Federal Tax Ombudsman Munir A Sheikh has ruled that Customs department, before enhancing transactional value of goods must show clear evidence/Goods Declaration to demonstrate that the importer's invoice is not genuine.
The FTO gave this ruling while disposing a complaint of Majid & Co, of Lahore, which imported 40 pieces of 12-bore shot guns from China and sought clearance under Goods Declaration No 25389 dated 27.11.06 from AFU, Lahore, declaring the value as $40 per unit/piece.
Since the department doubted the declared value, the complainant requested for provisional release of goods, under section 81 of Customs Act, 1969.
The request was acceded to and the value was provisionally finalised on the basis of evidential value of identical goods imported under Goods Declaration No 6331 dated 7.8.06 at $75 per piece, and the difference between the declared and assessable value was secured through a bank guarantee.
The offending goods were, however, detained till finalisation of the proceedings, under section 2(kk) of the Act. Following provisional assessment made under order dated 17.3.07, the complainant filed a writ petition in Lahore High Court, seeking release of the goods, and requested that determination of value of the goods be made according to 'sequential order', as laid down in section 25 of Customs Act, 1969.
The complainant raised in the writ petition two issues, namely the entitlement and availability of quota of import fixed by the Ministry of Commerce, and determination of value in sequential order under section 25 of the of Act.
With regard to the valuation aspect of the case (subject matter of this complaint) the Court observed that the petitioner had the remedy to make submission before the Deputy Collector as to the determination of value of his goods in terms of sequential order as contemplated in section 25 of the Customs Act, 1969.
The DC, after hearing the complainant, passed a final assessment order, dated 28.5.07, which was challenged in the FTO secretariat.
After hearing arguments of the two sides, the FTO observed that the crux of the issue was that as per scheme of section 25 of the Act the value of goods had to be determined in a sequential manner.
He said that in the first instance the method of valuation, as laid down in section 25(1) of the Act, had to be addressed "and it is only after it is established that the declared value is not correct or genuine transaction value within the meaning of section 25(1) of the Act the department could proceed to apply other methods of valuation, including the one laid down in sub-section (6) of section 25 of the Act, to determine the correct value".
He said that according to Rule 109 of the Valuation Rules, 2001 the appropriate officer who has reason to doubt the truth or accuracy of the price or of the documents produced in support of the declared value could ask the importer to provide further explanation, including documents or other evidence to substantiate the value.
He noted that a notice dated 8.1.07 was issued to the complainant before making provisional assessment asking it to submit documentary evidences in support of its claim for assessment at the declared invoice value, but it appeared that the complainant did not produce the evidence in support of the declared value.
He, however, observed that the aforesaid notice did not identify specific documents, evidences and information that the department wanted the complainant to submit for determination of correct value in the case.
He further observed that in case the department proved beyond doubt on the basis of concrete evidences/documents/information that the value was not determinable under section 25(1) of the Act only then it could move to alternative method of valuation as envisaged in section 25(6) of the Act.
He said that since the value of the goods was not determinable under section 25(1) of the Act, and resort to section 25(6) of the Act for determination of value on the basis of G.D No 1430 dated 14.12.06 without providing the complainant with the evidential G.D in question to enable it to counter it, therefore he recommended that the FBR to (i) Reopen the final assessment order dated 28.5.07 under section 195 of the Customs Act, 1969, set it aside and;
ii) Examine afresh the question whether or not the value declared by the complainant is the genuine transaction value of goods within the meaning of section 25(1) of the Act by (i) confronting the complainant with evidence showing that the declared value was not a genuine transaction value and (ii) invoking the appropriate provisions of law to ask the complainant to provide evidences, documents and information (identifying for the complainant specific documentary evidences/information required from it) in support of its declared value and then decide complainant's valuation case in accordance with the provisions of law.
iii) In case it is found on the basis of scrutiny of all relevant evidences that the value is not determinable under section 25(1) of the Act and the department seeks to determine the value under section 25(6) of the Act, as it did in the final assessment order dated 28.05.07, the complainant should, in the first instance be confronted with specific 'evidential Goods Declaration No 1430 dated 14.12.06 under which similar goods are said to have been imported at $82.50 per piece to enable the complainant to rebut the same before finally deciding the valuation case.