Duty on confiscated vehicles: Illegal customs guidelines cost exchequer dearly: FTO

"The illegal customs guidelines of the Federal Board of Revenue on the assessment of duties and taxes of the confiscated vehicles issued in violation of Customs Act, 1969 has resulted in huge revenue loss."
These were the findings of Federal Tax Ombudsman (FTO) Dr Muhammad Shoaib Suddle on a complaint alleging maladministration on the part of Customs officials, Peshawar, for inordinate delay in verification of Customs NOC in 2009 for registration of his Toyota Land Cruiser, which consequently resulted in cancellation of the deal to sell the vehicle, causing the complainant a loss of Rs 500,000.
The FTO has also ordered the FBR to immediately recover short-levied amount of duty and taxes where the benefit of the FBR's unlawful Guideline was wrongly granted to vehicles dealer in the past. Collectors of Customs would recover the amount in cases where benefit of the illegal Customs Guidelines has been given.
The FTO has observed that the arbitrary withholding of verification of NOC already issued to the complainant by the Customs at Peshawar and non-response to the complainant's letters as well as of Motor Registration Authority (MRA) letter constitute maladministration. The Guideline No (v) contained in FBR letter C.No 10(17)L&P/05 dated March 8, 2006 being patently violative of the explicit provisions of Section 30 of the Customs Act, 1969, its issuance is void ab initio. Moreover, coercing recovery in any manner other than that provided under the law involves maladministration under the FTO Ordinance, 2000.
The FTO has recommended the FBR to direct the Collector of Customs, Peshawar, to confirm the genuineness of NOC to MRA, Islamabad. The FBR should direct all Collectors in Pakistan to recover the short levied amount of duties and taxes etc where the benefit of the FBR's unlawful Guideline was unduly granted in the past. The FBR should submit vehicle-wise and year-wise details of recoveries made, as per law. The FBR should proceed against those found responsible for issuing the Guidelines which was contrary to law and report compliance within 30 days, FTO added.
The FTO has observed that as regards the Guideline No (v) of FBR letter C.No 10(17)L&P/05, by failing to mention "or date of payment of duty and taxes, whichever is higher," it is violative of Section 30 of the Customs Act. The resultant corrective action therefore will need to be taken uniformly in all cases where the benefit of the Guideline was availed. Those in the FBR who issued the unlawful Guideline also need to be effectively disciplined, FTO directed.
The complaint was referred for comments to the Secretary Revenue Division in terms of Section 10(4) of the FTO Ordinance, 2000. In response, the Collector of Customs, Peshawar, filed para-wise comments stating that while applying for adjudication, the complainant, vide application addressed to the Additional Collector (Adjudication), indicated his readiness to pay the applicable duty, taxes and redemption fine. However, when the adjudicating officer allowed the release of the vehicle, the Complainant instead filed appeal against the Order-in-Original (O-in-O) No 672 dated December 20, 2006. It was only when the appeal failed at the level of both the Collector (Appeals) and the Appellate Tribunal that the complainant applied for the release of the vehicle. The complainant also furnished an undertaking dated November 17, 2009 to pay any short-levied amount of duty and other taxes. The Customs Department instead of finalising the demand in accordance with the fourth proviso to Section 30 of the Customs Act, 1969, which required assessment either at rate prevalent on the date of seizure or that on the date of payment of duty and taxes, whichever was higher, erroneously applied the FBR's "Guidelines for the implementation of amendments made in SRO 574(I)/2005 June 6. 2005" and determined the amount of duty, taxes and fine at Rs 1,177,615 on the basis of the date of seizure, which resulted in short levy of duty and taxes amounting to Rs 2,071,890. The department contended that verification of NOC was to be done only after the Complainant had fulfilled his undertaking and deposited the short-levied amount for which a demand notice was issued.