JUDGMENT AMIR-UL-MULK MENGAL, J. - This petition has been filed under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 seeking relief as under:- "It is, therefore, prayed that this honourable Court may be pleased to:-
(a) Declare that the assessm ent made by the respondents according to their on calculations as illegal without jurisdiction and of no legal effect;.
(b) Declare that the Clean Report of Finding dated 19.6.1995 is against the provisions of section 25 of the Customs Act and is ab-initio void, mala fide, unlawful and without jurisdiction;
(c) Direct the respondents to accept the value declared by the petitioner and allow the clearance of goods at U.S $ 180/- per LDT;
(d) Strike down the Notifications SRO 1108(I)/94, dated 14.11.1994 as illegal and contrary to the Customs Act;
(e) Cost of the Petition;
(f) Any other/further/additional relief this honourable Court may deem fit and proper in the circumstances of the case".
Facts briefly stated are that the petitioner is carrying out the business of import of ships for the purpose of breaking/scrapping at Gaddani and subsequent sale of the goods and material so obtained. On 4th May. 1995 petitioner executed a Memorandum of Agreement with a foreign seller for import of 36775 LDT Vessel AVAJ-2. It is the case of the petitioner that the price was paid through a letter of credit established through Muslim Commercial Bank S.I.T.E. Branch Karachi. On payment of the price, the seller issued an Invoice and executed a Bill of Sale in favour of the petitioner who applied for pre-shipment inspection of the Ship to respondent No. 3. The petitioner then imported the goods according to the Invoice and respondent No. 3 issued a Certificate of Inspection endorsing the Invoice and confirming that goods covered by this Invoice have been inspected. On the faith of such inspection, the petitioner allowed his Vessel to be beached at Gaddani as thought he value declared by him as equal to the valuation advice, i.e., US Dollars 180 per LDT which included C & F Value. Accordingly the Vessel AWAJ-2 was beached at Gaddani on 2.6.1995. The Respondent No. 3 issued a Clean Report of Finding at Karachi and fixed the value of above-mentioned Vessel at US Dollars 186.42 per LDT instead of US Dollars 180 per LDT.
2. Feeling aggrieved of fixing of value at the rate of US Dollars 186.42 per LDT the petitioner has filed this petition.
3. The petitioner's counsel assailed the action taken by the respondents on three main grounds firstly that the action is contrary to section 25 read with section 30 of the Customs Act. Second Limb of attack was that there has been discrimination with the petitioner as identical vessel of the same description have been assessed by respondent No. 2 prior to this import without any objection regarding the value as disclosed by the importer, thus a different treatment has been given to petitioner which amounts to violation of Article 4 and Article 25 of the Constitution of Islamic Republic of Pakistan. 1973. The third ground urged before us was that the Notification SRO 1108(l)/94.
Dated 14.11.1994 issued by respondent No. 1 is ultra vires. In this regard inter alia, it was contended that "pre-shipment inspection" of the vessels is a necessary ingredient of the said notificational in order to provide the importers an opportunity to remove the discrepancy if found by respondent No. 3. After issuance of clean report of finding and endorsing the invoice, no objection could have been taken to the value subsequently.
Mr. Zafar Abbas Syed appearing for official respondents No. 1 and 2 challenged maintainability of the petition mainly on the ground that adequate alternate remedy was available under Rule 4(6) of SRO 1108(l)/94, dated 14.11.1994, as such the petition being pre-mature may be dismissed. On merits, learned counsel submitted that the Custom Department has acted pursuant to provisions of SRO 1108(l)/94, dated 14.11.1994, under Rule 8 Sub-Rule (2) by demanding leviable amount of duty.
Therefore, no '.Exception can be taken to the demand put forth by the official respondents. It was contended that the demand of the Customs is in accordance with the CRF provided by respondent No. 3 which is a PSI Company as per SRO. The respondent No. 3 is authorised as a PSI company under the said SRO to determine the value of the ship. He, therefore, argued that the petition may be dismissed with costs.
4. Mr. Muhammad Riaz Ahmad appearing for respondent No. 3 urged that the price of the ship as mentioned in the invoice was not the normal value of the ship. The respondent No. 3 Was required to Verify the physical description and specification and t6 determine the value of the goods on the basis of prevailing price in Pakistan keeping in view the Brussels Definition of Value which provides notional concept of the value prevailing in the open market. Besides he also supported Mr. Zafar Abbas by saying' that there is a Working Committee headed by Deputy Collector of Customs and also comprises of representatives of PSI Company which is competent to hear the representation, therefore the writ is premature.
5. Learned Deputy Attorney General opposed the. Maintainability of the petition on the ground that alternate remedy is available and further contended that the arguments of petitioner's counsel are irrelevant as far as determination of the value is concerned because Central Board of Revenue is competent u/S. 219 of the Customs Act to frame Rules in order to carry out the provisions of Customs Act and the value fixed by PSI company is in accordance with the provisions of SRO. It was also contended by learned Deputy Attorney General that even the CRF issued by PSI Company is also not binding, as the Custom Authorities are still competent to determine the value independent; if and when they, on the basis of material available to them find that such value is inconsistent with the prices prevailing in the open market. As to the vires of SRO learned Deputy Attorney General submitted that the same is provided by the Act, therefore, it has been competently issued by CBR and is intra vires.
6. Agha Shahid Majeed Khan, Assistant Collector Customs submitted that no discrimination has been made with the petitioner company because the SRO has got universal application and a system has ben devised to regularise the assessment of value of goods. There has been no discrimination as far as present petitioner is concerned. He refuted the argument that exemption from Comprehensive Shipment Inspection to goods, value whereof is either US Dollars 3000 or less, is discriminatory, as according to him, such goods are equally liable to customs duties as per section 25. This is no case tantamount to discrimination. Furthermore he invited our attention to ITP.
7. In order to appreciate the arguments so advanced we would take firstly the contention that since PSI Company Coteen Inspection S.A. Has certified the invoice of the declared value on the back of the invoice, therefore, the value as declared by the petitioner has been confirmed and same could not have been altered subsequently by the PSI Company. This argument is devoid of any force. As stated by the third respondent that PSI Company is required to verify the physical nature as to specification, quantity and classification of the goods and to determine the value of the goods on the basis of prevailing export price in Pakistan. This was in fact a Physical Inspection Report and not a confirmation of value as declared by the importer in the invoice. The endorsement on the invoice has no nexus with the declared value, which in fact is issued independently by PSI Company through CRF. The CRF value almost corresponds with the value prevailing in the open market. In such view of the matter contention that certificate of preshipment inspection is a certificate of confirmation of declared value as given in invoice is not tenable hence ruled out.
8. We now attend to the main ground challenging the vires of SRO 1108(l)/94, dated 14.11.1994. The petitioner's counsel submitted that the SRO in question was beyond the scope of Section 25 and section 30 of the Customs Act which lays down the procedure for fixation of the value of the imported goods and any Rules for fixation of the value of the imported goods outside the scope of section 25 or section 30 of the Customs Act would be illegal and without lawful authority. The SRO can be challenged if the petitioner demonstrates that the value has been arbitrarily and capriciously fixed. Reliance was placed on PLD 1989 Quetta 74 and PLD 1989 Karachi 621 in which it was observed as under:- "10. In our view a notification under section 25-B can be impugned if it can be demonstrated that the powers contained u/S. 25-B have been exercised arbitrarily or capriciously, for example in a case where the import value in terms of section 25 of a particular item is US Dollars 20, whereas under a notification issued u/S. 25-B the CBR or the officer authorised by it fixes the value at 40 US Dollars. There should be nexus between the notified value and the actual market value as observed hereinabove. But some discrepancy between the two will not vitiate the notification. In the instant case the difference between the price declared by the petitioners namely, 40 US Dollars per dozen and the notified price 42 US Dollars, comes to about only 5% and, therefore, it cannot be urged that the powers u/S. 25-B have been exercised arbitrarily or capriciously as to make notification illegal."
As far as issuance of SRO 1103(l)/94, dated 14.11.1994 is concerned, the same has been issued in exercise of powers conferred to Central Board of Revenue u/S. 219 of the Customs Act. Thus it is clear from the parent section that CBR can frame Rules or make an order to regulate the valuation of imported goods, inspection and verification of their physical nature, quality, specification, quantity and classification and collection of customs duties and taxes leviable thereon and application of notification and import Regulations. Thus no objection can be justifiably raised to the competency of CBR to issue SRO or notification for carrying out the provisions of Customs Act.
Another argument advanced by Mr. Zahid Alvi was that Administrative Order of CBR cannot bye- pass or allow deviation of statutory provision. It was reiterated that the Rules framed under SRO are beyond the scope of section 25 and section 30 of the Customs Act. Reliance was placed on PLD 1988 Karachi 99. We have perused the said judgment in which inter alia it was held that administrative order of C.B.R, cannot bye-pass or allow the deviation of a statutory provision. It was further held that the Customs Authorities in terms of section 25 have to determine the normal price for assessing the custom duty and cannot accept the above concessional price. While defining the object of issuing C.G.O. It was observed that it is not to impose a tax but to provide guide-line to the Assessing Officer for arriving at the proper normal price in terms of section 25 and to plug the nefarious designs on the part of some unscrupulous importers and some unscrupulous Customs Officials. In this regard learned counsel also invited our attention to PLD 1995 S.C. 497 and NLR 1993 Tax 118.
9. In order to further substantiate his plea, it was argued, that while determine the value for the purpose of customs duty in terms of section 25 read with section 30 of the Customs Act, there must exist some tangible material which should be demonstrated to the importer. If the Custom Authorities failed to show any such material on the basis of which assessment was fixed, the same is fanciful, arbitrary and capricious and is liable to be set aside. The C.B.R, has assigned this duty to PSI Companies, under the Rules framed under SRO. Which are supposed to assess the value, after taking into consideration the prevailing market value. Previously the appraising staff of the Customs Department exercised general authority of assessing the value of goods. Through practice, it was observed that there was under-invoicing in case of import and over-invoicing in case of export and as such the legislature introduced section 25-B. Thereafter such Rules were framed. The vires of the Rules can only be questioned/challenged when it is found that the same have been issued in contravention of the provisions of section 25 or section 30 of the Customs Act.
According to Mr. Alvi these Rules are beyond the scope of section 25 and section 30. We have perused the Rules which provide a procedure for inspection, valuation and assessment of imported goods. In fact the C.B.R, has made an attempt to regularize the price for determination of value in order to avoid under-invoicing and over-invoicing. But simultaneously regard has been had of the fact that valuation must commensurate with the existing prices prevailant in the market. For the said purpose two PSI Companies have been constituted under Rule 4 sub-rule (3) which is reproduced as under:-
(3) The overseas importers of goods for which no letter of credit is required, may serve the inspection Order on the relevant local office of the PSI Company in the country of export. The address of concerned local office can be obtained from the Pakistan Embassy abroad or from the Central Board of Revenue Islamabad, or from the following places:- Cotenant Inspection S.A.
58, rue de 1a Terrasgiere, P.O. Box No. 6155, CH-1211, Geneva-6, Switzerland.
Fax No. 41 22 - 849-69.39 Societe General de Surveillance, S.A. (SGS) a place des Alpes P.O. Box.
2152, CH-1211, Geneva, Switzerland."
Thus the C.B.R, in order to facilitate the evaluation of price has assigned to PSI Companies as mentioned in sub-rule (3) of Rule 4 to issue CRF after taking into consideration the prices from the exporting company. In the counter-affidavit it has been specifically mentioned by Respondent No. 3 Cotenant Inspection S.A. That it assessed the value considering the prevailing export price in the country of origin. The respondent No. 3 has assessed the goods on the basis of Brussels Definition of Value which provides notional concept of the value prevailing in the open market. Thus the entire process has been regularised in line with the principles of section 25- B of the Customs Act. It cannot, therefore, be said that issuance of CRF value is without any basis or has been issued in a capricious or fanciful manner having no regard for the prevailing export price.
10. Still there is another provision in the Rules namely Rule 7, sub-rule (5) which reads as under:- "(5) In addition to the inspection of goods, the PSI Company, shall undertake a price comparison of the goods in the country of export or origin to verify whether the price elements of the total amount invoiced by the foreign suppliers (such term to include seller, exporters and shippers) correspond within reasonable limits with the export price levels generally prevailing in the country of supply or origin, or where applicable, the world market at the time of examination of the goods. The price comparison shall not be limited to the price of the goods but shall cover the total contracted value, freight, insurance, commission and all related services".
11. From perusal of above rule it becomes crystal clear that PSI Company shall undertake the price comparison of the goods in the country of export or origin in the order to verify whether the price elements of the total amount invoiced by the foreign suppliers correspond within reasonable limits with the export price levels general prevailing in the country of supply or origin.
12. In short every attempt or effort has been made that these rules should correspond with the parent section i.e. Section 25 or section 30 of the Customs Act. In such view of the matter we are not inclined to concur with the arguments advanced by Mr. Zahid Alvi that the Rules are beyond the scope of section 25 or section 30 of the Act but, we found from the above discussion that these rules have been framed in consonance with the parent sections and are, therefore, declared as intra vires.
13. In fact there was a two pronged challenge to the validity of S.R.O, in question. The first has been determined in the preceding paras and as regards the second objection, the argument advanced was that Administrative Order of C.B.R, cannot bye-pass or allow deviation of statutory provision.
Suffice is to mention that S.R.O. 1108( 1 )/94 is not an Administrative Order unlike Customs General order (CGO) but rather it has been issued in exercise of statutory authority which the Board enjoys under section 219 of the Customs Act.
14. In fact these are Rules framed under section 219 of the Customs Act, therefore, these are not akin to an Administrative Order or a CGO, but on the contrary these are statutory Rules framed under the Customs Act. As such, the argument that Administrative Order cannot substitute or take the place of legal provisions is totally inapt and the authorities to the said effect are irrelevant for determination of the dispute.
15. After holding the S.R.O, as intra vires, we now proceed to determine whether the value at the rate of US Dollars 186 per LDT is arbitrary and capricious as against value declared by the petitioner as US Dollar 180 per LDT? The answer to the question would entail thorough probe, which cannot be undertaken by us in our constitutional jurisdiction. We, therefore, have to see. Prima facie whether the determination of value commensurate with the market rate or there is an alarming difference between the two, or at least between the declared value and that fixed by PSI company. In this regard we take benefit from PLD 1989 Karachi 621. It was held:- "that for example in a case where the import value in terms of section 25 of a particular item is US Dollar 20. Whereas under a notification issued under section 25-B the C B.R. Or the officer authorised by it fixes the value at 40 US Dollars then prima facie the powers have been exercised arbitrarily or capriciously".
It has been further held that there shall be nexus between the notified value and the actual market value. But some discrepancy between the two shall not vitiate the notification.
16. Applying this ratio to the facts of present case where value declared by the petitioner is US Dollars 180 per LDT and value assessed by PSI Company as 186, we do not find this difference alarming, or the discrepancy so vivid, as to justify for calling interference in exercise of Constitutional jurisdiction. Secondly the PSI company did not find the declared value in the invoice as the prevailing value of the identical vessels in the world market and therefore, respondent No. 3 evaluated the value of vessel keeping in, view the Brussels Definition of Value. On this score too, the objection is not sustainable.
17. Learned counsel also assailed the assessment of valuation at the rate of US Dollars 186.00 as against the declared value of US Dollars 180 per LDT. It was argued that in this regard a clear discrimination has been made by the PSI Company while issuing CRF value. Our attention was drawn to Annexure (M) where different valuations are mentioned of ships/vessels. According to learned counsel the respondents have accepted the declared value as regards ships "MV VETER', "DANNYF" "DOLPHIN VIH", "OBO STORM" and "TT RAFIO" but the declared value of the petitioner company has not been accepted.
18. The fallacy of this argument lies in Annexure VM' where as regards many ships the declared value has not been acceded to, rather the same has been enhanced much more than the declared value. Besides, the valuation as determined on the specification and description of the vessel and the price which they fetch in the open market. Furthermore the valuation cannot be uniform as otherwise only one value could be fixed for all sort of ships/vessels which is not possible.
The rates always changed with the fluctuation of the market. In Annexure 'M' Vessel YUKONG PIONEER is valued at US Dollars 198 and on the basis of equal treatment the value of AVAJ 2 could conveniently be fixed at the same rate i.e. 198 US Dollars per LDT but it would have flouted the provisions of section 25 of the Customs Act because the PSI company has fixed the rate in lime with the prevailing market.
19. Since we have not accepted the contention raised by petitioner, therefore, we are not inclined to determine the question of non-maintainability of the petition on the ground of alternate remedy.
However, the petitioner has raised another argument that the respondents should have demonstrated material to the petitioner in order to satisfy him that the value assessed by respondent No. 3 is the same which was prevalent in the market. This could be conveniently done if the petitioner had made a representation under Rule 4 sub-rule (6) of the SRO which reads as under:- "6. In case of dispute, with reference to the services performed by the PSI Company, enhancement of value, change of classification, refusal to allow benefit under any notification, or for any other reason, the importer may take up the matter directly with the PSI Company liaison office in Karachi or Lahore. If the dispute is not resolved within seventy two hours, the importer may file a representation for resolution of dispute by the Working Committee, headed by a Deputy Collector of Customs, and comprising of representative of PSI Company Pakistan Customs and any other person nominated by the Central Board of Revenue or the Government''.
Since this has not been availed by the petitioner, therefore, petitioner cannot say that PSI Company had fixed rates without any material.
20. Lastly the. Petitioner's counsel invited our attention to the discrepancy between demand of respondent No. 2 and the CRF value fixed by respondent No. 3. He contended that respondent No. 2 has clearly stated in para were comments as under:- "Respondent No. 2 are assessing the goods as per CRF provided by respondent No. 3 in accordance with SRO 11- 08 (l)/94.
21. Thus it cannot make a demand more than that which was assessed by the ASI Company. The difference is of 42 US Dollars per LDT because the CRF value determined by PSI Company is US Dollars 186.42 per LDT. The excess of.42 US Dollar per LDT is, therefore, unjust as the respondent No. 2 per LDT is, therefore, unjust as the respondent No. 2 himself admitted in his comments before this Court that the goods have been assessed as per CRF provided by respondent No. 3. We, therefore, declare that the value assessed by PSI Company i.e. US Dollars 186.00 per LDT is the correct value and the respondent No. 2 can justifiably make a demand from the petitioner only US Dollars 186.00 and not US Dollars 186.42 per LDT.
22. With this modification the petition is dismissed with no orders as to costs.