............................................................................................ ..................
(6) ........................................................................................ ...
(a) ...............................................................................................................
(b) ............................................................................................................... "
The submission was that no reliance could be placed upon the value of the goods in U.S.A, because the country of origin, namely, purchase of the goods, was West Germany and therefore irrespective of the fact whether the goods were manufactured in U.S.A, or not their value has to be determined on the basis of the value of the same in open market same has been completely left out for consideration. The petitioner had further contended that respondents had not proved the value of such goods in open market in West Germany at the relevant time, therefore, they were bound to accept the value of the same as shown by the petitioner which was supported by contract documents.
6. Mr. Wajihuddin, has on the other hand, submitted that the petitioner had been guilty of malpractice and it had been found that the goods were different from what had been described by the petitioner or their supplier in Germany. He further submitted that the respondents were justified in evaluating the goods on the basis of price and offers of M/s. Eastman Chemical International Company of U.S.A.
The petitioner's counsel had relied upon the case of Eastern Rice Syndicate as reported in PLD 1959 SC 364 and 1985 CLC 1781 = PTCL 1985 CL. 353.
In the Supreme Court case reported in PLD 1959 SC 364 it was held that the word untrue conveys the sense that the requirement of law is that in order to attract the penalties on the basis of a wrong statement made by the person concerned there must be falsity to the knowledge of that person. It was further held that normal price which may be related to the market value at the port of entry in Pakistan is of no relevancy in determining a true export price paid by the importer in the country of origin Further observations of the Supreme Court in that case appearing on page 373 are hereby reproduced:- "......A discrepancy between the "normal price" as fixed by the authorities, in complete honesty, and the declared invoice price must always exist. That is a proposition whose universal truth in all such cases can hardly be questioned. And it is equally unquestionable that no merchant can be rendered subject to penalties merely on account of such a discrepancy. It is claimed by the authorities that he has made a misstatement of price in his invoice, that cannot, in our opinion, be established otherwise than by furnishing proof of the prevailing commercial price in the country of origin at the time of the import. Without first making an attempt to furnish such evidence, it is impossible to see how the making of an untrue statement, within the meaning of section 39, and the consequent mischief "of item (9-B) in section 167 can be imputed to anyone".
In the above cited Karachi case it was held that the value of the goods has to be determined on the basis of open market rates as prevalent in the country where goods were purchased. And it was further held that price in local market could not be made the basis for determination of normal price for the purpose of section 25 of Customs Act, 1969. We respectfully agree with the view taken in the Karachi case and we have to follow the view taken by the Supreme Court.
7. It is an admitted position that the goods in question have been purchased from West Germany and it is further an admitted position that the said goods had to be and were of U.S.A, origin. And, therefore,, they must have some market value in West Germany itself. It was incumbent upon the respondents to determine the value of the goods according to their open market value as prevailing in West Germany at the relevant time even if they were similar to the product of Eastman Chemical International Company. But the respondents have failed to do so and have merely relied upon the price and offers quoted by Eastman Chemical International Company, it is, therefore, apparent that there has been an apparent omission by the respondent to take into consideration the open market value of the goods in West Germany which was the, requirement of section 25 of the Customs Act, 1969, and is also the view !Of the Supreme! Court as well as of a Bench of this Court.
The orders of the respondents are, therefore, held to be without lawful authority and the case has, therefore, to be remanded to the respondent No. 3 for fresh decision after notice to the petitioner and taking into consideration the value of the imported ufS. A's dyes in West Germany at the relevant time.
8. We do not agree with the petitioner's counsel that the price quoted by his supplier could alone be deciding factor in this case. It would be for the respondent No. 3 to obtain the open market prices for such goods in West Germany and in that process of course the price quoted by the supplier of the petitioner would also be one of the relevant factors to be considered by the respondent No. 3.
9. We do not agree with Mr. Wajihuddin that the price of the goods in U.S.A, alone should be the guiding factor because it is basically the open market price of the country from which the goods are imported which should be the criteria for arriving at the value.
It is correct that the words used in section 25 are "open market" but the same cannot be given such a wide connotation as to mean the open market in the world. It is ho secret today that prices of the same goods in different countries are different from each other due to various considerations, sometimes owing to foreign exchange requirements and sometimes on account of the import restrictions and sometimes on account of the demand and supply of goods at a particular time.
Therefore, what should really be the relevant open market is the open market of the country from which the goods have been imported.
10. In the Supreme Court case cited above the words used are "the country of origin". And these words should be construed as the country from which the goods originate or are imported. Open market has been explained in the above, cited Karachi case as the open market of the country from which the goods have been purchased and in our view the same is the correct interpretation of the open market.
It is not difficult to imagine situations in which a product produced in one country may be selling at higher rate in that country on account of the local taxes and/or sales tax and it may be available in a foreign country at a reduced rate owing to the export being influenced by either a subsidy in respect of the same having been granted or on account of other market considerations and vice versa also.
Therefore, we are of the view that, although the price of the manufacturer may be a relevant factor to be considered in respect of the value of the goods, but the most important and relevant price of goods for the purposes of section 25 would be the value of the goods prevailing in the open market of the Country of purchase.
11. The contention of Mr. Wajihuddin that the importer had been guilty Of malpractice as the goods were found to be different from what they had been described by the importer is not found to be fully established on record. Merely because the dyes were found by the test to be similar to the dyes of Eastman Chemical International Company U.S.A, cannot burden the petitioner with the responsibility of false declaration. Since the petitioner had insisted upon his importer that he would purchase only the dyes of U.S.A, origin therefore the possibility cannot be ruled out that the exporter from Germany may have tried to pass the goods under a different name to attract a customer.
There is so far no positive evidence to this effect. But since we are remanding the case therefore we do not wish to conclude this matter on this point at the stage.
12. For the above reasons this petition was allowed on 23rd October, 1985 by a short order and these are the reasons of the same and the three impugned orders are declared to be without lawful authority and of no effect.
The case would be treated to be pending before respondent No. 3 who is directed to determine the value of the goods in the light of the above observations after notice to the parties and decide the case afresh.