2009 PLP 1983 (PTD)

(vii) Being seriously aggrieved with the aforesaid order-in-original, the complaint was filed with this office with the request to take its cognizance and declare that if provisional assessment is not finalized within the prescribed time due to inaction and neglect, and inefficiency on the part of the Customs officers, the importer shall not suffer for the losses incurred on account of negligence and delay on the part of a public functionary. (viii) It has been held in several recommendations of the Federal Tax Ombudsman that where it is held that it could not be the intention of the law makers and the government to place a premium on the delay, inaction, indecisiveness, lack of investigation etc, the failure of the Customs/Valuation Department to determine, with substantive reasons and justification, the final assessment within the period of six months, the importer should not be deprived of the security. The findings and decisions on the above subject have been upheld by the President of Pakistan on the representations of the Revenue Division.

3. The complainants reiterated the acts of maladministration as follows:- (i) In cases of goods assessed provisionally under section 81 of the Customs Act, the final determination of value and assessment should be made within six/nine months. Therefore, the order-in- original and the show-cause notice issued after about three years were hit by the limitation. (ii) The show-cause notice and the order-in-original under sections 181 and 32(3) of the Customs Act have no nexus with the Complainants' case and, therefore, his decision is contrary to law/rules and regulations which constitutes an act of maladministration. (iii) The Department did not provide copy of the C.B.R.'s letter on the basis .of which it held that the assessment order was issued within the time-limit for finalization of assessment and Order-in-Original, was passed. (iv) The adjudication order has been passed on the basis of the C.B.R.'s letter whereas paragraph 66 of Customs General Order No.12 of 2002 provides that the final assessment order should be a speaking one and also incorporate all details and evidence on record on the basis of which assessment was finalized. This crucial legal aspect has been ignored.

4. It was requested that the issue of Order-in-Original No.9 of 2008 be declared as an act of administration and it should be set aside, the PDC for Rs.103,710 with award of costs and compensation for the losses suffered on account of maladministration be paid to the complainants and any other relief deemed fit be allowed.

5. The Assistant Collector of Customs (Appraisement) stated in his parawise comments that the complaint was premature and barred by section 9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, and be dismissed on the ground that the complainants have not availed the legal remedy under the law. With regard to the contents of the complaint it was stated that post clearance scrutiny revealed that the goods were not classifiable under the PCT 8482 and were not entitled to sales tax exemption under S.R.O.530(I)/2005. Subsequently C.B.R.'s clarification, dated 3-3-2006 also explained that the goods were not covered under the exemption notification. The short-levied 'amount of Rs.103,710 was to be recovered after process of adjudication.

6. The Assistant Collector further stated that: (i) The charge of maladministration was misconceived, there was no mala fide on the part of the Adjudicating Officer who did his job in accordance with the clarification issued by the C.B.R. about the inadmissibility of sales tax exemption on imported goods. (ii) PDC was not released because the benefit of S.R.O. was not admissible. (iii) Demand-cum-show-cause notice was issued to the complainants and fair opportunity of defence was provided by the adjudicating officer. They failed to contest the case on legal points. (iv) The Adjudicating Officer proceeded in accordance with law and the denial of inadmissible concession cannot be attributed as maladministration. The undue concession would have caused loss of revenue of Rs.103,710. (v) The complainants provided the copy of the C.B.R.'s letter during the hearing proceedings and given the opportunity to contest the case but they could not substantiate the claim. The Adjudicating Officer applied his judicious mind and decided the case independently after considering all aspects. The decision was justified and did not exterminate the right of the complainants but met the ends of natural justice.

7. It was added that the complaint was barred under section 9(2)(b) of the Federal Tax Ombudsman Ordinance,' the complainants did not avail the remedy available before the appellate forum, the complaint is based on mala fide intention by preferring personal interest on national interest to obtain undue inadmissible concession.

8. During the hearing of the complaint, the learned counsel for the complainants stated that 5% statutory customs duty was paid on the goods which were covered by sales tax exemption under serial 1, condition (a) of S.R.O.530(I)/2005, dated 6-6-2005. This was not accepted by the Customs and they allowed provisional release under section 81 of the Customs Act against a PDC Rs.103,710, dated 16-11-2007 for the amount of sales tax. The amount of duty and taxes actually payable on the goods was not finally assessed as provided under subsection (2) of section

81. It was stated that two letters dated 10-12-2005 and 24-12-2005 for decision and release of the PDC were sent to the Customs but no action was taken. Another letter dated 23-1-2007 for return .of PDC was sent and again without result. It was argued that since the provisional assessment was not finalized within the stipulated period of nine months, the provisional assessment became final under subsection (4) of section 81 ibid and it was the responsibility of the customs authorities to return the PDC to the importer.

9. It was further stated that after about three years of the provisional release, the Assistant Collector of Customs issued a show-cause notice on 25-10-2008 under section 32 of the Customs Act. The adjudication proceedings were not justified because there was no misdeclaration. The learned counsel stated that the elements attracting provisions of section of the Customs Act such as mens rea, misdeclaration, error or misconstruction were not applicable in this case because the declaration was correctly made and accepted by the Customs officials and the dispute related to the admissibility of sales tax exemption under S.R.O. 530(1)/2005, dated 6-6-2005. It is established law that 'where goods are released and assessment is to be made under section 81 of the Customs Act, the provisions of section 32 cannot be invoked for recovery of short levied amount. Therefore, he argued, the only option available to the customs officials was to determine the final amount of duty and taxes within the permissible period which was not done and the adjudication proceedings were (unlawfully) initiated under section 32 of the Act.

10. It was further 'argued that the negative list of tariff headings relating to S.R.O.530(I)/2005 and S.R.O.70(I)/2005 was issued-on 3-4-2006. Firstly, this negative list could not legally change the exemption scheme allowed by the Federal Government under clause (c) of section 4 of Sales Tax Act through a notification vide S. R.O.530(I)/2005. Secondly, this negative list could not be applied retrospectively in respect of clearance allowed in November, 2005. The learned counsel further argued that there was no loss of revenue because if any sales tax had been paid by the importer, it would have been adjusted against the out-put tax on the complainants' supplies.

11. The Assistant Collector of Customs replied that since there was dispute whether the goods i.e. Roller Bearing and Sleeves could be treated as components (not covered by exemption notification), the goods were provisionally released. C.B.R.'s clarifications were received in January, 2006 and April, 2006 and, since the goods were covered by negative list, dated 3-4-2006, sales tax was leviable. He added that the PDC, dated 16-11-2007 had expired and the demand for additional duty and taxes was raised vide order-in-original, dated 16-2-2009.

12. Submissions made by both the sides have been examined. First of all it is established law that where goods are released provisionally under section 81 of the Customs Act, action under section 32 of the Act is not justified. Secondly, the C.B.R.'s clarification could have only prospective effect and cannot be enforced retrospectively on past transactions. However, if the Department was of the view that the provisional assessment was contingent on the C.B.R.'s clarifications which were received in January and April, 2006 it was the duty of the Customs officials to finalize the assessment within the period prescribed under subsection (2) of section 81 ibid. this was not done and as a result the provisional assessment attained finality under subsection (4) of section

81. PDC should have been returned to the importer under subsection (3) of section 81 ibid. There was no legal justification to issue a show-cause notice under section 32 of the Act on 25-10-2008, after about three years of the date of provisional release, (to cover up the Department's failure to finally assess the goods within the stipulated period under section 81(2) of the Act), and pass order-in-original, dated 16-2-2009. The adjudication proceedings were contrary to law, against the established practice, without valid reasons and amounted to maladministration under subsection (3) of section 2 of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000 the objection about the maintainability of complaint before this office being irrelevant is rejected.

13. It is recommended that the Federal Board of Revenue. (i) set aside the Order-in-Original No.9 of 2009, dated 16-2-2009 passed by the Assistant Collector of Customs (Appraisement), Custom House, Karachi, under section 195 of the Customs Act; (ii) direct the Collector of Customs to finalize the assessment on the E basis of the provisional assessment under subsection (4) of section 81 of the Act; and (iii) return the (expired) PDC for Rs.103,710 to the complainants under subsection (3) of section 81 ibid; (iv) The above action be completed within thirty days; and (v) compliance reported to this office within forty five days. C.M.A./95/FTO Order accordingly.