2011 PLP 1630 (PTD)

(iv) The laboratory reports pertaining to the samples drawn from other consignment are not applicable to the present consignment as the Laboratory report regarding disputed consignment was available. (v) The complainant cleared the consignment after payment of leviable duties and taxes and after Customs clearance there was no justification for contesting the classification. (vi) The only difference in respect of PCSIR and the Customs Lab report was regarding chemical nature of the solvent. The issue has been settled by the World Customs Organization (WCO) wherein they have determined the classification of Polyurethane Resin dissolved in DMF under heading 3208.9090. (vii) The FTO complaint No.1489-L/03 referred by the complainant relates to delay in the implementation of the decision of Appellate Tribunal. The earlier complaint has no bearing on the present complaint. (viii) The classification dispute was on the basis of composition of the chemical. Hence no lab was competent forum to decide classification. The classification was to be made by Customs with the help of technical literature, lab report and examination report of the goods. (ix) The SGS is a pre-shipment company whose opinion on classification has no force under the law.

5. At the time of hearing both the parties reiterated the arguments as contained in the complaint and comments received from the F.B.R. The DR stated that issue of classification of Polyurethane Resin had already been decided by the World Customs Organization (WCO) under PCT heading 3208.9090. The AR contended that Customs had been allowing clearance of Polyurethane Resin under PCT heading 3909.5000 even after issuance of WCO ruling, and so he was being discriminated against other importers. Being a regular importer, in the past this chemical was classified on the basis of percentage of volatile contents of the medium (organic solvent) in which it was dissolved. He stated that if the Polyurethane Resin was imported in a medium of more than 50% volatile organic solvent, it was classified under PCT heading 3208.9090 and if the percentage of volatile organic solvent was less than 50% then it was classified under PCT heading 3909.5000. The AR stated that according to technical literature the percentage of volatile organic solvent (Methyl Ethye Ketone) in the consignment was 30-35% and correct classification of imported goods was under PCT heading 3909.5000.

6. After carefully considering the contentions of the both parties, the following position has emerged:-- (i) The complainant being an industrial consumer has been regularly importing the Polyurethane Resin. The clearing of imported goods under PCT heading 3909.5000 was disputed by Customs many times in the past, but allowed under the declared PCT heading on the basis of less than 50% volatile contents of organic solvents. (ii) According to the technical literature on the composition of imported product, it was Polyurethane Resin (30%), Dimethyl Formamide (35%) and Methyl Ethye Ketone (35%). (iii) According to report of PCSIR Laboratories Lahore No.ACRC/ CMA/2000/3152 dated 15-8-2000, the organic solvent DMF was a non-volatile solvent. (iv) According to report of Customs Laboratory Lahore No.LDP/LAB/1692/2000 dated 16-7-2000 DMF was not considered "Volatile Organic Solvent" and it was taken as non-volatile organic solvent. (v) The Federal Board of Revenue vide classification Ruling No.12 of 1999 classified the Polyurethane Resin under PCT heading 3208.9090 where organic solvent accounted for more than 50% by weight. The word solvent in classification ruling was substituted by the word volatile solvent after the filing of Writ Petitions No.10714/99 and 5930/2000 in the Lahore High Court Lahore. The Writ Petitions were disposed of after amendment in the classification ruling. Therefore, the F.B.R. classified Polyurethane Resin imported in a medium of less than 50% volatile organic solvent under PCT heading 3909.5000. (vi) The Collectorate of Customs (Appraisement) Karachi decided the classification of Polyurethane Resin under PCT heading 3909.5000 and allowed clearance accordingly vide Bill of Entry ST-3020 dated 22-1-2000. The Collectorate of Customs Lahore examined the issue of classification vide file No.V.Cus/Misc/212(1)/98 and accepted classification under PCT heading 3909.5000. (vii) The Customs Laboratory Lahore in its report No.LDP/ LAB/609/2010 dated 6-5-2010 reported that Polyurethane Resin was dissolved in more than 50% volatile organic solvents consisting of DMF and MEK. In this report organic solvent DMF has been taken as volatile solvent against the already reported findings of the same lab where it was reported as non-volatile solvent. The PCSIR laboratory had also reported DMF as non volatile solvent. According to F.B.R. ruling the classification of Polyurethane Resin was based on the percentage of volatile contents of organic solvent in which it was dissolved. (viii) The Pre-shipment Inspection Company SGS in its reports has been categorising the product under PCT heading 3909.5000, and the Customs accepted those certificates without any reservation despite the fact that classification was not the mandate of SGS. (ix) The Federal Board of Revenue referred the issue of classification of Polyurethane Resin (30%) dissolved in organic solvent DMF (70%) to World Customs Organization (WCO) who decided the classification under PCT heading 3208.9090 in May 2003. The Federal Board of Revenue circulated the classification ruling vide letter C.No.2(4)Tor-1/99 dated 26-7-2003. The Customs even after the receipt of classification ruling of WCO continued to allow clearance of consignments of Polyurethane Resin of different importers including the complainant under PCT heading 3909.5000. (x) The WCO ruling was regarding classification of Polyurethane Resin (30%) dissolved in medium of organic solvent DMF (70%) whereas the composition of imported consignment was Polyurethane Resin (30%) dissolved in medium of organic solvents DMF (35%) and MEK (35%). According to F.B.R. ruling and the Customs practice, the volatile contents of organic solvent were taken into consideration while deciding the classification. If the volatile contents were found more than 50% by weight, the goods were classified under PCT heading 3208.9090 and if volatile contents of organic solvent were less than 50% by weight, the goods were classified under PCT heading 3909.5000. The PCSIR Laboratory Lahore and Customs Laboratory in their reports had held the DMF non-volatile solvent. However, the Customs report No.LDP/LAB/609/2010 dated 6-5-2010 reported the DMF as volatile solvent along with MEK ignoring the previous findings of the same laboratory and report of PCSIR laboratory where DMF was held non-volatile solvent. (xi) While the FTO is not mandated to take up issues pertaining to classification, the objection of the FBR in this case is misconceived; the issue here is not of classification, but fair application of already in vogue classifications/practices and the available evidence on the subject in a consistent manner, not in an arbitrary fashion.

6. The WCO ruling was regarding classification of Polyurethane Resin (30%) imported in a medium of organic solvent DMF (70%) whereas in the disputed consignment Polyurethane Resin was imported in a medium of organic solvents DMF & MEK. In the Customs Laboratory report dated 6-5-2010 DMF has been taken as volatile solvent against the pervious findings of Customs Lab and the report of PCSIR Laboratory. The Customs Laboratory report dated 6-5-2010 being a departure from the previous reports/practice should at the very least have been referred to PCSIR Laboratory for comparison, before finally deciding the classification issue. Findings:--

7. Maladministration in terms of section 2(3) of FTO Ordinance, 2000, is established against the Department. Recommendations:--

8. F.B.R. to- (i) direct the concerned officials to refer the matter to PCSIR Laboratory, as the result of the Customs Laboratory appears to be contrary to its earlier findings, the technical literature on the product, the explanatory notes to HS Code, WCO classification and the F.B.R. ruling on the subject; (ii) constitute a committee for the determination of correct classification of the imported product considering PCSIR Laboratory report, the available evidence on the subject and affording opportunity of hearing to the complainant; (iii) ensure that classification of imported goods is done in a consistent manner, including in the complainant's case; and (iv) repot compliance within 30 days. H.B.T./125/FTO Order accordingly.