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Over Valuation Error of Auctioned Vehicle; FTO upheld the Customs Authorities decision to cancel an auction to protect Government Revenue

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Over Valuation Error of Auctioned Vehicle; FTO upheld the Customs Authorities decision to cancel an auction to protect Government Revenue

Islamabad 31-10-2024: In a recent judgement, the Federal Tax Ombudsman (FTO) has addressed a contentious issue involving the cancellation of an auction for a 2020 Audi E-Tron by customs authorities due to valuation inconsistencies. The judgement, issued under Section 14(8) of the Federal Tax Ombudsman (FTO), 2000, found that the Collectorate’s decision to cancel the auction, citing a valuation error, was justified to protect government revenue.

The case arose when a successful bidder, the complainant, alleged maladministration after the Collectorate of Customs at Port Qasim cancelled the auction, which initially set the reserved price for the vehicle at Rs. 13 million. Following a recalculated valuation based on the correct currency (Euro instead of USD), the revised price was set at Rs. 24,086,469, prompting the customs department to retract the auction to prevent revenue loss. The complainant argued that they were the highest bidder, having deposited 25% of the bid, and should be allowed to purchase the vehicle under the original terms.

The Federal Tax Ombudsman (FTO) findings, referenced from various sections of the Customs Act, 1969 and Customs Rules, 2001, emphasized that customs authorities acted within their legal discretion. Specifically, the Customs Act, Section 25A and SRO 577(1)/2005 require accurate valuation and allow for reserve price adjustments, while CGO 12/2002 mandates a depreciation allowance for used vehicles, set at a rate of 2% per month. Under Rule 75(ii) of the Customs Rules, 2001, the Collector has the authority to cancel auctions if valuation errors are detected, underscoring the discretionary power of customs officials in safeguarding public revenue.

While dismissing the complainant’s allegations of maladministration, the Federal Tax Ombudsman (FTO) ordered that the 25% earnest money be refunded to the complainant once they submit the required documentation. Additionally, the Federal Board of Revenue (FBR) was instructed to allow the complainant to re-bid in future auctions for the vehicle if desired. In a rare commendation, the Federal Tax Ombudsman (FTO) also recommended that the Collector at Port Qasim receive an appreciation letter from the FBR for their prompt action to prevent potential revenue losses and their commitment to upholding procedural accuracy.

This decision reinforces customs authorities’ obligations to follow due process and accurately assess reserve prices, especially for high-value assets. It also underscores the Federal Tax Ombudsman (FTO) role in promoting accountability within customs operations while protecting taxpayer interests. The judgement may serve as a precedent for similar cases involving valuation and auction procedures in the customs domain, ensuring adherence to legal frameworks in financial oversight.

This judgement highlights the Federal Tax Ombudsman (FTO) stance on safeguarding public resources and maintaining transparency in customs operations. It serves as a reminder of the importance of due process in valuation and auction procedures, setting a benchmark for similar disputes in the future.