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Petitioner: Messrs SSJ Brothers (Smc-Pvt.) Ltd., Karachi VS Respondent: The Deputy Collector (R&D) Mcc Of Appraisement-East, Custom House, Karachi and 2 others
Court Name: Customs Appellate Tribunal Judge(s): Jehanzaib Wahlah Title:Messrs SSJ Brothers (Smc-Pvt.) Ltd., Karachi vs The Deputy Collector (R&D)
Mcc Of Appraisement-East, Custom House, Karachi and 2 others Case No.: Custom Appeals Nos.K-1503 and 1504 of 2018 Date of Judgment:2019-07-26 Reported As: 2021 PTD (Trib.) 2151 Result: N/A Judgment ORDER JEHANZAIB WAHLAH (MEMBER JUDIC IAL-III ).---Through this order , I intend to dispose off 02 Appeals bearing Nos.K-1503 and 1504/2018 directed against the Orders-in-Original Nos.1221866 and 1221873 dated 17.04.2018 passed by Collector of Customs, Adjudication-II, Karachi (Respondent No. 3). 2. Since, these 02 appeals are based on identical fact and grounds, it is needless to reproduce facts of each case separately and so the grounds, facts of Appeal No. K-1503/2018 are taken into consideration for deliberation/decision which are the appellant is a commercial importer cum clearing agent during the course of his business activities appellant imported a consignment of 120054 meters weighing to 4166 kgs of Viscose Bleach Fabric from Surat, Gujrat, India a US$. 0.16/kg. Upon receipt of shipping documents, transmitted Goods Declaration (GD) with the MCC of Appraisement-East, under the provision of Section 79(1) of the Customs Act, 1969 (Act) and Rule 433 of Sub-Chapter III of Chapter XXI of Customs Rules, 2001 (Rules) and as per pre- requisite deposited upfront duty and taxes in NBP on the basis of declaration. Consequent to which GD was numbered as KAPE-HC-83009 dated 08.11.2017, which was selected for examin ation in terms of Section 198 of the Act and Rule 435 of Rules, wherein declaration was confirmed and report so prepared was uploaded in the reservoir of the GD and so the test report by the Laboratory confirming constituent material/description of the goods. Immediately , upon receipt of the reports in the reservoir of the GD, the Deputy Collector (R&D), MCC of Appraisement-East (respondent No.1) placed an hold on the GD/detained the consignment on the premise that the appellant has mis-declared the value as evident from the comparison or shipping bill presented by the exporter with the Indian Customs at the time of exporting the instant consignment to the appellant. The consignment of the appellant was subsequently seized by the subordinates of respondent No.1 under the provision of 168(1) of the Act. Sensing the gravity of the situation and so the illegal commission of the act of respondent No. 1 and his
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subordinates, appellant filed Constitution Petition with the High Court of Sindh, which passed restraining order dated 12.12.2017. Despite availability of restraining order of no corrosive action of the High Court, the respondent No.1 subordinate lodged FIR on the same date with the allegation that on the basis of acquired shipping bill from the local shipping agent, it has been transpired that FOB value declared by the appellant have difference of US$ 105,183,00. i.e. 531%, this resulted in loss of revenue of Rs.4,044.422.00. Hence, contravened the provisions of Sections 32(1)(2), 32A (1)(2), 79 of the Act and Sections 3, 6, 7 and 34 of the Sales Tax Act, 1990 (STA) and Section 148 of Income Tax Ordinance, 2001 (ITO). Subsequently , the respondent No.1 framed contravention report and transmitted that to Additional Collect or-Law , who approved the same and routed it to respondent No. 3, who issued show-cause notice dated 24.04.2018 containing the same facts and contravening provision of the Act, STA and ITO, while ignoring restraining order of the Hon'ble High Court of Sindh. Final order in the petition was issued on 23.10.2018, consequent to which reply to show cause notice was submitted vide dated 06.11.2018 followed by corrigendum dated 08.11.2018. The respondent No. 3 without considering the reply and the provision of the Act/Ordinance passed order dated 16.11.2018 through which held the charges as levelled in the show-cause notice as established and ordered confiscation of the goods subject to redemption of those upon payment of fine of Rs.4,709,147.00, imposed penalty of Rs. 500,000.00 and Rs.50,000.00 simultaneously on the appellant being an importer and clearing agent, in addition to short paid amount of duty and taxes of Rs.4.044,422.00. It is beneficial to reproduce paras 8 to 12 of the order . "8- I have gone through the case record as well as written and verbal arguments put forth by the respondent and departments. It has been alleged by the case making agency that the respondent have imported a consignment and declared to be Viscose Fabric from Indian vide Good Declaration No, KAPE-HC-83009- 08.11.2017, through in the name of own clearing agency . As per contravention report indicates that the case making agency received credible information to the effect that the aforesaid consignment has been grossly mis-declared with reference to description of the goods as well as value thereto. The actual description of the goods reported as "Crinkle Georgette Shiffon Fabric" which has been confirmed by the lab test, the detail of same given as above para. After difference found in the description, the value was verified through concerned shipping company M/s. Modern Shipping Agency (Pvt.) Ltd.', Karachi, the local agent of M/s. M.M Co., Container Line provided the Shipping Bills along with invoice and other relevant documents of import. The value of the goods was found as US$. 124,964/- instead of declared value US$ 19781/-. Resulting the difference come to US$: 116495/- US$ 105183/- (excess value 531%). The respondent contended that the item is of Valuation Ruling. The documents relied for the value are not legal and obtained value is of Icegate Website which is not acceptable. The custom authorities cannot recover sales tax and income tax. Detail reply is reproduced above. The departmental representative stated that all the particulars of this consignments match with the obtained invoice whereas invoice attached with the GD does not bear part-wise price which proves the mala fide on importer parts. 8.(sic) On basis of the documents and arguments from the both side following finding can be deduced : A. CHANGE IN DESCRIPTION OF GOODS. The description declared was not correct as found by the lab report and physical attributes. This fact is not challenged by the respondent. B. VALUE DIFFERENCE on founding difference in description of the imported fabric the Collectorate probe the value on credible information and obtained the export documents and invoice from the shipping agent of the respondent. There is a huge difference between the declared value and value found in documents provided by the shipping agent. The respondent has objected on the documents obtained through shipping agent but not objected on the authenticity of the documents. The respondent has also raised the objection on value of Icegate Web Site but the Collectorate has used the documents given by the shipper and not the Icegate Web Site. The objection raised on availability on the Valuation Ruling is also not sustainable as that Valuation Ruling, was issued after the filing of the GD and moreover , valuation ruling cannot be applied where evidence of higher transaction is available. C. POWER OF CUST OMS OFFICERS TO RECOVER SALES TAX AND INCOME TAX. The arguments of the respondent that customs authorities are not empowered to recover sales tax and income tax is incorr ect. The show-cause notice has been issued by invoking the provision of / Section 32 of the Customs Act, 1969 which empowers the custom authorities to recover short levy amount of duty
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and taxes 32A. Fiscal Fraud; (I) If any person, in connection with any matter related to customs - (a) causes to submit documents including those filed electronically , which are concocted, altered, mutilated, false, forged, tampered or counterfeit to a functionary of customs ; (b) declares in the 32 [Goods Declaration] electronically filed documents declaration, the name and address of any exporter or importer which is physically non-existent at the given address; (c) declares in the 82 [Goods Declaration] electronically filed customs declaration, and untrue information regarding 97 [Payment of duties and taxes through self assessment] description, quantity , quality , origin and value of goods; (d) alters, mutilate or suppresses any finding of the custom functionaries on any document or in the computerized record or (c) attempts, abates or connives in any action mentio n in clauses (a), (b), (c) and (d) above, he shall be guilty of an offence under this section 32(2) where, by reason of any such document or statement as aforesaid or by reason of some collusion , any duty, taxes or surcharges has not been levied or has been short levied or has been erroneously refunded, the person liable to pay any amount on that account shall be served with a notice within [5] years of the relevant date, requiring him the show-c ause why he should not pay the amount specified in the notice. 9. Further more, under the provision of the section 179 of the Customs Act, 1969 the customs officers are empowered to adjudicate the cases relating to recovery , of the duty and taxes for case of reference the relevant provision is produced hereunder; "179. Power of Adjudication:- Subject to subsection (2), in cases involving confiscation of the goods or recovery of duty and other taxes not levied, short levied or erroneously refunded, imposition of penalty or and other contravention under this Act or the Rules made there-under , the jurisdiction and powers of the officers of the customs in terms of amount duties and other taxes involved excluding the conveyance shall be as follows, namely 10. In addition, the custom officer has also been empowered by the legislature to recover duty and taxes under section 202 of the Customs Act, 1969. For case of reference the relevant provisions is reproduced here-under; "202. Recovery of Government dues; (1) when, under this Act or under any other law for the time being enforce, which provides for any tax, duty or other levy being collected in the same manner as customs, duties are collected , a penalty is adjudged against , or in notice or demand is served upon, any person calling for the payment of any amount unpaid which may be payable by way of penalty or by way of duty, tax or other levy or under any bond . 10 [Guarantee] or other instruments executed under this Act or such other law or other Rules made there-under , the Appropriate of ficer " 11. In the light of afore stated provisions of law, the officers of customs are empo wered to collect, adjudicate and recover customs duties and taxes not paid or short paid at import stage the arguments of the respondent the custom authority are not empowered to recover income lax are also not tenable. As section 161(2) read with Section 80 of the Income Tax Ordinance, 2001 empowers the customs authorities to recover short levied Income Tax. For reference sections 161(2) and 80 of the Income Tax Ordinance, 2001, are produced here-under section 161. Failure to pay tax collected or deducted; (1) where as person (2) a person personally liable for an amount of tax under subsection (1) as a result of failing to collect or deduct the tax shall be entitled to recover the tax from the person whom the tax should have been collected or deducted 80. Person; (1) the following shall be treated as persons for the purposes of this Ordinance, namely; (a) an individual; (b) a company or association of person incorporated, formed, organized or established , in Pakistan or elsewhere (c) the Federal Government , a Foreign Government, a Political Sub-Division of a Foreign Government or Public International Organization. 12. Further , Federal Board of Revenue (FBR) vide letter C.No. 3(32)T AR 1/90 dated 06.08.2012 has clarified that customs are empowered to recovers Sales Tax, Federal Excise Duty for ease of reference, same is reproduced hereunder; Subject ; LEGAL OPINION -- ADJUDICA TION OF CASES RELA TING TO LEVY AND COLLECTION OF FEDERAL EXCISE DUTY , SALES TAX AND WITHHOLDING TAX ON IMPOR TED GOODS. I am directed to refer to the subject cited above and to enclose herewith a copy of the letter No. F.242/2012. Law-I, dated 11.07.2012 issued by the Ministry of Law Justice , wherein it has been clarified that the officers of customs are competent to take cognizance of any short paid amount of Federal Excise Duty at import stage all adjudged such cases in view of the provision of Section 3(2) of Federal Excise, 2005, namely "duty in respect of goods imported into Pakistan shall be levied and collected the same manner and the same time as if it were a duty of customs
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payable under of the Customs Act, 1969 (IV of 1969) and the provisions of the said Act included 31A therefore, shall apply " 2. Since identical provisions also provisions also exist in the Sales Tax and Income Tax Laws, the Officers of Customs are also competent to take cognizance of any short paid amount of sales tax and withholding tax pertaining to import stage. Accordingly , Board's earlier letter on the subject matter bearing C.No. 6(8) S/IR- Ops/2012-8259-R dated 16.01.2012 and C.No. 6(8)S/IR-/Ops/2012/8958 dated 18.01.2012 issued by SA to Chairman FBR and Secretary (IR Operati ons) FBR are no longer of any effect being contrary to the legal provision of law, as clarified by the law and justice Division. 3. The relevant officers of customs may, therefore continue the adjudication proceedings already initiated and take cognizance of all cases of FED, Sales Tax and Withholding Tax pertaining to import stage in future as well. 4. This issues with the approval of Chairman , FBR sd/- Raza Secretary (Tariff-I) 9 (sic) Therefore, it is clear mis-declaration of value and the same hits or para 1(d) of SRO 499(1)/2009 dated 13th June, 2009. It is also pertinent to mentio n here that the WeBOC System is base d on self assessment in which importers first declares description, classification, quantity or weight/origin/value SRO and calculated /assesses duty and taxes and then Customs counter checks the declaration, hence, the onus of correct declaration and assessment is on the importer . However , in clear violation of the trust reposed in the importer . The respondent deliberately misdeclared the impugned goods and avoid in order to payment of leviable duty and taxes so as to deprive government exchequer of the due revenue. 10(sic) In the light of afore discussed facts and findings I am convinced that the charges of mis-declaration in the show-cause notice stands established. Accordingly , the offending goods are confiscated under clauses (1) (14) and 14(A) of Section 156(1) of the Customs Act, 1969 for violation of provision of Sections 32(1), 32(2) and 79(1) ibid. However , an option is given to the importer to redeems goods under section 181 of the Customs Act, 1969 on payment of a fine equal to the 35% of offending goods to the tune of Rs. 4709147/- (35% of ascertained value of impugned goods Rs. 13454706/-) subject to the condition that the same are otherwise importable as per import Policy Order in vogue as prescribed under SRO 499(1)/2009 dated 13th June 2009. In addition to leviable duty and taxes thereon. A penalty of Rs. 500,000/- (Rs. Five hundred thousand only) is also imposed under clauses (14) and (14A) of Section 156 (1) of the Customs Act, 1969 on the importer . 11(sic) As far as the role of the clearing agent in the subject case is concerned , it is observed that under the Customs Act, 1969 , he acts on behalf of the principal for all the purposes of the Act and cannot be absolved of all responsibility other than merely scanning the documents delivered by the principal/importer . He is required to make a true statement/presentation to customs after analyzing all aspects of the Goods Declaration and the documents delivered to him by his principal. In case the declaration is proved, the clearing agent has to be penalized along with the principal/importer . A penalty of Rs.50,000/- (Rupees Fifty thousand only) is also imposed on M/s. SSJ Brothers (KCUS-1772) Karachi in terms of clause 14 of Section 156(1) of the Customs Act, 1969 for violation of Section 32 of the Customs Act, 1969. 12(sic) The case is disposed off accordingly . The assessing officer are directed to assess the GD as per above direction and check all other legal aspects/formalities before release of the said consignment. 3. The appellant filed the instant appeal on the basis of grounds enumerated therein, the consultant/advocates on the date of hearing argued the case strict ly in accordance with those. No cross objection under Section 194A(4) of the Act has been filed within the stipulat ed period of 39 days by the respondent No.1, resultant, lost his right in defending the appeal by not submitting counter affidavit, which is tantamount to admission and deposition made by and on behalf of the appellant in the memo. of appeal and affidavit are therefore, deems to be true and correct and no controversy is left behind in regards to the fact of the case. Non submission of counter affidavit whether by will or default forfeit the respondent No.1 right to deny assertion made in the affidavit. This proposition of law stood validated from the following judgments of the Superior Judicial Fora reported as (1974) 94 ITR --I, PLJ 1979 (sic) 71 and 72, 1986 CLC 745 Kar. (1984) 146 ITR 140, 1986 PTD (Trib.) 119, 1986 CLC 1119, 1986 CLC 1408 Kar, 1991 MLD 1243 , PLD 1992 SC 317, 1993 SCMR 662, PLD 1996 Kar. 68 and PU 1997 Quetta 66, 2003 PTD 2118. However , on the date of hearing the representatives of respondent No.1 made averment that the appellant grossly mis-declared the value as evident from analytical comparison of the invoice and shipping bill submitted by the
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exporter of the instant imported goods with the Indian Customs, the said value is to be construed practically and legally as the declaration made by the appellant under Section 79(1) and Rule 433 of the Act/Rules in the GD, which is found to be mis-declared for depriving the exchequer from the actual leviable duty and taxes as against levied with the application of Valuation Ruling No. 776/2015 dated 04.12.2015 as para 6 of it directs the assessing officer of the Clearance Collectorate that where transaction value are higher than the Custom Values determined in this ruling, the Assessing Officer shall apply those value in terms of subsection (1) of Section 25 of the Act. With this supported the order passed by respondent No. 3 correct in fact and law and even the invoking of the provision of Sales Tax and Income Tax for which detail deliberation is available in the order and prayed for dismissal of the appeal being of no substance. 4. Rival panics heard and case record perused and so the relied upon judgments and framed following issues for decision: (i) Whether respondent No. 1 and his subordinates are empowered to detain the imported goods under the provision of Section 186 of the Act? (ii) Whether mandatory seizure notice tinder section 168(1) of the Act was served on the appellant and as to whether show-cause notice dated 17.04.2018 issued by respondent No. 3 is within time as expressed in section 168(1) of the Act? (iii) Whether Sections 3, 6, 7, 33 and 34 of STA and Section 148 of the ITO are relevant sections and could be invoked for the contravention of the charging/applicable sections of the STA/ITO and as to whether those were correctly invoked by the respondent No. 3 in the show-cause notice? (iv) Whether provision of Sections 80 and 161 of the ITO were invoked by the respondent No. 3 in the show-cause notice and as to whether these have any nexus with the case of the appellant and as to whether respondent No. 3 can travel beyond the scope of show-cause notice? (v) Whether respondent No. 3 has been appointed as officer of Inland Revenue under Section 30 of the STA or any section of ITO and as to whether with the insertion of word "taxes" automatically gain jurisdiction in nullity to section 30 of STA and respective applicable section of ITO and so the powers under the expression of Section 11 of the STA and 162(1) of IT O ? (vi) Whether Ministry of law and Justice and FBR arc empowered to exercise the powers of legislature for amending the existing provisions of the STA and ITO or insertion of new sections in STA/ITO and as to whether they have mandate to interpret the existing provisions of ST A/ITO? (vii) Whether any contravention of Section 79(1) of the Act has been committed by the appellant? (viii) Whether shipping bill of the exporting country is a document defined in Section 2(kka) of the Act for submitting/transmitting declaration under the provision of Section 79(1) and Rule 433 of the Act/Rules and as whether that -can be construed as a declaration made by importer (appellant) through any definition/imagination And as to whether that can overrule the value determined by the Director , Directorate General of Valuation under the provision of Section 25A of the Act? (ix) Whether charges under the provision of Sections 32 and 32A of the Act can be invoked on the strength of the value declared by exporter in the shipping bill for the purpose of assessment of the Custom Officials of the exporting country could be treated as direct evidence as enunciated in paras 78, 101 of CGO 12/2002 dated 15.06.2002 and clause (d) of SRO 499(I)/2009 dated 13.06.2009? (x) Whether order passed by respondent No. 4 was within time as per the enunciation of Section 179A (3) of the Act? (xi) Whether appellant in the capacity of clearing agent committed any mis-declar ation in material particular while transmitting GD under the provision of Section 79(1) and Rule 433 of the Act and as to whether he committed willfully , negligently or default causing loss to the exchequer as per the contemplation of Section 209(3) of the Act? 5. That as regard to issue No. (i). The power/jurisdiction of respondent No. 1 and his subordinates of putting an hold on the GD/ detention on the consignment under the provision of Section 186 needs to be determined, in the light of its expression verbatim or which is given here-in-under for casement: 186: Detention of Goods pending payment of fine or penalty;-
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(1) When any goods or fine or penalty has been imposed, or while imposition of any fine or penalty is under consideration, or pending any inquiry or investigation, in respect of any goods such goods shall not be removed by the owner until such fine or penalty has been paid or such inquiry and investigation has been completed. (2) When any fine or penalty has been imposed in respect of any goods, the appropriate officer may detain any goods belonging to the same owner pending of such fine or penalty . Upon conscientious analysis of Section 186, it is observed that the said section comes into play during the course of imports, meaning thereby , if any case has been adjudicated by the competent authority against an importer and through which he held the charges established as levelled in the show-cause notice and imposed fine and penalty , and the importer has not paid that or any inquiry or investigation in respect of any goods is under way and imposition of penalty is under consideratio n. The appropriate officer is empowered to detain the forthcoming goods of the same owner/importer till the time fine and penalty are paid. The case or appellant is that against him no order is infield, through which fine/penalty has been adjudged against him and he has not paid that or has not assailed the order before the forum defined in the Act, nor any inquiry or investigation in respect of any of his imported consignment sans the instant is under way for decision for imposition of penalty . Resultant, his lawful imported goods cannot be detained under any pretext by any officer of customs, respondent No.1 is not exception as held by the Hon'ble High Court of Sindh in its judgments reported at 2014 PTD 582 Amir Siddiqui v. Federation of Pakistan and 3 others that "authorities could detained such goods in respect of which inquiry or investigation was pending and not the goods which had been or were been imported by a person. The subsequent imported goods belonging to a same owner can only be detained once a fine or penalty has been imposed in respect of any other goods and the same remained un-paid. By no stretch of imagination all subsequent import can be detained or withheld clearance on the premise that some inquiry or investigation is pending in respect of some other goods. In our opinion no such action is permitted under this provision. The respondent are only authorized to take action for issuance of detention notice in terms of section 202 of the Act, once the amount alleged to have been evaded has been finally adjudicated and decided against the person. The proce dure and mechanism…
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