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Petitioner: Messrs KHYBER TEA AND FOODS COMPANY, PESHAWAR VS Respondent: The COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE
Court Name: Customs Appellate Tribunal Judge(s): Syed Sardar Hussain Shah, Qurban Ali Khan Title:Messrs KHYBER TEA AND FOODS COMPANY, PESHAWAR vs The COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE,
JUDGMENT
Reported As: 2020 P C T L R 497, 2019 PTD (Trib.) 2092 Result: Appeal allowed Judgment JUDGMENT QURBAN ALI KHAN, MEMBER (TECHNICAL).--- This appeal filed by Messrs Khyber Tea and Food. Company Peshawar Head Office Shop No. 143 Ashraf Road, Katchery Gate Peshawar having name and style of Khyber Tea and Food Company NTN No. 1021567-7 and STRN No. 0501090208964 against the Order-in-Appeal No. 145/2017 dated 09.11.2017 passed by the Collector of Customs (Appeals), MCC, Peshawar whereby he while maintaining the Order-in-Original No. 33/2017 dated 16.6.2017 dismissed the appeal. 2. Brief facts of the case are that the Customs Mobile Squad Mardan on 26.9.201 6, in pursuance of prior information, a Truck bearing Registration No. P-3334 Peshawar was intercepted at Mardan. Search of the vehicle resulted into foreign origin goods (as detailed in the recovery Memo. 17/2016 dated 26.9.2016). On demand, the occupants of the vehicle namely (1) Noman son of Ijaz resident of Peshawar (2) Salman son of Gufran resident of Peshawar failed to produce any legal documents/lawful possession of the said goods so recovered. Therefore, the Customs staff seized the foreign origin smuggled goods along with the said vehicle under Section 168 of the Customs Act, 1969 for violation of Sections 2(s), 16 and 157 ibid read with Section 3(1) of the Imports and Exports (Control) Act, 1950 punishable under Section 156(1)(8), (89) of the Customs Act, 1969 read with Section 3(3) of the Imports and Exports (Control) Act, 1950. 3. Subsequently , after completion of the requisite formalities, the matter was placed before the Deputy Collector Adjudication Customs Peshawar , who vide Order-in-Original No.33 of 2017 dated 16.6.2017 ordered outright confiscation of the seized goods and released the vehicle against 20% redemption fine @ Rs.3,00,000/- 4. Appeal was filed against the Order-in-Original No. 33 dated 16.6.2017 before the Collector Appeal Customs Peshawar , who dismissed the appeal vide Order-in-Appeal No. 145/201.7 dated 09.1 1.2017. 5. Aggrieved from the Order-in-Original No. 33 of 2017 dated 16.6.2017 and Order-in-Appeal No. 145 of 2017 dated 09.11.2017, the appellant filed appeal before this Tribunal with the following grounds. 1. That the seized/confiscated goods were lawfully imported legitimately locally purchased and bona fidely transported duly supported with sales Tax Invoices and Bilities. The appellant registered as manufacturer , income tax department as well as sales tax department. The seized goods after mixing, blending, cutting, processing and assembling packed in plastic bags and cartons bearing appellant's firm address, trademark and Monogram. The Customs department seized the imported goods without detention under section 17 and no notice issued under section 26 of the Customs Act, 1969. 2. That respondent No. 2, never enquired from the detecting staff as to how the CIF value of the seized goods amounting to Rs.11300000/, was determined and did not bother to know the reasons of 2nd valuation and assessment in one and same case. 3. That respondent No. 2, did not bother to call for the appraiser to know as to how he evaluated the seized goods and why he did not associate the respondent (now appellant) at the time of evaluation and assessment of seized goods. 4. That the value determined by the appraiser is not a fair value having no legal sanctity as the same has not been approved by the competent authority . 5. That content of the Affidavits given the appellant are to be admitted as the prosecution has failed to give counter -affidavits. 6. That the provisions of Section 2(s) of the Customs Act, 1969 are not applicable in this case. 7. That the provisions of Section 16 of the Customs Act, 1969 are not applicable in this case because; (i) the seized/confiscated goods are freely importable. (ii) there is no prohibition or restriction on the import of the seized/confiscated goods. (iii) The seized/confiscated goods were supported with legal documents. 8. That the provisions of Section 157 of the Customs Act, 1969 are not applicable in this case because; (i) the owner of the vehicle was not travelling with the seized vehicle. When intercepted. (ii) The prosecution did not bring any evidence on record which prove any criminal link or association with the owner of the seize goods. (iii) The owner of the vehicle was never issued show-cause notice and in absence thereof no penal or punitive action can be taken against the owner of the vehicle nor any redemption fine could be imposed on the vehicle. 6. In rebuttal, the respondent-department filed their parawise comments as under:-- 1. Incorrect. At the time of interception of the vehicle the owner/ driver did not produce GD except sales Tax invoices, billies to the seizing officer from the recovery memo. The seizing officer accordingly got signature from the owner/driver on recovery memo. 2. No comments 3. Incorrect. The appraiser was not under obligation to associate the accused person while assessing the duty and taxes. The Collector or Director valuation has the power to re-examine the assessment made under Section 80 of the Customs Act, 1969 if he is not satisfied. Section 25D of the Customs Act, 1969 empower the Director General valuation to hear appeal if filed by an aggrieved person. 4. Incorrect. 5. Incorrect.
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6. Incorrect. (i) Incorrect. (iii) Incorrect. 7. I have heard both the parties and perused the record with their assistance. On the way to Mingora Swat the Customs Squad Mardan stopped the vehicle. Driver of the vehicle showed the sales tax invoices to the customs officials where the customs officials denied to accept the sales tax invoices Nos. 4, 5 and 6 dated 06.9.2016 and brought the vehicle to customs of fice Mardan and seized the said goods along with vehicle and served notice under section 171 of Customs Act, 1969. 8. It also transpires from the affidavits that initially the driver shown the sales tax invoices issued by Messrs Khyber Tea and Food Company Peshawar . There is no any counter affidavit on behalf of seizing officer till date. It is a settled law if a fact which is not rebutted, it amounts to admission. Reliance takes place on 2007 PTD 167. The prosecution while not submitting counter af fidavit has admitted the facts narrated by the appellant in his af fidavit and the af fidavits produced in support of his version. 9. Departmental Representative stated that at the time of seizure the driver of the vehicle submitted an affidavit that he is ready to pay relevant duty and taxes. I have perused the said affidavit. The said affidavit was submitted to the seizing officer prior to the issuance of show-cause notice. It was not submitted to the adjudication officer at adjudication stage. Therefore such affidavit has no legal value. Further it seems that the said affidavit has forcibly been obtained by the seizing officer from the driver of the vehicle. 10. The perusal of seizure report reveals that the seizing officer by himself has determined the approximate value of the seized goods however the determination of the value of the seized goods is the domain of appraiser not Superintendent Customs of the seizing agency . The domain of Superintendent Customs of the seizing agency is to prevent the smuggling and not to determine the CIF value of the seized goods. Further approximation of valuation of seized goods has no room in the law rather the perfect valuation has the value in the eye of law. Moreover the seizing officer didn't associate the appellant during the proceeding of evaluation and assessment of seized goods. However it is mandatory for the seizing officer to associate the owner of the goods or his agent at the time of evaluation and assessment of the seized goods. The adjudication of ficer and Collector Appeals as well have been failed to adjudge this import aspect of the case. 11. Further the duty and taxes involved in this case are of Rs. 5233600/-. Therefore Deputy Collector wrongly assumed the jurisdiction by issuing the show-cause notice, the Order-in-Original No. 33/2017 dated 16.6.2017 passed by Deputy Collector Adjudication MCC Peshawar was violation of section 179(iii) of the Customs Act, 1969. Reliance takes placed on 2015 PTD 462 Sindh High Court, 1999 PTD 4126 (Peshawar High Court) and 2006 SCMR 1713 . 12. The order-in-original show that the documents produced by the appellant were found afterthought. I am not agree with the plea of learned DR that the documents presented were afterthought. If the said documents were afterthought, so why the adjudication officer has issued show-cause notice and why he called upon as to penal action should not be taken against the appellant and why the seized said goods should not be confiscated. The purpose of issuance of show-cause notice is that the accused should know about the allegatio n levelled against him and he prepared his defense. This is the right of appellant to defend himself and produce the evidence of legal import and lawful possession of the goods. There is no provision in the Custom s Act, 1969 and the other laws of land that the accused cannot produce the documentary evidence in support of his version at any stage. 13. The show-cause-notice in this case was issued on 07.11.2016. The provisions of section 179(3) of Customs Act, 1969 required that the case should be adjudicated within a period of 120 days from the date of show-cause notice. The period between the issuance of show-cause notice and passing of the Order-in-Original is 6 months. Therefore,. the order-original is barred. Neither the Order-in-Original No. 33/2017 dated 16.6.2017 speaks about any approval of extension of time by the Collector in this Adjudication period. Where law requires a thing to be F done in a particular manner , it would be legal and valid only if it was done in that manner and not other wise. It was mandatory to decide the case within the period specified by the Customs Act, 1969. Reliance takes placed on 2017 SCMR 1427 = 2017 PTD 1756 , 2007 SCMR 1095 , G 2008 PTD .60 , PLD 2005 Pesh 214 and 2007 SCMR 1256 , 2010 SCMR 1408 , 2006 PTD 340 and PTCL 2005 CL 841 (President of Pakistan). 14. Moreover once the goods imported into the country for home consumption and issue a sales tax invoice under section 23 of Sales Tax Act, 1990 in respect of the import goods. The provision of Customs Act, 1969 are not applicable because the importer has already paid customs duty, sales tax, income tax, regulatory duty, federal excise duty as well as additional customs duty etc at import stage. 15. The learned Departmental Representative contended that the marks and number of recovered seized goods don't tally with the Goods Declaration. The record has been examined which revealed that the seized goods were imported by Messrs Khyber Tea and Food Company Peshawar vide GD No..KAPW -HC-136690 dated 25.3.2016, KAPE-HC-140255 dated. 15.1.2016. According to available record the shape of seized goods at import stage and shape after manufacturing is tabulated as under;
S. No. Shape at Import Stage in GDs (Raw Shape)Shape at Seized time (Finished Shape after Manufacturing) Reshaped 1. Black tea Kenya Origin Garden Name Gatuti, Nadeema, Munanga PF-1, Mfg 03/2015 Exp 03/2018 (200 bagsx68KG)= 13600KG India Black tea Garden Mehak and Charminar PF-1 Mfg 02/2016Blended Black tea (Khyber Trade Mark) (100 Bags x20 Kg)=1200 KG (10 Bags x25 Kg)=250 KG (10 Bags x20 Kg)=200 KG (10 Bags x10 Kg)=100 KG Exp 02/2019 (200 bagsx70KG)=14000 KG 2. Vietnam Origin Black pepper whole (50 bags x25kg)=1250 KGGrinded Black Pepper (Khyber Trade Mark) (50x12)= 600KG 3. Guatemala Green Cardamom (50 ctn x 40kg)=2000 KGGrinded Green Cardamom (Khyber Trade Mark) (100 bags xl2kg)=1200 KG 4. Cloves whole (100 bags x30 kg)=3000 KGGrinded Cloves (Khyber Trade Mark) (100bags x20kg) = 2000 KG 5. Cumin Seed (20 bags x20kg)=400 KGCumin powder (Khyber Trade Mark) (20bags x15 kg)=300 KG 6. Indian Dry Copra (50bagsx50kg) = 2500KGGrinded Dry Copra (Khyber Trade Mark) (50bags x30kg )=1500 KG 7. Indian Ispaghol Husk (10 bags x20 kg)=200 KGIspaghol Powder (Khyber Trade Mark) (10bags x10 kg)=100 KG
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8. Cassia whole (100 bagsx30 kg) = 3000 KGGrinded Cassia (Khyber Trade Mark) (100 bagsx 20kg )=2000 KG 9. Ziffle and Jalwatry (100 bagsx40kg)=4000 KGGrinded Zif fle and Jalwatry (Khyber Trade Mark) (100 bugs xl2kg)=1200 KG 10. Indian Black Cardamom (100 bags x40kg)=4000 KGGrinded Black Cardamom (Khyber Trade Mark) (100 bags xl2kg)=1200 KG 11. Holland Milk powder (100 bagsx25kg)=2500 KGMix Milk Powder (Khyber Trade Mark) (100 bags xl2kg)=1200 KG 12. Nut Meg, Almond, Ground Nut and Peanut, Kajoor (100bags x30kg)=3000 KGKheer Powder/mix Mawa (Khyber Trade Mark) (50bags x 12kg)=600 KG 13. Red Chili whole (50 bags x30kg)=1500 KGGrinded Red Chili (Khyber Trade Mark) (50 bagsx 12kg)=600 KG 14. Green Tea leaves and stick Vietnam Mfg 03/2015 Exp 03/2018 (200 bagsx70KG)=14000 KG (20 bags x 35kg)=700 KG (20 Ctns x 20kg)=400 KGMixture Green tea (Khyber Trade Mark) (40 Ctns x 12kg)=480 KG (30 Bags x 25kg)=750 KG 15. China sewing machine parts (20 ctn) = 1000 KGLocal assembled sewing machine (Khyber Trade Mark)(40 PCS) 16. Srilankan Broom sticks (6ft) Local assemble broom (3ft) (Khyber Trade Mark) 17. China Stationary paper in size24 x 18 = 3000KGStationary paper size 12 x 9 = 2000 KG 18. China Tissue paper roll 12 x 12 = 3000KGTissue paper in packets (Khyber Trade Mark) 6 x 4 = 1000 KG 19. China Iron sheet without color 20 x 20 = 4000KGIron sheet in 4 color 20 x 20 = 4000KG
16. NON-P AYMENT OF MINIMUM V ALUE ADDITION TAX @ 3% TAX AT IMPOR T STAGE :-- The learned Departmental Representative pointed out that the appellant didn't pay 3% value addition tax which is chargeable on the goods mentioned in the GDs produced by the appellant and placed reliance on SRO 480(I)/2007 dated 09.6.2007. He further contended that the appellant has also violated sections 3(1A), 3 (2) (a), 3 (5), 6, 7A(1) and 7A(2) of Sales Tax Act, 1990. According to the available record appellant is importer manufacturer and 3% of value addition tax is not applicable to the present appellant because in Sales Tax Special Procedures Rules, 2007 proviso to the rule 58-B exempts the importer manufactures from 3% value addition tax therefore the question raised by the learned DR has no force and has been turned down. Sales Tax Special Procedures Rules, 2007 of the Sales Tax Act, 1990 of Rules 58-B is reproduced as under: Sales Tax Special Procedures Rules, 2007 of the Sales Tax Act, 1990 [Chapter X SPECIAL PROCEDURE FOR P AYMENT OF SALES TAX BY [***] IMPOR TERS [58A. Application .---The provisions of this Chapter shall apply to imports of all taxable goods as are chargeable to tax under section 3 of the Act or any notification issued there under .] [58B. Payment of sales tax on account of minimum value addition.---(1) The sales tax on account of minimum value addition (hereinafter referred to as value additio n tax in this Chapter), shall be levied and collected at import stage on goods as specified aforesaid at the rate of [three] percent of the value of goods in addition to the tax chargeable under section 3 of the Act or a notification issued there under-- [Provided that the value addition tax shall not be charged on- (i) The goods as are imported by a manufacture for in house consumption; (ii) The POL products, imported by an Oil Marketing Company for sale in the count ry, whose prices are regulated under a special pricing arrangement by the Government of Pakistan or by a regulatory authority working under the Government of Pakistan. (iii) Registered service providers importing goods for their in-house business use for furtherance of their taxable activity and not intended for further supply .] (2) The value addition tax paid at import stage shall from part of input tax, and the importer shall deduct the same from the output tax due for the tax period, subject to limitations and restrictions under the Act, for determining his net liability . The excess of input tax over out put tax shall be carried forwarded to the next tax period as provided in section 10 of the Act. [58C. T ax not to be refunded ---(1) In no case, the refund of excess input tax over output tax, which is attributable to tax paid at import stage, shall be refunded to a registered person. (2) The registered person, if also dealing in gods other than imported goods, shall be entitled to file refund claim of excess carried forward input tax for a period as provided in section 10 or in a notification issued thereunder by the Board after deducting the amount attributable to the tax paid at import stage i.e. sum of amounts paid during the claim period and brought forward to claim period. Such deducted amount may be carried forward to subsequent tax period.) [58D. Treatment of existing stocks of commercial importers .---The closing stocks of imported goods held by commercial importers on 30th June 2008 on which additional sales tax at two percent was paid at import stage shall be disposed of under the provisions of this Chapter as in force before 1st July, 2008. The differential amount payable, in case tax charged was higher than that paid at import stage, shall be paid on the monthly return as arrears of tax.] [58E filing of return and audit.---(1) The importers paying value addition tax under this Chapter shall file monthly return as provided in Chapter II of the Sales Tax Rules, 2006. 17. NON P AYMEN OF FUR THER TAX @ 2% UNDER MISINTERPRET ATION OF THIRD SCHEDULE . The learned DR also raised a question that the appellant has made supplies of black tea, Green tea, dry copra, ground nuts, peanuts, tamarind seeds, cumin seeds, cassia whole, cardamom and black pepper to unregistered person without charging/paying further tax @ 2% on the value of supplies leviable in terms of section 3(1A) of the Sales
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Tax Act, 1990. Therefore the appellant has violated the provisions of sections 2(27), 3(1A), 3(2)(a), 3(5), 6, 7 A(1) and 7A(2) of the Sales Tax Act, 1990 read with rule 58 B of Chapter-X of the Sales Tax Special Procedures Rules, 2007. In rebuttal the AR produced SRO 648(1)/2013 dated 9.7.2013 amendment in subsection (1A) of section 3 of the Sales Tax Act, 1990 [See Para (1) of FBR letter C. No. 1/93-STB of 2015 dated 7th July 2015] which is reproduced as under; In exercise of the powers conferred by the proviso to subsection (1A) of section 3 of the Sales Tax Act, 1990, the Federal Government is pleased to direct that further tax @ 2% shall not be charged, levied or paid on the taxable supplies mentioned in column (2) of the Table below namely; Serial No. 6 of the table provides that items failing in the third schedule to the Sales Tax Act, 1990 while at serial No. 14 of the third schedule tea is mentioned whereas at serial No. 18 of the said schedule spices sold in retail packing bearing brand names and Trade Marks is mentioned. The crux of the above mentioned is that further tax at the rate of 2% shall not be charged, levied or paid on the tea and spices etc.
GOVERNMENT OF P AKIST AN MINISTR Y OF FINANCE ECONOMIC AFFAIRS STATISTICS AND REVENUE (REVENUE DISISION) Islamabad: the 9th July , 2013 NOTIFICA TION (SALES TAX)
S.R.O. 648(1)/2013.--- In exercise of the powers conferred by the proviso to subsection (1A) of section 3 of the Sales Tax Act, 1990. The Federal Government is pleased to direct that further tax at the rate of two percent shall not be charged, levied or paid on the taxable supplies mentioned in column (2) of the T able below namely:-- TABLE S.No. Description of goods (1) (2) 1. Electrical energy supplied to domestic and agricultural consumers 2. Natural gas supplied to domestic consumers 3. Motor spirit, diesel oil, jet fuel, kerosene oil and fuel oil 4. Goods sold by retailers to the end consumers 5. Supply of goods directly to the end consumers including foods and beverages, fertilizer and vehicles 6. Items falling in the Third Schedule to the Sales Tax Act, 1990. 7. Second hand worn clothing and other worn articles falling under PCT heading 6309.000].
This notification shall be deemed to have taken ef fect from the 13 day of June, 2013. Mohammad Raza Baqir Additional Secretary
The Sales Tax Act, 1990 THE THIRD SCHEDULE See [clause (a) of subsection (2) of section 3] Serial No.Description Heading Nos. of the First Schedule to the Customs Act, 1969 (IV of 1969) () (2) () 1 Fruit juices and vegetable juices20.09 2 Ice cream 21.05 3 Aerated waters or beverages22.01 and 20.02 4 Syrups and squashes Respective headings 5 Cigarettes 2402.2000 6 Toilet soap 3401.1 100 and 3401.2000 7 Detergents 3402.2000 8 Shampoo 3305.1000 9 Tooth paste 3306.1010 10 Shaving cream 3307.1000 11 . Perfumery and cosmetics Respective sub-headings of 33.03 and 33.04 12 Omitted 13 Omitted 14 Tea Respective sub-headings of 09.02 15 Powder drinks 21.06 16 Milky drinks 2106.9090 17 Toilet paper and tissue paper4818.1000 and 4818.2000. 18 Spices sold in retail packing bearing brand names and Trade Marks09.04, 09.06, 09.08 and 09.101 3
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19 Omitted 20 Omitted 21 Shoe polish and shoe cream 3405.1010. 22 Finished or made up articles of textile and leather , including garments, footwear and bed wear sold in retail packetRespective heading 23 Omitted Omitted
24 *** 25 *** 26 *** 27 *** 27 *** 28 *** 29 *** 30 *** 31 *** 32 Fertilizers Respective headings 33 Cement sold in retail packing Respective headings 34 *** 35 *** 36 *** 37 Mineral bottled water Respective headings Recently Finance Bill for the year 2018-2019 has been passed and further tax has been increased from 2% to 3%. The increased rate of 3% is not applicable upon the items mentioned in 3rd schedule of Sales Tax Act, 1990. The appellant also produced the certificate of Ministry of Commerce and Trade which shows that the appellant company has been registered with Trade Mark or Brand name by the Intellectual Property Right Certificates and is using the same since 2002.. 18. The learned DR contended that the appellant has sold the tea and spices in huge quantity and the learned DR has also admitted that the seized goods are in retail packing of 25KG 20 KG,10 KG (Hotel Pack), 5 KG, 2 KG, 1 KG, 500gm, 250 gm, 50 gm, 25 gm and 100gm sachet of packets which also carries the Trade Mark of the appellant's company , retail price and sales tax also mentioned on the bags, cartons and packets. I have examined the SRO 648(1)/2013 dated 09.7.2013 along with the 3rd schedule. It is no where mentioned in the law and in schedule as well that the manufacturers will not sale the tea and spices in huge quantity . Therefore, this plea of DR has no force hence turned down. 19. The learned Departmental Representative raised a question that the blending, mixing, cutting and repacking of tea and spices etc. were made un-necessarily is also a frivolous while the Messrs Khyber Tea and Food Company Peshawar is a registered manufacturer with FBR. Messrs Khyber Tea and Food Co. Peshawar being manufacturer mixed/ blended the tea in question at registered factory premises situated at Katchery Gate Peshawar and repacked the same in bags having Khybe r brand name and Trade Mark. The learned DR produced FBR Income T ax Circular No. 03 of 2009 dated 17.6.2009 Para. No. 34 where it has clearly been defined "person engaged in packing and repacking have been excluded from the definition of manufacturer" For the purpose of section 153 of Income Tax Ordinance, 2001 and as per Finance Act, 2009 the packing and repacking activities have been excluded from the definition of manufacturer . It is correct that the Finance Act and the above noted circular excluded the packing and repacking activities from the definition of manufacturer . But the provision of Finance Act, 2009 and the above mentioned circular did not exclude the process of assembling, mixing, cutting or preparation of goods in any other manner from the definition of manufac turer . The business activities of Messrs Khyber Tea and Food Company Peshawar is of mixing and blending of various tea with each other in order to create taste and flavor of tea. Thus the business activities of Messrs Khyber Tea and Food Company Peshawar falls within the scope and definition of manufacturer under section 2 (16) and (17) of the Sales Tax Act, 1990, section 153(7)(iv)(b) of Income Tax Ordinance, 2001 and section 2(25) of Federal Excise Act, 2005 as well. The sections of law ibid reproduced as under; Section 2 (16) of Sales T ax Act, 1990 provides as under: "Manufacture" or "produce" includes; (a) any process in which an article singly or in combination with other articles, materials, components, is either converted into another…
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