048-SLLR-SLLR-2003-V-2-MANS-LANKA-PVT-LTD-v.-LAKSHMAN-PERERA-DIRECTOR-GENERAL-OF-CUSTOMS-AND-O.pdf
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MANS LANKA (PVT) LTDv
LAKSHMAN PERERA,
DIRECTOR-GENERAL OF CUSTOMS AND OTHERS
COURT OF APPEALTILAKAWARDENA, J. (P/CA) ANDABEYRATNE, J.
CA NO 1081/2001MARCH 24, 2003
Writ of certiorari – Customs Ordinance, sections 8(1), 51, 52, 130, 145 and 167- Under valuation – Forfeiture – Determination of the value – Is the order offorfeiture amenable to writ jurisdiction? – Alternative remedy – When does itnot lie 7
. On a suspicion to the possibility of undervaluation of a consignment of mam-moties, an Inquiry was held under the provisions of the Customs Ordinances.8(1) and the goods were forfeited (s. 52.)
The petitioner sought a writ of certiorari to quash the said forfeiture.
Held:
The Inquiring Officer had failed to take into consideration the most rel-evant and crucial facts in determining whether the petitioner has under-valued the consignment in question.
Certiorari and prohibition have become general remedies which may begranted in respect of any decisive exercise of discretion by any author-ity having public functions, whether individual or collective.
They will lie where there is some preliminary decision, as opposed to amere recommendation, which is a prescribed step in a statutoryprocess which leads to a decision affecting rights, even though the pre-liminary decision does not immediately affect rights itself.
It cannot be said that the Director General of Customs when conduct-ing an inquiry merely conducts a fact finding Inquiry.
A decision which is made in contravention of a statutory requirementbecomes null and void then the question of alternative remedy wouldnot arise.
Mans Lanka (Pvt) Ltd v Lakshman Perera
CA Director-General of Customs and others (Shiranee Tilakawardena. J.)
Cases referred to:
Jayawardena v Silva – 73 NLR 289
Amisminis Ltd., v Foreign Compensation Commission (1969) – 2 AC147
Director of Public Prosecutions v Head – (1959) AC 83 at 111.
Sanjeeva Jayawardena with Faizer Markar for petitionerFarzana Jameel, Senior State Counsel tor respondent
June 16,2003
SHIRANEE TILAKAWARDENA, J. (P/CA)
The petitioner has filed this application seeking a writ of cer- 01tiorari to quash forfeiture order dated 03.07.2001 made by the 4threspondent with regard to a consignment of mammoties and thepenalty of Rs. 8,227,924 and for a writ of mandamus to compel the1st respondent to release the said goods. However the said con-signment was released on a bank guarantee as directed by thiscourt. The petitioner company is engaged in the business of import-ing, exporting, merchandising and trading in hardware, timberpaints and electric goods.
On 12./04.2001 the petitioner had entered into a contract with 10Fu Yuan Enterprises Pvt. Limited of Singapore for the purchase of2280 dozens of Chillington Crocodile Brand Mammoties. The salesconfirmation bears No. SC No. LKR/E/01, marked P3. The peti-tioner submits that the said i:u Yuan Enterprise of Singapore is thebona fide importer and distributor of Crocodile mammoties andother agricultural products by Chillington Tool (Thailand) Co.Limited. The “Crocodile” trademark and device are owned by thesaid Chillington Tool Co. Limited.
The said consignment arrived at Colombo Port on or about
and the petitioner’s clearing agent had produced the 20Customs Declaration bearing No. 54898 and had submitted thedocuments with Invoice bearing No. E 1029 for Singapore Dollars56,520. (Cusdec and Invoices marked P4 and P5 respectively).
On 04.06.2001 the said cargo was inspected by the CustomsOfficials on a suspicion that they were not genuine “Crocodile”
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brand mammoties. However after a physical inspection it wasfound that the mammoties were genuine.
Subsequently on another suspicion to the possibility of under-valuation of the said consignment, an inquiry was held under sec-tion 8(1) of the Customs Ordinance and the goods were forfeited 30under section 52 of the Customs Ordinance.
The main issue that needs to be considered in this applicationis whether the said inquiry held under section 8 (1) of the CustomsOrdinance and the finding made thereupon could be justifiedaccording to the facts and circumstances of the present case.
Section 51, 52 and Schedule E of the Customs Ordinancecontain the law relating to valuation of articles upon importation.
Section 51:-
“In all cases when the duties imposed upon the importation ofarticles are charged according to the value thereof, the 40respective value of each such article shall be stated in theentry together with the description and quantity of the same,and duly affirmed by declaration by the importer or his agentand such value shall be determined in accordance with theprovision of Schedule E, and duties shall be paid on a valueso determined”.
The word used in the provision is shall when determiningvalue of an article. Therefore it has to be decided whether this wordis used in a mandatory sense or not. Before attempting a definitionof this provision it is necessary to consider the other relevant pro- 50visions in this regard.
Section 52:-
“Where it shall appear to the officers of the Customs that thevalue declared in respect of any goods is not in accordancewith the provisions of Schedule E, the goods in respect ofwhich such declaration has been made shall be forfeitedtogether with the package in which they are contained. Wheresuch goods are not recoverable, the person making such falsedeclaration shall forfeit either treble the value of such goods orbe liable to a penalty of two thousand rupees, at the election 60
Mans Lanka (Pvt) Ltd v Lakshman Perera
CA Director General of Customs and others fShiranee Tilakawardena, J.) 311
of the Director General".
The phrase “where it says that where it shall appear to the offi-cers of the Customs that the value declared is not in accordancewith the provisions of Schedule E” makes it clear that the languageused in section 51 is mandatory.
Therefore the value of such imported items should be deter-mined in accordance with the provisions of schedule E and dutiesshall be paid on the value so determined.
Section 167 defines value as – the price of such goodsdetained in accordance with Schedule E. Schedule E Clause 170
states – “The value of any imported goods shall be the normalprice, that is to say, the price which they would fetch at the time ofimportation on a sale in the open market between a buyer and aseller independent of each other as indicated in paragraph 2.7”.
Clause 2.7 states:
“That a sale in the open market between a buyer and a seller
independent of each other presupposes”
2.7.1.-that the price is the sole consideration.
-that the price is not influenced by any com-
mercial, financial or other relationship sobetween the seller or any person associatedin business with him, other than the relation-ship created by the sale itself.
However, Clause 3 states – ‘The price paid or payable may beaccepted as the value for customs purposes if the price corre-sponds at the time of valuation to the normal price as indicated inparagraph 1 above and the price is adjusted if necessary to takeaccount of the circumstances of the sale which differ from those onwhich the normal price is based."
The question that has to be decided is the “price” that the 90goods would fetch at the time of importation.
It is utmost importance to analyze these provisions carefully todecide whether there was an undervaluation of the goods con-cerned in this case so as to warrant an inquiry under section 8(1)
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of the Customs Ordinance.
As was submitted by the counsel for the respondents, citingBindra on Interpretation of Statutes (9th Edition at page 1017) it isaccepted that when interpreting a taxing statute, equitable consid-eration should not be taken into considerations and every wordmust be given its plain meaning.100
“The duty of the Judge in construing statutes is to adhere tothe literal construction unless the context renders its plain thatsuch a construction cannot be put on the words. The rule isspecially important in cases of statutes which impose taxa-tion.”
On perusing the relevant provisions it becomes clear thatvalue of imported goods should be the normal price, that is theprice they would fetch at the time of importation on a sale in theopen.market. That price should be the sole consideration and itshould not be influenced by any commercial, financial or other rela- notionship.
However as noted above, while accepting that the literalmeaning of a fiscal statute should be given effect to, it is alsoaccepted that it is a well established principle of statutory interpre-tation that a provision of a statute cannot be read in isolation, butshould be read with the rest of the provisions of the statute.
It has to be noted that although the respondents have failed tomake reference to Clause 3 of Schedule E, it is of importance whenfixing the price of a good for the purpose of levying custom duties.
Clause 3 provides:-120
“The price paid or payable may be accepted as the value forcustoms purposes if the price corresponds at the time of valu-ation to the normal price as indicated in paragraph 1 aboveand the price is adjusted if necessary to take account of thecircumstances of the sale which differ from those on which thenormal price is based.”
This provision contain a qualification to the rules embodied inthe provisions relating to fixing of the price. Therefore when com-puting the normal price, which is the price that the goods will fetch
Mans Lanka (Pvt) Ltd v Lakshman Perera
CA Director General of Customs and others (Shiranee Tilakawardena, J.) 313
at a sale in the open market, adjustment of the price according tocircumstances of the sale, has to be taken into account.
According to the facts and circumstances of the present casethe petitioner’s submission is that they were able to obtain the con-signment of Crocodile brand mammoties in question, at a lowerprice as a result of a strategic move made by the supplier in orderto recapture the lost market.
In support of this contention, the document marked P13, whichis a letter issued by Fu Yuan Enterprise to the 1 st respondent, issubmitted. P13 refers to invoice No. E 1029 in respect of the con-signment in question. The letter reads “we refer the above ship-ment and understand that there has been a query with regard to theprice of this commodity being lower than previous shipments fromour principals”. Further clarifying this position it was stated that “weconfirm that we have decided to market the Chillington Crocodilemammoties at a lower price as a strategic move to recapture thelost market share for this product due to cheap fakes being import-ed from China and India.”
“We confirm that prices are lowered to facilitate our current dis-tributor M/s Mans Lanka (Pvt) Ltd., to re-launch the product at anattractive price supported by an aggressive marketing campaign.”
In order to understand the market share of this particularbrand it is necessary to consider the history of the market for thisbrand, other importers of the product, current market share of theproduct etc. According to the materials, produced in this court theBrown and Company had been the sole agent of Crocodile brandmammoties prior to 1971 and after 1991. However in January 2001Chillingworth (Thailand) did away with the sole distributorship in SriLanka and Brown and Company is no longer the sole agent.
The evidence of the other importers of the said Crocodilebrand mammoties led at the inquiry indicate that the prices afford-ed by Fu Yuan Enterprises is not in conformity with the normalprice. The representative from Agrotechnica has given evidence tothe effect that the revised price offered to them on 23.3.2001 is US$2.20 for 9” x 9” size mammoties and US$ 2.45 for 10” x 8” sizemammoties. According to the witness from Brown and Company,for their last import, which was on 3.6.2000, the rates afforded were
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US$ 2.84 for 9” x 9" size mammoties and USS 3.24 for 10” x 8” sizemammoties.
However according to the petitioner’s contract, which wasmade on 12.04.2001, the reduce prices offered were USS 1.11 for 1709” x 9” size and USS 1.24 for 10” x 8” size.
It was revealed during the inquiry that due to drop in sales,stocks were not moving. Evidence of Mr. Wickremasooriya,Director, Brown & Company at page 96 and evidence of Miss.Preethi Fernando, Agrotechnica Ltd., at page 98 of IR 7.
The evidence of the witness from the Brown &.Company clear-ly states that when he negotiated with the supplier to obtain thelowest price, that he did not indicate the quantity he wanted to pur-chase. Also admitted the fact that they had stocks in hand at thetime of negotiation of the prices and that no written confirmation isowas made as to the prices offered. The witness from Agrotechnicaalso admitted that they did not attempt to buy at the revised ratesas they too had remaining stocks in hand.
What is significant to note is that this evidence reveals that theinquiring officer had not made specific reference and directed hismind to the fact that an increase in the quantity imported couldattract a low price rate. Similarly, if new stocks were purchased ata lower price the possibility of having the lower prices of the exist-ing stocks in the market is a crucial factor which should have beenaddressed by the inquiring officer.10o
The Respondent contended that the document P6 which is aletter dated 30.5.2001 addressed by Chillington (Thailand) onlystates that the Fu Yuan Enterprises is a bona fide importer and dis-tributor of Crocodile mammoties but does not refer to the price atwhich the goods were sold by the manufacturer in Thailand, northe price at which the agent sold to the petitioner.
This is a letter written upon inquiries made as to the genuine-ness of the product, when the issue first arose. However it must benoted that there was no plausible reason given as to why the 1stRespondent could not have requested, a clarification as to the 200lower prices offered to the petitioner, from the said Mr. Rod Buyers,Managing Director of Chillington (Thailand).
Mans Lanka (Pvt) Ltd v Lakshman Perera
CA Director General of Customs and others (Shiranee Tilakawardena. J.) 315
Another contention which has been made repeatedly by thecounsel for the respondents is that the claim by the petitioner thatit got the consignment at a reduced price as the agent in Singaporeand wanted the petitioner to indulge in an aggressive MarketingCampaign is most implausible and is irrelevant to the statutoryrules of valuation. The fact that the petitioner obtained the saidconsignment at a lower price just after two weeks from the date23/3/2001, the Agrotechnica negotiated prices, were found unac- 210ceptable by the respondents. In a highly advanced consumer ori-ented society, market strategies need to be invented and imple-mented every now and then in order to face the challenges bycompetitions. Reduction of prices in order to recapture the lost mar-ket within a two weeks time cannot be termed as implausible.
The above contention of the respondents is based on Clause2.7 of Schedule E. What the respondents have failed to consider isClause 3 of Schedule E, wherein unequivocal terms provides thatthe price paid or payable may be accepted as the value for customspurposes if the price corresponds at the time of valuation to the 220normal price and the price adjusted if necessary to take account ofthe circumstances of the sale which differ from those on which thenormal price is based.
Therefore the inquiring officer had failed to take into considerationthe most relevant and crucial facts in determining whether the peti-tioner has undervalued the consignment of mammoties in question.
Especially so as Schedule E does not envisage the prices ofthe goods that were imported previously but the prices, the goodswould fetch at the time of importation. (Vide Clause 1 Schedule E).
On perusing the observations of the Inquiring Officer at page 101 230of IR 7 it becomes clear that the evidence was not assessedaccording to Clause 3 of Schedule E. Only Clause 2.7 of the saidSchedule was considered, but again the assessment of evidencewith Clause 2.7 is flawed as no evidence was led to the effect thatthe price was influenced by any commercial, financial or other rela-tionship other than the relationship created by the sale itselfbetween the petitioner and the supplier.
The contentions raised by the petitioner in relation to docu-ment marked IR 2, purported to be a guideline adopted in valuing
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goods, need not be discussed as the respondent has admitted that 240this document was not the basis of valuation in respect of petition-er’s goods.
The respondent on the other hand contends that an order for-forfeiture is not liable to be quashed by way of a Writ of Certiorari.
In support of this contention, the case Jayawardene v Silva,W wascited. It was held that where an order of forfeiture is made by thecollector under Section 130 and the collector has not yet beenasked to exercise his power of mitigation under Section 145, it can-not be said at this stage the collector had made any determinationwhich can be described as quasi judicial. However it has to be 250emphasized that this decision is not in line with the development ofadministrative law principles of modern Law.
Wade 8th Edition page 601 states “As the law has devel-oped, certiorari and prohibition have become general remedieswhich may be granted in respect of any decisive exercise of dis-cretion by any authority having public functions, whether individ-ual or collective”. They will lie where there is some preliminarydecision, as opposed to a mere recommendation, which is a pre-scribed step in a statutory process which leads to a decisionaffecting rights, even though the preliminary decision does not 260immediately affect rights itself. Accordingly it cannot be said thatthe Director General of Customs when conducting an inquirymerely conducted a fact finding inquiry. This is borne out by theDocument IR 7, wherein an order was made forfeiting the subjectmatter of the inquiry.
The Counsel for the respondent too, submits that a decision ofthe Inquiry Officer can be set aside on the basis of no evidence orif the Inquiring Officer acted in contravention of statutory provisions.
In the present matter before this Court it is obvious that theInquiry Officer conducted the inquiry without considering Clause 3 270of Schedule, which was vital for the determination of the inquirybefore him.
The issue raised as to the availability of an alternative remedyhas to be decided only if there is an order which can be consideredas valid. In the case of Anisminic Ltd. v Foreign CompensationCommission<2), it was held that when a decision is made where the
Mans Lanka (Pvt) Ltd v Lakshman Perera
CA Director General of Customs and others (Shiranee Tilakawardena. J.) 317
authority had no jurisdiction to make, such decision becomes nulland void.
Therefore a decision which is made in contravention of astatutory requirement becomes null and void and then the question 280of alternative remedy would not arise. Nevertheless here a ques-tion arise as to whether a certiorari will lie to quash nullities. LordDenning in the case of Director of Public Prosecution v Head3) stat-ed that “where an order is a nullity there is no need for an order toquash it and that it is automatically null and void .without more ado.”
However the view accepted now is that there is no means bywhich nullity can be established without invoking the jurisdiction ofthe Court.
Therefore this Court is of the view that the decision made bythe Inquiry Officer dated 03/07/2001 is made in contravention of 290provisions of the Customs Ordinance. Accordingly a Writ ofCertiorari is granted quashing the said decision of the InquiryOfficer. Application is allowed with costs of Rs. 5000/-.
ABEYRATNE, J. – I agree.Application allowed