2007 PLP (Trib (PTD)

MUHAMMAD WALI KHAN (MEMBER (TECHNICAL).

This judgment disposes of the appeal filed by Messrs Pakistan Tobacco Company Ltd., First Floor, Evacuee Trust Complex, Agha Khan Road, Sector F-5/1, Islamabad (hereinafter called the appellants) against the Order-in-Appeal No.131 of 2006 dated 6-7-2006 passed by the Collector of Customs, Sales Tax, and Federal Excise (Appeals), Islamabad (hereinafter called the Appellate Authority).

2. Brief facts of the case are that during the course of audit conducted by the staff of DRRA, Lahore it transpired that appellants filed a bill of Entry No. 14442 dated 4-6-2004 and No.16443 dated 8-6-2005 through Customs Clearing Agent Messrs Pakistan Baggage. At the time of assessment lesser freight was included instead of the actual freight paid on the airway bill. This omission resulted in short realization of Government revenue amounting to Rs.2,31,585.00.

3. Show-cause notice C. No.AFU/Imports/Audit/U8/OS/3309-3310 dated 13-12-2005 was issued by the Additional Collector of Customs, Air Freight Unit, Islamabad (hereinafter called the Adjudicating Officer) to the appellants calling upon them to submit their reply to the show-cause notice within 10 days of the issuance of the said notice. They were further directed to appear before him on 28-10-2005 personally or through their legal representative. Subsequently after hearing both the parties and examining record of the case the Adjudicating Officer passed the following order:

"I have gone through the record placed on file and the written statement submitted by the respondent as well as their verbal arguments during hearing proceedings, it is evident from the documents submitted and arguments forwarded by the respondent's lawyer that they could not give any cogent reason for not .including the actual airfreight shown on the airway bill submitted along with the bill of entry at the time of clearance of subject goods. They only produced a statement of the freight forwarded, which is insufficient evidence for not including the freight declared on the airway bill in the value. Therefore, the objection raised by DRRA is valid and show-cause notice No.V.Cus/Ad/11/05/3309-3310 dated 13-12-2005 issued to Messrs Pakistan Tobacco Company Limited stands established. Messrs Pakistan Tobacco Company Limited are directed to deposit the differential amount of Rs.231,585 vide audit observation 12 part 1 of Proposed Draft Para No.10130. A penalty of Rs.25,000 as envisaged under section 156(1) for violation of section 25 of the Customs Act, 1969 is also imposed on the respondents."

4. Aggrieved of the decision of the Adjudicating Officer the appellant filed an appeal before the Appellate Authority. The Appellate Authority upheld the order of the Adjudicating Officer and rejected the appeal.

5. Dissatisfied with the decision of the Appellate Authority the appellants have filed the present appeal before this forum with a prayer to set aside the orders of the lower forums.

6. Mr. Farrukh Jawad Panni, Advocate appeared for the appellants acid argued the appeal. Referring to the grounds of appeal he made the following submissions:

(1) Under the provisions of section 25(2)(a)(i) of the Customs Act, 1969 the cost of transport/air freight of the imported goods to the place of importation is not includible in the price of imported goods if such airfreight is already .included in the price. The airfreight paid by the appellants is shown in the invoice and the price was paid by the appellant on C&F basis as per terms of the invoice. (2) rule 113(1) of the Customs Rules, 2001 appearing in Chapter-III dealing with "Primary Method of Valuation" defines the price as "the total payment made or to be made by the buyer to or for the benefit of the seller as price for the imported goods". The invoiced price has been paid to the' seller and the same price was declared to the customs by the importer for assessment of import duties. (3) Customs Department has failed to adduce evidence to the effect that air freight shown in the airway Bill in question was actually charged by the airline and further that the difference in freight shown in the invoice and the Airway Bill was paid or is payable to the seller by PTC by way of part of the price of .the imported goods. (4) It is incumbent upon the Customs Department to accept the declared value/transaction value in cases like the present one as ordained by the provisions of section 25 read with rule 113 as recently held by the Honourable Lahore High Court in a case reported as 2006 PTD 1876. (5) Without prejudice to above, according to Customs General Order. No.6/1990 which is based on the Explanatory Notes (Chapter VII) to Brussels Definition of Value, the additional cost of transportation (air freight) which is borne by the seller (if hypothetically assumed that consignor had paid the freight as per Airway Bills but same not payable by PTC as part of price) would not result in increase of C.I.F. price of th8 goods. (6) At the time of initial assessment the Customs Authorities, on the