FINDINGS /DECISION ' The complaint is directed against the provisional assessment of Methanol not finalized in accordance with the Valuation Advice within the prescribed legal time frame and alleged illegal rejection of claims for refund of excess duty and taxes amounting to Rs,3,896,928 by the Customs Authorities. The complainants imported Methanol in bulk during May to November, 1995 against 19 Bills of Entry at declared value ranging from $ 315 PMT (per metric ton) to $135.350 PMT. The customs provisionally assessed the imports. At higher values of $532 and S227 of PMT and the complainants had to pay excess amounts of duty and taxes mentioned above. The importers wrote several letters to the Customs Department during period from 1995 to 1997 for refund of excess duty.
2. The complainants submitted another application alleging that on account of their filing the complaint to this Secretariat, "the Customs Department arbitrarily finalized the orders of our nineteen Bills of Entry on August 13, 2001 (photocopies of orders are attached herewith) rejecting our claim of Rs,3,896,928".
3. In yet another application, the complainants furnished additional information regarding the progress of this case since 1998. When they wrote to the Collector in October, 1998 for settlement of the refund claims, the Assistant Collector, Oil Section, replied vide letter dated 26-10-1998 that the Oil Section had finalized the prices of 'Methanol' in the light of the Valuation Advice issued by the Valuation Department. The Complainants again wrote to the Collector in November, 1998 to set aside the Assistant Collector's order, dated 26-10-1998 and sanction the refund. Thereupon, the complainants were served with 19 identical show-cause notices dated 1-12-1999 with the following operative portion: "The course of finalization and issue of final advice took approximately two years as the imports were effected in the year 1995. Accordingly, in terms of subsection (4) of section 81 of the Customs Act, 1969 the provisional assessm ent already made @ US $532 per metric ton stood finalized and the claim for refund of duties/taxes paid in excess having no merit and are liable for rejection."
4. The complainants in their replies to the notices vide letter dated 11-12-2000 and 7-2-2001 and during personal hearing highlighted the crucial point. "In the year 1997, the Controller of Valuation had advised the Collectorate vide Letter No, Misc/39/95-11/3643, dated 24-10-1997 to accept the price of Methanol confirmed by the Commercial Counsellor, Jaddah, Saudi Arabia, if no valid evidence of higher value against the declared value is available with them." They wrote to the Deputy Collector (who had issued the show-cause notices) that the decision to accept the declared value was delayed by the Valuation Department while they had regularly followed up the case for early decision vide letters dated 6-10-1998, 26-10-1998 and 23-11-1998, also drawing the attention of the Collectorate that if provisional assessment was not finalized within the time limit specified under subsection (4) of section 81 of the Customs Act, the declared value would automatically become final and the additional amount would be liable to be refunded. No action was taken on the refund claims and the assessment was even then not finalized.
5. The Department finalized the assessment after fix/six years in August, 2001 after the complaint was filed with the Federal Tax Ombudsman. The Assistant Collector issued 19 identical assessment orders rejecting the refund claims. The complainants requested that Customs Department be directed to refund the excess amount of Rs,3,892,589 alongwith reasonable compensation for the last 6 years.
6. In a brief response to the complaint, the Collector of Customs (Preventive) did not offer any comments on the allegations and merely mentioned that the case was under process, hearing opportunity had been provided, the case was likely to be finalized within two weeks and the Federal Tax Ombudsman would be informed of the outcome. In a subsequent letter the Collector stated that the consignments imported from 14-5-1995 to 22-6-1995 at declared Value of $351/MT were assessed at $532/MT on the basis of Valuation Advice, dated 19-4-1995. The Bills of Entry presented from 17-8-1995 onwards were assessed at the value of $277/MT on the basis of revised Valuation Advice dated 17-8-1995. The importer, agitated against application of the Valuation Advice, and therefore, the goods were assessed provisionally. "The importers applied for refund but the same was premature because the assessm ents had not been finalized".
7. The Collector added that assessm ents were made on the advice of the Valuation Department Controller of Valuation had issued an amendment/advice on 24-10-1997 but "by the time the revised Valuation Advice arrived the mandatory period under section 81(2) had expired and the provisional assessm ents attained finality in terms of section 81(4) of the Customs Act, 1969".
8. During the hearing of the complaint, Vice-Chairman of the Company stated that originally the price of the commodity was stable but due to the merger of the manufacturing companies, the price started rising. The Customs Authorities assessed the imports on the then rising price, which was not objected to by the importers. In April 1995 the international price touched the peak of $532.
Thereafter, the price stated declining but the Customs Authorities continued assessing imports at higher price of $532 PMT. Later, with the approval the Chairman and Member (Customs) C.B.R , the assessm ent was made at the price $ 277 PMT. From November, 1995 onwards none of the assessm ent was made at the declared value and duty was charged on enhanced value.
9. The complainant's representative argued that in case of provisional assessment under subsection (2) of section 81 of the Customs Act, the assessment should be made on the basis of declared value and difference of duty and taxes for higher value be secured in cash or bank guarantee. In these cases, security was not taken and full duty and taxes on higher value was realized. On 24-10-1997. The Controller informed the Collector that the price of Methanol, as confirmed by the Commercial Counsellor at Jeddah, were close to the declared price. The evidence of falling price of Methanol published in international magazine and journals were furnished to the Customs and should be available in their record. In spite of the advice of the Controller in 1997, the assessm ent was not finalized. The complainants kept pursuing the matter with the Collectorate but no reply was received.
10. Additional Collector (Preventive), representing Customs Department, stated that it has been the practice in the Customs that after the expiry of six months statutory period, the assessment was finalized on the enhanced value and the deposits of duty and taxes credited to the revenue account. According to him there is no ruling of the C.B.R. About the interpretation of subsection (2) of section 81 of the Customs Act. He submitted that the record of provisional assessment was not available as it pertained to the year 1995. No specific orders for final assessment were issued since on expiry of six months the assessm ent stood finalized under section 81 of the Customs Act.
11. The facts of the case discussed above at considerable length highlight the basic problem faced by the importers when the provisional assessment of goods is not finalized by the Customs within the prescribed mandatory period. The problem is aggravated by non-responsiveness of the Customs Authorities to the repeated pleas of the importers to finalize assessment. They file refund applications apprehending that that provisional assessment would not be finalized in the normal course and only to guard against illegal application of time-bar to their disadvantage for failure of the Customs to fulfil their responsibility within the legal time frame. This fear is accentuated when the differential amount of duty and taxes is not secured in a suspense account but credited directly to the revenue account.
12. The (wrong) practice of (automatic) finalization of assessment (at the enhanced value) after expiry of six months' period was admitted by the Department's representative. The Collector re- counted this illegality in his own words: "In view of the importer's plea the assessment was made provisionally under section 81 of the Customs Act, 1969. The importer applied for refund but the same was premature because the assessment had not been finalized". "By the time the revised Valuation Advice arrived the mandatory period of 180 days under section 81(2) had expired and the provisional assessm ent attained finality in terms of section 81(4) of the Customs Act".
13. The assessm ent was originally made (provisionally) on enhanced value but the cases were not forwarded to the Valuation Department which was a serious departure from the procedure. The complainant pursued the refund claims with the Customs Authorities and simultaneously kept on agitating the valuation factor with the Valuation Department. When Controller of Valuation notified the normal price on 19-8-1995, the Customs did not finalize provisional assessment on this price but applied it only for future imports. Finally Controller advised the Preventive Collector on 24-10- 1997 to accept the declaration of the importer if valid evidence of higher value was not available.
Final assessm ent of the imports was not made even after receipt of valuation advice/information from the Valuation Department. The blatantly illegal interpretation of the provisions of subsections of section 81 of the Act was enforced in the following manner.
14. In the 19 cases of imports made in 1995, the Deputy Collector of Customs issued identical show- cause notices on 1.12-2000 for rejection of the refund claim on the charge stated in paragraphs 2 and 3 as follows:-- "Later on in terms of Valuation Advice No, Misc/39/95-II/3643, dated 24-10-1997 and further enquiries the assessm ent was suggested to be finalized at US$ 170.35 per Metric Ton. The course of finalization and issuance of final advice took approximately two years as the imports were effected in the year 1995. Accordingly, in terms of subsection (4) of section 81 of the Customs Act, 1969 the provisional assessm ent already a US$ 532 per Metric Ton made stood finalized and the claim for refund of duties/taxes paid in excess having no merit and are liable for rejection."
"The importer Messrs Dyno Pakistan Ltd., are hereby called upon to show cause as to why the claim filed by them for refund of duty/taxes paid in excess should not be rejected under the provisions of aforesaid clause of Customs Act, 1969."
15. The cases of 19 identical show-cause notice by a Deputy Collector were decided by an Assistant Collector vide order, dated 13-8-2001. The operative part of the identical decision was as follows: "I find that the assessm ent made in the year 1995 had attained finality and there is legal bar, as aforesaid to carry out reassessm ent in the light of the said letter of Valuation Department."
"Keeping in view, the facts and the record of the case available I am inclined that the claim of refund filed by the importer does not merit consideration and is rejected accordingly."
16. From the proceedings and facts stated above it seems clear that provisions of section 81 of the Customs Act have been misunderstood and misapplied. The object of section 81 is to ensure proper assessm ent in case of dispute between the department and the importer or exporter. The provision for provisional assessm ent is intended to grant relief to the importer/exporter and to give sufficient time to the Customs Department to ascertain the correct value of the goods before final assessm ent is made. It, therefore, follows that in cases where it is not possible immediately to assess the custom duty that may be payable on any goods for the reasons that goods require chemical or other test or further enquiry for purposes of assessment or that all the documents or complete documents or full information pertaining to those goods have not been furnished, the Assistant Collector or Deputy Collector of Customs may provisionally assess the duty payable on such goods. Such provisional order should be passed by the relevant officer in a clear manner setting out the reasons for provisional assessment and clearly indicating the amount of duty provisionally assessed. The practice of making provisional assessment by writing short notes or marginal remarks is improper and not in accordance with law. The proviso to subsection (1) of section 81 provides that the importer/exporter has to pay additional amount as security or furnish a bank guarantee of a scheduled bank for payment of such amount as the said officer deems sufficient to meet the excess of the final assessment of the duty over the provisional assessment. It, therefore, follows that in cases of provisional assessment where there is dispute between the declared value and the Customs proposed value the provisional assessment should be on the declared value. This is clear because if this would not have been the intention of the Legislature there was no need for payment as security or furnishing bank guarantee for the excess amount calculated at the time of provisional assessment, which may accrue in case final assessment is made which is higher than the declared value. There are two values 8 under consideration, the declared value and Customs proposed value which is higher than the declared value. The question of payment or furnishing guarantee will arise only when provisional assessment is made on the lesser value i,e, the declared value. Section 81 does not contemplate that the provisional assessm ent should be made at higher value proposed by the Department. If this is accepted then the proviso referred to above will be completely redundant and redundancy can be attributed to the Legislature or a statute.
17. Subsection (2) provides that after the provisional assessment has been completed the final assessm ent should be made as soon as possible within 180 days of the date of provisional assessm ent, which can be extended by the Collector of Customs under circumstances of exceptional nature after recording such circumstances. Thus, order of extension passed by the Collector should be in writing giving reasons for such extension as contemplated by proviso to subsection (2) of section 81. After the final assessment has been completed the appropriate officer shall order that the amount payable on the basis of final assessment may be adjusted from the amount already paid or guarantee furnished at the time of provisional assessment. It further directs that different between the two amounts shall be paid forthwith to or by the importer/exporter. It means that the final assessment could be made on the declared value or the proposed value. It is in these circumstances that the balance will accrue for payment as required by subsection (3). It is, therefore, clear that the provisional assessment cannot be made at the proposed value. This conclusion finds support from subsection (3) and particularly as subsection
(4) provides that the final assessm ent if not completed within the period specified in subsection
(2) i,e, 180 days or extended period of not more than 90 days, the provisional assessment shall become final. This provision was added in view of the complaint to the Wafaqi Mohtasib about the delay in making final assessm ent. It intends to provide redress to the importer/exporter against inaction and delay in making final assessment. It was never intended to allow the Customs Authorities to assess at the higher value and may not make final assessment within the prescribed time thereby allowing the provisional assessment to become final. This will adversely affect the importer/exporter and add premium to the lethargy, inaction and negligence of the Customs officials. Therefore, the interpretation favourable to the taxpayer must be adopted. It is suggested that the Federal Government may consider to amend section 81(1) by adding the following after the words 'such goods be assessed provisionally'. "at the declared value"
18. Coming to the present case the Department assessed the goods provisionally on the proposed value and recovered the same from the complainant. This order was patently illegal, and therefore, on failure to make final assessm ent within 180 days from the date of provisional assessment it could not be treated as final. It may also be mentioned that the relevant officer should pass a speaking order while making final assessment even if it falls under subsection (4) of section 81.
19. In view of the illegality of the orders passed by the Assistant Collector, it is recommended that C.B.R. Direct the Collector of Customs:
(i) to set aside the said orders under section 195 of the Customs Act;
(ii) finalize the assessm ent within six weeks after taking into consideration the advice of the Valuation Department and providing to the Complainants the opportunity of hearing; and
(iii) Compliance be reported within six weeks.