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Petitioner: Messrs ASIF TEXTILE TRADING VS Respondent: DIRECTORATE GENERAL OF INTELLIGENCE AND
Court Name: Customs Appellate Tribunal Judge(s): Muhammad Nadeem Qureshi, Muhammad Yahya Title:Messrs ASIF TEXTILE TRADING vs DIRECTORATE GENERAL OF INTELLIGENCE AND
JUDGMENT
Reported As: 2016 PTD (Trib.) 969 Result: Appeal accepted Judgment JUDGMENT MUHAMMAD NADEEM QURESHI, MEMBER (JUDICIAL-I).--By this order, we intend to dispose off Customs Appeal No.K-982/2015 filed by the appellant against Order-in-Original No. 552/2014-2015 dated 22.05.2015 passed by the Collector of Customs, Adjudication-I (here-in-after to be referred as respondent No. 3) through this single order. 2. Briefly facts as stated by the appellant and Directorate General of Intelligence and Investigation- FBR, Karachi (here-in-after to be referred as respondent No. 1), are that the appellant is a manufacturing unit of textile, registered with FBR vide NTN No. 02844457-5 and STRN-12-00-3903- 003-28, during the course of his business activities he imported 72 consignments between 19.12.2013 to 03.01.2014 of polyester filament yarn and upon receipt of import documents his clearing agent transmitted Goods Declaration under the provision of Section 79(1) of the Customs Act, 1969 and Rule 433 of Sub-Chapter (III) of Chapter XXI of the Customs Rules, 2001 with the MCC of Appraisement under supervisory control of Collector (here-in-after to be referred as respondent No. 2) while claiming payment of sales tax and income tax on reduced rates in terms of Notification No. S.R.O. 1125(1)/2011 dated 31.12.2011. The clearance of all consignment was allowed by the subordinate of respondent No. 2 after due verification that the appellant manufacturing ;nit is one of the five sector as enunciated in Table I of the Notification, he is duly registered with the Inland Revenue and his status is "Active Tax fayer", after passing valid and legal assessment/clearance orders under Sections 80 and 83 and Rules 438 and 442 ibid., after going through the examination report carried out under the provision of Section 198 of the Customs Act, 1969 and Rule 435 of Customs Rules, 2001 in the month of May 2014 the respondent No.1 blocked clearance of two
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consignments of the appellant corresponding to Goods Declaration No. KEPW-HC-147133 dated 09.05.2014 and KEPW-HC-149319 dated 13.05.2014. Resultant, the appellant approached the Officials of respondent No. 1, which informed him that his registration is "suspended". Since, the status appearing on the Portal of FBR was contrary, the appellant filed C.P. No. 2899/2014 with the High Court of Sindh, against respondent No. 1, which upon notice of the Hon'ble High Court of Sindh submitted comments, in which it stated that a show cause notice dated 28.12.2006 was issued to the appellant, against which order-in-original was passed and demand was created, therefore the User ID of the appellant was blocked and the registration was suspended. In the light of the comments and Annexures, the appellant approached the Commissioner Inland Revenue, Zone-I, RTO for supply of the impugned show cause notice and order-in-original enabling him to assail the vires of those before the forum set-forth in the Sales Tax Act, 1990. Ironically, he was not having either show cause notice or order-in-original. Resultant, the Chief Commissioner, RTO forwarded letter dated 14.10.2014 to the Collector of Customs, MCC of Export for supply of the copy of the show cause and order-in-original, who informed through letter dated 24.10.2014 that the appellant had not availed any facility of DTRE as per their records, hence no information can be supplied in this regard in addition to the impugned Order-in-Original No. 06 dated 19.05.2007, which is non-existent and as such cannot be supplied due to suffer of lack of availability. After receipt of the said reply the Commissioner, Zone-1, RTO inspite not warranted in the given circumstances of the case directed the appellant to submit a bank guarantee for the sake of regularization and to securing the amount said to be adjudged against the appellant through the impugned Order-in-Original No. 6 dated 19.05.2007, amounting to Rs. 3,762,050.00. 3. Since, the appellant consignment were lying in the Terminal and suffering container detention/rental and terminal demurrage/storage charges, he submitted the same through bank guarantee dated 21.11.2014. Consequent to which the Commissioner Inland Revenue, Zone-1, RTO restored Sales Tax Registration of the appellant vide order dated 24.11.2014. Inspite of the fact that no proceeding can be initiated against the appellant in the given circumstances of the case, the respondent No. 1 framed contravention report and forwarded to Collector of 'Customs, (Adjudication-I) (here-in-after to be read as respondent No. 3) with the allegation that the appellant inspite of having status of non active and suspended w.e.f. 30.06.2013 imported the consignment valuing to Rs. 268,456,049.00 referred in para supra and managed to obtain their clearance with the benefit of payment of sales tax and income tax at reduced rates under Notification No. 1125(1)/2011 dated 31.12.2011. Inspite non entitlement and as such evaded 15% sales tax 3% additional sales tax and consequential 4.5% with-holding tax on the said import amount of which have been worked out to Rs. 40268,407/-, Rs. 8,053,681/- and Rs. 14,255,016/- totaling to Rs. 62,577,105/-, this act of his is in violation of the provision of Section 32(1) and (2) of the Customs Act, 1969, Sections 3, 4, 6, 7A, 8(1b), 34, 36 and 71 of the Sales Tax Act, 1990 read with Section 148 of the Income Tax Ordinance, 2001,punishable under clauses (14) of Section 156(1) of the Customs Act, 1969 read with Sections 33 and 34 of the Sales Tax Act, 1990. Who issued show cause notice dated 26.11.2014, which was replied by the appellant vide letter dated 07.01.2015 in addition to attendance of hearing fixed for 12.01.2015 and 21.01.2015. Since, inspite lapse of 03 months from the date of last hearing no order was issued by respondent No. 3, the appellant engaged consultant, who submitted addendum to the reply to the show cause notice through letter dated 30.05.2015, which was acknowledged by the respondent No, 3 on 01.06.2015. Inspite receipt of addendum on 01.07.2015 the respondent instead of considering that passed order on the same day but dating 22.05.2015 and dispatched the same to the appellant through consignment note No. K-180358982 dated 01.06.2015, paras 4 and 5 of the order are relevant, which are reproduced here-in-below:-- 4. I have gone through the record of the case and considered the written reply of the respondent and verbal arguments of both sides, it is an accepted position that Messrs Asif Textile Trading
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(NTN-284457) office No. 303, 3rd Floor, Textile Plaza, M.A. Jinnah Road, Karachi was suspended from the Active Tax Payer list since 30.06.2013 and all imports stated in the show cause notice are for the period of their suspension, condition (i) of S.R.O. 1125(1)12011 dated 31.11.2012 stated as under:-- The benefit of this Notification shall be available only to the person doing business in textile (including jute), carpets, leather, sports and surgical goods sector, who are registered as manufacturer, importer, exporter or whole-seller under the Sales Tax Act, 1990 and appears on the Active Tax Payer list ATL) on the website of Federal Board of Revenue." (emphasis added) (sic). 5. Since it is un-equivocally and clearly stated in the aforesaid condition that the benefit of S.R.O. 1125(1)12011 dated 31.12.2011 is only available if the person's name appears on active tax Payer List (ATL) which in the case of M/s. Asif Textile Trading (NTN-284457), Office No. 303, 3rd Floor, Textile Plaza, M.A.Jinnah Road, Karachi was under suspension, therefore, 1 hold that they were not eligible for the benefit of S.R.O. 1125(1)/2011 dated 31.12.2011 and are liable to pay duty and taxes at statutory rates. Accordingly, the charges as enumerated in the show cause notice stand established. I therefore, order M/s. Asif Textile Trading (1VTN-284457), Office No. 303, 3rd Floor, Textile Plaza, M.A. Jinnah Road, Karachi to immediately deposit the short paid amount of Rs. 67,109,814/- (Sales Tax amounting to Rs. 43883008/-Additional Sales Tax amounting to Rs. 8776601/- and With Holding Tax amounting to Rs. 14450205/- ) in Government Treasuring in terms of Section 32(2) of the Customs Act, 1969. A penalty of Rs. 2,000,000/- (Rs. 02 Millions) is also imposed under clause (14) of Section 156(1) of the Customs Act, 1969 for violation of Section 32(1) ibid, on the respondent M/s. Asif Textile Trading (NTN-284457), Office No. 303, 3rd floor, Textile Plaza, M.A.Jinnah Road, Karachi. 4. Being aggrieved and dissatisfied with the impugned Order-inOriginal, the appellant filed instant appeal before the Tribunal on the grounds incorporated in memo of appeal and which are:-- (i) That after passing of clearance and assessment order under Sections 80 and 83 Rules 438 and 442 of Sub-Chapter III of Chapter DU of Customs Rules, 2001 by the authority defined in Section 2(a) ibid and 'out of charge' of the consignments, the appropriate authority to conduct audit of the cleared consignments rests with the Officials of 'Directorate General of Post Clearance Audit', formed under the provision of Section 3DD of the Customs Act, 1969 and empowered under Notification No. 500(1)/2009 dated 13.06.2009 and to issue audit observation and thereafter prepare contravention report for the purpose of adjudication by the competent authority empowered under the provision of Section 179 of the Customs Act, 1969, after issuance of proper Show Cause Notice under Section 180 ibid. The Officials of respondents Nos. I and 2 figure nowhere in the respective provision of the Customs Act, 1969, nor in the Notification No. 500(1)/2009 dated 13.06.2009. By laying hands on the consignments which have been cleared after passing of valid assessment and clearance order by the competent authority Under the referred in above provisions of the Act/Rules, 2001, the respondents tried to conduct audit of the consignments after clearance for which they are not empowered. By transgressing the powers and jurisdiction of the Directorate General of Post Clearance Audit, they acted without powers/jurisdiction rendering their acts ab-initio void and as such coram-nonjudice. Reliance is placed on PLD 2001 Supreme Court 514, PLD 1976 Supreme Court 514, PLD 1971 SC 184, 2006 PTD 2237, 2001 SCMR 1822, PLD 2004 Supreme Court 600, PLD 2005 Supreme Court 842, 2009 PTD 1083, PLD 1995 Kar. 587, PLD 1973 SC 236, PLD 1971 SC 197 . (ii) The Officials of respondent No. 1 are not designated as "Officers of Inland Revenue" under Section 30A of the Sales Tax Act, 1990 and 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 different Sections of the Sales Tax Act, 1990 through Notification No.S.R.0.776(1)/2011 dated 19.08.2011 and Section 207 of the Income Tax Ordinance, 2001. Resultant, Officials of respondent No. I acted without powers/jurisdiction,
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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 MA 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. Saifraz 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) The Officials of respondent No. I have no powers under Sections 32 and 195 of the Customs Act, 1969 as notified in S.R.O. 486(1)/2007 dated 09.06.2007 issued by the Board through which powers have been delegated. Intercepting consignment after clearance on the pretext of mis- declaration on the basis of feeding of status ATL despite not by the FBR in its portal. The Officials of respondent No. 1 acted beyond their notified powers/jurisdiction, rendering their act as transgression to the vested powers under the respective Section otherwise not vested to them by the Board. In these circumstances the impugned contravention report and show cause notice and all the subsequent proceeding there on deems to be illegal and void. No body is allowed to act beyond his jurisdiction and all the acts or deeds beyond the scope of jurisdiction are null and void in the eyes of law. Reliance is placed on the reported judgments 2008 PTD 981, PLD 1971 Supreme Court 61, PLD 1973 Supreme Court 236, PLD 1964 SC 536, 2001 SCMR 838 and 2003 SCMR 1505, In PLD 1996 Karachi 68, 2006 PTD 978 and PLD 1971 Supreme Court 184. (iv) That on conclusion of transaction, under the provision of Sections 80 and 83 of the Customs Act, 1969 and Rules 438 and 442 of Customs Rules, 2001, the order so passed under the said provision of the Act become appealable order before Collector of Customs (Appeals) under Section 193 of the Customs Act, 1969 and the Officials of respondent No. 1 are empowered under the said Section through Notification No. 486(1)/2007 dated 09.06.2007. If they had any reservation against the passed assessment order, the appropriate course of action was to assail the said order before the Collector of Customs Appeals. Which had not been done within the stipulated period and order so passed by the competent authority defined in Section 2(a) under Section 80 of the Customs Act, 1969 final and that cannot be disturbed by any authority. (v) That upon filing of the appeal by the Officials of respondent No.1 before the Collector of Customs Appeals under Section 193 of the Customs Act, 1969 emanating the facts of the case and the relevant provision of law. Upon taking up the appeal it is mandated on him to go through the fact and ground of the appeal and thereafter if he think fit that in the case under adjudication correct duty and taxes has not been either not levied or short paid on the basis of found goods, is empowered to issue a notice under Section 32 of the Customs Act, 1969 to the importer (applicant) and after receipt of reply to the said notice the Collector of Customs has to decide the appeal in the light of the issued show cause notice and reply. In the instant case no appeals has been filed by the Officials of respondent No. 1 despite mandated under law, instead assumed the powers under Section 195 of the Customs Act, 1969 and reopened a valid passed order under Section 80 ibid. The Officials of respondent No. 1 are not empowered to reopen an order, hence acted without power/jurisdiction, rendering their act of preparing contravention report is without any lawful authority and as such ab-initio, null and void as held by Superior Judicial Foras in umpteenth reported judgments e.g. 2014 PTD 1256 M/s. Paramount International (Pvt.) Ltd. v. FOP and others. (vi) That the respondent No.3 has invoked in the show cause notice Sections 3, 4, 6 7A, 8 (lb), 34, 36 and 71 of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2001 contrary to the fact that none of the Sections of Sales Tax are applicable on the appellant with the exception of Section 36 ibid, which stood omitted through Finance Act, 2012.
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Likewise Section 148 is equally not a charging Section instead a machinery Section 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 void and 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 MW 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. (vii) That apart from the above, it is imperative to state that respondent No. 3 is also not designated as Officer of 'Inland Revenue' under the provisions of clause (c) subsection' (3) of Section 25 of the Sales Tax Act, 1990 and Section 207 of the Income Tax Ordinance, 2001 thus not empowered to issue a 'Show Cause Notice'(SCN), in the matters of Sales Tax under Section 11 (mentioned as 36 without realizing/consulting the Act that it stood deleted through Finance Act, 2012) of Sales Tax Act, 1990 and Section 162(1) of the Income Tax Ordinance, 2001. By doing so, respondent No. 3 usurped the powers of officers of 'Inland Revenue'. In other words, even very issuance of SCN is in flagrant violations of law. Hence corum non judice and ab initio null and void and of no legal effect/consequences. Reliance is placed upon PLD 1971 SC 184 Major Syed Walayat Shah v. Muzaffar Khan and 2 others, 1992 ALD 449(1) Omer and Company v. Controller of Customs ( Valuation) Ali Muhammad v. Hussain Buksh and others PLD 1976 Supreme Court 514 and PLD 2001 SC 514, PTCL 2008 CL.37(sic) M/s Al-Faiz Industries (Pvt.) Ltd. And others, C. P. No.D-216/2013 , Messrs Lucky Cement Ltd Karachi v. Federation of Pakistan and others:-- "The word emphasized could be regarded as being In the nature of deeming provisions. If so, then (subject to the rules of Interpretation that apply in such a situation) that nature of sales tax or excise duty on imports, for purpose of levy, charge or collection (as the case may be), may be regarded as a customs duty. Clearly, this would be a materially different situation than that which obtains in relation to advance income tax on imports. In our view, the jurisdiction of the customs authorities (i.e. The Collector of Customs) is limited to only the collection of the advance income tax. Furthermore, subsection (6) of Section 148 emphasizes that provisions of the Customs Act apply only to the Collection of the tax and that too, only in so far as is relevant. Since there is a clear distinction between the collection of a tax on the one hand and its recovery or enforcement on the other, in our view, the provision of the Customs Act as relates to the latter are not applicable in relation to the jurisdiction conferred on the Customs Authorities under Section 148." (viii) That respondent No, 3 has also invoked in the Show Cause Notice the provision of Section 32(1) on the strength of contravention forwarded by the Officials of respondent No. 1 which read as follows; Section 32 False statement, error, etc.-----If any person, in connection with any matter of customs, (a) makes or signs or causes to be made or signed, or delivers or causes to be delivered to an Officer of customs any declaration, notice, certificate or other document whatsoever, or (b) makes any statement in answer to any question put to him by an Officer of customs which he is required by or under this Act to answer, Knowing or having reason to believe that such document or statement is false in any material particular, he shall be guilty of an offence under this Section. (Emphasis Supplied) (ix) That it is evident from the above expression, that the untrue and false statement attracting the mischief of these provisions has to be made by the importer/exporter and by the clearing agent or by any person submitting document with the customs in connection with any matter of customs "Knowing or having reason to believe". The provision of Section 32 contemplate, the existence of a personal "knowledge" Believe being a conviction of mind arising not from actual
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perception or knowledge but by way of inference of evidence received or 'information derived from others. It falls short of any absolute certainty because the accused in accounting for his possession, may be able to show that the ground upon which is based are unsubstantial. (x) In the instant case as evident from the annexed goods declaration no mis-declaration in any aspect hqs been visible made by the appellant and for that reason the Officials of the respondent No. 2 allowed clearance of the goods after passing of valid assessment/clearance order under the provision of sections 80 and 83 of the Customs Act, 1969 and Rules 438 and 442 of Sub-Chapter III of Chapter XXI of the Custom Rules, 2001. The feeding of status in the FBR Portal rest on the part of the FBR itself, not on the appellant or the Officials of respondent No. 2. That also does not fall within the ambit of mis-declaration attracting Section 32(1) of the Customs Act, 1969, for leveling allegation for the status of ATL is without any substance as there exist least an iota of reason to believe that the said act is on the appellant part and this has been held in the case of Fazal Kader Chowdri v, Crown PLD 1952 FC 19, That the term "reason to believe", has to be classified at a "higher pedestal, then mere suspicion and allegation, but not equivalent to prove evidence, Even the strongest suspicion cannot transform in "reason to believe", The criteria laid down (to differentiate between mere suspicion and reason to believe) has to be, that some tangible evidence is available against the accused, which if left unrebutted, may leave to the inference of guilt." Reliance is placed on reported judgment 2011 PTD (Trib.) 2220 and 2011 PTD (Trib.) 2220. (xi) That respondent No. 3 simultaneously has also invoked the provision of subsection (2) of Section 32 of the Customs Act, 1969, without observing the fact that the same is not applicable as evident from contravention report, which is silent in regards to any "deliberate act" on the part of the appellant or connivance with the Officials of the respondent No. 2 in the act of assessment/clearance of the goods, this confirms that Section 32(2) is not applicable and the case of the appellant squarely falls within the ambit of inadvertence, error and misconstruction falling under the provision of Section 32(3) of the Customs Act, 1969. The power to adjudicate cases under the provision of Section 32(3) rest with the Principal Appraiser in terms of S.R.O. 371(1)/2002 dated 15.06.2002 and none else. To the contrary, respondent No. 3 issuca show cause notice while transgressing the powers of the Principal Appraiser, which is not permitted under law, rendering the show cause notice and the anticipated order to be passed without power/jurisdiction, hence void and ab-initio and non judice. (xii) The powers of adjudication are specific and empowered by the statute. It is an elementary principle of law that where there is a conflict between special and general provision of law, the special provision shall prevails (reference is invited to the case of Lt. General (Retd) Shah Rafi Alam v. Lahore Race Club, 2004 CLD. 373). The power of adjudication, as already observed is special in nature. This cannot be eclipsed by any other general provision. Even otherwise there is another settled principal of interpretation of statute i.e. That the courts can supply construction with a view to avoiding absurdity (reference is invited to the case of Khalid Qureshi v. UBL 2001 SCMR 103). Equally it must be kept in mind that if it is held that Sections 4 and 179 and S.R.O. 371(1)/2002 dated 15.06.2002 occupy the same fields, there is likely to be redundancy in respect of powers conferred under section 179 and Notification 371(I)/2002 dated 15.06.2002. The Supreme Court in the case of East West Steamship v. Queen Land Insurance PLD 1963 SC 663 has been pleased to hold that redundancy is to be avoided in respect of any provision of the statute. There is also plethora of case law on the point that where there is a conflict between two provision of the statutes, the later provision prevails and has to be given precedents (reference is invited to the case of Sahibzada Sharfuddin v. Town Committee, 1984 CLC 1517. Apart from this law favour actions of the authorities to be confined to their own spheres of jurisdiction conferred by the statute. An action taken by a state functionary beyond the
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ambit of his jurisdiction is nullity. In this respect the judgment reported as Abida Rashid v. Secretary, Government of Sindh PLD 1995 Kar. 587 is referred. Their lordship observed as under: "It is trite law that power vested in an authority should only be exercised by that authority, in default whereof, the exercise of power and authority becomes without jurisdiction, illegal, void, ab- initio and of no legal effect. The term "without jurisdiction" has been judicially interpreted to include usurpation of power warranted by law (the Chief Settlement…
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