RUSTAM S. SIDHWA, This judgment will dispose of writ petition W.P. No. 3275 of 1988 filed by Commercial Pipe (Pvt.) Ltd., petitioner, calling in question the order of the Deputy Collector of Customs (Appraisement) whereby which he increased the value of the imported goods by reducing the trade discount of 60 percent which had been granted by the exporter to 40 percent.
2. The brief facts of the case are that Commercial Pipe (Pvt.) Ltd., petitioner, imported malleable
(cast) iron pipe fittings from China. According to the trade practice prevailing in China in respect of Pakistani buyers, the petitioner received 60 percent trade discount on its invoices. When the goods arrived in Pakistan, bills of entry for in-bonding were filed by the petitioner in respect of the goods which were OF-loaded by different steamers. When bill of entry No. 22413, dated 12th May, 1988 for ex-bonding was filed, the Deputy Collector of Customs (Appraisement), Dry Port, Lahore, did not accept the value of the goods as declared by the petitioner, but increased its value by reducing the trade discount of percent granted by the exporter to 40 percent. Being aggrieved by the action of the Deputy Collector of Customs (Appraisement), Lahore, the petitioner filed a writ petition in the High Court, which is now before me for disposal.
3. On behalf of the petitioner, it is submitted that the price declared by it before the Customs was true and correct and that it had received 60 percent discount from the exporter and that the discount shown in the bill of entry for ex-bonding was not an arranged figure. It is further submitted that Customs General Order No. 16 of 1986 applied by the Deputy Collector of Customs (Appraisement), Lahore, respondent No. 4, to the case of the petitioner, is ultra vires of section 25 of the Act. In this connection it is submitted that the Customs General Order No. 16 of 1986 does not anywhere mention that inquiries conducted by the Appraisement Branch had revealed that not more than 40 percent trade discount was offered by the Chinese Exporters on the disputed goods, but only mentions that the export price had been artificially kept at the same level by the exporter in terms of Pak Rupees as they were at the time of relinking of the Pak Rupees from U.S. Dollers in January, 1981, by gradually increasing the trade discount to meet the gradual depreciation in the value of the Pak Rupee. It is urged that since the Customs General Order only refers to the depreciation in the value of the Pak Rupee as against the U.S. Doller for the purposes of pegging trade discount to 40 percent, the same should be declared to be ultra vires of section 25 of the Customs Act, 1969. It is next contended that the material on the basis of which Customs General Order No. 16 of 1986 was framed was never shown to the petitioner at the time of assessment, nor was it given any opportunity to rebut any material which the Customs may have had in raising the value of its goods. It is therefore, submitted that the order of the Deputy Collector of Customs, (Appraisement), Lahore, being without jurisdiction, deserves to be set aside. In this connection Indus Automobile (Pvt.) Limited v. The Central Board of Revenue (PLD 1988 Kar. 99) is referred.
4. On behalf of the Customs it is submitted that the price declared by the petitioner on the basis of invoices submitted by it, were arranged values and did not represent the normal values of these products and the assessing officer, therefore, correctly applied Customs General Order No. 16 of 1986 to the case of the petitioner. In this connection, it is submitted that the said Customs General Order was based on material which the Appraisement Branch of the Customs had collected, which showed that trade discount granted over 40 percent were arranged discounts and did not represent the normal value of the imported goods.
5. I have given my anxious consideration to this case. The Customs Authorities can, under section 25 of the Customs Act, fix the normal value of the goods, when it considers that the value submitted by the importer is a suppressed one. The normal price of imported goods, as per the basis stated in section 25, is that which it would fetch on the date referred to in section 30 on a sale in open market between a Pakistani buyer and a foreign seller, independent of each other; it being assumed that the goods are to be delivered to the Pakistani buyer at the port or place of importation. In short, in case of goods destined for the port of Karachi, the CIF price of the goods for Karachi on the date referred to in section 30 on a sale in open market between a Pakistani buyer and a foreign seller would be the true normal price. Normal price cannot be B increased merely because the linking or relinking of Pak Rupee with any foreign currency has resulted in depreciation ,in the invoice value of the goods. Section 25 is intended to Correct arranged or suppressed values given by the importers which do not represent the true value of the imported products, but this is to be carried out on principles stated in that section and not on principles extraneous to it.
6. The Deputy Collector of Customs, (Appraisement), respondent No. 4, has applied Customs General Order No. 16 of 1986 to the case of the petitioners. It is, therefore, necessary to examine this Order which relates to evaluation of galvanized malleable (cast) iron pipe fittings imported from China. The tenor of the whole Order seems to give the impression that trade discount over 40 percent should not be given, as exporters had by increasing the discount over the years, been artificially keeping the price of the disputed goods at almost the same level in terms of Pak Rupee as they were in January, 1981, when the Pak Rupee was delinked from the U.S. Doller. Section 25 of the Customs Act does not permit this criteria to be applied in assessing the normal price. If this be the only basis for pegging the trade discount to 40 percent, the Customs General Order can only be treated as ultra vires of section 25 of the Customs Act. However, the said Order inter alia mentions that the prices, with trade discounts above 40 percent, "are arranged values and do not represent the normal value of these products." This gives the impression that there may be material with the Customs Authorities, of the nature referred to by the Supreme Court in Eastern Rice Syndicate's case (PLD 1959 SC 364), showing that trade discounts above 40 percent were not being given by the Chinese exporters during the periods they contracted to sell their goods to the petitioner. If this be so, the said Customs General Order would be legal and valid.
7. It is contended by the learned counsel for the petitioner that the Deputy Collector of Customs, (Appraisement) respondent No. 4, when he applied the Customs General Order No. 16 of 1986 to its case, did not provide to the petitioner the material on the basis of which the said Order was passed to show how and why trade discount above 40 percent should not be allowed. It is submitted that it was the right of the petitioner to examine the said material and to challenge the same, in case it thought that the same was incorrect or defective. In this connection reliance is placed upon Indus Automobile's case (supra). I think the objection of the petitioner is well founded. Customs General Orders are only aids to Customs officers in order to understand and interpret the Customs Act.
They cannot over-ride or modify the law. Since the Deputy Collector of Customs, (Appraisement), did not provide the material to the petitioner on the basis of which Customs General Order No. 16 of 1986 was framed, but blindly applied this Order, his order deserves to be set aside.
8. For the foregoing reasons, this petition is accepted and the order of the Deputy Collector of Customs, (Appraisement), Lahore, dated 13th July, 1988 is set aside and the case is remanded to him with a direction that he should show the material which the Customs has on the basis of which the Customs General Order relied upon by the Department was issued. If such material is present, he shall also provide the petitioner the opportunity to produce in rebuttal any material which it may wish to produce. If such material is not present, he shall accept the invoice values submitted by the petitioner, as referred to in para 2 of this petition. In either case, the Deputy Collector of Customs, Appraisement, shall pass fresh orders, in accordance with law. The petitioner shall have the right to prefer an appeal or take up other proceedings which may be available under the Customs Act before the forums which are competent, in case it is aggrieved by the fresh order.
9. This petition is accepted with costs. Rupees Two Thousand (Rs.2000/-) is fixed as counsel's i.e, which shall be paid to the petitioner.