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The Secretary,

Revenue Division,

Islamabad. …Respondent

Dealing Officer …Mr. Muhammad Akbar, Advisor



FINDINGS/DECISION

Present: Mr. Muhammad Ahmad Sethi, Director M/s Nizami Wire Industries (Pvt.) Ltd (the complainant).

Mr. M. Faisal Khan, A.C., Appraisement for the Customs House Karachi.

Mr. Zahid Hussain Malik, Advocate for the Karachi Port Trust.

The complainant imported a consignment of Wire Rods and filed Goods Declaration (GD) for clearance thereof under PCT Heading 7213.9190, attracting customs duty at 10%. The Customs Appraisement Group insisted on classification of goods under PCT Heading 7217.9000, leviable to customs duty @ 20% without any valid reasons. Although the Customs Shed Staff had confirmed the goods to be steel wire rods and not wires the appraisement staff did not accept this position. The Customs released 90% of the goods but detained 10% till finalization of classification dispute. The respondents obtained samples of the goods and referred the same to a laboratory for analysis. The lab report confirmed the declaration of goods as made by the complainant. Classification of goods was finally confirmed under PCT Heading 7213.9190, as was declared by the complainant. The respondents wasted lot of time in getting the lab results, which led to piling up of demurrage charges amounting to Rs.380920/-. The complainant applied to the Customs to provide delay and detention certificate to enable it to take delivery of goods from Karachi Port Trust (KPT) without paying demurrage charges. The respondents issued delay and detention certificate. The same was submitted to Traffic Manager, KPT vide letter dated 29.11.05 seeking delivery of detained goods without payment of demurrage. The KPT staff did not accept the delay and detention certificate issued by the Customs and asked the complainant to pay the demurrage before lifting the goods. The KPT used to honour delay and detention certificates issued by the Customs Authority but did not do so in complainant’s case. As a result, the complainant had to deposit an amount of Rs.380920/- as demurrage under-protest on 30.11.05 and lifted the detained goods on 30.11.05. Later, the complainant submitted an application for refund of the amount of demurrage paid to the Chairman KPT vide letter dated 29.12.05. The matter was referred to the Board of Trustees of KPT, who finally rejected its application vide KPT’s letter dated 18.04.06, without providing any opportunity of personal hearing and assigning any reason. Although the complainant’s declaration of goods was true, the customs authority delayed release of the consignment that led to undue demurrage. The KPT should have honoured the delay and detention certificate issued by the Customs authority as both were State-Governed Organizations. The KPT authority should refund the collected amount of demurrage, or, alternatively, the Customs authority should refund the amount of demurrage already paid by the complainant.

2. Subsequent to filing the complaint in the FTO Secretariat, the complainant, vide its letter dated 16.10.06, moved this forum to implead KPT as one of the respondents to the complaint as demurrage charges were deposited by the complainant in their account and because of its failure to honour the delay and detention certificate issued by the customs authority. Complainant’s application was considered. It was ordered by the FTO that “subject to all exceptions, this application is allowed and KPT is impleaded as respondent in the complaint to whom notice shall be issued”. Accordingly, a notice was issued to the KPT also.

3. In reply, the Collector of Customs Karachi has submitted that while 90% of the consignment was released under declared PCT Heading, only 10% was detained for confirmation of classification. It was the complainant itself who requested for release of its consignment by detaining 10% quantity as security in terms of section 81 of the Customs Act, 1969. Subsequently, however, the samples were sent to Technical Services Centre of M/s Pakistan Standard and Quality Control Authority, which Centre, vide report dated 29.10.05, confirmed the declaration made by the importer and the detained goods were accordingly released. The delay and detention certificate was also issued on the request of the complainant. FTO’s jurisdiction in the case was ousted in terms of section 9(2) of the FTO Ordinance, 2000, because the complaint involved classification dispute of imported goods, and because the complaint was hit by time limitation as provided in section 10(3) of the FTO Ordinance. The complainant had first had the notice of matter alleged in the complaint on 17.09.05 and the complaint was, therefore, time barred. The complainant was basically aggrieved by KPT’s decision, who refused to waive demurrage charges and as such the Customs Department was not involved. There was narrow distinction between wires and wire rods. The complainant did not furnish any mill certificate at the time of processing of the case to enable the respondents to confirm the declaration. The complainant had itself opted for examination. The Assessment Staff ascertained correct classification. The complainant did not lodge any protest with the Customs Department. Complainant’s contention that the goods were mild steel wire rods was incorrect. These goods were declared as high carbon steel wire rods and not wire steel rods. The KPT was governed by the Ministry of Port and Shipping, which had no nexus with the Revenue Division. The complaint may be set aside as it was based on incorrect facts.

4. Three hearings were notified. No one appeared for the KPT at the first hearing. At the second and third hearings, the advocate representing the KPT appeared but submitted that he was waiting for the parawise comments, duly signed by the Port Trust authority, and sought adjournments for filing the same before arguing the case. Since the officer representing the Customs Department had come to attend the hearings all the way from Karachi to Lahore thrice, it was decided to hear him as well as the complainant. The learned advocate representing the KPT, however, argued his case later.

5. Mr. Muhammad Ahmad Sethi, Director M/s Nizami Wire Industries, reiterated the arguments advanced in the written complaint. He submitted that part of the consignment imported by the complainant was held up by the Customs for determination of classification. The matter was resolved in complainant’s favour as the declaration made by it was found correct by the lab. Realizing that the Customs had delayed the consignment, the Customs House issued delay and detention certificate on 29.11.05 for the complainant to seek waiver of demurrage. Accordingly, the complainant moved the KPT for waiver but the KPT vide its letter dated 18.04.06 rejected complainant’s claim despite the fact that the Customs House had issued delay and detention certificate. This, he said, was an act of maladministration. The KPT may be directed to refund the amount of demurrage, already paid by the complainant i.e. demurrage, which was incurred because of delay caused by the Customs in deciding the complainant’s case or, alternatively, the Customs may be directed to pay the amount of demurrage.

6. The DR representing the Revenue Division submitted that the Collectorate had issued delay and detention certificate dated 29.11.06. In this regard the department had acted in accordance with Customs Appraisers Manual, read with public notice No.16/89, which provided for issuance of delay and detention certificate. It was for the KPT to honour the same. He cited FTO’s decision dated 24.12.05 in Review No.60/05 in complaint No.558-K/04 in support of his contention that the KPT should have honoured the delay and detention certificate issued by the Customs Department as the KPT was acting on behalf of the Customs as its agent. Some of the arguments contained in unsigned parawise comments prepared by KPT’s advocate were read out to the Customs representative for his reaction. He submitted that all these points were raised by the KPT before the Honourable FTO in Review No.60/05 in complaint No.558-K/04 and the points as such stood answered vide Honourable FTO’s decision dated 24.12.05.

7. In its parawise comments, since filed, the KPT has submitted that it was a statutory organization, incorporated under the KPT Act 1886 and was performing its duties and functions under the said Act and Rules and Regulations framed thereunder. There was no provision in the KPT’s rules and regulations to accept the delay and detention certificate issued by the Customs Authorities. The scale of rates and charges of KPT were dealt with under sections 43, 43A, and 43B of KPT Act 1886 and while framing these rates and charges the old provision of delay and detention certificate was deleted by the KPT vide SRO. 1(KE)/2003. There was no allegation of ‘maladministration’ against the KPT and as such the complaint was not maintainable. The complaint was barred by time under section 10(3) of the FTO Ordinance, 2000. The case involved a classification dispute, which did not fall within the jurisdiction of the FTO; hence the complaint was liable to be dismissed. Scrutinizing the wires and applicability of SRO.1(KE)/2003 relating to delay and detention certificate was outside the jurisdiction of the FTO. Presently there was no provision of delay and detention certificate in the by-laws of KPT and, therefore, complainant’s request for its acceptance was not admissible under the Rules. The KPT did not in any way contribute towards delay in clearance of complainant’s consignment. The storage charges were KPT’s legitimate dues, which were recoverable for the services rendered by the Port. Complainant’s request for waiver of storage charges was examined and rejected by the Board of Trustees of the KPT for lack of sufficient justification as KPT was in no way responsible for delay in clearance of the consignment. The complainant was informed accordingly vide letter dated 18.04.06. Since there was no delay on the part of the KPT and the storage charges were its legitimate dues and there was no provision for acceptance of delay detention certificate under the KPT by-laws, no ‘maladministration’ was committed by the KPT. The complainant had no justification to claim refund of the demurrage charges already paid by it. The complaint may be dismissed.

8. At the hearing, the counsel for the KPT reiterated the arguments advanced in its written comments. The KPT was not working as customs agent for it was the creation of the KPT Act, 1886. Its work was governed under its own Act. The delay and detention certificates issued by the Customs Department used to be accepted, but in 2003 the KPT deleted the provision of acceptance of delay and detention certificate vide SRO.No.1(KE)/2003. The KPT was not responsible for causing delay in the clearance of subject goods. The delay occurred on the part of the Customs. If there was any ‘maladministration’ it was not committed by the KPT. Even if the Customs department availed various port facilities it was supposed to pay the charges to the KPT for services rendered. As for FTO’s decision cited by Customs Department representative the counsel for the KPT submitted that the KPT had filed representation against FTO’s decision contained in Review No.60/05 in complaint No.558-K/04 and the President of Pakistan’s decision was pending. He reiterated that the KPT was not the assignee or agent of the Customs. Port charges were not a ‘tax’; these were, in fact, charges for services rendered by the KPT to the importer and such service charges did not fall within the jurisdiction of the FTO. Questioned as to whether the KPT would give clearance to a consignment on which custom duty and tax were not paid, unless the customs department indicated that duty and taxes were paid, he submitted that the KPT charged its own dues and the Customs collected its own dues, the two worked independently. He argued that the KPT did not detain the goods as the same were detained by the Customs and, therefore, the complainant should claim the demurrage charges from the Customs Department. He added that it was advisable that the FTO’s forum may make a recommendation that both the KPT and Customs department should sit together to resolve the matter so that the question of acceptance of delay and detention certificate either by the KPT or by the Customs department was resolved.

9. The arguments of the two sides and records of the case have been considered and examined. The complainant imported a consignment of goods from Ukraine and declared it as carbon steel wire rods and filed GD dated 08.09.05 for clearance. At the time of assessment, a dispute regarding classification of subject goods arose. Initially, the Customs classified the goods under PCT heading 7217, chargeable to customs duty @ 20%, as against declared classification of 7213.9190, chargeable to custom duty @ 10%. However, 90% of the consignment was released under declared PCT Heading and the remaining 10% was detained pending laboratory analysis. The question whether the subject goods were wire rods or wires was referred to Technical Services Centre of Pakistan Standard and Quality Control Authority. The said centre confirmed the declaration as made by the importer. Since the goods in question had been detained at the port, the Customs Department issued delay and detention certificate dated 29.11.05 to the complainant. The complainant, vide letter dated 29/30.11.05, applied to the KPT authority for waiver of demurrage charges on the basis of delay and detention certificate issued by the Customs Department. To begin with, the KPT authorities informed the complainant vide letter dated 03.12.05 that since there was no provision for acceptance of delay and detention certificate in the existing SRO, as such the request for concession by acceptance of the said certificate could not be acceded. At the same time, the KPT asked the complainant to submit certain documents to examine its request for waiver of storage charges. Finally, the KPT vide letter dated 18.04.06 informed the complainant that the Board of Trustees of KPT had rejected its request for waiver of storage charges due to lack of sufficient justification as the KPT had in no way contributed towards delay in clearance of the subject consignment.

10. The port authority is opposing complainant’s demand for payment of refund of demurrage paid by it on the grounds that (i) it was performing its duty and functions under the KPT Act 1886 and the rules and regulations framed thereunder, (ii) there was no provision in the rules and regulations of KPT to accept delay and detention certificate issued by Customs authority, (iii) the old provision of delay and detention certificate was deleted by the KPT vide SRO.No.1(KE)/03, (iv) the KPT was not an agent or assignee of the Customs Department for it was working under its own law and rules and did not detain the goods on behalf of the Customs Department (v) the complaint was barred by time under section 10(3) of the FTO Ordinance, 2000, (vi) since the case involved classification dispute, it did not fall within the jurisdiction of the FTO, (vii) scrutinizing the vires and applicability of SRO.No.1(KE)/03 relating to delay and detention certificate fell outside the jurisdiction of the FTO, (viii) in no way did the KPT contribute to delay in clearance of the consignment, (ix) storage charges were KPT’s legitimate dues and the same were recoverable for services rendered by it. The KPT did not commit any ‘maladministration’.

11. Earlier, this forum had decided complaint No.558-K/04 making recommendation in that case that the Ministry of Communication remit the demurrage charges and reimburse the amount already paid by the complainant in that case. The KPT filed a review application against findings in the aforesaid complaint for recalling the recommendation made in decision dated 11.04.05 in the said complaint on the grounds almost identical to the grounds which have been advanced vide KPT’s comments filed in this complaint and argued by its counsel. While arguing the Review Petition, the KPT contended that (i) the dues were statutory charges in lieu of the services rendered by the KPT and not a ‘tax’ and as such the jurisdiction of the FTO was barred, (ii) no provision to accept the delay/detention certificate issued by the Customs authority existed in the relevant SRO and as such the KPT was bound to follow its own rules and, therefore, the KPT was not in a position to accept or implement the said recommendation, (iii) the KPT had not committed any ‘maladministration’, (iv) through a resolution passed by the Board of Trustees of KPT the provision in the KPT Rules of acceptance of delay and detention certificate issued by the Customs authority for waiver of demurrage was omitted, therefore, the KPT was working within the ambit of scope of its own rules and could not be directed to accept the said detention certificate and waive demurrage, which was neither part of Revenue Division nor amount of surcharge was tax.

12. In the present complaint, in addition to reiterating the arguments advanced in the review petition, as mentioned in preceding paragraph 11, the KPT and its counsel have also argued that (i) the present complaint was hit by time limitation under section 10(3) of the FTO Ordinance and was, therefore, not entertainable, (ii) the case involved classification and hence it was out of the jurisdiction of the FTO and (iii) the goods were not detained by the KPT on behalf of the Customs department.

13. As regards the respondents’ contention that the complaint was hit by section 10(3) of the FTO Ordinance, 2000, this is to point out that admittedly the complainant’s request for waiver of demurrage charges was finally rejected by the KPT vide letter dated 18.04.06. The complaint was filed in the FTO Secretariat by the complainant on 24.08.06, well within six months as envisaged in section 10(3) of the FTO Ordinance and as such the complaint is not hit by time limitation provided in the aforesaid section. It is, therefore, entertainable. Similarly, the contention that the FTO could not investigate the complaint because it involved classification issue is misconceived because the complainant has alleged ‘maladministration’ on the part of the KPT for its failure to honour the delay and detention certificate, issued by the Custom House, compelling it to pay demurrage charges and is seeking refund of demurrage charges already paid by it. Even otherwise this forum is fully competent to investigate cases involving ‘maladministration’. It may also be noted here that in so far as the Customs Department is concerned, it has in the parawise comments filed by it taken the position that the complainant was essentially aggrieved by decision of the KPT and the Customs Department has been unnecessarily dragged into this controversy.

14. While objections to FTO’s jurisdiction in terms of sections 10(3) and 9(2)(b) of the FTO Ordinance have been dealt with and answered in para 13 above, the other issues raised in the present complaint by the KPT are the same as were advanced and argued by it in the review petition in complaint No.558-K/04. These issues and KPT objections were dealt with and decided by this forum vide Order-In-Review No.60/05 dated 24.12.05 in complaint No.558-K/04, the operative portion of which is reproduced below:

“I have considered the contentions and arguments of learned counsel for KPT and the complainants and gone through the record.

As to the contention that KPT while dealing with the consignment in question was rendering services of detaining the goods at their premises as such the amount of demurrage was due for the services rendered and not a tax, it may be mentioned here that learned counsel for KPT when questioned was unable to refer to any provision of law by which KPT was established authorizing it to detain goods on account of non-payment of custom duty or any tax relating to Customs Authorities. He, however, frankly admitted that the goods were detained at the KPT premises by the KPT Authorities for and on behalf of the Customs Authorities/Revenue Division till it was decided as to whether on the import of these goods, custom duty was chargeable. The decision was to be made under custom law by the Authority established under those laws, otherwise KPT had no authority under its own law to refuse the importers to receive the goods as no amount of KPT itself was payable and due. From this, it is clear that the KPT was acting for and on behalf of Customs Authorities relating to a matter as to payment of custom duty, etc., as such, its legal status in relation thereto was that of assignee or agent of Customs Authorities, therefore, it can safely be held that for this limited purpose it was as much part of the Revenue Division as its principal was for whom they were detaining the goods, otherwise the importers could legally maintain that since KPT Authorities under its law had nothing to do with determination of custom duty by the Customs Authorities or the question whether the same were liable to payment of custom duty, therefore, they could not detain the goods for which they were liable to be sued for damages.

After having held that in the matter of detention of goods by KPT in connection with payment of custom duty, etc., on behalf of Customs Authorities, it was part of the Revenue Division, the next question which arises is whether KPT of its own by making amendment of the rules for omission thereof provision of acceptance of delay/detention certificate issued by the Customs Authorities could maintain that it was not bound by the said certificate of its principal. It may be mentioned here that in the matters relating to detention of goods for want of clearance of custom duty on behalf of Customs Authorities, it was neither governed nor regulated by the law and rules of KPT, therefore, even if such a resolution was held to have been validly passed. The same did not alter the legal position that by acting as agent of the Customs Authorities in respect of detention of goods, the KPT Authorities were bound to act also on the directions and the decision of the Customs Authorities, as regards clearance of the goods without payment of amount of demurrage. Since the demurrage normally is payable by the importers in a case where detention is prolonged on account of non-payment of custom duty or other taxes due as such, it was in the nature of penalty on delayed payment of taxes, therefore, it was also a part of tax. The argument that amount of demurrage is recoverable by the KPT as an amount for services rendered is not tenable for even if KPT is held to be rendering services, it may be doing so to Customs Authorities and not to importers whose goods were wrongfully detained though no tax or custom duty was chargeable. The KPT if so, advised may settle the matter with the Customs Authorities on whose behalf it detained the goods”.

Reverting to the judgment of the Sindh High Court passed in Constitutional Petition No.2518/2001, it may be mentioned here that the contention of the importers was accepted that they were not liable to pay the amount of demurrage and it was ordered that after getting clearance of goods by payment of demurrage to KPT, the Customs Authorities should, be approached to pay the said amount by them. It is clear that the High Court had accepted the said position that so far as importers were concerned, they were not to suffer on this account. I find that this judgment was passed keeping in view that it is the Revenue Division, which was liable to compensate the importers and not the KPT which was functioning under its own law. The question whether the KPT Authorities were part of the Revenue Division while detaining goods for and on behalf of Customs Authorities till clearance of custom duty and other taxes of the Revenue Division was neither raised nor adjudicated in the said judgment. This question has been raised before me through the application by KPT as to whether KPT was part of Revenue Division, as regards non-clearance of goods for want of payment of custom duty and act of detention of the goods for the purpose for and on behalf of the Revenue Division has now been answered that it is part of the Revenue Division for this limited purpose, therefore, it was bound to clear goods without charging demurrage once a certificate was issued by the Customs Authorities.

For the foregoing reasons, the application made by the KPT and the Ministry of Communications is hereby dismissed and the KPT is hereby directed to implement the recommendations of remission of the amount of demurrage to the complainants by refunding the amount of Rs.68,570/- already received by it”.

15. KPT’s contention in the present complaint that it did not detain the goods on behalf of the Customs is contradictory to the position taken by it in the review petition referred to above where, it will be noted, the learned counsel for the KPT had frankly admitted that the goods were detained at the KPT premises by the KPT authorities for and on behalf of the Customs authorities/Revenue Division till it was decided as to whether on the import of these goods custom duty was chargeable. The present argument, therefore, that the goods were not detained by the port authority on behalf of Customs because Customs authority itself detained the goods is at best nothing but an afterthought and hence not tenable.

16. KPT’s contention regarding complaint being time barred and its objection to FTO’s jurisdiction on the ground that the case involved classification issue as well as its argument that the goods were not detained by the KPT have been dealt with and answered in paragraphs 13 & 15 of this order. In so far as other points and arguments of the KPT are concerned, they, being the same as were agitated by the KPT while arguing the review application referred to above, have already been discussed, dealt with and decided by this forum vide its findings in Order-In-Review dated 24.12.05 in complaint No.558-K/04. The findings of the aforesaid Order-In-Review are, therefore, also extended to and applied in the present complaint also.

17. In view of the foregoing position, ‘maladministration’ on the part of the KPT is established in that it failed to honour delay and detention certificate issued by the Customs Department compelling the complainant to make payment of demurrage charges, which the KPT should have waived off on the basis of delay and detention certificate issued by the Customs Department. Accordingly, the complaint is accepted and the contentions of the KPT are rejected. It is, therefore, recommended that:

i. The KPT accept the delay and detention certificate issued by the Customs Department and refund an amount of Rs.380920/- i.e. the amount of demurrage charges, which the complainant claims the KPT has already received from it.

ii. Compliance be reported within 30 days of the receipt of this order.


(Justice (R) Munir A. Sheikh)

Federal Tax Ombudsman

Dated: -2006

BEFORE THE FEDERAL TAX OMBUDSMAN

REGIONAL OFFICE

KARACHI

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