Pakistan Case Law
1986 MLD 790
[Sindh High Court]
Present: Nasir Aslam Zahid and Abdul Razzak A. Thahim, JJ

MOGHAL TOBACCO COMPANY LTD. Versus COLLECTOR OF CUSTOMS

Constitutional Petition No,D-545 of 1982, decided on 28th February, 1984.
Authored by Nasir Aslam Zahid. Result: Writ allowed.
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Summary

The petitioner, a cigarette manufacturer, imported a second-hand reconditioned cigarette machine and declared its import value as Rs. 3,73,136. The Customs Authorities rejected this valuation and arbitrarily assessed the import value at Rs. 10,00,000, an assessment upheld by the Collector of Customs on appeal without citing supporting evidence. The petitioner challenged this order through a constitutional petition before the Sindh High Court. The core legal question was whether the customs valuation could be arbitrarily fixed at a higher amount without disclosing or relying upon tangible evidence, and without affording the aggrieved party an opportunity of rebuttal. The Court held that the impugned valuation order was passed without any proper basis or documentary material, in violation of the principles of natural justice. Consequently, the High Court set aside the appellate order, remanded the matter back to the Collector of Customs for a fresh decision after providing a fair hearing and access to any material relied upon, and laid down the principle that any enhancement of declared import value by customs authorities must be grounded in disclosed evidence and subject to the right of rebuttal by the importer.

Questions settled in this judgment
  • Can customs authorities arbitrarily fix the import value of machinery without relying on tangible evidence?
  • Does an order enhancing the declared import value violate natural justice if the material used against the importer is not disclosed?
  • Whether an appellate customs order that fails to specify the basis for valuation is sustainable in law?
Laws & provisions referred
  • Section 25, Customs Act 1969
customs valuationimport valuedeclared valueprinciples of natural justiceremandCustoms Act 1969

NASIR ASLAM ZAHID, J.--The petitioner, a manufacturer of cigarettes, imported one second hand but reconditioned Molins Mark 8 Cigarette Machines of 1969 make and the price of the machinery was declared as L.20,000 equivalent to Rs .3,73,136, for replacement of its old machinery installed at their factory in Karachi. According to the petitioner, this machine was purchased after hunting, as there was no readily available market for such old and reconditioned cigarette machines. On import of the said machine, bill-of-entry was filed on behalf of the petitioner in the Customs House on 28-7-1981 showing the aforesaid figure as the import value of the machine. According to the petitioner, the Customs Authorities did not accept the valuation of the said machine as given in the Bill-of-Entry and went on fixing arbitrary valuations ranging from Rs,6,00,000, to Rs,10,00,000. The Deputy Collector of Customs (Shed.) assessed the import value of the said machine at Rs,10,00,000. The case of the petitioner was also examined by the Customs Valuation Department which advised the Collector of Customs that the value be fixed at Rs,6,40,000 as against the declared value of Rs,3,73,136. The matter was taken in appeal before the Collector of Customs, Appeals (Appraisement) Karachi. Before the Collector of Customs it was argued on behalf of the petitioner that no evidence contrary to the declared value was furnished by the Customs House and a request was made that the case be referred to Valuation Branch for determination of value. The followinig order, dated 31-12-1981 was passed by the Collector of Customs:--

"The case was examined in the Valuation Department who determined that machinery was ten years old and evidence of higher value of identical machinery was not available on official record and the assessable value be calculated @ 40% of the value of the new machinery as also allowed by the Investment Promotion Bureau, Government of Pakistan in such cases. The value as worked out comes to Rs,6,40,000 (C & F) and it tallies with the appraised value of Rs,6,00,000 originally determined by M.S.A. I have heard the appellant and gone through the record of the case. It is observed that the advice of the Valuation Department is influenced by a note of B/E proposing Rs,6,00,000 as appraised value but actually Rs,10,00,000 was appraised by D.0 .A. (Shed) and that appears more reasonable than that advised by the Valuation Department. That being the case, I reject the appeal."

The petitioner has challenged the order of the Customs Authorities valuing the machine in question at Rs,10,00,000 for purpose of levy of Customs Duty. We have heard Mr. Rashid A.Akhund, learned counsel for the petitioner and Mr. Abdul Khair who has appeared for the Department.

2.It has been contended by the learned counsel for the petitioner that the assessment of valuation of Rs,10,00,000 of the machine by the Customs Authorities is not in accordance with law and is liable to be set aside. The following contentions have been raised:--

(a)The assessm ent at Rs,10,00,000 is in violation of section 25 of the Customs Act, 1969.
(b)There was no evidence at all before the Customs Authorities that the valuation given by the petitioner was incorrect and without any evidence the value has been arbitrarily fixed at Rs,10,00,000.
(c)The D.C.A (Shed), whose note influenced the Collector of Customs had inspected the condition of the machine which was not warranted by law. According to the learned counsel a visual examination was not permissible under section 25 of the Customs Act, 1969 for purposes of assessm ent of the value of an imported article.
(d)The machinery imported by the petitioner was old and used and then reconditioned and such cigarettes manufacturing machine was not readily available in the market and it was not possible to have the valuation of similar or identical machinery. In the Circumstances it was argued that the valuation given by the petitioner which was the price between a buyer and seller, independent of each other, should have been accepted by the Customs Department.

3.On the other hand it was argued on behalf of the Department by Mr. Abul Khair, Advocate that no illegality has been committed by Customs Authorities and in fact material is available with the Department showing the value of similar/identical machinery and it was on the basis of such material that the valuation of Rs,10,00,000 was fixed by the Customs Authorities. It was further pointed out by the learned counsel for the Department that from the order, dated 31-12-1981 of the Collector of Customs it is apparent that the Collector had perused the record of the case and as such it is to be presumed that the material available with the Department about the value of similar/identical machine had been seen by the Collector. In fact Mr. Abul Khair wanted us to peruse photo copies of some invoices of certain other exporters located in foreign countries.

4.From the notings on the Bill-of-Entry and the order, dated 31-12-1981 of the Collector of Customs it appears that the decision to fix the the value at Rs,10,00,000 was taken without any basis. Neither the notings on the Bill-of-Entry nor any observation in the order, dated 31-12-1981 of the Collector Customs indicates that any documentary material was taken into consideration for the purposes of assessing the value at a higher figure than declared by the petitioner. And then if any material is taken into consideration for the assessment of value of any goods and on the basis of such material a higher value is proposed to be fixed than that declared by the party, principles of natural justice require that such material must be brought to the notice of the party and an opportunity be given to the party 'to challenge the genuineness or applicability of such material in his case and to place such other material before the Customs Authorities as the party may choose for the purposes of maintaining that the value declared by the party is correct. The impugned order, dated 31 12-1981, in our view, suffers from an error which is apparent on the face of the order and that is that it does not disclose the material on the basis of which the valuation was fixed at Rs,10,00,000. The figure of Rs,10,00,000 was apparently fixed arbitrarily by the Customs Authorities. The order, dated 31-12-1981, in the circumstances, cannot be sustained.

5.The order, dated 31-12-1981 of the Collector of Customs Appeals (Appraisement) is accordingly set aside and the case is remanded to the Collector of Customs for decision of the appeal afresh after notice to the petitioner and after giving full opportunity of hearing. It is further made clear that in case the Collector decides to rely on an material documentary evidence or otherwise for assessing the value of the machine in question at a higher figure than declared by the petitioner, he will make available subh material to the petitioner for inspection and then give him sufficient opportunity to rebut such evidence. It is expected that the Collector of Customs will decide the appeal within two months. A Bank Guarantee had been furnished by the petitioner to the Customs Authorities and on furnishing such Bank Guarantee the goods in question were released by the Customs. It is further ordered that in case the appeal is not decided finally by the Collector by 30- 4-1984, the Bank Guarantee furnished by the petitioner shall stand cancelled and shall be returned to the petitioner. There will be no order as to costs.

Writ allowed.

Cited by 17 cases

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