Mustafa Kamal and another (Appellants)
Vs.
Commissioner of Customs and others (Respondents)
Supreme Court
Appellate Division
(Civil)
Present:
Mustafa Kamal CJ
Bimalendu Bikash Roy Choudhury J
Mahmudul Amin Choudhury J
Judgment
December 8, 1999.
The Customs Act, 1969 (IV of 1969), Section 25 (7)
In fixing tariff value by the Government on the recommendation of a high powered advisory committee such committee does not possess any unfettered, unlimited and absolutely arbitrary discretion in determining tariff value. It must follow some guidelines which are germane to the Customs Act and not alien to it and should also pay heed to the recommendations of the Tariff Commission when protective custom duty is involved. In coming to a decision in respect of each item the committee must have in its possession contemporaneous documents to show that the international market price of a particular item of import or export has either gone up or down during the interim period between the last meeting of the committee and the impugned meeting. …………………(20)
Cases Referred to-
Commissioner of Customs, Chittagong vs. Giasuddin Chowdhury, 50 DLR (AD) 129, Collector of Customs, Chittagong vs. Ahmed Hossain and others, 48 DLR 199, Phassco Hardware Company vs. The Government of Pakistan, PLD 1989 Karachi 621.
Lawyers Involved:
Dr. Kamal Hossain, Abdul Baset Majumder Advocate with him, instructed by Md. Aftab Hossain, Advocate-on-Record—For the Appellants in both the Appeals.
Mahmudul Islam, Attorney General instructed by B Hossain, Advocate-on-Record—For the Respondents in both the appeals.
Civil Appeal Nos. 116 & 117 of 1997.
(From the judgment and order dated 17-12-1996 passed by the High Court Division, Dhaka in Writ Petition Nos. 4336 and 4337 of 1996 respectively).
Judgment
Mustafa Kamal CJ.- These two appeals by leave are from the judgment and order dated 17-12- 96 passed by a Division Bench of the High Court Division in Writ Petition Nos. 4336 and 4337 of 1996 discharging the Rules Nisi.
2. Both the writ petitioner-appellants opened two separate letters of credit on 26-8-96 for import of Soda Ash Light from China under HS Code No. 2836.20 at the rate of US $ 130 per metric ton. At the time of clearance of the imported goods from the vessel at Chittagong Port on 23-10-96 respondent No.1, the Commissioner of Customs, Chittagong directed the appellants to declare tariff value US $ 220 per metric ton for purpose of assessment of customs duty and other charges in terms of SRO No. 2/96-Cus dated 18-9-96. Previous to 18-9-96 the tariff value of Soda Ash Light was US$ l60 per metric ton.
3. The appellants challenged the aforesaid direction in the writ petitions on the ground that the SRO was issued under section 25(1) of the Customs Act which contained an excessive delegation of power to the executive authority without giving any guideline. The High Court Division held, reading sections 25, 30 and 30A of the Customs Act together, that there are guidelines in those sections in fixing the tariff value of imported goods. The plea of excessive delegation was not accepted. The High Court Division further held that in view of the fact that a high-powered committee reviewed tariff value from time to time the fixation of tariff value at US $ 220 per metric ton cannot be called an arbitrary decision. The Division Bench desired that the National Board of Revenue should frame rules with regard to the provisions of section 25(1) of Customs Act to avoid further complications.
4. Leave was granted to consider the limited submission that the very difference in the invoice value and tariff value is indicative of arbitrariness and fictitiousness in the imposition of tariff value at an unreasonably higher figure. There is no guideline for fixing tariff value in section 25 of the Customs Act and the Government has utilised the wide scope for fixing tariff value without regard to the local and international market rate of the imported goods, purely for purposes of augmenting its revenue without legislative sanction.
5. We have heard at length Dr. Kamal Hossain, learned Counsel for the appellants and Mr. Mahmudul Islam, learned Attorney-General appearing on behalf of the respondents.
6. What emerged as a common ground between the parties and what we consider to be the correct legal position is that a customs duty is levied for two purposes and for giving protection to local industries which is called protective customs duty.
7. It also emerged as a common ground that when customs duty is imposed for any purposes, the authority to do so is Parliament as Article 83 of our Constitution says, “No tax shall be levied or collected except by or under the authority of an Act of Parliament’. Under section 18 of the Customs Act, 1969 the rate of duty leviable in respect of goods described in that section is prescribed in the First Schedule, which rate is amended by Parliament each year by either the Finance Act or by any other law. The power to change the rate of duty is an exclusive power and preserve of the Parliament and this is an illustration of the principle that the power of taxation is that of the Parliament. This power under section 18 is not delegated to the Government or to any other authority. But the Government has been given the delegated power under section 18(2) of levying (1) regulatory duty on goods specified in the First Schedule (2) countervailing duty under section 18A and (3) anti-dumping duty under section 188. Section 19 of the Customs Act delegates to the Government the power to exempt any goods imported into or exported from Bangladesh the whole or any part of the customs duties chargeable thereon. Section 18(2), 18A, 18B and 19 are instances of delegated legislation by an Act of Parliament in terms of the proviso to Article 65(1) of the Constitution. When the Government passes an order under those sections it has a legislative effect.
8. Section 25 of the Customs Act is concerned with the tariff value of imported and exported goods, not with the rate of duty. This section describes how the tariff value of imported goods and exported goods will be determined, the assumptions on the basis of which the normal price of such goods will be determined and the meaning of some words used in that section. This is an executive power, not a legislative power. Section 25A is also an executive power of the Government to accept as the basis of assessment a certificate issued by an approved pre-shipment inspection agency. Section 30 then provides that both the value and the rate of duty applicable to any imported goods shall be those on the date on which bill of entry is presented under section 79 of the Customs Act. A new section 30A was added by the Finance Act, 1995 with effect from 1-7-95 wiping out the effect of some decision of this Court notably that of Collector of Customs, Chittagong vs. Ahmed Hossain and others, 48 DLR 199.
Section 25(7) provides as follows:
25. (7) Notwithstanding anything contained in this section, the Government may by notification in the official Gazette, fix for the purpose of levying customs duties, tariff values for any goods imported or exported as chargeable with customs duty ad valorem:
Provided that any imported or exported goods the declared value of which is higher than its tariff value fixed under this sub-section shall be chargeable with customs duties on the basis of its declared value.
9. The appellants raised the question in the writ petitions as to whether the aforequoted delegated power of the Government to fix tariff values is hit by excessive delegation or not, specially when there is no guideline provided any where to enable the Government to follow a known route. The High Court Division held that the guidelines are provided in a combined reading of sections 25, 30 and 30A of the Customs Act. The appellants are not challenging this part of the decision of the High Court Division but are challenging the arbitrariness and fictitiousness in the imposition of tariff value at an unreasonably higher rate by the SRO in question dated 18-9-96.
10. It is stated in the affidavit-in-opposition of the respondents that the tariff value is determined by a high-powered committee of the Government consisting of representatives from Tariff Commission, Ministries of Commerce and Industries, Textiles and Finance, Controller of Valuation of Customs and representatives of Federation of Chamber of Commerce and Industry and National Board of Revenue. The fixation is done quarterly each year after taking into account the international market value of the commodities and the same is reflected in the Harmonised System of Coding known as HS Code and published in the Gazette notification. The tariff value is determined after due deliberation and consideration of the international market price of the goods.
11. It is here that Dr. Kamal Hossain impugns the method, manner and procedure followed by the high-powered committee in enhancing tariff value. He submits that the determination of tariff value is based on the market price and for that market information is to be collected. It is available in the Internet and when challenged the committee, represented by the Customs Authorities, ought to be able to produce materials on the basis of which the tariff value has been increased. In determining the value the Government do not have an unfettered, unlimited and absolutely arbitrary discretion. The high-powered committee did not have any objective information before it. Even it has not considered section 27(1). 387 items were considered in a few hours time at a meeting on 21-8-96 in a single day. Procedural fairness could not have been observed on the very face of it. The committee decided to change the tariff value in respect of 41 items, reducing tariff value in respect of 31 items and increasing tariff value in respect of 10 items, including Soda Ash Light. The tariff value of Soda Ash Light was fixed at US$ 160 per metric ton in the previous Notification dated 17-6-96 but in the next meeting held on 21-8-96 the tariff value Was increased to US $ 220 per metric ton without there being any material on record that in between 17-6- 96 and 21-8-96 the international market price of Soda Ash Light has gone up to that extent. The high-powered committee did not have in its possession any reliable materials to take such a big leap in tariff value. The high-powered committee, according to paragraph 2 of the supplementary affidavit-in opposition of the respondents, has “taken into consideration” the invoice value of a consignment of Soda Ash Light of Chinese origin valued at US $ 375 per metric ton (Annexure-1). Annexure- 1 is an invoice dated 9-3-95 showing import of 200 bags equivalent to 10 MT of Soda Ash from China. The consideration of this particular import reflects, Dr. Kamal Hossain submits, a mindless application of facts. The last Gazette Notification on the tariff value of Soda Ash Light was made on 17-6-96 Sitting next on 21-8-96 the high-powered committee only see whether the international market price of Soda Ash Light had gone up down since 17-6-96. Instead, it has “taken into consideration” an import which has taken place 17 months earlier. The committee has thus exposed itself to a justified accusation that it had no relevant and rational materials at hand to raise the tariff value to such an abnormal and unreasonable proportion. Dr. Kamal Hossain also draws our attention to paragraph 3 of the respondents’ supplementary affidavit-in-opposition wherein it is stated that the committee ‘also took into consideration’ the representation of Narayanganj Chamber of Commerce and Industry for enhancing the tariff value of Soda Ash Light (Annexure-2) at US $281 per metric ton, on the ground that Soda Ash Light imported from abroad were being smuggled out to India. Dr. Kamal Hossain submits that the high-powered committee cannot take into account extraneous matter or policy considerations while fixing tariff value. It can take only those matters consideration, which are germane to the Customs Act and not anything else. Besides, some members of the said Chamber earlier imported a huge quantity of Soda Ash Light and by lobbying for enhanced tariff value they want to make a windfall profit at the cost of the petitioner, their competitor Dr. Kamal Hossain also submits that Soda Ash Light is not produced or manufactured in Bangladesh and therefore the Tariff Commission has nothing to do in the fixation of tariff value of this item because it does not fall under protective customs duty. Protective customs duty will be levied on the recommendation of the Tariff Commission established under the Bangladesh Tariff Commission Act, 1992 (Act No. XLIII of 1992). The presence of as Tariff Commission in the high-powered committee has vitiated the proceeding of the committee. Dr. Kamal Hossain relies upon the decision in the Phassco Hardware Company vs. The Government of Pakistan, PLD 1989 Karachi 621 and submits that the powers under section 25 if exercised arbitrarily or capriciously may be impugned and set aside.
12. Mr. Mahmudul Islam, leaned Attorney-General, submits in reply that the Government do not join issue with the appellant that exercise of power under section 25(7) has to be made on a rational basis, not totally unconnected with international market price, and that some guidelines ought to be there to enable the Government to follow a chartered course. He further submits that since it is unwieldy and cumbersome to fix tariff value in each case by examining each invoice and other papers of each import it becomes necessary for the Government under section 25(7) of the Customs Act to fix the tariff value from time to time, so that a uniform tariff value governs each case of import for a period of time whatever be the invoice value. This value has necessarily to be changed and modified from time to time because of fluctuation in the international market price of each item. He submits that the report of the high-powered committee (Annexure-4 to the supplementary affidavit-in-opposition of the respondents) clearly stated the yardstick or guidelines which the high- powered committee followed in amending the tariff value. According to the said report, the said guidelines are as follows:
(Ka) Ponner gunogoto maner byabodhan, poribohon byae ebong utpadan prokriae srom nibirotar karone bivinno desh/utso hote amdanikrito ponner muller khetre guruttopurno tartommo;
(Kha) Ponno muller under ebong over in voicing;
(Ga) Amdanikrito ponner poribohon byae;
(Gha) Tariff muller khetre jotha sombhob sthitabostha rokkha koron ebong;
(Umo) Ovinno ba somotullo ponner tariff muller khetre samonjossota bidhan.
13. The learned Attorney-General submits that none of these considerations are extraneous to the Customs Act and none of these criteria is irrelevant or superfluous in determining the tariff value under the Customs Act, Regarding disposal of 387 items containing 2228 tariff values in a single meeting, he submits that when representatives of various Ministries, Commissions and trade representatives are required to attend a particular meeting of a committee, it is not possible for these busy functionaries to meet for days together to consider each and every item exhaustively for hours together. To facilitate their work within the span of a few hours extensive paper works are made beforehand to enable the members of the committee to come to a prompt decision. In this respect the learned Attorney-General has drawn our attention to paragraph 2 of the report of the high-powered committee in which it is stated that facts were gathered from various customs houses and customs stations in respect of contemporaneous invoices, recommendations have been received from industries and chambers of commerce, specially FBCCI, comments have been received from the Industries, Textile and other Ministries, recommendations have been received from the Tariff Commission and applications have been received from various importers and manufacturers of goods. All these materials received from a broad spectrum of interests involved in import of goods have been considered in the light of the prevalent international market price. There was, therefore, no arbitrariness, fictitiousness or capriciousness in the deliberations and decisions of the high-powered committee. Regarding the presence of representatives of the Tariff Commission the learned Attorney-General submitted the among 387 items carrying 2228 tariff values there are many items on which protective customs duties are imposed. Therefore the presence of the representatives of the Tariff Commission is essential and their mere presence in respect of items involving non- protective customs duty will not vitiate the proceeding. In fact, their presence is essential when a subject-matter under the jurisdiction of Tariff Commission is considered. He further submits that the Government of necessity has to hear the views of Chambers of Commerce and Industries. The Narayanganj Chamber of Commerce and Industries may offer many reasons for increasing tariff value including smuggling into India of imported Soda Ash Light, but while deciding the issue the high-powered committee has not accepted the suggestion of the said Chamber to raise the tariff value from US $ 160 per metric ton to US $ 280 per metric ton. The appellant is a member of that very Chamber and it is not known to the Government who are his competitors. Since the high-powered committee has to make an exercise which has a legislative effect it is not necessary to allow each and every importer to produce their own papers while deciding tariff value. With regard to the invoice (Annexure- 1 to the supplementary affidavit- in-opposition of the respondents) the learned Attorney-General submits that this invoice may not be the appropriate contemporaneous transaction for determining the current international market value of Soda Ash Light between 17-6-96 to 21-8-96, but he submits that imports relied upon by the appellant in their Annexure-X series to the writ petition containing invoices dated 18-1-96, 22-3-96, 27-4-96, 25-5-96 and 3 1-8-96 showing unit price of Soda Ash Light at US $ 130 per metric ton are absolutely untenable and unacceptable documents, because those are only invoices and there are no seals of customs authorities on them to show that the value shown in the invoices was accepted by the customs authorities. These documents are, therefore, completely useless to prove that the international market price on 21-8-96 was below US $ 160 which was the tariff value fixed in the earlier Gazette Notification dated 17-6-96.
14. The learned Attorney-General has also drawn our attention to Annexure-Z to the supplementary affidavit-in-reply of the appellants which is a letter dated 15-3-95 containing an offer to Bangladesh Chemical Industries Corporation from a manufacturer in China to sell 4000 metric tons of Soda Ash Light at the rate of US $ 127.80 per metric ton. The offer is in respect of a letter from the said Corporation dated 24-5-92 and the reply is dated 15-3-95. There is no evidence that this order was placed by the said Corporation at the said rate and that the consignment was duly delivered. This is also a useless paper, he submits, to determine the prevalent international market price of Soda Ash Light on 21-8-96. Referring to Annexures-Z1 and Z2 to the said supplementary affidavit-in-reply the learned Attorney-General submits that these are certificates of origin from the Peoples Republic of China which is only an evidence of the origin of the imported goods. There is no column for stating the value of the goods exported from China. Yet unsolicitiously the price of Soda Ash Light was mentioned on the left hand side of the certificates of origin at US $ 102 per metric ton as on 20-7-96 and 28-9-96 respectively. These two gratuitous information are also uncalled for and not worthy of consideration, he submits, in establishing the appellants case that the international market price was much below US $ 160 per metric ton, the prevalent tariff value, at the time the high-powered committee met on 2 1-8-96.
15. On the final date of hearing the learned Attorney-General filed an application for acceptance of a supplementary paper book in which two invoices dated 26-7-96 and 8-9-95 were enclosed showing that on those dates the importer M/s Lever Brothers Bangladesh Limited imported 790 bags and 1540 bags of Soda Ash Light from India at the rate of US $ 236 per metric ton. There is, however, no assertion in the application that these invoices were considered by the high-powered committee. In any case, Dr. Kamal Hossain submits, the Lever Brother’s invoices dated 26-7-96 could not have been considered by the high-powered committee in its meeting dated 2 1-8-96 because the invoice was certified in Bombay on 19-8-96 and the tariff value was determined by the Appraiser of Customs on 6-9-96 which is evident on the face of the invoices. The other invoice, of course, passed through the customs authorities before 21-8-96, but there is no assertion that this invoice was taken into consideration by the high-powered committee.
16. Dr. Kamal Hossain submits that the question of determination of tariff value is of utmost importance because from 1st January, 2000 Bangladesh will have to abide by its obligation under the World Trade Organisation (WTO) valuation agreement in terms of which the transacted value system will have to be followed.
17. Having heard both sides in extenso we are of the view that when a writ petition is filed on a bald assertion that the high powered committee arbitrarily and fictitiously raised tariff value without any objective material before it, the High Court Division ought not to rush into issuing a Rule Nisi and stay payment of duties and taxes. It should take notice under section 114(e) of the Evidence Act, 1872 and should start with the presumption of regularity in official business. Initially, in the writ petition itself, the writ petitioner must include some reliable and relevant materials to show that between the last date of fixation of tariff value and the impugned date of fixation of tariff value the international market price of a particular imported item has either gone down or has gone up to an extent which is significantly higher or lower than the impugned fixation of tariff value, according as the writ petitioners case is. If there are no such materials in the writ petition itself the High Court Division should not entertain the petition and dismiss it in limine.
18. If the writ petitioner annexes relevant and reliable documents in support of its claim that the impugned fixation of tariff value is grossly inflated and is abnormally higher than the prevalent international market price the High Court Division will issue a Rule Nisi and may or may not pass an interim order keeping in view the decision of this Court in the case of Commissioner of Customs, Chittagong vs. Giasuddin Chowdhury, 50 DLR (AD) 129 .
19. When the Government or the Customs authority in its affidavit-in-opposition annexes rebuttal materials to show that the prevalent international market price of any particular item is approximate to the impugned tariff value, the question of onus fades into insignificance and the High Court Division is then free to decide on the basis of documents annexed by both sides as to on whose side the scale is heavier. If the writ petitioner’s documents carry more weight his case will be accepted. If the Government’s documents carry better weight its case will be accepted.
20. In the light of the above principles we hold that even though the Government fixes the tariff value on the recommendation of a high-powered advisory committee, the committee does not possess an unfettered, unlimited and absolutely arbitrary discretion in determining tariff value. It must follow some guidelines which are germane to the Customs Act and not alien to it and should also pay heed to the recommendations of the Tariff Commission when protective customs duty is involved. It is not necessary for the committee to invite all the importers and exporters of all imported and exported items to consider their papers and documents. The committee, as presently constituted, is representative enough to come to an objective decision. In coming to a decision in respect of each item the committee must have in its possession contemporaneous documents to show that the international market price of a particular item of import or export has either gone up or down during the interim period between the last meeting of the committee and the impugned meeting. In the absence of any credible materials in this regard the committee will be exposed to a justified criticism that the increase or reduction of tariff value was done arbitrarily or fictitiously. So long as the increase or reduction in tariff value is done on the basis of an objective information, it does not matter whether the committee sits for a few hours or for few days. The participation of a representative of the Tariff Commission will not vitiate the proceeding of the committee because the committee has also to consider the tariff value for the purposes of imposing protective customs duty.
21. In the present appeals, on the grounds urged by the learned Attorney-General, we find that the documents relied upon by the importer appellants are not worthy of any credit to show that the international market price of Soda Ash Light was much below the tariff value fixed by the committee on 21-8-96. On the other hand, for the reasons urged by Dr. Kamal Hossain we find that the documents allegedly taken into consideration by the committee in its meeting held on 21-8-96 are also unworthy of credit in determining the prevalent international market price. When both sides have led evidence in support of their respective cases the question of onus of proof fades into insignificance and the Court has to decide whether in the absence of reliable and relevant materials on the part of both sides the increase in the tariff value was arbitrary or not.
22. In this connection we uphold the contention of the learned Attorney-General that the guidelines followed by the Committee as attested earlier are not extraneous and that those are germane to the Customs Act in determining tariff value. But what concerns us in these two appeals is that there were no relevant and reliable materials in the hands of the Committee in its meeting held on 21-8-96 to show any justification for increase of tariff value from US $ 160 per metric ton to US $ 220 per metric ton. In the absence of any such material we are constrained to uphold the contention of Dr. Kamal Hossain that the increase in the tariff value has been made without regard to the local and international market value of the imported goods. We, however, do not subscribe to the submission of Dr. Kamal Hossain that the very difference in the invoice value and tariff value is indicative of arbitrariness and fictitiousness in the imposition of tariff value at an unreasonably higher figure. The international market price may at times behave in such a manner that it may be necessary to fix the tariff value at a disproportionately high figure than the invoice value. It all depends how the international market price has fluctuated at a given moment.
23. We however, find that in exercise of powers under section 25(7) read with section 219 read with section 219(1) of the Customs Act the Government in the Finance Ministry has framed rules by a Notification published in the Bangladesh Gazette Extraordinary on 29-5-97, namely, the Rules governing the fixation of tariff value of imported goods. Goods imported on or after 29-5-97 will carry a tariff value determined in accordance with the said Rules. This is a welcome development which will reduce the area of conflict between the importers and the Customs authorities.
24. For the reasons stated above, we hold, on the facts of the present appeals, that the fixation of higher tariff value on Soda Ash Light in a meeting of the high-powered committee held on 21-8-96 was not based on any objective information obtained from reliable and relevant materials. We, therefore, allow the appeals and declare that the impugned orders dated 23-10-96 and the impugned notifications dated 18-9-96 have been issued without lawful authority insofar as they relate to Soda Ash Light. In the result, the two appeals are allowed without any order as to costs.
Ed.
Source: 52 DLR (AD) (2000) 1