Customs duty valuation based on post-devaluation currency rates upheld as non-discriminatory and administrative.

[*571] 1970 June 9

(TRIANTAFYILIDES, J.)

REVISIONAL JURISDICTION

In the matter of Article 146 of the Constitution

P. M. Tseriotis Ltd. and others,

Applicants,

and

The Republic of Cyprus, through

the Minister of Finance,

Respondent.

(Cases 32/68, 47/68, 92/68, 97/68, 132/68, 169/68, 258/68, 260/68).

Customs duty - Foreign currency - Devaluation of sterling and Cyprus pound - Vehicles imported, or ordered and paid, from countries outside "sterling area", prior to devaluation - Basis of ascertainment of their value for customs duty purposes before the repeal of the Customs Management Law, Cap. 315 - By converting into "sterling" prices expressed in foreign currencies at the time of warehousing goods - Such practice consistent with, and reflecting, the proper construction, as a whole, of the Customs Management Law (supra) - After the repeal of Cap.

315 (supra) (on 30.12.67), vehicles being goods, matter regulated by section

159 of the Customs and Excise Law, 1967 (Law 83/67) - Section 79 of the Law inapplicable.

Constitutional Law - Article 24(3) of the Constitution - Retrospective imposition of taxation - Customs Management Law Cap.315 and Customs and Excise Law 1967 (Law 83/67) are not statutes imposing taxation, but customs management and administration legislation - Nor is section 159 of Law 82/67 within the ambit of the said Article 24(3) of the Constitution.

Constitutional Law - Article 28 of the Constitution - Discrimination - Foreign currency - Devaluation of sterling and Cyprus pound - Whether basis of ascertainment, for purposes of customs duty, of value of goods imported, or ordered and paid, from countries outside "sterling area", prior to devaluation, involves discrimination.

Interpretation Law Cap. 1 - Repeal

of the Customs Management Law Cap.315 by the Customs and Excise Law,1967 (Law 82/67) - Section 10 of the Interpretation Law (supra) inapplicable.

A. Triantafyllides, for the Applicants in Cases 32/68,47/68, 32/68, 97/68, 169/68, 258/58, 260/68.

N. Zomenis, for the Applicant in Case 132/68.

K. Talarides,Senior Counsel of the Republic,for the Respondent.

JUDGMENT

The following judgment was delivered by:

TRIANTAFYLLIDES. J.: All these eight recourses, which were heard together in view of their involving common issues, challenge [*572] decisions of the Director of the Department of Customs & Excise, who comes under the respondent Minister of Finance, to impose on vehicles imported by the several applicants from countries outside the "sterling area", custom duty which was calculated on the basis of the value of such vehicles in relation to the value of the Cyprus pound after its devaluation as from the 21st November, 1967 (which followed the equal devaluation of the sterling, on the 17th November, 1967), even though the said vehicles were either imported prior to the 21st November, 1967, or, in the case of those imported after that date, they had been ordered and paid for before such date.

Actually, the vehicles involved in cases 32/68, 47/68, 92/68, 97/68, 1,69/68, 258/68 and 260/68 were imported before the 21st November, 1967, but they were not cleared, immediately, for home use; they were placed in approved warehouses and they were cleared, later, on various dates, after the 21st November, 1967; the same applies to vehicles under Nos. 1, 2, 3, 4, 10 and 11 in Schedule 'A' attached to the Application in case 132/68, whereas vehicles under Nos. 5, 6, 7, 8 and 9 in the said schedule were ordered and paid for before the 21st November, 1967, but they were imported after such date. It is common ground that customs duty became payable only on clearance for home use.

During the long and protracted hearing of these cases, counsel tried to base their opposing views, regarding the value by reference to which the customs duty ought to be [*573] imposed, by relying mainly on various provisions of the Customs Management Law (Cap. 315) and of the Customs and Excise Law, 1967 (Law 82/67), which repealed Cap. 315 as from the 30th December, 1967.

It is convenient to mention at this stage that there was, also, evidence given by a Customs & Excise Officer, 1st grade, Mr. G. Asprou - (who was called to testify by counsel for the respondent) - to the effect that, during eighteen years when he had been dealing with valuation matters in his Department, it was always the practice in such Department to calculate the customs duty 0n the basis of the value of imported goods as ascertained, for accounting purposes, at the time when the goods were placed in approved warehouses (described, also, as "bonded" or "licensed" warehouses) .

Subsequently, there was put in, by consent, as exhibit 13, a letter dated the 26th April, 1969, and addressed by the Department of the Director of Customs & Excise to counsel for the respondent (with copy to the Director- General of the Ministry of Finance), by means of which the Director confirmed the evidence of Mr. Asprou and proceeded to state, inter alia, the following:-

"At the time when warehousing entries were presented to Customs, prices expressed in foreign currencies were converted into sterling (a) for internal accounting purposes and (b) for compilation of trade statistics. In practice, these [*574] values were accepted for duty purposes at the time of clearance. No cases can be traced in the Department in which these values were adjusted at the time of clearance.

There is no evidence by way of minutes, correspondence etc. indicating that the legal position or administrative practice were considered at the time of the several devaluation/revaluations during 1957-196l. In these cases, as well, values determined at the time of warehousing prevailed at the time of clearance for home use".

Of course, if the practice followed in the past by the Department in question was contrary to law, it cannot create a legal rule which would enable the applicants to succeed in these recourses. But, leaving aside the complicated question of principle as to whether or not, and to what extent, custom can be the source of law for administrative law purposes (see Kyriacopoullos on Greek Administrative Law, 4th ed., vol. I, p. 78-80 and Dendias on Administrative Law, 5th ed., vol. I, p, 51-52), it seems to be sufficiently clear that an administrative practice which is consistent with the correct construction of the relevant legislation is properly applicable (see Lectures on Administrative Law by Stassinopoullos, 1957, p. 127).

There is no provision in Cap. 315 laying down expressly that the value of goods is to be ascertained by reference to the time of their clearance from the Customs. On the contrary, the conclusion may be drawn, when reading [*575] together provisions such as sections 148 (defining the time of importation of goods) 138 (regarding the determination of customs duties ad valorem) and 94 (providing about the revaluation of warehoused goods), that the value being material for purposes of customs duty is to be the value assessed at the time the goods are imported and placed in an approved warehouse, if not cleared at once, for home use, on importation,

I have, thus, reached the conclusion that the practice mentioned in exhibit 13 was consistent with, and reflected, the proper construction, as a whole, of the relevant legislation, Cap. 315; and that, therefore, it should have been followed in relation to all vehicles involved in the present proceedings and cleared from the Customs while Cap. 315 was still in force, viz. until the 29th December, 1967.

In the light of the foregoing I have decided that recourse 32/68 ought to succeed, and the relevant decision of the respondent should be annulled, in so far as it relates to the vehicles, involved in such recourse, which were cleared from the Customs up to the 29th December, 1967; and the same applies in relation to the vehicles involved in recourses 47/68 and 92/68, which were cleared from the Customs up to the said date. To that extent, therefore, the sub judice decisions of the respondent are declared to be null and void and of no effect whatsoever. [*576]

As regards, however, all other vehicles involved in these eight recourses, which were cleared from the Customs on or after the 30th December, 1967 - when Law 82/67 came into force, repealing Cap. 315 - I find that the matter is amply covered by section 159 of Law 82/67, the first two sub-sections of which read as follows:-

"159.- (1) For the purposes of any enactment for the time being in force where under a duty of customs is chargeable on goods by reference to their value, the value of any imported goods shall be taken to be that laid down by the First Schedule and duty shall be paid on that value:

Provided that, in the case of goods imported under a contract of sale and entered for home use, duty shall be deemed to have been paid on that value if, before the goods are delivered for home use, duty is tendered and accepted on a declared value based on the contract price.

(2) For the purposes of the proviso to the foregoing sub-section –

(a) the declared value of any goods is their value as declared by or on behalf of the importer in making entry of the goods for home use;

(b) that value shall be deemed to be based on the contract price if, but only if, it represents that price properly adjusted to take [*577] account of circumstances differentiating the contract from such a contract of sale as is contemplated by the Schedule;

(c) the rate of exchange to be used for determining the equivalent in sterling of any foreign currency shall be the current selling rate in the Republic as last notified before the time when the goods are entered for home use".

These two sub-sections are practically the same as the corresponding sub-sections of section 258 of the English Customs and Excise Act, 1952; and the First Schedule referred to in sub-section (1) of our section 159 is substantially the same as the Sixth Schedule to the said English Act (see Halsbury's Statutes of England, 2nd ed., vol. 32, p. 855, p. 909).

The effect of the aforesaid provisions of the English Customs and Excise Act, 1952, is set out in Halsbury’s Laws of England, 3rd ed., vol. 33, p. 147, para.252; and, as it appears from footnote (r), at p. 147, the "value, for the purposes of duty chargeable ad valorem, of goods entered for home consumption on their removal from warehouse is thus their value at the time they are so entered".

It is interesting to note that no such statement appears in the earlier, 2nd edition, of Halsbury’s Laws of England (see vol. 28), because in the legislation then in force in England, prior to 1952, there was not to be found [*578] a provision in the terms of section 258 of the Customs and Excise Act, 1952; and at the part of the text of the said vol. 28, dealing with the valuation of goods for purposes of duties (see p. 314, para. 584) reference is made to section 10(l) of the English Finance Act, 1935 (see Halsbury’s Statutes of England, 2nd ed., vol. 21, p. 1155) which hears a significant similarity to our section 138 of Cap. 315. This is something which, in my opinion, strengthens the view, that, prior to the enactment in Cyprus of a provision such as section 159 of Law 82/67, it was lawful to treat the value of any goods, as it was ascertained on their importation, as being their value which was relevant the matter of the imposition of customs duty in relation to the said goods, even if such goods were, before clearance from the Customs, placed in an approved warehouse.

The now in force section 159 of Law 82/67 should be read together with the provisions of section 24 of the same Law, about delivery by an importer to the proper Customs officer of an "entry" of imported goods and the possibility of entering such goods for, inter alia, warehousing or home use; and, also, with the provisions of section 77, regarding delivery of an "entry" of any goods removed from, a warehouse (a warehouse, of course, duly approved under the Law) and the possibility of entering such goods for, inter alia, home use; the corresponding provisions of the English Customs and Excise Act, 1952, being sections 28 and

86. [*579]

In the light of the foregoing, it follows, from a proper application to the circumstances of these cases of section 159, that, for purposes of Customs duty, the value of each vehicle involved in these recourses, was rightly taken to be - when entered for home use, either on importation or on removal from a warehouse, on or after the 30th December, 1967 - the equivalent in sterling - after its devaluation in November 1967 - of the contract price of each such vehicles (as such contract price is to be understood for the purposes of section 159).

On the material before me it is clear that the vehicles in, question are goods within the ambit of subsection (1) of section 159, and particularly of the proviso thereto, and there are applicable in relation to them the provisions of sub-section (2) of section 159.

All such vehicles were imported from countries outside the sterling area and their values were contracted for , and paid in, foreign currencies (see paragraph 3 in the Applications in all these eight recourses). The facts that for banking transactions in Cyprus the said values may have been converted into sterling or that on some of the documents relevant to certain of the vehicles involved in Case 132/68 the dollar values are, also, expressed in terms of sterling, do not, in my opinion change, in the least, the foreign exchange nature of the transactions concerned. [*580]

It has been argued that in relation to the vehicles which were either imported, or ordered and paid for, while Cap. 315, and not Law 82/67,was in force, the provisions of the former, and not of the latter, enactment should have been applied; because the application of the provisions of Law 82/67 was excluded by Article 24(3) of the Constitution - which prohibits the imposition of taxation with retrospective effect - and by section 10 of the Interpretation Lew (Cap. 1), which provides about the effect of a repeal of a statute.

Moreover, it has been submitted, that even if Law 82/67 were to be found to be properly applicable, then it is section 79 thereof which should provide the answer about the disputed issue regarding the value on the basis of which the Customs duty ought to have been computed.

It is convenient to deal with this last point at once, before dealing with those just mentionéd earlier in this judgment: In my opinion, on a proper reading of section 79, in the context of the whole law 82/67, it is obvious that it refers to an account being taken of the quantity, weight, volume and the like of warehoused goods, and it has nothing to do with the ascertainment of their value for Customs duty purposes.

Regarding the argument based on Article 24(3), Law 82/67 - like Cap. 315 - is not a statute imposing taxation, but Customs management and administration legislation; and a provision, such as section 159 of Law 82/67, [*581] laying down the method of ascertaining the value of goods for the computation of Customs duty, cannot, in my opinion, be held to he, in any sense, a provision within the ambit of Article 24(3) of the Constitution.

In relation to the argument based on section 10 of Cap. 1, what I have to observe is that there cannot, in the circumstances, be said to exist any right or privilege vested in the applicants, under Cap. 315, regarding the vehicles concerned; all that has happened is that, when Cap. 315 was repealed by Law 82/67, the approach to the question of the valuation for purposes of Customs duty was put, by express legislative provision, on a more realistic and precise basis, such provision being clearly intended to be applicable as from the 30th December, 1967. Once a Law, such as Law 83/67, was enacted, renovating as a whole, in accordance with modern concepts, the administration and management of Customs, it cannot be reasonably inferred that it was intended to allow the continuance, in respect of any goods, of the earlier practice, which was not even laid down by an express, for the purpose, provision in the repealed Cap. 315; so, the application of the provisions of section 10 - even if they are at all relevant - is excluded by a contrary intention to be derived from the whole context and object of Law 83/67. Moreover, the valuation of the vehicles concerned, being an administrative act, had to be governed by the law in force at the time, viz. section 159 of Law 83/67. [*582]

It has, next, been submitted that the course taken by the respondent - based on Law 82/67 - involved discrimination as between importers who cleared from the Customs their vehicles prior to the date of the devaluation and those who imported, or ordered, and paid for, them prior to such date, but cleared them after it; and, further, that there would be involved discrimination as between importers from sterling area countries and those from other countries.

On any view I cannot find any discrimination being involved; because there is a difference in the material circumstances and in the essential nature of things in general. An importer who chose to keep imported vehicles in an approved warehouse, instead of clearing them at once from the Customs, took certain risks, including those of devaluation or of an increase in the meantime of the relevant Customs tariff, which those importers who cleared from the Customs their vehicles immediately on importation did not chose to take. Also, it is a well established distinction, which is based on obviously reasonable factors and, thus, it cannot be regarded as involving discrimination, for importers who import from a group of countries to which the importing country belongs and deal on the basis of the currency applicable for the whole of such group, to be in a position which may, due to the nature of things, be different from that of those who import from outside that group or deal in foreign currencies. [*583]

For all the foregoing reasons these recourses fail, except to the. extent indicated by this judgment that they should succeed; there shall, in the circumstances, be made no order as to costs.

Applications dismissed except to the extent indicated in the judgment that they should succeed; no order as to costs.