CA rules valuation process adopted by Customs is outlawed
Friday, 10 October 2014 01:46
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In a landmark judgement [CA (Writs) 392/2012] given last week, in which a business establishment had challenged the Customs valuation procedure, the Court of Appeal held that the valuation procedure adopted for customs purposes for the determination of value for imported goods is outlawed, arbitrary and violating the law governing the valuation of goods for Customs purposes.
In this case, the Petitioner Aramson Enterprises, a long-standing business entity, had imported a consignment of rubber hoses from Indonesia but the Customs Valuation Directorate had refused to accept the declared transaction value given in the commercial invoice.
Initially the Customs Valuation Directorate had ‘uplifted’ the declared value for Customs purposes by 5%, which had been further uplifted by 50% and had insisted the importer either to pay additional levy or clear the shipment on a bank guarantee to cover the additional levy, pending final determination of value for the Customs Purposes.
The importer, in order to avoid mounting demurrages, had opted to clear the shipment on a bank guarantee to cover the additional levy, hoping to resolve the matter with the Customs.
The importer had then presented all correspondence concerning his imports (rubber hoses) from the very same source (Indonesia) since the year 2005, with the identical transaction value, which had been acknowledged by the Customs.
Further to the presentation of the said correspondence, the Customs Valuation Directorate had reduced the uplifted value from 50% to 40%. With further representations made, the uplifted value had been further reduced from 40% to 20% and finally to 5% with no basis whatsoever.
The importer however, refused to pay any additional levy on the basis that the value declared in the commercial invoice presented for Customs purposes represent the actual transaction price.
The importer had resorted to challenge the Customs Valuation process before the Court of Appeal by way of a Writ application, seeking a Writ of Mandamus, compelling the Director General of Customs to accept the transaction value declared in the commercial invoice, on the basis that the process adopted for the determination of value for Customs purposes was clearly unlawful and arbitrary.
The importer had also produced before the Court the clear evidence of acknowledgment of the identical transaction value for similar/identical shipment imported by him by the Customs Valuation Directorate several months after the declared transaction value for a identical rubber hose shipment rejected by the very same Valuation Directorate.
Arguing the case for the Petitioner importer, Counsel Nagananda Kodituwakku, a former Deputy Director of Customs, submitted to the Court that as the law provides the primary method of valuation of goods for Customs purposes shall be the Article 1 of Schedule E (transaction value declared for the Customs purposes).
He further submitted that all imported goods are to be valued in accordance with the provisions of Article 1 whenever the conditions prescribed therein are fulfilled.
It was further submitted that the Schedule E of the Customs Ordinance (Article 7) require that ‘value for Customs purposes shall be determined using ‘reasonable means’ consistent with the principles and general provisions of the agreement on implementation of Article VII of the General Agreement on Tariff and Trade (1994), also known as the WTO Valuation Agreement, which expressly outlaws the determination of value for Customs Purposes on the basis of minimum Customs value or ‘arbitrary or fictitious value’.
It was also submitted that Customs had simply adopted a plainly arbitrary process that is manifestly unlawful.
Court of Appeal held that Customs had adopted an outlawed process for the determination of value for Customs Purposes and issued a Writ of Certiorari, quashing the ‘arbitrary decision making’ by the Customs Valuation Directorate adopted to enhance the transaction value.
The Court also issued a Writ of Mandamus on the Director General of Customs to accept the Transaction Value declared by the importer and also directed the DGC to release the bank guarantee obtained from the Petitioner to cover the additional levy as demanded by the Customs.
Deputy Solicitor General Milinda Gunathilake appeared for the Respondent the Director General of Customs.
