Full Judgment Text & Judicial Ruling

2017 P T D (Trib.) 2069 [Customs Appellate Tribunal] Before Tahir Zia, Member (Judicial-II) Messrs GALAXY ENGINEERING, LAHORE Versus DEPUTY COLLECTOR OF CUSTOMS, R&D, MCC OF APPRAISEMENT-EAST, CUSTOMS HOUSE, KARACHI and 2 others Customs Appeal No.K-1285 of 2015, decided on 25th January, 2017. Customs Act (IV of 1969)--- ----Ss. 32, 79, 80, 83, 156(1), Cls. (14)(14A), & 186---S.R.O. No. 371(I)/2002, dated 15-6-2002---Misdeclaration---Upfront duty and taxes were deposited to which goods declaration was numbered---Nominated Appraiser opted to get the goods examined---Officials posted at terminal after physical verification of the goods confirmed the declaration---Appraiser passed assessment order on the basis of declaration, examination report, images and infield valuation ruling and transmitted the view message for payment of additional amount of duty and taxes, which were paid and Authority passed the clearance order---Officials of terminal operator informed the importer that hold had been placed on the goods declaration by the Deputy Collector and delivery could not be effected---Deputy Collector of Customs(MCC), informed the Clearing Agent that it was their apprehension that duty and taxes had not been levied correctly---Importer, upon apprehending the mala fide on the part of Deputy Collector Customs (MMC) filed constitutional petition before High Court on which order was passed that goods be allowed to be released after submitting of pay order of specified amount with the Nazir of the High Court and thereafter importer to present certificate and Nazir of the Court issued certificate---Department, thereafter, framed contravention report and show-cause notice was issued to the importer, with the allegation that the importer was involved in mis-declaration of description, brand, quality, classification, value and non-application of valuation ruling, resulting in loss of Revenue and that importer had violated the provisions of S.32 of the Customs Act, 1969---Validity---Consignment of importer could be detained under S.186 of the Customs Act, 1969 after payment of leviable duty and taxes and order of clearance by the authority defined in the SRO No.371(I)/2002, dated 15-6-2002, if any adjudication order against the said importer was in field and wherein fine/penalty had been imposed upon him and which he had not paid; or in a case wherein contravention report had been framed in an under clearance consignment for adjudication by the competent authority for imposition of fine or penalty---In the absence of availability of said conditions, consignment could not be detained under S.186 of the Customs Act, 1969---In the present case, no such order was available, wherein adjudicating Authority had imposed any fine or penalty on the importer nor any contravention report was prepared for the purpose of adjudication prior to passing of assessment/clearance under the respective provisions of Act/Rules---Department was only authorized to take action for issuance of detention notice, once the amount alleged to have been evaded had been finally adjudicated and decided against the person---Show-cause notice which was barred by time by 128 days was without power, jurisdiction and lawful authority hence, void ab initio and not enforceable under the law---Deputy Collector of Customs (Adjudication) issued show-cause notice and passed order in original by usurping the powers of Additional Collector, which was not permitted under the law---Exercise of jurisdiction by Deputy Collector of Customs (Adjudication) was without lawful authority and jurisdiction---Issuance of show-cause notice and passing of order-in-original, were void ab initio, in addition to the order passed by Collector of Customs (Appeals)---After passing of clearance order by the competent Authority, same could not be disturbed by any Authority, for preparing contravention report for adjudication proceedings---No misdeclaration of quantity, quality, weight for alleged PCT or value, were visible, as the weight in both the examination reports, assessment order and show-cause notice were one and the same; difference was shown only in description---Preparation of contravention report by Deputy Collector of Customs (MMC) and issuing/passing of show-cause notice/order-in-original by the Deputy Collector of Customs (Adjudication) and order-in-appeal by Collector of Customs (Appeals) were ab initio illegal and void, and of no legal effect which were annulled and set aside by the Tribunal. Case law referred. Nadeem Ahmed Mirza for Appellant. Azam Shah A.O. for Respondents. Date of hearing: 6th December, 2016, JUDGMENT TAHIR ZIA (MEMBER JUDICIAL-II).---By this order, I intent to dispose of Customs Appeal No.K-1285/2015 directed against the Order-in-Appeal No. 10445/2015 dated 27.07.2015, passed by the Collector of Customs, Appeal (here-in-after to be referred as respondent No.3), maintaining the Order-in-Original No. 85/2014-2015 dated 06.05.2015 passed by Deputy Collector of Customs, Adjudication, (here-in-after to be referred as respondent No.2). 2. Briefly facts of the case are that the appellant imported a consignment of 697 packages stuffed in 1x20 container comprising of 12000 kgs of Motorcycle Parts from China, upon receipt of shipping documents he delivered those to his clearing agent Messrs Khurram Brothers, Karachi for transmitting Goods Declaration (here-in-after to be referred as GD) under the provision of Section 79(I) of the Customs Act, 1969 (here-in-after to be referred as Act) and Rule 433 of Sub-Chapter-III of Chapter XXI of Customs Rules, 2001 (here-in-after to be referred as Rules) with the MCC of Appraisement-East, which he did and as per pre-requisite upfront duty and taxes of Rs.904,362.00 were deposited on 18.06.2014. Consequent to which GD was numbered as KAPE-HC-115019-18.06.2014. The nominated Appraiser opted to get the goods examined under Section 198 and Rule 435 prior to passing assessment order. Officials posted at terminal after physical verification of the goods confirmed the declaration and uploaded the report and images of goods. Upon appearance of those on his desktop, the Appraiser passed assessment order on 05.07.2014 on the basis of declaration, examination report, images and infield valuation ruling under the provision of Section 80 and Rule 438 of the Act/Rules, and transmitted view message for payment of additional amount of duty and taxes of Rs.530,979.00/-, which were paid on 05.07.2014, consequent to which the inbuilt authority of the WeBOC passed clearance order under Section 83 and Rule 442 of the Act/Rules. When the appellant clearing agent approached the terminal after obtaining delivery order from the shipping company, the official of terminal operator showed his inability and informed the appellant that a hold has been placed on the GD by the Deputy Collector, R&D.MCC of Appraisement-East,(here-in-after to be referred as respondent No. 1). Therefore, delivery cannot be effected, the appellant approached respondent No. 1, who informed the clearing agent that it is their apprehension that duty and taxes are not being levied correctly, which expect is being probe by the R&D Cell and the hold on the consignment shall be lifted in due course of time. On 04.07.2014, the respondent No. 1 directed respondent No. 2 to create an examination order in the system, which was done and consignment was re-examined and report to the said effect was against posted (sic) in the reservoir of the GD. Upon apprehending the mala fide on the part of respondent No.1, the appellant filed constitution petition bearing D-3791 on which order was passed vide dated 24.07.2014 that the goods be allowed to be released after submitting of pay order of the differential amount of Rs.238,007.00/- with the Nazir of the High Court of Sindh and thereafter presentation of certificate, which appellant did and the Nazir issued certificate dated 02.08.2014. The respondent No. 1 upon presentation of certificate lift the hold, consequent to which appellant obtained the delivery. Thereafter, the Officials of respondent No.1 framed contravention report and forwarded to ADC Law, who approved that and forwarded it to respondent No. 2, who issued show-cause notice dated 19.01.2015, with the allegation that the appellant is involved in mis-declaration of description, brand quantity, classification, value and non application of valuation ruling, resulting in loss of revenue of Rs.227,007.00/- and as such violated the provisions of Section 32 of the Customs Act, 1969, Section 33 of the Sales Tax Act, 1990 and section 148 of Income Tax Ordinance, 2001, which was replied by the appellant consultant vide letter dated 06.03.2015 on which respondent No. 2 sought comments from respondent No.1, upon receipt of which the consultant of the appellant submitted rebuttal dated 11.04.2015. The reply/rebuttal were not considered valid by respondent No. 2 and he passed order dated 27.07.2015 against the appellant. Paras 11 to 13 are relevant which are:-- "11. I have gone through the record of the case and perused verbal/written reply of the importer. The importer has allegedly mis-declared description, brand, quantity, classification and value of the impugned goods in order to suppress the correct value and leviable amount of duty and taxes thereon to the tune of Rs.227,007/-. This misdeclaration let to the establishment of contravention and show-cause notice was issued to the importer in reply to the same. Mr. Nadeem Ahmed Mirza Advocate from Nadeem and Company, appeared on behalf of the importer as well as the Clearing Agent and submitted detailed replies. The representative of the importer raised many objection regarding the contents of Show-Cause Notice, jurisdiction of the undersigned, legal lacunas in the exercise of jurisdiction by R&D etc. the objections raised by the representative of the importer are being discussed and addressed as detailed below: (a) The first objection raised by the representative of the importer regarding the issuance of show-cause notice was that the show-cause notice has been issued without application of mind and on the basis of absurd opinion submitted by the R&D Section of MCC of Appraisement East. However, no discrepancy or legal infirmity was pointed out by the representative of the importer on the contents of Show-Cause Notice. (b) In paras a, b and c of the reply with the Show-Cause Notice, the 1st ground taken by the representative of the importer that the subject goods were in the constructive possession of the Customs Authorities, whereby the same subject to seizure and sections 168 and 178 stand invoked, however, as the subject goods were still under the process of clearance after filing Goods Declaration, whereby discrepancy of description value and weight and value were found, the same were sent for adjudication after establishment of Contravention for violation of section 32 of the Customs Act, 1969. Consequently, the ground that the subject Show-Cause Notice was time barred as a result of seizure is also not maintainable. (c) The representative of the importer objected to the jurisdiction of undersigned as per section 179 of the Customs Act, 1969, the objection of the representative of the importer is not maintainable as section 179 ibid. deals with adjudication whereby the cases are sent for adjudication involving cases where certain restriction, prohibition, evasion of duty and taxes etc have been violated. The duty and taxes already paid by the importer to the National Exchequer are not the subject matter of any adjudication proceedings. (d) The representative of the importer raised objection (paras e and f) regarding jurisdiction of the Customs Officers for issuance of Show-Cause Notice in the cases involving evasion of Sales Tax and Income Tax. The objection of the importer is not maintainable as the subject goods were still lying at the port in Customs Area, whereby section 148 of the Income Tax Ordinance, and section 33 of the Sales Tax Act, 1990 empowers the Customs Authorities to collect sales tax and income tax as Customs Duty at import stage whereby their evasion leads to initiation of adjudication/recovery proceeding under the aforementioned provision of Law. (e) The representative of the importer raised objection regarding jurisdiction for issuance of Show-Cause Notice, whereby the order of assessment has already been passed and R&D was not empowered to interfere. It is pointed out that the R&D Section is established in the Collectorate to check any evasion and to monitor the data of all imports whereby the same can check, intercept, examine and reassess Goods Declaration to save the legitimate state revenue. The concerned DC Group assessed the goods as per information uploaded by the importer, whereby the consignment was intercepted on the basis of credible information that the importer has furnished incorrect detail. The contention of the representative or importer that the subject goods has already been assessed by the appropriate officer and Collectorate should had filed an appeal before the Collector Appeal instead of taking cognizance by the R&D section of the concerned Collectorate specially empowers equipped and assigned to the job to check any discrepancy, fraud and mala fide attempt to evade legitimate government revenue does not bear weight and is rejected reply to the in addition to this, as long as the goods are in port area the same can be reassessed at any time for recovery of section 80(3) of the Customs Act, 1969. (f) The representative of the importer further submitted that there was not misdeclaration of description and quantity and the PCT heading determined by the concerned group cannot be changed, however, the representative of the importer failed to produce any evidence/arguments to support his contention whereby it is established vide examination report submitted by R&D Section that the importer were found involved in misdeclaration of description and weight effecting the classification and value of the goods. The contention of the importer that no case for mis-declaration of value on the basis of valuation ruling can be made and PCT heading can be made is partially correct as it was, in principal the misdeclaration of description of goods which affected the value and classification of the goods. Neither goods can be classified nor assessed without proper description of the goods. The importer is already not coming with clean hands when he has already paid additional duty and taxes amounting to Rs. 910,953/- in addition to upfront payment of duty and taxes by the importer. 12. The representative of the importer raised identical objection in reply to the Show-Cause Notice submitted on behalf of the Clearing Agent. However, the objection raised by the representative of the importer; in order to established the charge leveled in the show-cause notice, it must be clearly established in the adjudication proceeding that the same were in connivance with the importer/exporter for committing the alleged tax evasion and misdeclaration. The representative of the importer argued that the Clearing Agent files Goods Declaration on the basis of the documents/information submitted by the importer /exporter and the same cannot be simply held responsible on his filing Goods Declaration. The perusal of the record and the documents submitted by the importer clearly reflect inaccurate detailed in the invoice, packing list provided by the importer led to the filing of incorrect detail and faulty description of the goods in Goods Declaration, whereby the Clearing Agent cannot be held responsible.; hence, mala fide and mens rea on the part of Clearing Agent is not established. 13. In the light of above discussion, the charges of misdeclaration of description, value, classification and quantity as leveled in the Show-Cause Notice stand established. However, as the goods have already been released on the direction of Hon'ble High Court of Sindh, Karachi no redemption fine as a consequence of confiscation can be imposed. However, a penalty of Rs.100,000/- is imposed under clauses 14 and 14A of section 156(1) of the Customs Act, 1969 on the importer. The Collectorate may approach the Nazir of the Hon'ble High Court of Sindh, Karachi for deposited pay order of duty/taxes. As far as the role of the Clearing Agent is concerned, mala fide and mens-rea on the part of importer could not be established; hence no penal action is warranted against the same. 3. The vires of the order was challenged before Respondent No.3 by the appellant vide Appeal No. Cus-7061/2015/A-East, who also vide his order dated 27.07.2015 rejected that by observing in paras 5 and 6 that:-- "5- I have examined the case record. The technical objection raised by appellant have already been adequately addressed in the adjudication orders. The appellant have tried to attribute release of the goods under order of Hon'ble Court as completion of assessment. The assessment was still open as the goods were in customs charge and the respondent were under lawful authority to re-assess the goods under section 80(3) of the Customs Act, 1969. Upon re-assessment the respondent found incorrect declaration to the extent of value, quantity and classification, therefore, show-cause notice under section 180 of the Act was issued to the appellants. 6- The respondent's action is in accordance with law. The adjudication order is without discrimination or bias. The appellant could not pick and choose assessment made on a particular date and refuse re-assessment while goods were still within custom charge. The appeal being without merit is rejected. 4. Being aggrieved and dissatisfied with the impugned Orders the appellants filed the instant appeal before this Tribunal on the grounds Mr. Nadeem Ahmed Mirza (Consultant) appeared and argued in line with those and are detailed here-in-under:-- (a) That Mr. Dost Muhammad Appraiser subordinate of respondent No.1, MCC of Appraisement-East put on hold on appellant consignment on 05.07.2012. Such hold amounts to notional seizure as held by High Court of Sindh in reported judgment 2003 PTD 2821 Syed Muhammad Razi v. Collector of Customs (Appraisement), Karachi and 2 others in the following words:-- "A careful consideration of section 168(1) and section 2(rr) leads to the conclusion that the word "possession" is not confined to the physical possession and is inclusive of constructive possession as well. We are further of the considered opinion that the seizure of goods cannot be confined to the cases where an order in writing in this behalf is made but is inclusive of notional seizure as well, meaning thereby, that if the customs officials have not passed any specific order in writing about the seizure of goods but has verbally given instructions or by his conduct has made the release for removal of goods under restraint thereby depriving to the owner of the goods of exercising all the incidents of the right had title and interest in the goods, it would also amount to seizure of goods within contemplation of section 168(2) of the Customs Act. (b) That by virtue of notional seizure the provision contained in sections 171 and 168(1) of the Customs Act, 1969 comes into operation. Meaning thereby in the case of seizure of goods under section 168 the reason are to be recorded and notice under section 171 of the Customs Act, 1969 has to be served on the person from whose possession the things are seized . (c) In the instant case no notice under sections 168(1) and 171 has been served on the appellant. Non serving the notice render the whole proceeding infested from legal infirmity and as such of no legal effect as held by Superior Judicial Fora in umpteenth reported judgment e.g. 1993 SCMR 311, 1983 PCr.LJ 620, 1983 PCr.LJ 623, 1983 CLC 786, PTCL 1983 CL 47(sic), 1987 PCr.LJ 1413, 1987 PCr.LJ 1091, 2004 PCr.LJ 1958. (d) That in the case of seizure under section 168(1) of the Customs Act, 1969 a show-cause notice under section 180 of the Customs Act, 1969 by the authorities vested with the powers under section 179 ibid is also required to be issued within 2 months of the seizure of the goods subject to extension for further two months based on exceptional circumstances by the Collector of Customs after giving notice to the respective person as per law laid down by the Supreme Court of Pakistan in reported judgment 1999 SCMR 1881 Khalid Mahmood v. Collector of Customs, Custom House, Lahore and recording of those exceptional circumstances. Failing to which the owner or the person from whose possession they were seized earn a right for the return of the goods and the order/act of seizure become illegal and invalid. (e) That the entire period of 4 months stood lapsed on 05.11.2014 from notional seizure dated 05.07.2014 and even from the order of the High Court of Sindh dated 24.07.2014. To the contrary, the show-cause notice by respondent No. 2 has been issued on 09.01.2015, rendering it time barred and as such without powers/jurisdiction, hence void and ab inito as held by Superior Court in umpteenth judgment e.g. 1998 MLD 650, 2005 PTD 23, 2003 PTD 2821 and 2007 PTD 2092. (f) The expression of Section 179 of the Customs Act, 1969 is very clear in regards to determination of Adjudicating Authority on the basis of "amount of duty and taxes involved excluding the conveyance." Not "amount of evaded duty and taxes". Which are Rs.904,362.00/- paid upfront on 18.06.2014 + paid Rs.530,979.00/- on 05.07.2014 in compliance of view message dated 05.07.2014 + the shown evaded amount of Rs.227,007.00/- in the show-cause notice). Meaning thereby that the involved amounts of duty and taxes is Rs. 1,662,348.00.00 in appellant case and the competent authority to adjudicate the said case under clause (ii) of section 179(1) is Additional Collector. To the contrary, respondent No. 2 issued the show-cause notice and passed order-in-original while usurping the powers of the Superior, which is not permitted under law. Rendering both suffers from lack of powers/jurisdiction, hence, ab-initio null and void and coram non judice as held in Order in Sales Tax Appeal No. 444/03, STA 465/07 and judgments reported at PLD 1971 SC 184, PLD 1976 Supreme Court 514, 1992 ALD 449, 2004 PTD 624, PLD 2004 Supreme Court 600, PLD 2005 Supreme Court 842, 2009 PTD 1112, 2010 PTD 465 and 2010 PTD (Trib) 1636 (g) That in the show-cause notice issued by the respondent No. 2 Section 33 of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2001 have been invoked without realizing to the fact that Section 33 is not a charging section instead a penal synonymous to Section 156(1) of the Customs Act, 1969 and Section 148 is equally not a charging section instead inserted in the Ordinance empowering the officer of Customs, to collect the leviable Income Tax at import stage. No show-cause notice can be issued under the said sections, rendering the show-cause notice and order-in-original without power/jurisdiction, hence void ab-initio and of no legal effect as held in reported judgments Asst. Collector v. Khyber Elec. Lamps 2003 PTD 1275, D.G. Khan Cement v. Collector of Customs 2005 PTD 480, Caltex v. Collector 2003 PTD 1593, Union Playing Card Company v. Collector of Customs 2002 MLD 130, Atlas Tyres v. Addl. Collector 2002 MLD 180, State Cement v. Collector PTCL 2001 CL 558, Kashmir Sugar v. Collector 1992 SCMR 1898, Rose Color v. Chairman, CBR and 2013 PTD 813 Sarwar International v. Addl. Collector of Customs. (h) That even otherwise the respondent No. 2 is also not appointed as Officer of Inland Revenue under Section 30 of the Sales Tax Act, 1990 and Section 207 of the Income Tax Ordinance, 2001 and as such is not empowered to issue show-cause notice and pass order-in-original relating to matters of Sales Tax and Income Tax under Section 11 of the Sales Tax Act, 1990 and Section 162(1) of the Income Tax Ordinance, 2001. Hence, by issuing show-cause notice with the inclusion of amount of Sales Tax and Income Tax, the respondent No. 2 usurped the powers of Officer of Inland Revenue to which he is not vested, Rendering the show-cause notice and order-in-original being in flagrant violation of law and as such coram non-judice as held in Order in Sales Tax Appeal No. 444/03, S.T.A. 465/07 and judgments reported at PLD 1971 SC 184, PLD 1976 Supreme Court 514, 1992 ALD 449, 2004 PTD 624, PLD 2004 Supreme Court 600, PLD 2005 Supreme Court 842, 2009 PTD 1112, 2010 PTD 465 and 2010 PTD (Trib.) 1636. (i) The respondent No. 2 has invoked Section 32 of the Customs Act, 1969 as a whole, which is not permitted under law one has to be specific that which subsection of section 32 is applicable in the case. In the instant case the show-cause notice is silent in regards to the "deliberate act" of the appellant or connivance with the official of the Customs in getting the goods examined in accordance to his…

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