In this landmark judgment, the Court of appeal held that customs had had adopted an outlawed process for the determination of value for Customs Purposes and issued a Writ of Certiorari, qashing the ‘arbitrary decision making’ by the Customs Valuation Directorate adopted to enhance the transaction value
In a landmark judgment [CA (Writs) 392/20l2], 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 of imported goods was outlawed, arbitrary and violating the law governing the valuation of goods for Customs purposes.
In this case, the Petitioner, 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 paid on additional levy or cleared the shipment on a bank guarantee to cover the additional levy, pending final determination of value for 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 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 and 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. Understandably, this lawlessness prevalent in the Customs Valuation Directorate permits room for unjust enrichment.
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 Court that as the law provided the primary method of valuation of goods for Customs purposes shall be Article l of Schedule E (transaction value declared for the Customs purposes) and that all imported goods were to be valued in accordance with the provisions of Article l whenever the conditions prescribed therein were fulfilled. It was further submitted that the Schedule E of the Customs Ordinance (Article 7) required 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 outlawed the determination of value for Customs purposes on the basis of minimum Customs value or ‘arbitrary or fictitious value.’ In this Writ application it was submitted that Customs had simply adopted a plainly arbitrary process that was manifestly unlawful.
In this landmark judgment, the 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. Milinda Gunathilake, the Deputy Solicitor General, appeared for the Respondent, the Director General of Customs.
