Full Judgment Text & Judicial Ruling

2016 P T D (Trib.) 2463 [Customs Appellate Tribunal] Before Tahir Zia, Member (Judicial-II) Messrs ZUBAIR WALI AHMED ZIA LTD. and another Versus The PRINCIPAL APPRAISER and others Customs Appeals Nos. K-1310 and K-1311 of 2015, decided on 13th April, 2016. (a) Customs Act (IV of 1969)--- ----Ss. 1(2), 2(s), 25, 25-A, 30, 32, 73, 79, 121, 129, 156, 168, 181, 207, 208, 209 & First Schedule---Customs Rules, 2001, Rr. 110, 473(6) & Ch. XXI, Sub. Ch.VII---Sales Tax Act (VII of 1990), Ss. 6, 11, 30, 33, 34 & 48---Income Tax Ordinance (XLIX of 2001), Ss. 48, 140, 148, 162, 207 & 228 to 230-A---Revised Koyoto Convention (1999)---S.R.O. No.151(I)/2004 dated 10.03.2004---S.R.O. No.886(I)/2012 dated 18.07.2012---Transit trade---Goods declaration---Classification of goods--- Procedure--- Insurance guarantee---Necessity---Clearing agent---Liability---Scope---Importer, in the present case, was a citizen of Afghanistan and was duly registered as an importer with the Ministry of Commerce and Industry of Afghanistan under the Trade license for importing goods for home consumption in Afghanistan at Karachi for transit to the place of business in Afghanistan under Afghan Pakistan Transit Trade Agreement, 2010 (APTTA)---Any discrepancy found in the import documents submitted for transit of the goods or in the goods thus imported had to be reported by the Director General of Transit Trade (DGTT) to the Ministry of Commerce and Trade of Afghanistan (MOCA) through the Ministry of Commerce, Pakistan and subsequently a complaint under para 2 of Art. 3 of S. II of APTTA had to be filed before the Afghanistan Pakistan Transit Trade Co-ordination Authority under Art. 34 of Section S. X of APTTA, as under the provisions of Customs Act, 1969, the officials of Customs were not empowered to proceed---Customs Act, 1969, being neither applicable in Afghanistan nor on the citizens of Afghanistan, was not applicable to the appellant, and the department had no locus standi to serve impugned show cause notice to him--- Word 'mis-declaration' was alien to Revised Kyoto Convention, 1999, Afghan Pakistan Transit Trade Agreement, 2010 and Sub-Chapter VII of Chapter XXI of Customs Rules, 2001---Importer of Afghanistan, transmitting goods declaration under WeBOC regime, narrated the tentative facts of the goods stuffed in container that could be varied in description, quantity, quality and weight, which was curable through an amendment, and if the same was not possible, the importer could have been asked to submit additional insurance guarantee for the amount of leviable duty and taxes on the value determined under S. 25 or 25-A of Customs Act, 1969 for home consumption under S. 79(1) of the Act---Use of the word 'mis-declaration' in the impugned show cause notice and Order-in-Original was out of context besides the same being based on mis-conception, as the provisions of Customs Act, 1969 were not applicable to said goods---Goods, in the present case, having been allowed "gate-out", could not have been allowed to "gate in", nor could the same have been stopped under any apprehension, as the customs Officials, after clearance of the goods and removal of the consignment from the customs area, had become functus officio to reopen the case again, which had become past and closed transaction---Impugned show cause notice had been issued after expiry of the initial period of two months, without any extension by the Collector prior to expiry of the initial period after serving a notice to the appellants and recording of exceptional circumstances and reasons in writing---Impugned show cause notice being barred by 22 days, was without power or jurisdiction and lawful authority---Sections 33 & 34 of the Act could not have been invoked in the impugned show cause notice in isolation, unless the charging section was invoked and by the authority competent to do that---Incorporation of the irrelevant sections rendered the impugned show cause notice and Order-in-Original void ab initio and of no legal effect---Additional Collector of Customs, under said sections, was not empowered to exercise powers under the charging S. 11 of Sales Tax Act, 1990 and S. 162(1) of Income Tax Ordinance, 2001---Department had no power to recover the arrears of the taxes on their own, unless they were in receipt of notice from the Officer of Inland Revenue and Commission of Income Tax under Ss. 48 & 140 of Income Tax Ordinance, 2001---Impugned adjudication proceedings under S. 11 of Sales Tax Act, 1990 and S. 148 of Income Tax Ordinance, 2001 were, therefore, not legal and justifiable---Initiation of legal proceedings in case of discrepancy against the importer of Afghanistan through his clearing agent rested with Principal Appraiser of the DGTT, who was to take cognizance of the discrepancy found in the documents and the goods during the course of examination, and in case of need, he was competent to issue show cause notice himself to the clearing agent of the importer of Afghanistan for seeking justification for the found discrepancy or pass an observation for preparation of complaint for submission with the Ministry of Commerce of Pakistan for its onward submission with the Ministry of Commerce of Industry of Afghanistan for placing it before Afghanistan Pakistan Co-ordination Authority in terms of para 2 of Art. 3 of Afghanistan Pakistan Transit Trade Agreement, 2010---Principal Appraiser, in the present case, took cognizance of the issue, instead of proceeding himself inspite of being competent, had opted to frame contravention report instead of complaint and transmitted the same to the respondent/Additional Collector of Customs, who issued impugned show cause notice and subsequently passed order in the capacity of Principal Appraiser, to which he was not empowered being an Additional Collector---Additional Collector was not even empowered to adjudicate the cases where there was technical violation of import and export having no revenue loss---Superior Officer was not empowered to exercise quasi judicial powers of his subordinate in the matter of adjudication---Impugned show case notice, not having been issued by the authority defined in R. 473(6), proviso of Chapter VII of Customs Rules, 2001, was without jurisdiction and void ab initio---Goods Declaration of Transit Trade did not fall within the ambit of the phrase 'any other approved purpose'; hence, the same was outside of the ambit of S. 79(1) of Customs Act, 1969---Department had presumed the classification of the said goods as being auto parts on the basis of presumption without disclosing the appropriate H.S. Code or evidence under which the impugned goods could have been classified as auto parts---Opinion and findings of the department with regard to the impugned goods were without any substance due to the fact that auto parts and accessories fell within the ambit of headings 87.01 to 87.08, and none of the sub-heading subsequent to 87.08 expressed nuts and bolts as motor parts---Nuts and bolts imported by the appellant, therefore, did not fall within the ambit of auto part---None of the Customs Authorities operating at Karachi for clearance of the imported goods and Enforcement and even Directorate General of Intelligence and Investigation of the Federal Board of Revenue were empowered either to hold or detain or examine the goods meant for transshipment under the S. 121 of Customs Act, 1969, which was synonymous to S. 129 of the Act---Goods, in the present case, were meant for transit to Afghanistan were subject to submission of insurance guarantee to the extent of the amount of duty and taxes leviable thereon under 1st Schedule to the Customs Act, 1969 returnable after cancellation upon receipt of confirmation to the effect that the goods had been crossed the border---Confiscation and detention of the goods were, therefore, declared without lawful authority---Charges against the appellant/clearing agent were wholly misconceived, as his action did not fall within the operative mechanism of S. 32 of the Act---Liability of the appellant/Clearing Agent during the course of clearance of the consignment had to be evaluated under the provisions of Ss. 207, 208 & 209 of Customs Act, 1969, which indicated that an agent represented his principal and until and unless any direct evidence was attributed against him or when the department was not able to prove any criminal intent on his part, he could not have been penalized under the general provisions of Customs Act, 1969, unless, he violated the governing condition of his license---Clearing agent could not be presumed to be privy to any illegal arrangement, which the importer might have coined or had intended in his mind, and for that purpose some evidence of his direct involvement would have to be brought on record, particularly, when the clearing agent was not shown to have been directly or indirectly a beneficiary of evasion of taxes/duties---Customs Appellate Tribunal, vacating the impugned show cause notice and setting aside the orders-in-original passed thereon, being illegal, void ab initio, directed the department to allow transit of the goods shown and found in the Goods Declaration upon securing insurance guarantee---Principles. Case-law referred. (b) Words and phrases--- ----'Discrepancy'----Definition and scope. Case-law referred. (c) Administration of justice--- ----Things should be done as or required to be done and not at all. Case-law referred. Nadeem Ahmed Mirza, Mirza Muhammad Abeer (Consultants) and Obaydullah Mirza for Appellants. Jam Muhammad Akram, Appraiser for Respondents. Date of hearing: 8th January, 2016. JUDGMENT TAHIR ZIA, MEMBER (JUDICIAL-II)---Through this common order, I intend to dispose of two (02) Appeals bearing Nos. K-1310 and 1311/2015 filed against Order-in-Original No.137/2015-16 dated 13.08.2015 passed by Additional Collector of Customs, Adjudication-II (hereinafter to be referred as respondent No.2) in the capacity of Principal Appraiser. 2. Since, these 02 appeals are of importer of Afghanistan and Clearing Agent operating in Karachi and are based on similar facts and questions of law, therefore it is needless to reproduce facts of each case separately. Hence, being heard and dealt with and disposed off simultaneously through this common order in the light of the judgment of the honourable High Court of Sindh in Customs Reference No.157 of 2008, S.M. Naqi son of Syed Muhammad Hussain, Karachi v. Collector of Customs (Adj-I) and others. For reference the facts of Appeal No. K 1310/2015 as reported by the Principal Appraiser, Directorate General of Transit Trade (herein after to be referred as respondent No.1) are taken into consideration, the appellant is a importing company and is registered with the Ministry of Commerce and Industry of Afghanistan (MOCA) in the said capacity, during the course of his business activities he imported a consignment of 1532 cartons, comprising of 96945 pcs stuffed in 1 x 40" container bearing No. PCIU8563551 of different items/articles namely. Slippers, shoes, radio and nails amounting to $. 6682.00 C&F Karachi in transit to Afghanistan against invoice No. Zz-252-2015 dated 23.03.2015 and B/L No. NKHI15620358 dated 23.03.2015. Upon receipt of documents from the shipper, he delivered those to his clearing agent M/s Akmal Rafay International, Karachi (CHAL No. 2456) for transmitting Goods Declaration (hereinafter to be referred as GD) in transit under the provision of section 129 of the Customs Act, 1969 and Rule 472 of Sub-Chapter VII of Chapter XXI of Customs Rules, 2001 inserted in the Customs Rules through S.R.O. 121(I)/2014 dated 24.02.2014, with the Directorate General of Transit Trade (hereinafter be referred as DGTT) which he did on the strength of the documents supplied to him by the appellant. The information so transmitted was accepted and DGTT allotted number ITTK-AT -24068 on 08.04.2015 to the GD. After receipt of which on his desktop, the Appraiser concerned processed the Good Declaration under rule 473 and communicated the amount of Insurance Guarantee equivalent to leviable duty and taxes on the goods if cleared for home consumption under section 79(1) of the Customs Act, 1969. Which was submitted by the appellant and was found correct and therefore the Goods Declaration was out of charge of the customs control. The GD was subsequently assigned to carrier and the nominated official of DGTT fed the carrier information comprising of truck number, driver name and other particulars. The container along with carrier was subsequently presented to Customs Computerized Sealing Unit (CCSU), which affixed the seal on the container and fed the said effect along with other information in the system in terms of Sub-Rule (7) of Rule 473 ibid. Thereafter, the sealing staff verified the installation of the gadgets, inclusive of seal and uploaded the images of the "seal", "tracking devise", "vehicle" and "container in the system and generated the transport note on the prescribed format and handed over to the carrier, each copy of which was signed by the custom sealing staff and copy of which was handed over to the driver for submitting to the gate-in staff. The terminal operator and the custom office staff thereafter allowed gate out of the consignment as expressed in Sub-Rules (8) and (9) of Rule 473 ibid, while doing so the Terminal Operator also entered the weight of the container at the time of "gate-out" for onward communication to the computerized system through EDI in terms of Sub-Rule (10) ibid., and the vehicle accordingly proceeded to its destination. That when the driver of the carrier was having tea in a hotel at Kathore, the Officials of DGTT intercepted it and brought it back to the terminal on the pretext that they had certain information in regards to description and quantity. The container thereafter was gate-in and re-examined, which transpired that the item available in the consignment are 17 in numbers as against 4, including Benz wheel Bolt, which are not allowed to import it for transit to Afghanistan under SRO 151(I)/2004 dated 10.03.2004. The respondent No.1, thereafter feed the goods and served notice under sections 158(1) and 171 of the Customs Act, 1969 on the appellant No.2. Subsequently, the respondent No. 1 framed contravention report and forwarded to respondent No. 2 stating inter alia that the appellant has mis-declared the quantity and description of the goods and as such he committed an offence of smuggling attracting 2(s) and an act of mis-declaration and as such has contravened the provision of sections 2(s), 16, 32A(1), 127, 128, 129, 192 and 209 of the Customs Act, 1969, section 3(I) of Import and Export Control Act, 1950 and Import Policy and Procedure Order in addition to sections 3, 6 and 11 of the Sales Tax Act, 1990 and section 148 of the Income Tax Ordinance, 2001, punishable under clauses 8, 9, 14, 14(A), 63,64 of section 156(1) of the Customs Act, 1969 and sections 33 and 34 of the Sales Tax Act, 1990 and section 148 of the Income Tax Ordinance, 2001. The respondent No.2 as reported by respondent No. 1 issued show cause notice dated 10.03.2014 to the appellant. The appellant submitted reply to the show cause notice dated 24.07.2015, on which comments by respondent No. 1 were submitted, controverted by the consultant, vide letter dated 05.08.2015. The reply and additional arguments failed to find acceptance of respondent No. 2 and he passed order dated 13.08.2015 paras 10 to 15 are relevant which are reproduced here in below for easement: 10- I have gone through the case record and considered the verbal/written submission put forth by the respondent. The case of the department is that M/s. Zubair Wali Ahmed Zai Ltd., Sarak-e-Koh Television Market, Shah Mahmood Khan, Kabul, Afghanistan based importer had filed a goods declaration bearing GD No. ITTK-AT 24068-08042015 to through their authorized clearing agent M/s. Akmal Rafay (Pvt.) Ltd., CHAL 2456, Karachi vide Import General Manifest (IGM) No. 123 dated 09.04.2015, Index No. 346, B/L No. NKHI15620358 (1x40") container No. PCIU-8563551. Seeking clearance of the following items. (i) Slippers (ii) Radio (iii) Shoes (iv) Nail. 11. Later on, in pursuance of a credible information the container was intercepted by the staff of the Directorate General of Transit Trade, Karachi on Super Highway and brought back to East Wharf, Karachi Detailed examination of the consignment was made and the following items were found as against the declared items as stated above.

Declared Items

Undeclared Items

(i) Slippers (ii) Radio (iii) Shoes (iv) Nail

(i) Electric Calculator (ii) Mega Phone (iii) LED Display (iv) Mens Vest (v) Cable Jointer (vi) TV Back Cable Pin (vii) Co-Axial cable (viii) Floor Hinge (ix) School Bags (x) Electric Cutting Machine (xi) Electric Plug (xii) Benz Wheel Bolt (xiii) Magnet

12. Accordingly, the case was referred for adjudication wherein the value for the un-declared item has been reported as Rs. 47,41,836/- involving duty and taxes of Rs. 27,93,439.00 the counsel for the respondent has raised legal/factual objection which can be summarized as follows: a. This forum lack jurisdiction to adjudicate the case in terms of SRO 886(I)/2013 dated 18.07.2012. b. The show cause notice has to be issued by the Learned Collector instead of this office as the amount involved is Rs. 5,413,139.00, which falls within the jurisdiction of Collector as per provisions of section 179 of the Customs Act, 1969. c. Provisions of section 32 of the Customs Act, 1969 are not attracted. 13. The above referred issues are analyzed to the light of law and rules as under: a. This forum lacks jurisdiction to adjudicate the case in terms of SRO 886(I)/2012 dated 18.07.2012. Perusal of the case record and examination report reflects that it is not a case of technical violation but a case mis-declaration of description having revenue implication. Provision of section 32 of the Customs Act, 1969 have been invoked in the show cause notice besides as pointed out by the Directorate of Transit Trade duty and taxes amounting to Rs. 27,93,439.00 are involved. Thus, the objection raised by the counsel is not tenable. b. The show cause notice has to be issued by the learned Collector instead of this office as the amount of duty and taxes involved is Rs. 54,13,139.00, which fall within the jurisdiction of Collector as per section 179 of the Customs Act, 1969. The counsel of the respondent has raised legal objection in respect of assumption of jurisdiction by this forum on the pretext that the total amount of duty and taxes involved is Rs. 54,13,139.00, it has been observed that the department has referred the case for adjudication in respect of mis-declared banned items and has not included the value/duty and taxes involved in respect of the declared item. The amount of duty/taxes involved in respect of mis-declared item are Rs. 27,93,439.00 which falls within the jurisdiction of this forum. Furthermore, it will be appropriate to examine the provision of section 179 of the Customs Act, 1969. For reference the same is reproduced here-in-under: "179. Power of Adjudication: Subject to subsection (2) in cases involving confiscation of good or recovery of duty and other taxes not levied short levied or erroneous refunded, imposition of penalty or any other contravention under this Act or the Rules made there-under , the jurisdiction and power of the officer of Customs in terms of amount of duty and taxes involved excluding the conveyance, shall be as follows..... Since the duty and taxes not levied in this case have been reported by the Directorate General of Transit Trade reported as Rs. 27,93,439/-, which fall within the monitory limit of this forum. c. Provision of section 32 of the Customs Act, 1969 are not attracted A bare perusal of examination report reveals that the importer has mis-declared the contents of the consignments, the provision of section 32 of the Customs Act, 1969 are attracted and have been correctly invoked. Further more, the arguments of the respondent that the GD for transit is filed under section 129 of the Customs Act, 1969 and not section 79 of the Customs Act, 1969 is incorrect. It will be appropriate to examine the provision of both sections: 79. Declaration and Assessment for home consumption and warehousing:- (1) The owner of any imported goods shall make entry of such goods for home consumption or warehousing or for any other approved purposes within 15 days of the arrival of the goods by,-- 129 Transit goods across Pakistan to a foreign territory:- Where any goods are entered for transit across Pakistan to a destination outside Pakistan, the appropriate officer may, subject to the provisions of the rules, 'allow the goods to be so transited without payment of the duties which would otherwise be chargeable on such goods." Provided that the Federal government may, by notification in the Official Gazette prohibit the bringing into Pakistan by Sea, land or air in transit to a foreign territory any goods or class of goods. It is clear that section 79(1) requires the owner of any imported goods to make entry for:- (a) Home consumption (b) Warehousing (c) Any other approved purpose. Thus, the goods declaration filed for Transit falls under "any other approved purpose". Section 129 only empower the Officer of the Transit Trade to process the goods declaration in the light of relevant rules. Since the importer clearing agent has failed to discharge the liability by filing a true and correct declaration as required under section 79 of the Customs Act, 1969, furthermore, the counsel has argued that since no duty/taxes are involved, section 32 of the Customs Act, 1969 cannot be invoked. This contention is also in correct since the transit goods, duty/taxes are levied, however, the same are not paid sine the levy exist as per provision of Customs Act, 1969 read with Rules provision section 32 are attracted. 14. It has been observed that the clearing agent has also failed to discharged his liability by filing an incorrect declaration of the goods further more item No. (xii) Benz wheel Bolt being autopart are not importable in terms of SRO 151(I)/2014 dated 10.03.2014, the authorized representative has contested that these are ordinary nuts/bolts, whereas the departmental representative has produced literature/photograph which clearly depict that the same are Mercedes Benz Wheel Bolts and Nuts. Accordingly, the same are not allowed to be imported under SRO 151(I)/2014 dated 10.03.2014. In addition the departmental representative has submitted that the same are specifically mentioned as nuts/bolts of vehicle in Chapter 73 of the Pakistan Customs Tariff. 15. In the light of afore stated facts, the charges leveled in the show cause notice stands established. In exercise of the powers conferred upon me under section 156(1)(14) of the Customs Act, 1969, I order for confiscation of undeclared item i.e. (i) electronic calculator, (ii) Mega Phone, (iii) LED Display (iv) Men's Vest, (v) Cable Jointer, (vi) TV Back Cable Pin, (vii) Co-axial Cable, (viii) Floor Hinge (ix) school bags (x) Electric cutting Machine (xi) Electric Plug (xii) Magnet (xiii) whereas item No. (xiii) Benz Wheel Bolt is outrightly confiscated for violation of Rules 473 and 484Q of SRO 121(I)/2014 dated 24.02.2014 and SRO 151(I)/2004 dated 10.03.2004 read with sections 16, 32(1), 32A(1), 127, 128, 129, 192 and 209 of Customs Act, 1969. Section 3(i) of Imports and Exports (Control) Act, 1950 and Import Policy and Procedure Order in vogue. Sections 3, 6 and 11 of the Sales Tax Act, 1990 and section 148 of the Income Tax Ordinance, 2001. However, the importer is given an option to redeem the same (excluding item No. xii Mercedes Benz Wheel Bolt that has been out-rightly confiscated). On furnishing of customs security as per Afghan Transit Trade Rule in respect of undeclared item and payment of redemption fine equivalent to 35% of the value of the undeclared item (offending goods) in terms of clause (1C) of SRO 499(I)/2009 dated 13.06.2009 read with section 181 of the Customs Act, 1969 subject to the condition that the same are otherwise importable under relevant provision of the Transit Trade Rules and legal provision of the Act. Provision of Law a penalty of Rs. 300,000/- (Rs. three hundred thousand only), is imposed on the importer for mis-declaration of description, under section 156(1)(14) of the Customs Act, 1969. A penalty of Rs. 25,000/- (Rs. Twenty Five thousand only) is imposed on the clearing agent) M/s. Akmal Rafay International, clearing agent office. (CHAL 2456) Karachi for active connivance with the importer under section 156(1)(14) of the Customs Act, 1969. 3. Being aggrieved and dissatisfied with the impugned Orders-in-original the appellant No. 1 filed the appeal before this Tribunal on the ground incorporated in the Memo of Appeal, on the date of hearing Mr. Nadeem…

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