ORDER SHEET
Spl Cus. Ref. Application No.03 to 10 of 2009
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Order with signature of Judge __________________________________________________________________
1. For Katcha Peshi.
2. For hearing of Stay Applications
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Dates of hearing : 15.10.2009, 03.11.2009, 13.11.2009
& 10.12.2009.
Applicant through : Mr. Muhammad Najeeb Jamali Advocate.
Respondent through : Mr. Raja Muhammad Iqbal Advocate.
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IRFAN SAADAT KHAN, J. By this consolidated order we propose to dispose off the Special Customs Reference Applications filed by the applicant against the order dated 22.12.2008 of the Customs, Excise and Sales Tax Appellate Tribunal, Bench-I, Karachi (CESTAT), by which the following questions of law have been raised:
1. Whether the transaction value of the goods declared by the importer under section 25(1) of the Act, cannot be ignored/rejected by the department without giving specific reasons ?
2. Whether such rejection is in violation of rule 109 of the Customs Rules 2001 ?
3. Whether the Demand cum Show Cause Notice dated 05.03.2007 was issued without giving an opportunity of hearing to the Applicant and the demand was finalized in blatant violation of rule 109 of Customs Rules 2001 ?
4. Whether the provisions of section 25 of the Act are to be followed sequentially before finalizing the assessment of goods or before having a recourse to section 81 of the Act for assessment ?
5. Whether the department erred in law in finalizing the assessment, under section 81 of the Act, of Split Air Conditioners, without first following the provisions of section 25 of the Act ?
6. As the Director of Valuation had himself observed that the listed values were only indicative in nature and had directed that the cases may be finalized strictly in accordance with the provisions of section 25 of the Act then, in such circumstances, the listed prices could be adopted in complete ignorance of section 25 of the Act ?
7. Whether the listed prices which are only indicative in nature (i.e. not being a valuation advice) are not binding on the department, especially where the letter of indicative prices itself directs that the provisions of section 25 of the Act be followed ?
8. Whether the market inquiry conducted by the representative of the department in presence of the representatives of the Directorate of Valuation and the Chamber of Commerce and Industry under the work-back method (which is less than price declared by the Applicant) can be rejected without any cogent reasons ?
9. Whether the letter dated 20th April, 2006, where the Director General Customs Valuation of PCA has suggested 8% increase in values of goods for China origin, is self-contradictory, arbitrary and fictitious and hence contrary to rule 110 of the Customs Rules 2001 ?
10. Whether the Demand cum Show Cause Notice dated 05.03.2007 of the final assessment was barred by limitation under section 81(2) of the Act ?
11. Whether in the facts and circumstances of the case the Collector of Customs had any lawful authority to extend the period of limitation under section 81(2) for final assessment and in particular without recording reasons ?
2. Mr. Muhammad Najeeb Jamali Advocate has appeared on behalf of the applicant and submitted that the department has failed to comply with the provisions of section 25 of the Customs Act 1969 (‘The Act’) read with Rule 109 of the Customs Rules, 2001 and in support of his contention has relied upon the following decisions :-
i) Rehan Umer vs. Collector of Customs (2006 PTD 909).
ii) Messrs Khan Trade International through Proprietor vs. Assistant Collector Customs (Group-VIII) Appraisement Collector, Karachi and 4 others (2006 PTD 2807).
iii) Collector of Customs Port Muhammad Bin Qasim vs. Messrs. Zymotic Diagnostic International Faisalabad (2008 SCMR 438).
iv) Messrs Pakistan Dry Battery Manufactures Associates through Vice-Chairman and another vs. Federation of Pakistan through Secretary, Revenue Division, Islamabad and 9 others (2006 PTD 674).
3. The learned counsel further submitted that as the department has failed to finalize the assessment under the provisions of section 81 within the stipulated time and the provisional assessment becomes the final assessment hence whatever value has been declared in the provisional assessment has to be accepted as final assessment. In support of his contention he has relied upon the following decisions :-
i) M/s.Dewan Farooq Motors Ltd., Karachi vs. Customs, Excise and Sales Tax Appellate Tribunal, Karachi and 2 others (2006 PTD 1276).
ii) Messrs. S. Fazal Ilahi & sons through Registrar vs. Deputy Collector Customs and others (2007 PTD 2119).
4. The learned counsel for the applicant further submitted that in any case the order passed by the learned Member (Technical) sitting singly is ab initio void and illegal as a Member (Technical) cannot hear the matters relating to questions of law. As per the learned counsel the said Member Technical does not have the jurisdiction to adjudicate upon the matters involving questions of law hence at the very outset the order passed by him lacks proper jurisdiction and therefore the matter may be decided in his favour. In support of his contention he has relied upon Collector of Customs, Model Customs Collectorate of PACCS, Karachi vs. Muzammil Ahmed (2009 P T D 266).
5. Mr. Raja Muhammad Iqbal Advocate has appeared on behalf of the department and submitted that all the questions raised in the present Reference Applications are questions of fact and hence as per the provisions of section 196 of the Act these cannot be admitted by this court. In support of his contention he has relied upon the following decisions :-
i) Collector of Customs, Central Excise and Sales Tax, Quetta vs. Messrs Haji Ahmadullah & Company (PLD 2005 S.C. 461 also in 2005 PTD 1654)
ii) Messrs Rabeel’s Lahore vs. Collector of Customs, Dry Port, Mughalpura Lahore and another (2003 PTD 78).
iii) Government of Pakistan vs. Sandoz ( Pakistan) Ltd. (2006 SCMR 1403)
iv) Messrs Cool Fridge (Pvt) Ltd through Commercial Manager vs. Central Excise, Sales Tax and Customs Appellate Tribunal Lahore and another (2004 PTD 417).
v) M/s. Nissho SRI, Lahore vs. Assistant Collector of Customs (Import) Dry Port Trust, Faisalabad and two others (PTCL 2003 CL 688).
vi) Pakistan State Oil Company Ltd vs. Collector of Customs E & ST (Adjudication-II) and others (2006 SCMR 425).
vii) Towellers Ltd. Through Chief Operating Officer vs. Government of Pakistan (2006 PTD 310).
viii) Messrs Lever Brothers Pakistan Ltd. Vs. Customs, Sales Tax and Central Excise Appellate Tribunal (2005 PTD 2462).
ix) Collector of Customs E & ST (Adjudication-II) and others vs. Pakistan State Oil Company Ltd (2005 PTD 2446).
x) Manhattan International (Pvt) Ltd Karachi and others vs. Director General Intelligence and Investigation Customs and Excise Karachi and others (2006 PTD 2609)
6. The learned counsel further submitted that the present applicant is only aggrieved with the valuation made by the Customs authorities and as per the learned counsel the question of valuation is a question of fact which cannot be agitated before this court. In support of his contention he has relied upon the following decisions :-
i) Madina Traders vs. The Federation of Pakistan and 4 others (1999 SCMR 95).
ii) The Collector of Customs Karachi vs New Electronic (Pvt) Ltd and 59 others (PLD 1994 SC 363)
7. The learned counsel further submitted that the present Ref. Applications have not been filed on the prescribed form as specifically mentioned in Rule 420 of the Customs Rules, 2001, hence the same are not maintainable for want of filing on the prescribed form. The learned counsel also submitted that review application filed by the applicant under the provisions of section 25D of the Act is pending before the Director General Valuation, hence the present Ref. Applications are not maintainable.
8. In the rebuttal by Mr. Jamali stressed that all the questions raised by him are questions of law and not that of fact. He further submitted that no ref. Application could be dismissed merely on the basis of defect in filling the ref. Application on the prescribed form. He also submitted that the review application pending before the Director General has no relevancy with the present case. He vehemently contended that the three fora below have not considered the issues raised by him in the proper perspective and have summarily rejected his contentions. He vociferously submitted that the questions raised by him are mixed questions of fact and law and in this regard relied upon the decision reported as 1970 SCMR 158. The learned counsel submitted that in any case the respondent were not justified in comparing the case of the applicant with the case of the persons which are not akin to the case of the applicant. In the end he submitted that the order passed by the three authorities below may be set aside by allowing the present Ref. Applications.
9. Briefly stated the applicant is a company engaged in the manufacture, import and export of electronics household goods. The applicant imported Split Air conditioners model DAC 180CT3K (18000 BTU) at a price of US$ 195.85 per unit. When the goods reached Karachi the respondent assessed these goods provisionally under section 81 of the Act at a value of US$ 221 per unit and the differential amount was secured by receiving postdated cheques for each consignment. The matter thereafter was referred to Directorate of Valuation and PCA for their valuation advice, which vide his letter dated 20.4.2006 assessed the same value of US$ 221per unit. The applicant objected to the said valuation fixed by the Directorate Valuation and the said Directorate thereafter conducted a fresh enquiry. However, the Directorate vide its letter dated 12.2.2007 affirmed its previous stand of valuing the unit at US$ 221 and advised the Directorate General to finalize the cases at an early date. The department thereafter issued the demand cum show cause notice dated 05.03.2007 asking the applicant to pay the differential amount. A reply dated 15.05.2007 was thereafter sent by the applicant to the department, but of no avail. The department then vide its order in original dated 16.5.2007 rejected the contentions of the applicant. Appeals thereafter were filed before the Collector (Appeals) who also vide his order dated 16.1.2008 rejected the contentions raised by the applicant. The applicant thereafter filed appeals before the CESTAT which also vide its order dated 22.12.2008 upheld the orders of the authorities below by dismissing the appeals of the applicants. It would not be out of place to mention that the said appeals were decided by the Member (Technical) while sitting singly.
10. Before adverting to the various objections raised by the learned counsel appearing on behalf of the applicant, we first would like to dilate upon the legal issue raised by the counsel with regard to the assumption of jurisdiction by the learned Member (Technical) by hearing the said appeals sitting singly. Mr. Muhammad Najeeb Jamali Advocate has attacked the order passed by the learned Member (Technical) by submitting that in the case of Muhammad Muzammil this court has already held that the Member (Technical) has no jurisdiction while sitting singly to decide the questions of law. He submitted that the present appeals involve very important questions of law whereby it was stressed before the learned Member (Technical) that the department has violated the provisions of section 25 of the Act read with Rule 109 of the Customs Rules and this legal issue has already been decided in his favour in a number of decisions quoted supra. He has further stressed that in addition to the above legal objection, the provisions of section 81 also have been blatantly brushed aside and no heed in this regard was paid by the learned Member (Technical) while hearing the appeals singly.
11. We have considered his above argument with enthusiasm, however before giving any authoritative pronouncement we consider it expedient to quote relevant extract from the decision in the case of Muhammad Muzammil wherein a Division Bench of this court comprising our learned brothers namely, Muhammad Athar Saeed and Arshad Noor Khan (as he then was) J.J. observed as under :-
“When reading the statute as a whole we are of the opinion that although prima facie it is seen that the deletion of explanation will empower both judicial member and technical member to decide questions of law sitting singly but after considering the second proviso to subsection (2) and trying to arrive at a harmonious interpretation the only interpretation which follows is that the intent of the legislature is that if Special Bench comprising two or more technical members cannot hear a matter involving question of law then it will be illogical and absurd to conclude that the legislature intended that a Technical Member sitting singly can hear a matter relating to a question of law and as the learned Amicus Curiae has already opined that absurdity cannot be presumed in an interpretation.
15. We are, therefore, of the considered opinion that the deletion of the explanation to subsection (3-A) has empowered a Judicial Member sitting singly to hear a question of law but when the statute is interpreted as a whole the only interpretation which can be drawn is that the technical member sitting singly is not empowered to decide a matter involving a question of law. We would therefore, a answer the common question in these reference applications in affirmative i.e. we hold that the member technical does not have the jurisdiction to adjudicate in matters involving questions of law.”
12. A perusal of the above explicit findings given by the Bench would reveal that the learned Bench has categorically in unequivocal terms has held that the Member (Technical) does not have the jurisdiction to adjudicate in matters involving questions of law. It would not be out of place to mention that during the course of the arguments we specifically asked a question from Mr.Raja Muhammad Iqbal, the learned counsel appearing on behalf of the department, as to whether the decision given in Muzammil’s case, which has invariably been followed in a number of cases by this court, is squarely applicable to the present reference applications or not. Though Mr. Raja Muhammad Iqbal did not concede to this proposition however could not controvert the fact that the Member (Technical) while sitting singly does not have the jurisdiction to decide the questions of law raised before him.
13. We therefore without entering into other controversies and going into the merits of the case would like to dispose off these reference applications on the above legal proposition raised by the learned counsel appearing on behalf of the applicant that the learned Member (Technical) does not have the jurisdiction while sitting singly to adjudicate upon the issues involving questions of law. We therefore, remand all these reference applications back to the CESTAT with the directions that the matter should be placed before the Chairman CESTAT for forming a Bench comprising either a Member (Judicial), or a Bench comprising Member Judicial and Member (Technical) preferably within a period of thirty days from the date of the receipt of this order and the said Bench should decide all the appeals in accordance with law preferably within a period of ninety (90) days from the formation of the said Bench. The said Bench while deciding the appeal should consider and dilate upon, among others, the following questions of law:
i. Whether the department while dealing with the goods under question has applied the provisions of Section 25 of the Act, read with Rule 109 of the Custom Rules in its true spirit by fulfilling all the legal requirement as envisaged under the law in this regard?
ii. Whether the department while dealing with the goods under question has applied the provisions of Section 81 of the Act in its true spirit by fulfilling all the legal requirement as envisaged under the law in this regard?
14. Ample opportunity of hearing should be given to both the sides before reaching to any conclusion. All the above reference applications are disposed of in the above terms, alongwith the listed applications.
15. However before parting with the order we would like to dilate upon the issue raised by Mr. Raja Muhammad Iqbal that the present reference applications have not been filed on the prescribed format. In our view the requirement of filing prescribed form is a mere technicality which does not affect the substance of the application. We in this regard would like to refer the decision given by this Court in the case of Abdul Ghani & Co. Vs. Commissioner of Income Tax (1962) 6 TAX 185 wherein the Hon’ble Bench observed as under:-
“In any case, the requirement that the application should be filed in the prescribed form is a mere technicality which does not affect the substance of the application. The requirement appears to us to be merely procedural and directory in nature, and not of a mandatory character, so that its non-compliance would not invalidate the application itself. It is significant that subsection (1) does not contain any penal clause in case there is any failure to comply with this requirement. The right to require a reference to the High Court is a substantive right conferred by the statute and cannot be allowed to be taken away by mere non-compliance with a technicality. In this view we are fortified by the observations of Their Lordships of the Supreme Court in Eastern Rice Syndicate v. Central Board of Revenue [P L D (1959) S.C. (Pak.) 361].”
JUDGE
Karachi,
Dated: .01.2010. JUDGE