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Petitioner: Messrs AL-FAJAR ASSOCIATES, KARACHI VS Respondent: DIRECTORATE GENERAL OF INTELLIGENCE ANDINVESTIGATIONS-FBR, KARACHI
Court Name: Customs Appellate Tribunal Judge(s): Adnan Ahmed Title:Messrs AL-FAJAR ASSOCIATES, KARACHI vs DIRECTORATE GENERAL OF
INTELLIGENCE ANDINVESTIGATIONS-FBR, KARACHI Case No.: Appeal No,K-3140 of 2013 Date of Judgment:2014-12-08 Reported As: 2016 PTD (Trib.) 2125 Result: Appeal allowed Judgment ORDER ' ADNAN AHMED, MEMBER (JUDICIAL-II).---The appeal, filed by the appellant, is directed against Order-in-Original No,! 60/2013-2014 dated 27.09.2013 passed by the Additional Collector of Customs (Adjudication-1), Custom House, Karachi. 2. Briefly facts of the case as stated in memo of appeal are that the appellant is a proprietorship company and operates under the name and style of Messrs Al-Fajar Associates, Room No,25-A, 1st Floor, Pak Chamber, West Wharf Road, Karachi is being registered with the Custom House, Karachi as clearing forwarding agent vide No, 1596. During the course of his business activities he was approached by Messrs Gulzar Metal Works., Gujranwala, registered with FBR under NTN No, 0312206 and STR No, 2500740700137 in the capacity of manufacturer/ importer and exporter for clearance of his imported goods. The appellant after obtaining online verification from the FBR Portal, extended his acceptance for undertaking the job of clearance of his consignment. Consequent to which Messrs Gulzar Metals Works forwarded him documents for clearance, on the strength of which he filed good declaration with the Collectorate of Customs-PMBQ vide GD No, KPPIIIC-12452- 29092012 which instead of processing the GD for levy of duty and taxes referred the same for examination under section 198 of the Customs Act, 1969 and Rule 435 of sub Chapter III of Chapter XXI of Customs Rules, 2001. The goods were found in accordance with the declaration, resultant, the assessing officer passed assessm ent order under section 80 of the Customs Act, 1969 and Rule 438 for levy of duty and taxes, after payment of those, the Principal Appraiser allowed the clearance in exercise with the power vested upon him under section 83 and Rule 442 ibid. Thereafter, the appellant obtained the delivery from the port and transported the same to the importer. The
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Directorate General of Intelligence and Investigation-FBR (here-in-after referred as respondent No, 1) after lapse of several months framed contravention report and forwarded to the Additional Collector of Customs, Adjudication-I, Collectorate of Customs, Karachi here-in-after referred as respondent No, 2) with the allegation that the importer Messrs Gulzar .Metal Works, Gujranwala imported remeltable scrap for disposal in the local market in the same state other than raw material for in house consumption without payment of leviable Income Tax 5 % in terms of notification No 722(1)/2012 dated 26.06.2012 and got those cleared on payment of I% reduced rate of income tax as applicable to industrial concern. The goods were disposed off by the importer in the local market to retailers and other un-registered person without any manufacturing process. On the strength of which respondent No, 2 issued show cause notice dated 06.05.2013, since there was nothing for the appellant to reply, restraint himself. Notwithstanding the respondent No, 2 passed order-in-original dated 27.09.2013 through which a penalty, of Rs, 25,000.00 was imposed on the appellant, relevant portion of order is reproduced here-in-below:-- "Rs, 25,000.00 (twenty five thousand) is also imposed on each of the Clearing Agent I.D. Messrs Express Freight Links (CHAL-2207). Al- Bashir Impex (CHAL-2658) and Messrs AlFajer Associates (CHAL-1596)" 3. The appellant M/s.AI-Fajar Associates , Karachi has challenged the order of the respondent No, 2 by way of Appeal No, 160/2013-2014 dated 27.09.2013, through Mr. Obayd Mirza/Nadeem Ahmed Mirza (Advocates/Consultants) on the strength of the grounds incorporated in the memo of appeal and which are inter alia: (i) The respondent No, 1 is not designated an "Officer of Inland Revenue" under Section 230 of the Income Tax Ordinance 2001 under which Directorate General Investigation, Inland Revenue has been designated as officer of Inland Revenue and they had been delegated powers under Section 207 of the Income Tax Ordinance, 2001. Resultant, respondent No, 1 acted without powers/jurisdiction, rendering their act of preparation of contravention report, without power and jurisdiction, hence "coram non judice" as held in reported judgment Major Syed Walayat Shah v. Muzaffar Khan and 2 others (PLD, 1971 SC 184), Omer and Company v. Controller of Customs, (Valuation): (1992 ALD 449 (1) Karachi AAA Steel Mills Ltd. v. Collector of Sales. Tax and Central Excise Collectorate of Sales Tax (2004 PTD 624), PLD 1976 Supreme Court 514. Ali Muhammad v. Hussain Buksh and others and PLD 2001 Supreme Court 514 Land Acquisition Collector, Noshehra and others v. Satfraz Khan and others, 2006 PTD 2237, Pak Suzuki Motors, Company Ltd., Karachi v. Collector of Customs, Karachi, 2009 PTD (Trib.) 1996 and 2010 PTD (Trib.) 832. (iii) That similarly respondent No,2 is also not designated an "Officer of Inland Revenue" under Section 207 of the Income Tax Ordinance, 2001 and as such is not empowered to issue show cause notice and pass any order in original in respect of matter relating to Section 162(1) of Income Tax Ordinance, 2001. Hence, by issuing show cause notice and passing order-in-original by him deems to usurpation of the powers of "Officer of Inland Revenue" to which he is not vested with, rendering the show cause notice and order-in-original without powers/ jurisdiction , hence void and ab-initio and corum non judice as held in reported judgment Major Syed Walayat Shah v. Muzaffar Khan and 2 others (PLD 1971 SC 184), Omer and Company v. Controller of Customs, (Valuation): (1992 ALD 449 (1) Karachi AAA Steel Mills Ltd. v. Collector of Sales Tax and Central Excise Collectorate of Sales Tax (2004 PTD 624), PLC 1976 Supreme Court 514 Ali Muhammad v. Hussain Buksh and other's and PLD 2001 Supreme Court 514 Land Acquisition Collector, Noshehra and others v. Satfraz Khan and others, 2006 PTD 2237, Pak Suzuki Motors Company Ltd., Karachi V. Collector of Customs, Karachi, 2009 PTD (Trib.) 1996 and 2010 PTD (Trib.) 832. (iii) That in terms of proviso of subsection (3) of section 179 of the Customs Act, 1969 the Adjudication proceeding has to be completed within 120 days of the issuance of show cause notice or within such period extended by the Collector for which reason shall be recorded in writing but
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such extended period shall in no case exceed 60 days provided that any period during which the proceeding are adjourned on the account of stay or alternative dispute resolution proceeding or the time taken through adjournment by the petitioner not exceeding 30 days shall be excluded for the computation of the aforesaid period meaning thereby, the total period can be extended from 120 days to 180 days or 210 days. (iv) That since, the period for passing order in the instant case in terms of the section 179 of the Customs Act, 1969, has to be calculated from the date of issuance of show cause notice i.e, from 06.05.2013 , meaning therein, the order by the respondent should had been passed by 03.09.2013 i.e, prior to expiry of initial period of 120 days or within further extended period of 60 days prior to expiry of initial period based on exceptional circumstances and recording of those after giving notice to the appellant as held by Hon'ble Supreme Court of Pakistan in reported judgment 1998 SCMR 1881, Khalid Mahmood V. Collector of Customs, Custom House, Lahore.. (v) That the extension obtained as stated by the respondent in para 3 of the order is without any legal sanction as the same has been obtained after the expiry of initial period of 120 days, beside if the extension was given by the Collector it was nullity to the provision of Section 179(3) of the Customs Act, 1969 by virtue of non availability of exceptional circumstances and not intimating to the appellant as held by Supreme Court of Pakistan. Once the matter becomes barred by time "then the subsequent enhancement in the period of limitation shall not have the effect of reopening the past and closed transaction. The board in this case while extending the time limit acted beyond its mandate. Reliance is placed on reported judgment 2010 PTD (Trib.) 81 and 2007 PTD 117, rendering the order barred by time by 14 days as such without power/jurisdiction as held in reported judgment 2008 PTD 60, Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax, Gujranwala and 2008 PTD 578 Messrs Hanif Strawboard Factory v. Additional Collector (Adjudication) Customs, Sales Tax and Central Excise Gujranwala, 2009 PTD 762 Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax and 4 others and 2009 PTD (Trib.) 1263, Messrs Syed Bhai Lighting Limited, Lahore v. Collector of Sales Tax and Federal Excise, Lahore and 2 others 2009 PTD 1628, Leo Enterprises v. President of Pakistan and others 2010 PTD (Trib.) 1010 Innovative Impex v. Collector of Customs, Sales Tax and Federal Excise (Appeal), 2011 PTD (Trib.) 79 Fazal Ellahi v. Additional Collector of Customs, MCC of PaCCS, 2011 PTD (Trib) 987 Unique Wire Industries v. Additional Collector of Customs, 'MCC of PaCCS, 2011 PTD (Trib.) 1146 Kaka Traders v. Additional Collector of Post Clearance Audit and 2012 PTD (Trib.) 1650 Pak Electron Ltd. v. Collector of Customs, Lahore and others. (vi) That .Irrespective of the referred in above gross illegality, it is appropriate for the appellant to state that the declaration whatsoever transmitted through the GD to MCC of PMBQ under Section 79(1) of the Customs Act, 1969 and Rule 433 of Sub-Chapter III of Chapter XXI of Customs Rules, 2001 by the appellant for the clearance of the goods imported by Messrs Gulzar Metals Works, Gujranwala was based on the import documents and that has not been found incorrect in any material particular as evident from the GD. Instead the crux of matter is that the importer obtained the clearance of the goods on the basis of his status as "manufacturer" and the said status was allowed to him by the FBR and the effect of the same was fed accordingly in the database by the FBR against its NTN and STRN. Appellant just entered the NTN number in the system and rest of the data was picked by the system itself. Nothing can be attributed to appellant in this regard he has to rely upon on the status fed in the system and the system itself honoured that and so the officers of customs passing assessm ent/clearance order under Sections 80, 83, and Rules 438 and 442 of the Customs Act, 1969 Customs Rules, 2001, No question of appellant connivance or collusion is apparent in the light of referred facts. (vii) That it is also imperative for the appellant to state that it is ridiculous on the part of respondents Nos. 1 and 2 in regards to formed opinion that the appellant "connived and colluded"
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with the importer Messrs Gulzar Metals Work, Karachi on the basis of available data on the GD. When the custom officials who completed the assessment order under section 80 of the Customs Act, 1969 and Rules 438 and 442 of Customs Rules, 2001 and passed order of clearance under section 83 ibid, while relying upon the available data of The importer in the data base of the system, they are let escort free, despite standing on the same pedestal. The said of the respondent amounts to giving a partial and differential treatment to the appellant. A person placed at the same pedestal cannot be treated differently as it would constitute a negation of Articles 4 and 25 of Constitution of Islamic Republic of Pakistan. The Honourable High Court of Sindh in its reported judgment 2002 PTD 976 held that "vacating the show cause notice in one case and taking action against another person in similar situation, is amount to discrimination which is hit by Article 25". In reported judgment 2002 SCMR 312 and PTCL 2010 CL 671 the Hon'ble Superior Courts have observed that "there exists no power to target incidence of tax in such a way that similarly placed person be dealt not only this similarly, but discriminatingly". Whereas, in reported judgment 2005 SCMR 492 the Hon'ble Supreme Court held that "A facility allowed to some one and denied to other is discrimination". The Apex Court further held in reported judgment 2010 SCMR 431 that:-- "Doctrine of equality, as contained in Art. 25 of the constitution, enshrine golden rules of Islam and states that every citizen, no matter how high so ever, must be accorded equal treatment with similarly situated persons---State may classify persons and objects for the purpose of legislation and make laws applicable only to persons or objects within a class---In fact all, legislations involve some kind of classification whereby some people acquire rights or suffer disabilities whereas others do not---What however, is prohibited under principle of reasonable classification, is legislation favouring some within a class and unduly burdening others---Basic rule for exercise of such discretion and reasonable classification is that all persons placed in similar circumstances must be treated alike and reasonable classification must be based on reasonable grounds in given set of circumstances but the same in any case must not offend spirit of Art. 25 of the Constitution. " ' The treatment given to the appellant against the principle enshrined in Articles 4 and 25 of the Constitution of Pakistan violate the settled law laid down by the Superior Courts in their judgments reported as 1990 SCMR 1072, 1990 SCMR 1059, 1975 SCMR 352, PLD 1995 SC 396, 1998 SCMR 1404, PLD 1997 SC 582, PLD 1997 SC 334 and 1997 SCMR 1874. (viii) The appellant carves his right to add any fresh grounds at the time of hearing beside placing any valid incriminating evidence/documents. 4. No cross objection were submitted within the stipulated period given in Subsection (4) of Section 194A of the Customs Act, 1969 by the respondent No, 1. Nevertheless, Mr. Muhammad Aqil Alam, intelligence Officer stated that the question of jurisdiction does not arise in the case as the official of respondent No, 1 are empowers to scrutinized the pitch of payment of income tax leviable on the goods so imported by the client of the appellant. He was asked to prove mala fide on the part of the appellant in the light of sections 79(1), 80, 83 of the Customs Act, 1969 and Rules 433 to 442 of Customs Rules, 2001 and the invoked Section 148 of Income Tax Ordinance, 2001, astonishingly nothing was available with him either in the shape of documents or arguments in support of the allegation .Leveled in the show cause notice and passed order-in-original, against the appellant for imposing penalty of Rs, 25,000.00. 5. Rival parties heard and case record perused, this case can be decided on the short points of powers/jurisdiction of the respondent in the matter pertaining to Income Tax. Hence, it is beneficial to reproduce Sections 148, 162, 207, 230 and 230A of Income Tax Ordinance, 2001 for determination of their jurisdiction/powers and which are:-- ' Section 148:- Imports:--(1) The Collector of Customs shall collect advance tax from every importer of goods on the value of the goods at the rate specified in Part II of the First Schedule.
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(2) Nothing contained in subsection (1) shall apply to any goods or class of goods or persons or class of persons importing such goods or class of goods as may be specified by the Board. (5) Advance tax shall be collected in the same 'manner and at the same time as the customs duty payable in respect of the import or, if the goods are exempt from customs duty, at the time customs duty would be payable if the goods were dutiable. (6) The provisions of the Customs Act, 1969 (IV of 1969), in so far as relevant, shall apply to the collection of tax under the section. (7) The tax collected under this section shall be final tax on the income of the importer arising from the importer subject to subsection (1) and this subsection shall not apply in the case of import of :- (a) raw material, plant, machinery, equipment and parts by an industrial undertaking for its own use; (b) fertilizer by manufacturer of fertilizer and (c) {motor vehicles in CBU condition by manufacturer of {motor vehicles} (d) Large import houses, who-- (i) Have paid-up capital of exceeding Rs, {250} millions (ii) Have imports exceeding Rs, 500 million during the tax year; (iii) Own total assets exceeding Rs, {350} millions at the close of the tax year. (iv) Is single object company (v) Maintain computerized records of imports and sale of goods; (vi) Maintain a system for issuance of 100% cash receipts on sales. (vii) Present accounts for tax audit every year (viii) Is registered with Sales Tax Department; and (ix) Make sales of industrial raw material of manufacturer registered for sales tax purposes) (8) the tax collected from a person under this section on the import of edible oil {and packing material for a tax year shall be (minimum tax) (9) In this section-- 'Collector of Customs" means the person appointed as Collector of Customs under section 3 of the Customs Act, 1969 (IV of 1969), and includes a Deputy Collector of Customs in Additional Collector of Customs or an officer of customs appointed as such under the aforesaid section; ' [Value of goods" means the value of the goods as determined under the Customs Act, 1969 (IV of 1969), as if the goods were subject to ad valorem duly increased by the customs duty federal excise duty and sales tax, if any payable in respect of the import of the goods. ' Section 162 ... Recovery of tax from the person from whom tax was not collected or deducted---(1) Where a person fails to collect tax as required under Division II of this Part for Chapter XIII or deduct tax from a payment as required under Division III of this Part [or Chapter XII], the Commissioner may {pass an order to that effect and) recover the amount was not collected or deducted from the person from whom the tax should have been collected or to whom the payment was made. (2) The recovery of tax under subsection (1) does not absolve the person who failed to deduct tax as required under Division III of this Part or Chapter XII] from any other legal action in relation to the failure, or from a charge of additional tax or the disallowance of a deduction for the expense to which the failure relates, as provided for under this Ordinance.( Emphasis is ours) [207 Income Tax authorities (1) These shall be the following Income tax authorities for the purposes of this Ordinance and Rules made there-under, namely:- (a) Board (b) Chief Commissioner Inland Revenue. (c) Commissioner Inland Revenue (d) Commissioner Inland Revenue (Appeals) (e) Additional Commissioner Inland Revenue
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(f) Deputy Commissioner Inland Revenue (g) Assistant Commissioner Inland Revenue (h) Inland Revenue Officer (i) Inland Revenue Audit Officer (j) Superintendent Inland Revenue (k) Inspectors Inland Revenue; and (1) Auditor Inland Revenue (m) Officer of Inland Revenue with any other designation. (2) the Board shall examine, supervise and oversee the general administration of this Ordinance. (3) Income Tax Ordinance Tax authorities specified in subsection (1) except in clause (a) shall be subordinate to the Board] [(3A) Commissioner Inland Revenue, Additional Commissioners Inland Revenue, Deputy Commissioners Inland Revenue, Assistant Commissioners Inland Revenue, Inland Revenue Officers, Inland Revenue Audit Officers, Superintendents Inland Revenue, Auditors Inland Revenue Audit, Inspectors Inland Revenue shall be subordinate to the Chief Commissioners Inland Revenue] (4) Subject to Subsection (5) Additional Commissioner Inland Revenue, Deputy Commissioner Inland Revenue, Assistant Commissioner Inland Revenue, Inland Revenue Audit Officers, Superintendent Inland Revenue, Auditor Inland Revenue and Inspectors Inland Revenue shall be subordinate to the Commissioner Inland Revenue (4A) Deputy Commissioners Inland Revenue, Assistant Commissioners Inland Revenue, Inland Revenue Audit officers Inland Revenue Superintendents Inland Revenue, Auditors Inland Revenue and Inspectors Inland Revenue shall be subordinate to the Additional Commissioner Inland Revenue] (5) An officer vested with the powers and function of Commissioner shall be subordinate to the Chief Commissioner Inland Revenue. "230. Directorate General (Intelligence and Investigation), Inland Revenue:---(1) The directorate General (Intelligence and Investigation) Inland Revenue shall consist of a Director General and as many directors, Additional director, Deputy directors and Assistant Directors and such other officers as the Board, may by notification in the official Gazette, appoint. (2) The Board may, by notification in the official Gazette, (a) Specify the functions and jurisdictions of the Directorate General and its officers and (b) confer the powers of authorities specified in section 207 upon the Directorate General and its officers. ' 230A Directorate General of Withholding Taxes---(1) The Directorate-General of withholding Taxes shall consist of Director General and as many Directors, Additional Directors, Deputy directors and Assistant directors and such other officers as the Board, may by notification in the official Gazette appoint. (2) the board may, by notification in the official Gazette specify the functions jurisdiction and powers of the Directorate General of withholding Taxes. 6. Upon perusal of Section 230 of the Income Tax Ordinance, 2001 inserted through Finance Act, 2012, I found that the respondent No, 1 has not been appointed/designated as officer of Inland Revenue by the legislature, instead the officials of Directorate General of Intelligence and Investigation-Inland Revenue who have been delegated powers under Section 207 ibid for acting and proceeding as like officer of Inland Revenue under the respective provision of the Income Tax Ordinance, 2001. For overseeing the collection of withholding Tax by the Clearance Collectorate at import stage in terms of Section 148 ibid the Directorate General of Withholding Taxes has been established under Section 230A of the Income Tax Ordinance, 2001. The respondent No,1 figures nowhere in either of the section i.e, Sections 148, 230 and 230A of the Income Tax Ordinance, 2001 for collection of withholding tax or to investigate the payment of withholding tax on the imported
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consignment during the process of clearance or even clearance. Its officials laid hands on the matter of Income /withholding tax while transgressing the powers vested with Clearance Collectorate, Directorate General of Intelligence and Investigation -Inland Revenue, DG Withholding Tax, which is not permitted on any pretext or circumstances, rendering their act without any lawful authority and jurisdiction. 7. I have noted with great concern that acting without powers/ jurisdiction is the order of the day among the officials of respondent No, 1 and the Collectorate of Customs (Adjudications) which also include respondent No, 2, which derived powers for adjudication under the provision of Section 179 of the Customs Act, 1969 in the matter relating to Customs Duty not Income Tax, the plea taken that the word taxes has been inserted in the said provision through Finance Act, 2014 is quite enough for exercising jurisdiction corresponding to taxes. This understanding is based on misconception as the word taxes were inserted by the legislature for the calculation of involved amount of duty and taxes on the basis of which the adjudicating authority defined in Section 179 of the Customs Act, 1969 determines his powers. The A correct approach is that in spite of insertion of the word taxes, the adjudicating authority including the respondent No, 2 has to issue show cause notice within the respective applicable provision of the Customs Act, 1969 and not under the charging provision of Section 162(1) of the Income Tax Ordinance, 2001, which is non existence in the show cause notice and charge against the appellant has been leveled under Section 148 ibid; which is a machinery section and defined procedure for collection of income tax/withholding tax at import stage by the Clearance Collectorate. The appellant has nothing to do with the collection under section 148 ibid, hence no charge can be leveled against him under Section 148. The charging section for the short paid amount of income tax is section 162(1) ibid, under which Commissioner of Income Tax is the only authority to proceed in the matter and by none else. I have also noted that the respondent No, 2 has also relied upon clauses (14) and (14A) of Section 156(1) of the Customs Act, 1969, applicable in the case of mis-declaration falling within the ambit of Section 32 of the Customs Act, 1969. No mis-declaration is…
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