ISLAMABAD: The Federal Tax Ombudsman (FTO) has proposed the Federal Board of Revenue (FBR) to consider setting up a separate Classification Directorate to make the classification ruling more authoritative and binding for all Customs Stations across Pakistan.
The Classification Directorate could be set up on the pattern of Valuation Directorate, the FTO said while deciding on a complaint on a relevant issue here.
The FTO said that alternatively, the classification disputed be also entrusted to the Valuation Directorate and asked the FBR to decide the matter of classification of the impugned vehicle (in this relevant case) as per law.
According to details issued by FTO Secretariat here, Shahid Muhammad Swabi on 13 December 2011 had complained against the non refund of additional amount of duties and taxes collected by the Peshawar Customs due to alleged arbitrary classification of the Chrysler limousine.
The Complainant had imported the limousine and filed Goods Declaration (GD) dated 01.11.2011 at Peshawar Dryport.
However, instead of accepting the declared classification under Pakistan Customs Tariff (PCT) heading 87.02 (chargeable to 20% duty), the Customs arbitrarily determined its classification under PCT heading 87.03 chargeable to 100% Customs duty and 50% regulatory duty.
In so doing, the Customs disregarded the ruling of the Classification Committee, Karachi, issued vide CC-20/2011(A) dated 17.09.2011 and the recommendation of FTO Secretariat in complaint No.79/ISD/Cus(16)/818/2011 dated 13.12.2011.
Challenging this, the Peshawar Customs stated that the Classification Committee's ruling was advisory and not mandatory.
Moreover, the World Customs Organization (WCO) had classified limousines under heading 87.03 of the Harmonized Commodity Description and Coding System (HS) as "87.03 Motor cars and other motor vehicles principally designed for the transport of persons (other than those of heading 87.02), including station wagons and racing cars.....
The heading also includes: (i) Motor cars (e.g. limousines, taxis, sport cars and racing cars."
The respondents stated that the limousine involved in that case was also classified under PCT heading 87.03, as per law and contended that challenging the Classification Committee's decision by the Customs at Peshawar was neither contrary to the FTO's aforesaid Recommendations nor did it involve any maladministration in terms of Section 2(3) of the FTO Ordinance 2000.
Later, after examining the complaint the FTO maintained that the classification heading 87.02 reads as: "87.02 Motor Vehicles for the transport of ten or more persons, including the driver".
This heading covers all motor vehicles designed for the transport of ten persons or more (including the driver).
A plain reading of PCT heading 87.02 and 87.03 is indicative of lack of clarity in the two headings.
The FTO Office has already asked the FBR, being the final authority on classification, to remove this confusion through adding an appropriate amendment/explanation in the PCT Code, as three such cases have already been referred to the FTO Office.
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