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Port Moresby Enterprises Ltd v Loko [2004] PGSC 40; SC733 (8 April 2004)

SC733


PAPUA NEW GUINEA


[IN THE SUPREME COURT OF JUSTICE HELD AT WAIGANI]


SCA 65 OF 1999


Between


PORT MORESBY ENTERPRISES LTD
-Appellant-


And:


JAMES LOKO
-First Respondent-


And:


THE INDEPENDENT STATE OF PAPUA NEW GUINEA
-Second Respondent-


Waigani : Injia Dep.CJ, Sakora & Sawong JJ
2003 : 29th September
2004 : 8th April


CUSTOMS & EXCISE – Dealing with goods chargeable to duty which has been underpaid – Duty paid by importer after assessment by customs officer – Assessment based on false information provided by importer and/or its agent – Whether customs officers have power to seize or forfeit goods which have been "passed" by customs officers.


Customs Act ss.16, 19, 20, 79, 122, 125, 126, 146


Cases cited in the judgement:
Uval (No. 67) Pty Limited v David Sode and the Independent State of Papua New Guinea (Unnumbered and Unreported judgement of Amet CJ, dated 13th October, 1995 (OS 112 1994)
United Trading Pty Limited v David Sode and the Independent State of Papua New Guinea (Unreported judgement of National Court of Sevua, J dated 29th October, 1999 (No. N1925)).


Counsel:
A. Baniamai for the Appellant
C. Korus for the Respondents


DECISION


8 April 2004


BY THE COURT: This is an appeal against the decision of the National Court (Woods J) dated 8th June, 1999 where that court dismissed the appellant’s claim for the return of a container of cigarettes and damages against the Internal Revenue Commission in the National Court.


The facts are that the appellant had imported a container of cigarette from Singapore. Upon arrival of the container in Port Moresby, a Customs entry for home consumption (Form 15) was lodged by the Customs agent of the appellant. Three different Customs agents had been used by the appellant and the third one compiled the entry form consumption and lodged it with the Customs officers. Import Duty was then assessed at K17,851.89 by the Customs officials on the basis of the information and documents provided with the entry form consumption by the agent. On 21st February, 1996 the appellant paid the sum of K17,851.89 being the duty payable. On the 29th February, 1996 the container of cigarettes or goods was passed by the customs officers. After the duty was paid and on the same day the container of cigarettes was delivered to the appellant’s premises. On the same day the customs officers became suspicious because the information provided to the customs officials by the appellant’s three different agents contained different value of goods on the entry form consumptions. Consequently, the customs officials went to the appellant’s premises and advised the appellant to return the goods. The container with the cigarettes was then taken possession of and returned to the premises of the custom agents. On 5th March, 1996, a seizure notice was issued to seize the container of cigarettes. On or about June 1996 the appellant filed proceedings under WS 563 of 1996 to recover the container. After a trial the learned trial judge dismissed the proceedings on the basis that the container was properly seized by Customs officials.


GROUNDS OF APPEAL


The grounds of appeal are:


(a) The learned judge was wrong in not considering the discussions and the disputes relating to the proper rate of duty to be levied on the goods when making the decision he made.
(b) The learned judge erred in law and fact in holding that the case concerned calculation of a sum for duty on the entry document and its payment and whether that then meant the goods were outside the control of the Customs even though the entry may have been presented on the basis of an invoice known to be false when the case before him concerned the issue of whether duty on the goods were paid.
(c) The learned judge erred in ruling that the duty payable on the goods was assessed on the value of the goods.

Grounds (a) and (c) were abandoned during the hearing of the appeal. Consequently, these grounds are dismissed.


The only remaining ground of the appeal was ground 3(b). In relation to this ground, counsel for the appellant submitted that the issue in the trial was whether upon duty on the goods being paid, passed and delivered within the meaning of s.16 of the Act, the goods were still within the ambits of the control of Customs although the entry may have been presented and passed on the basis of a false invoice. It was submitted that once duty had been paid and the goods passed and delivered for home consumption, Customs lost its rights to forfeiture and seizure of the goods as the goods would not have been within its control. It was submitted that s.146(1)(j) of the Act is inapplicable where good is not a prohibited good and has been passed by Customs and delivered for home consumption.


It was further submitted that even if the duty on the goods were underpaid, the scheme of arrangements in the Act does not provide for seizure ad subsequent forfeiture of the goods. It was submitted that the remedy for the Customs is provided for in some other way such as s.102 of the Act or to issue a notice of demand to the importer to pay the balance of the underpaid duty or to institute criminal prosecution. It was submitted that the trial judge had erred in dismissing the appellant’s claim.


The respondent submits that there were two issues to be determined in the trial. The first was whether the information for instance that was contained in the invoices that were provided or attached to the entry for home consumption was false and subsequently the information contained in the entry form itself was false. Secondly, whether the seizure and subsequent forfeiture of the goods was lawful.


Ms Korus submitted that the seizure was lawful on the basis that the information provided to the Customs which included the invoices from the supplier which was attached to the entry form (Form 15) contained false or misleading information. She submitted that subsequently when the entry for home consumption was compiled, it contained information which were false or misleading, and therefore the goods were not lawfully passed.


Consequently, the goods were still the subject and under the control of the customs. She submitted that as a consequence the subsequent seizure and forfeiture of the goods were lawful pursuant to the provisions of the Act.


The submissions raised by counsels require consideration of several relevant provisions of the Act. We consider the relevant provisions to be s.16, 19, 20, 79, 122, 126 and 146. It is necessary to set out these provisions. The first provision for consideration is s.16. It reads:


"S.16 Customs control of goods.


(1) Goods are subject to the control of the Customs as follows:-

whichever first happens;

(b) goods under drawback – from the time of the claim for drawback until they are exported.

(c) goods subject to export duty – from the time when the goods are brought to any port or place for export until payment of the duty;

(d) goods for export the exportation of which is subject to compliance with any condition or restriction under any Act – from the time when the goods are made or prepared in, or are brought into, any prescribed place for export until they are exported;

(e) goods on board a ship, boat or aircraft from a place outside the country – whilst the ship, boat or aircraft is within a port or airport in the country.

(2) Goods imported through the post are subject to the control of the Customs in the same manner as goods otherwise imported.

(3) A person who, otherwise than by authority and in accordance with this Act, moves, alters or interferes with goods subject to the control of the Customs, is guilty of an offence.

Penalty: Subject to Sections 163, 164 and 165m a fine not exceeding K5,000.00."


By virtue of s.16(1)(a) the Customs have control over imported goods from the time of importation until delivery for consumption. By s.16(3) it would be an offence for a person to move or to interfere with goods subject to the control of customs unless otherwise permitted or authorized under the provisions of the Act.


The next provision is s.19 of the Act. It reads:


"S.19 Entries.


(1) Entries may be made and passed for all goods subject to the control of the Customs.

(2) Subject to Subsection (3), an entry in respect of any goods shall be made by the delivery to a Collector of an entry specifying the goods, and on the delivery of the entry the goods shall, for the purposes of this Act, be deemed to have entered.

(3) Where an entry in respect of any goods is delivered to a Collector at a port or airport before the arrival at the port or airport of a ship or aircraft carrying the goods, then for the purposes of this Act –

on the arrival of the ship or aircraft at the port or airport.


(4) At any time before duty of Customs has been paid on any goods, an entry made in respect of the goods may, with the consent of the Collector, be withdrawn.

(5) Where-

It is undesirable that the goods should be removed to that place; and


(c) the Collector, by written notice to the owner of the goods, requires the entry to be withdrawn,

the owner of the goods shall promptly comply with the notice, and for that purpose shall be deemed to have the consent of the Collector to withdraw the entry.


(6) Where an entry for home consumption has been made in respect of goods, a person who purports to make further entry in respect of those goods, or any part of those goods, is guilty of an offence unless the first-mentioned entry has been withdrawn in accordance with Subsection (4).

Penalty: Subject to Sections 163, 164 and 165, a fine not exceeding K1,000.00.


(7) A person making an entry shall, if required by the Collector, answer questions relating to the goods referred to in the entry."

Section 19 of the Act provides for entry of goods. It provides the procedure to be followed by importers and/or their agents in processing the entry of goods into the country. This is made clear by s.19(1) which provides that entries may be made and passed for all goods subject to the control of the Customs. Subsection 2 provides that an entry in respect of any goods shall be made by the delivery to a Collector of Customs of an entry specifying the goods and on the delivery of the entry the goods shall for the purposes of the Act be deemed to have been entered. In practice what is involved is that the importer or his agent would prepare and submit to the Collector a document called the Entry for Home Consumption (Form 15). This form would contain the value of the goods imported, costs of freight etc. Accompanying this particular document would be copies of the invoices from the supplier. Thus, in practice the entry for home consumption should contain all correct and relevant information and all other relevant documents such as copies etc. of invoices from the supplier or suppliers. All these would be presented to the Collector to examine and pass in accordance with s.20.


The next relevant provision is s.20. It reads:


"S. 20 Passing of entries.


(1) Entries shall be passed by the Collector placing on the entry the word "Passed" and adding his signature.

(2) An entry passed in accordance with Subsection (1) is warrant for dealing with the goods in accordance with the entry."

This section provides for passing of entries. Section 20(1) provides that entries shall be passed by the Collector placing on the entry the word "passed" and signing the entry.


The next relevant provision would be s.122 of the Act. It provides for examination of goods. It reads:


"S.122 Examinations etc., of goods.


  1. An officer may open packages and examine, weigh, mark and seal any goods subject to the control of the Customs.
  2. The expense of the examination of any goods under Subsection (1) (including the cost of their removal to the place of examination) shall be borne by the owner."

The next relevant provision is s.125. It provides:


"S.125 Seizure of goods.


(1) An officer or member of the Police Force may seize-

(2) All seized goods shall be taken to the nearest Government warehouse or to such other place of security as the Collector directs."

The next relevant provision is s.126. It reads:


"S.126 Notice of seizure.


(1) Where any ship, boat, aircraft or goods have been seized as forfeited, the seizing officer shall give written notice of the seizure and of the cause of it to the master, pilot or owner of the ship, boat, aircraft or goods (unless the master, pilot or owner is present at the seizure, in which case no notice is necessary), by delivering the notice to him-

(2) The ship, boat, aircraft or goods seized-

(3) If any goods seized are of a perishable nature or are live animals, they may be sold by the Collector without delay."

In general s.146 is the general enabling provision for forfeiture of various goods.


These provisions were considered in Uval (No. 67) Pty Ltd v David Sode & The Independent State of Papua New Guinea, (unreported and unnumbered judgement of the National Court delivered by Amet CJ, dated 13th October, 1995). There the then Chief Justice considered ss.16, 17, 125, 126 and 146 of the Customs Act. The facts of that case in brief were as follows. The plaintiff was an importer and a wholesale and retail distributor of general merchandise operating in the National Capital District. In January, 1994 it imported five (5) containers of general merchandise from Singapore for such wholesale/retail sale. The total value of the goods was Singaporean dollars $48,784. On 15th February, 1994 the plaintiff’s customs agent completed and paid a total duty of K7,539.17. Also on the same date the entry for home consumption (Customs Form 15), was completed by the customs agent in respect of the goods in five (5) containers and was stamped with "passed" and was signed by the customs agent. The number of containers and their shipping marks and numbers were specified. The description of the goods, the origin and quantities in kilograms were also specified in their appropriate columns on this said form. On 17th February, 1994 the plaintiff was required to make application with the Quarantine Office of the Department of Primary Industry for permission to import foodstuff, stuffs or plant and animal origin in separate forms. In those forms the products, their quantity and country of origin were required to be specified. Approvals were granted for the importation of the appropriate foodstuff. Subsequently, when the containers arrived in Port Moresby the five (5) containers were inspected. This inspection took place on the 16th and 17th of February, 1994 by officers of the Internal Revenue Commission. On the 16th of February the first of the five (5) containers was inspected and the inspection revealed no discrepancies. The other four (4) containers were inspected on the 17th February and several surplus goods were found. These surplus and undeclared goods were then repacked in the containers and sealed for further investigations. A day later on the 18th February, 1994 seizure notice was issued in respect of all the five (5) containers. The notice of seizure had several reasons stipulated in it. These included:


  1. No permission to import certain of the goods (foodstuff) was granted or obtained from the relevant authority.
  2. The entry form consumption made in respect of the goods was false in that a number of surplus goods were not declared.
  3. A document purportedly an invoice presented to the customs was false in certain particulars.

Subsequently, the plaintiff filed an Originating Summons seeking several declaratory orders and damages. His Honour then considered the provisions of s.16, 17, 19, 20 and 21. He then at p.8 of his judgement said:


"It would seem to me that the procedure of entry, by virtue of s.19(3) is a formal procedure that can be complied with prior 6t the goods actually arriving on the vessel into the country. It would seem also that the stamping on the entry documentary the words "passed" would appear to be another formality for having the duty assessed and paid for the goods to be entered formally into the country but still subject to the control of customs for clearance and inspection or examination purposes.


The answer then to the second declaration that has been sought that because the goods have been stamped as having been "passed" pursuant to s.20(1), in my view did not include the officers of the defendants from inspecting the goods and taking any further action thereafter as necessary, including the right to seize prohibited and unauthorized imports of goods pursuant to s.125 and also to, in consequent therefore to issue a notice of seizure in respect of such goods. Section 20(1) and (2) quite clearly only authorize the stamping of the documents of imports for entry and passage to be then dealt with in accordance with the other provisions of the Act thereafter. Once goods are "passed" as having entered the country they could then be dealt with in the other appropriate ways that the Act permits as authorized by s.21. for instance s.37 authorizes that, "goods may be unshipped only under an entry that has been passed". And so quite clearly when the customs entry document Form 15 is approved and stamped with the "passed" seal, goods are still on board the vessel and can only be unshipped by the production of an entry that has been so stamped "passed".


Section 122 enables officers of the first defendant general powers to open packages and examine goods that are within the control of customs. It is significant then that s.125 and 126 follow from this power to open and examine goods. Upon such examination if goods are found to be contravention of the Act and without authority or permission than they are liable to be seized under s.125 and a notice of such seizure is then issues pursuant to s.126. Quite clearly then after goods have been entered and "passed", they are liable to be inspected, seized and forfeited."


The above principles were subsequently followed and applied in United Trading v David Sode & The Independent State of Papua New Guinea (Unreported judgement of the National Court of Sevua J, dated 29th October, 1999 (No. N1925)).


We consider what His Honour said in the above passage to be the proper principles and accept them as sound principles. In our view the mere fact that the first respondent’s servants and/or agents have "passed" the goods and the duty paid and the goods delivered does not necessarily mean that the first defendant has no control over the said goods. The submission by the appellant that as the goods had been "passed", the appropriate duty paid and the goods delivered, the first respondent had lost its right to forfeiture and seizure of the goods is not tenable. In our view such a proposition would be sound and acceptable if the importer or its agents had provided the correct information, paid the correct duty payable to the first respondent and had complied with the various provisions of the Act. In such an event then, in our view the appellant’s submission would have some merit. However, in our view, where misleading or false information is provided or given to the servants and/or agents of the first respondent, or if any of the relevant provisions of the Act has not been complied with and relying on that false or misleading information, the servants and/or agents of the first respondent "passed" the goods and accept incorrect duty then, in our view the submissions that have been advanced on behalf of the appellant could not be sustained. In our view that is the effect of reading together s.16(1)(a), (i), s.19, 20 and the other provisions that we have referred to earlier in this judgement.


Counsel for the appellant has referred to s.102 of the Act. He submitted that the first respondent’s remedy was to sue for any short or underpayment payment on the duty and that it was improper and unlawful for the first respondent to have seized the container load of cigarettes. We accept that, that may be a possible remedy to the first respondent. But that is not the only remedy open to the first respondent because the first respondent has other remedies available to it such as seizure or forfeiture of the goods pursuant to ss.125 or 126 or 146 of the Act.


In any case, in the present case the goods were seized on the basis that the appellant by its agent has provided misleading or false information on the entry for home consumption in that it has stated an under value of the goods that have been imported. The documents and the goods were passed on the basis of that misleading or false information and the duty was calculated on that false value. Section 146(1)(j) provides that "all goods in respect or (over) which an entry, invoice, declaration, answer, statement or representation that is false or wilfully misleading in any particular has been delivered, made or produced" shall be forfeited to the State. In the present case this is precisely what had happened. In our view the appellant’s submissions against the trial judge’s reasoning has no basis.


In the present case we consider the appellant’s submission to be untenable. The entry for home consumption was "passed" on the basis of false information that was provided to the officers of the first respondent by the appellant’s agents. The entry for home consumption that had been submitted and "passed" had false information on it, in that the value of the cigarettes stated in the entry for home consumption (Form 15) was quite clearly different from the values stated in the invoice from the supplier. The scheme of the Act, in particular if one reads together ss.16, 19, 20, 122, 125, 126 and 146 means that even if the goods have been "passed" they would still be dealt with by the first respondent in other appropriate ways that the Act permits.


For the reasons we have given we dismiss the appeal and order that the appellant pay the respondents costs.
______________________________________________________________
Lawyer for the Appellant : Emilio & Associate Lawyers
Lawyer for the Respondent : Internal Revenue Commission

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