M/s Younus Textile Mills
Plot No.H-23/1, Landhi Industrial
Dealing Officer: …Mr. M Mubeen Ahsan, Advisor
Mr Imran Iqbal, Advocate
Mr Irfan Javed, Deputy Collector of Customs
The complaint has been filed against the four demand notices dated 02-09-2005 issued by the Collector of Customs (Appraisement) for payment of mark-up against bank guarantees filed in lieu of duty and taxes in 2003. It has been alleged that the issue of demand notices is “a decision, process, recommendation, act of omission or commission” which is contrary to law, and is perverse, arbitrary and unreasonable,” which constitute maladministration.
2. It has been stated in the complaint that the High Court in its judgment in Petition No.843 of 2003 decided that the company was liable to customs duty and other taxes. Consequently they received from the Respondent four notices dated 04-02-2005 to pay the principal amount alongwith mark-up @ 20%. On the basis of these notices they paid the principal amounts on 04-06-2005 and requested for release of the bank guarantees. They contested that the mark-up was not payable as it was repugnant to law and the Customs Act.
3. It has been further been stated that instead of releasing the guarantees, Respondent issued four final demand notices dated 02-09-2005 for payment of mark-up amounting to Rs.224,894/- failing which they would take action under section 202 of the Customs Act. They replied to the customs that mark-up was not recoverable under the Customs Act. However, the Respondent did not release the bank guarantees although their notices were illegal and without force of law.
4. It has been argued that
None of the 224 sections of the Customs Act empowers the Respondent to recover mark-up in judicial cases.
In the reverse situation the Respondent never pay back refunds with mark-up in cases decided by the superior courts. Therefore, the final demand notices were violative of law and acts of maladministration.
The contractual obligation to pay 20% mark-up has no force of law as it is not supported by the Customs Act.
The order of the High Court is silent on the question of mark-up. In case of M/s Usman Limited Vs Collector of Customs, the High Court of Sindh had clearly held that mark-up was not recoverable and this ruling has a binding force under the constitution.
5. It was requested that the four final demand notices dated 02-09-2005 be declared without force of law and the Respondent be directed to release four bank guarantees.
6. The Deputy Collector of Customs in reply to the complaint raised objections that the Complainants had failed to substantiate any maladministration, the complaint was not entertainable under sub-section (3) (a) of section 2 of Federal Tax Ombudsman Ordinance, it pertained to interpretation of law which fell outside the jurisdiction of this office, and it may be dismissed as barred by time under sub-section (3) of section 10 of the Ordinance.
7. He further stated that
The Complainants had imported consignments of spare parts and claimed exemption of customs duty which was not admissible and assessment was completed by the Respondent in 2003.
High Court allowed release of the consignments against bank guarantees and in one of the conditions the guarantor bank had undertaken to pay duty and taxes on demand within fifteen days and in case of delay to pay the mark-up at the prevailing bank rate.
The petition was dismissed by the High Court vide judgment dated 23-11-2004. No appeal was filed before the Supreme Court but the Complainants or the guarantor bank did not pay the government revenue despite repeated notices.
Seven months after the High Court’s judgment and nearly two years after the date of import/release of the imported goods, Complainants paid Rs.2,350,922/- on 04-06-2006 in customs duty and sales tax. This amount was payable at the time of importation and in case of non-payment within thirty days, the Complainants were required to pay surcharge @ 14% per annum as surcharge under section 83(2) of the Customs Act besides compensation for delayed payment.
As per agreement with the bank, the guarantees were to be released on fulfillment of all conditions and therefore the demand for 20% compensation was justified.
The provisions of sections 83, 83-A and 98 of the Customs Act read with section 72 of the Contract Act and High Court decision in CP 726 of 2001 clearly nullified the ground taken by the Complainants who have failed to mention any judgment of the court rendering these provisions of law redundant.
It was requested that the subject complaint be dismissed.
8. The contents of the complaint, the arguments put forward by the Counsel, the objections raised by the Respondent and their reply to the Complainants’ arguments have been examined. It is an established law that 20% mark-up agreed between the customs authorities and the importer is not chargeable under customs law and where an importer fails to pay the customs dues, only the rate prescribed under section 83(2) of the Customs Act can lawfully be imposed. This office has taken cognizance of this complaint because, despite the verdict of the President of Pakistan communicated vide letter No.22/2004-FTO-Law dated 05-05-2005 by the Law, Justice and Human Rights Division, the customs authorities were demanding 20% mark-up. This act is contrary to law, arbitrary and unjust and amounted to maladministration as defined under sub-section (3) of section 2 of the Federal Tax Ombudsman Ordinance No.XXXV of 2000.
9. From the facts of the case stated by the Complainants, the demand was raised vide notices dated 04-02-2005 and payment of the principal amount was made on 04-06-2005. Since the customs dues were not paid within thirty days of the issue of notices surcharge @ 14% per annum for the intervening period would be payable.
10. It is recommended that CBR direct the Collector of Customs to
recover the amount of surcharge under sub-section (2) of section 83 of the Customs Act;
release the bank guarantees after the payment of surcharge; and
compliance be reported to this office within thirty days.
(Justice (R) Munir A. Sheikh)
Federal Tax Ombudsman
BEFORE THE FEDERAL TAX OMBUDSMAN
Mr. Muhammad Shakoor
S/o Muhammad Shafi
Harrar Road, Kamoke. …Complainant