Provisional determination of liability

Initiation of proceedings under section 32 of the Customs Act, 1969 ('Act of 1969'), after the provisional assessment under section 81 of the Act of 1969 has attained finality

Finality of assessment, whether under section 80 or section 81, as the case may be, does not preclude invocation of the offence under section 32, nor proceedings for recovery of duty, taxes or charge that has not been levied, short levied or erroneously refunded within the prescribed time from the relevant date

Finality of assessment under section 80 or section 81, as the case may be, is distinct from the offence described under section 32 and does not bar the proceedings thereunder, provided they are within the limitation period explicitly specified in the case of each eventuality separately.

Subsection (4) to section 81 of the Customs Act, 1969 provides that if the final assessment is not completed within the specified given under subsection (2) to section 81 then provisional assessment shall become final.

Initiation of proceedings under section 32 of the Customs Act, 1969 ('Act of 1969'), after the provisional assessment under section 81 of the Act of 1969 has attained finality

Finality of assessment, whether under section 80 or section 81, as the case may be, does not preclude invocation of the offence under section 32, nor proceedings for recovery of duty, taxes or charge that has not been levied, short levied or erroneously refunded within the prescribed time from the relevant date

Finality of assessment under section 80 or section 81, as the case may be, is distinct from the offence described under section 32 and does not bar the proceedings thereunder, provided they are within the limitation period explicitly specified in the case of each eventuality separately.

Subsection (4) to section 81 of the Customs Act, 1969 provides that if the final assessment is not completed within the period specified given under subsection (2) to section 81 then provisional assessment shall become final.

While final determination was not completed within six months, appropriate officer passed the impugned final assessment order by holding that the amount determined through provisional assessment order had become final and as a result thereof, the security instrument i.e. bank guarantee for differential amount should be encashed

Petitioner / importer assailed impugned order passed by invoking constitutional jurisdiction of the High Court

Objection of the respondents / department was that impugned order could be challenged before the next higher forum in terms of S.193 of the Customs Act, 1969 (' the Act, 1969')

Validity

Section 193 of the Act, 1969 had provided specifically that an order passed by any officer of the Customs Department under different provisions of the Act, 1969 was appealable

Section 81 of the Act, 1969 did not figure in the said order which were appealable before the next higher forum

Indeed, appeal was a creation of statute and in absence of any provision of law envisaging for filing appeal against an order, the appeal could not be entertained by the upper forum as a matter of course

High Court set aside the impugned order passed by the appropriate officer, declaring that her findings were not based on correct appreciation of subsection (4) of S. 81 of the Act, 1969 and directed the respondents / department to return the bank guarantee through which the differential amount was secured from the petitioner / importer

Constitutional petition was allowed, in circumstances.

While final determination was not completed within six months, appropriate officer passed the impugned final assessment order by holding that the amount determined through provisional assessment order had become final and as a result thereof , the security instrument i.e. bank guarantee for differential amount should be encashed

Petitioner / importer assailed impugned order passed by invoking constitutional jurisdiction of the High Court

Validity

Though the appropriate officer, had herself admitted her failure to complete the final determination within six months, but her approach was not in consonance with the purpose, mandate and language of S. 81(4) of the Customs Act, 1969 ('the Act 1969'); she, while passing the impugned order, was probably misled by the explanation; as at the end S. 81 of the Act, it was explained that the provincial assessment meant the amount of duties and taxes paid or secured against bank guarantee, however, the provisional determination of the duty as provided under subsection (1) of S. 81 of the Act, 1969, did not include the additional amount determined on the basis of provisional assessment and the said differential amount was indeed a speculated amount of duty which could ultimately be the actual amount of duty , taxes and other charges after a complete probe and inquiry leading to the final determination of duties / taxes etc.

It was only when there was actual final determination within the stipulated period that the additional amount was relevant and was adjustable in terms of subsection (3) of S. 81 of the Act, 1969

Said differential amount secured through bank guarantee in terms of S. 81(1) of the Act, 1969 was not part of provisional determination, therefore, when the appropriate officer failed to pass an order of final determination as per inquiry envisaged under the enabling provision of S. 81 of the Act, 1969 , then the amount only determined as a provisional assessment would be deemed as a final determination and as a consequence thereof, the differential amount if already paid, would be refunded or if it was secured through an instrument (pay-order / bank guarantee) the same would be returned to the importer

High Court set aside the impugned order passed by the Appropriate Officer, declaring that her findings were not based on correct appreciation of subsection (4) of S.81 of the Act 1969 and directed the respondents / Department to return the bank guarantee through which the differential amount was secured from the petitioner / importer

Constitutional petition filed by the importer was allowed, in circumstances.

Petitioner sought direction to the department to allow provisional release of imported consignments under S. 81 of the Customs Act, 1969, till such time its representation for granting exemption from levy of regulatory duty was finally decided by the department

Validity

Pendency of mere representation could not be accepted as a cause for provisional release of any consignment

Petition being misconceived was dismissed.

If a provisional assessment is not finalized within the period provided in S. 81 of Customs Act, 1969, such provisional assessment attains finality.

Where provisional assessment was not finalized within a period of six months by the department on the ground that since the matter was referred to the Valuation Department and once the advice was received the provisional assessment was finalized

High Court observed that this was an internal matter between the concerned Collectorate and the Valuation Department and in any case it could not be made basis to enlarge the statutory period of limitation of six months as provided in the S. 81 of Customs Act, 1969.

Question before High Court was whether provisional assessment under S. 81 of the Customs Act, 1969, was finalized within 180 days

Such would not give rise to a question of law and perhaps at most was a matter of rectification as Appellate Tribunal had recorded the finding pursuant to the oral arguments made during course of hearing on behalf of the department

Question that whether the assessment was finalized within the statutory period or not, neither arose out of the order of the Tribunal, nor in view of the above facts could be agitated by the department.

Section 81 of Customs Act, 1969, stipulates that where it is not possible for an officer of the Customs to satisfy himself of correctness of assessment of the goods made by the importer, then an officer not below the rank of Assistant Collector of Customs may determine such goods for the duty, taxes and other charges provisionally and release them against the Bank guarantee to be furnished by the importer to meet a likely disparity at the time of final determination

In terms of S. 81(2), then, final determination, within 6 months of such provisional release of the goods, is required to be made

Said period, for the reasons of exceptional nature, can be extended for further 3 months by the Collector of Customs or the Director of Valuation

Irrespective of whether such course has been followed or not, when final determination is not made within specified period, the framework under subsection (4) of the S. 81 irrepressibly rolls out requiring provisional determination to be deemed as final determination

Failure to finalize provisional determination of value of the goods within specified time shall translate into clearing of the goods on the value declared by the assessee, and, therefore the provisional assessment as final.

Respondents imported a number of consignments of tiles and filed goods declarations on the basis of declared values for assessment purposes

Department refused to accept such values and determined the same in terms of a valuation ruling

Respondents impugned the valuation ruling before High Court wherein the Court passed interim orders directing release of goods provisionally by securing differential amounts of duty and taxes

Petition filed by respondents was ultimately dismissed

Department finally determined the duty and taxes

Respondents challenged the determination of duty and taxes before Collector of Customs (Appeals) through appeals, which were dismissed

Appellate Tribunal allowed the appeals of respondents on the ground that since provisional assessments were not finalized within the period provided in S. 81 of Customs Act, 1969, therefore, the final assessments were time barred

Held; it was never a case of provisional assessment sticto sensu in terms of S. 81 of Customs Act, 1969

Such was an order of Court exercising jurisdiction under Art. 199 of the Constitution in a writ petition and not under S.81 of Customs Act, 1969

Such provisional arrangement was subject to final decision of the Court

Appellate Tribunal had miserably failed to take note of crucial facts and had dragged itself into the limitation aspect for purported failure of the department in finalizing the assessments which was never the case

Impugned judgment was set aside and the orders of forum below were restored.

Declaration was objected by the department and consequently under S. 81 of Customs Act, 1969, the goods were provisionally released after securing the differential amount of duties and taxes

Petitioner, after lapse of more than a year, filed constitutional petition for release of the security as the department had failed to make final determination within the time prescribed under subsection (2) of S.81 of Customs Act, 1969

Release was objected on the grounds that the subsection (4) of S.81 of Customs Act, 1969 provided that if final determination was not completed within the period prescribed under subsection (2) of S.81 then the provisional determination would be deemed to be final determination and that the explanation to the subsection (4) of S.81 Customs Act, 1969 had defined the provisional assessment as the amount of duties and taxes paid or secured by Bank Guarantee or pay orders

Validity

Word provisional assessment was neither used in subsection (1) of S.81 nor in subsection (2) of S.81 Customs Act, 1969

Subsection (1) of S.81 had secured differential amount on provisional determination and provisional assessment

If the interpretation of department was accepted then Customs would never bother to determine it finally and would enjoy benefit of not doing anything after provisional release

To claim the amount which was secured from the importer as differential amount, the final determination was inevitable

Since final determination was neither made within the prescribed time nor within any extended period of time, therefore, the High Court allowed the petition to the extent that the amount of security would be released.

First proviso of S.81 of the Customs Act, 1969 provides that in case the goods are being entered for warehousing, the additional amount either be paid on the basis of provisional assessment or Bank guarantee be furnished or pay order of the like amount of a scheduled bank along with an indemnity bond for the payment as the officer deems sufficient to meet the possible differential amount between the final determination of duty, taxes and other charges and the amount determined provisionally.

Spirit of S.81 Customs Act, 1969 provides that when it is not possible for the officer of the Customs to reach to the correctness of the assessment of the goods declared by the importer under S.79 for any statutory reason, the officer not below the rank of Assistant Collector Customs may order that the duty and taxes or other charges payable on such goods be determined provisionally.

Subsection (2) of S.81 of Customs Act, 1969 caters for a situation when the goods are allowed to be cleared or delivered on the basis of provisional determination, the amount of duty, taxes and charges correctly payable to those goods shall be determined within six months from the date of provisional determination

Time is further extendable provided the officer concerned may in circumstances of exceptional nature and after recording such situation extend period of final determination, which shall in no case exceed ninety days

Proviso to subsection (2) of S.81 of the Act provides the calculating mechanism of the period prescribed in subsection (2) of S. 81

Subsection (3) of S.81 provides the mechanism on completion of final determination

Amount already paid or guaranteed shall be adjusted against the amount payable on the basis of final determination and difference between the two amounts shall be paid forthwith to or by the importer as the case may be.

Reliance was placed by the department on note of Additional Director of Customs which forwarded a summary for the approval of extension

Allegedly the time was granted by 60 days

By the time the purported summary was granted, six months' time had already lapsed

Fact of the matter was that the time for finalization had already lapsed, even if 60 days' time was counted from the date when time lapsed, it should not have gone beyond the prescribed time whereas final determination was made beyond time

No interference in the impugned judgment was required

Reference applications were dismissed.

Goods were released provisionally under S. 81 of Customs Act, 1969 and the matter was referred to Valuation Department for determination of correct customs value for levying duties and taxes

Directorate General of Valuation determined the value of the goods higher than the one declared, which resulted into levying of duties and taxes

Order-in-original was challenged before the Collector of Customs but the same was turned down

Appellate Tribunal, however, set aside the order-in-original and order-in-appeal by observing that the origin of goods was not the same

Validity

Valuation ruling was issued after about six months of the arrival of the goods

Questions proposed by the department did not germane to the root of the cause as firstly the subject valuation ruling itself did not demonstrate the value of the subject goods when they arrived, hence it became a question of fact rather than law and the Appellate Tribunal was right in observing that the subject valuation ruling was not applicable

Special customs reference application was dismissed, in circumstances.

Declaration is filed under S.79 of the Customs Act, 1969, for the assessment under S.80 of the Customs Act, 1969, or in case provisional assessment is required, then under S. 81 of the Customs Act, 1969

Two material issues are essentially considered at the time of assessment that whether PCT Heading is rightly claimed and what can be the value of goods for the assessment

Scheme of the Customs Act, 1969, reveals that the subject is governed in terms of S.25 of the Customs Act, 1969 and in case it cannot be determined under S.25, then the recourse is available by applying valuation ruling if available in terms of S.25-A whereafter it is finalized under the Customs Act, 1969

After the assessment and the release of consignment, the goods are made out of any charge of the Customs

If such process is required to be revisited, (in appropriate cases), the mechanism is available under the law such as Ss. 32, 193 & 195 of the Customs Act, 1969.

Appellant imported consignments of USB Flash Drive and MCC Card; goods were assessed in terms of S.80 of Customs Act, 1969 and released under PCT heading 8523.5120 whereunder customs duty @ 5% was chargeable

Amount of customs duty was not charged on the ground that the appellant would obtain an exemption notification from the Federal Board of Revenue and submit the same to the Department

Appellant had submitted undertakings along with post dated cheques to the effect that if he failed to submit the requisite exemption notification he would make the payment to the government

Appellant was thereafter asked to make payment of the deferred amount of duty and taxes but he refused to do so and the cheques submitted by appellant at the time of clearance of goods were dishonoured

Validity

Department had allowed clearance of goods in pursuance to Board's Letter No. C.No.6(1)/2007/CB, dated: 15-6-2009 addressed to the Department

Board had allowed provisional release with exemption cover in line with the policy of encouraging computer literacy by keeping computer gadgets at low taxation

Had the goods been assessed to duty/taxes under S.80 of Customs Act, 1969, release of the same would have been allowed under S.83 of Customs Act, 1969 after payment of such assessment

Assessment ought to have been finalized under S.81(2) of Customs Act, 1969

Alternative course would have been finalization through default under S.81(4), Customs Act, 1969

Had the department taken action within the stipulated period of 6 months under S.81(2), Customs Act, 1969, the matter would have attained finality

Provisional assessment was not finalized, hence, under subsection (4) of S.81, of the Customs Act, 1969 the assessment made provisionally was deemed final

Lapse of over three years when normal period of finalization under S.81(4) stood finalized being "deemed finalization"

Demand raised by the Department was unlawful

Appellate Tribunal allowed the appeals.

Where valuation ruling is more than ninety days old and an importer has approached the Director Valuation for provision of reasons as to why the ruling has to be revised or rescinded; fresh consignments of such importer shall be allowed provisional release in terms of S.81 of Customs Act, 1969, by securing the differential amount of duty and taxes in the shape of pay order/Bank guarantee.

Appellant imported compost (non-commercial furtilizer) and claimed exemption from payment of sales tax under Entry No. 99 of Sixth Schedule to the Sales Tax Act, 1990

Goods of appellant were released after acceptance of declaration in all aspects

Deputy Collector of Customs after lapse of about a year conducted audit on his own and thereafter framed contravention report with the allegation that the appellant had availed benefit of sales tax exemption which was not available on imported goods

Additional Collector of Customs accordingly issued show cause notice and vide order-in-original upheld the charges

Validity

Initial assessment order had attained finality by virtue of expiry of stipulated period expressed in subsection (2) of S. 81, Customs Act, 1969 and as such held field and no subsequent order could be piled upon assessment order as the same was not permitted besides being tantamount to double jeopardy barred under Art. 13 of the Constitution

Appellate Tribunal set aside the order-in-original passed by Additional Collector of Customs and allowed the appeal.

Deputy Collector of Customs provisionally released the goods of appellant and transmitted the goods declaration to the Directorate General of Valuation for determination of value

Deputy Collector of Customs thereafter determined the liability of appellant on the basis of value determined by Assistant Director, Directorate General of Valuation

Appellant filed representation to the Director, Directorate General of Valuation but it was not decided

Appellant thereafter assailed the order of Deputy Collector of Customs before Collector of Customs (Appeals), who dismissed the same on the ground of limitation

Validity

Officer of Customs, for opting provisional assessment of goods under S. 81(1), Customs Act, 1969, must have evidential invoice of higher value of the identical/similar goods, imported from the same country and within the same period as enunciated in R. 107(a) of Customs Rules, 2001

Recourse to provisional assessment could not be made merely on assumption/presumption or opinion that the value of the imported goods did not seem to be fair

Appellate Tribunal held that the Deputy Collector of Customs was not within his right to opt for provisional assessment of the imported goods

Appellate Tribunal set aside the orders passed by officers of customs and allowed the appeal.

Final assessment order had to be made by the officer of Customs or Directorate General of Valuation within a period of 6 months without any exception, however, if final assessment could not be made within 6 months, Collector or Director could extend the period further but not more than 90 days, subject to availability of "exceptional circumstances" and recording of those after serving a notice to the importer.

Appellant had assailed order of Director, Directorate General of Valuation, whereby he re-determined the value of imported goods

Appellant during pendency of appeal filed application for release of imported consignment

Appellate Tribunal directed release of consignment upon payment of duty and taxes in accordance with the declared value upon deposit of pay order for the differential between the declared and assessed value

Appellate Tribunal, later on, allowed the appeal

Deputy Collector of Customs passed assessment order through which he finalized the assessment while construing the case as one of provisional release and assessed the goods of appellant to higher rate by using identical goods method

Validity

Consignment of appellant was released on the order of Apellate Tribunal by Deputy Collector of customs and not in exercise of powers vested upon him under the provisions of S. 81(1) of Customs Act 1969

Appellate Tribunal had not directed Deputy Collector of Customs to determine value of goods

Powers under provisions of S. 81, Customs Act, 1969 and R. 439(a), Customs Rules, 2001 could be exercised by Deputy Collector of customs when the value declared by importor seemed to be incorrect

Appellate Tribunal set aside the orders passed by Customs authorities and allowed the appeal.

Where Valuation Ruling was more than 90 days old and an importer had approached Director Valuation in terms of judgment of Supreme Court in Sadia Jabbar v. Federation of Pakistan (2012 SCMR 617); fresh consignments of such importers should be allowed provisional release in terms of S. 81 of Customs Act, 1969 by securing differential amount of duty and taxes in the shape of Pay Order/Bank Guarantee as the case may be.

Where Valuation Ruling, though valid, but had lost its credibility and effectiveness for all legal and practical purposes then there was no justification in refusal of provisional release of consignments by the Department

Rule 125 of Customs Rules, 2001 issued by Department in terms of S. 219 of Customs Act, 1969 notified vide S.R.O. No. 450(I)/2001 dated 18-06-2001 also provided for provisional release of consignments if there was any valuation dispute

Determination of valuation under S. 25A of Customs Act, 1969 was dependent upon methods and mechanism provided for valuation under S. 25 of Customs Act, 1969, therefore, if assessments made under S. 25 of Customs Act, 1969 could be disputed and release could be allowed in terms of S. 81 of Customs Act, 1969 then there was no reason to withhold or deny such provisional release in case of assessments made under S. 25A of Customs Act, 1969.

complaint against failure of Department to respond to complainant's application for release/refund of customs duty and taxes in terms of S. 81(3) of the Customs Act, 1969

Validity

Goods in question were allowed provisional release subject to test reports from laboratory to ascertain the specifications of the goods, however, said reports were still awaited

Complainant vide two letters, requested the Department to pursue the pending test reports for a period exceeding a year and eight months, after which present complaint was filed

Federal Tax Ombudsman observed that it was evident that the Department did not pursue the matter of laboratory reports in the normal course, causing inordinate delay in finalization of provisional assessment which tantamount to "maladministration"

Federal Tax Ombudsman recommended the authorities to direct the Customs Department to pursue the matter with the laboratory and decide the case within a period of ten days, and furthermore, to evolve a mechanism for monitoring of pending test reports in all other cases of provisional assessment to avoid inordinate delays in finalization of cases

Complaint was disposed of, accordingly.

Differential amount was secured through pay order which was required to be released on final determination of value and payment of due amount of duty and taxes

Despite payment of duty and taxes as per final assessment the security/pay order was not released as it was allegedly stolen from the custody of the Department and encashed with the connivance of the officials of the Department

Pay order was in the name of Collector and it could have been credited only to the official/Government account

Registration of First Information Report against theft of the pay order and a departmental inquiry were not enough

Officials involved in the theft, after being suspended for a short term, had been re-instated

No action had been taken for the recovery of the amount of pay order illegally en-cashed

Complainant was entitled to the release of pay order, after payment of due duty and taxes

Department was under legal obligation to return the pay order or refund the amount

Complainant could not be deprived of his legitimate money for the fault of the Department

Inaction, delay, inefficiency and ineptitude in discharge of duties and responsibilities on the part of Department were apparent on the face of record and were tantamount to maladministration

Federal Tax Ombudsman recommended that Federal Board of Revenue direct the Collector to (i) finalize the departmental inquiry without further delay (ii) take steps, as per law, for the recovery of the defalcated amount and (iii) refund the amount of pay order to the complainant.