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Petitioner: IRAM GHEE MILLS (PVT.) LTD., LAHORE VS Respondent: CUSTOMS, CENTRAL EXCISE AND JUDGMENT
Court Name: Sindh High Court Judge(s): Shabbir Ahmed, Muhammad Mujeebullah Siddiqui Title:IRAM GHEE MILLS (PVT.) LTD., LAHORE vs CUSTOMS, CENTRAL EXCISE AND
JUDGMENT
Reported As: 2004 PTD 559 Result: Appeal dismissed Judgment JUDGMENT MUHAMMAD MUJEEBULLAH SIDDIQUI, J.---This appeal under section 196 of the Customs Act, 1969 has been admitted to regular hearing to consider the following point of law arising out of the order of Customs, Central Excise and Sales Tax (Appellate) Tribunal, Karachi in Appeal No, K-23 of 2000, dated 12-8-2000. "Whether the Respondent No,2 could charge the Appellants with misdeclaration under section 32 of Customs Act, of 1969 without producing any evidence to establish either the direct knowledge or guilty mind regarding the alleged misdeclaration and punish them with such a heavy penalty under section 156(1)(14) of Customs Act, of 1969?" Briefly stated the relevant facts are that appellant imported 3000 Metric tons of Palm Oil from Malaysia. The oil was supplied by Messrs Kulai Edible Oil Refinery Malaysia. The appellant filed into bond bill of entry for the entire quantity of 3000.000 M. Ts. There were three other importers as well. The bills of entry were processed and the entire consignment was stored in Tank No,1 of bonded (liquid) Terminal of Messrs Pakistan House International. The appellant alongwith three other importers, initially, filed ex-bond bill of entry for 1000 M.T. The appellant produced a test report supplied by the exporter in Malaysia and samples were drawn from the Oil stored in the bonded wherehouse. The appellants declared the Oil as RBD Palm Oil. The sample was tested by the Customs House Lab and on the basis of favourable test report, 1000 M.T. Of Oil out of total quantity of 3000 M.Ts. Imported by the appellant was ex-bonded and released. Subsequently, credible information was received by the Collectorate of Customs, Port Mohammad Bin Qasim to the effect that a number of importers were indulging in the import of oil unfit for
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human consumption. The issue was highlighted in the national press also. Taking cognizance of these reports, an inquiry was instituted in the matter. During the inquiry/investigation it transpired that whole of the edible oil imported per "S.S Fuji Hoshi" and supplied by Messrs Kulai Edible Oil Refinery, Malaysia contained higher percentage of stearin oil which renders the RBD Palm Oil unfit for human consumption. Accordingly, samples from Oil Tanker were again drawn, where 2000 M.Ts of oil was lying. The samples were sent for chemical test to various laboratories for determining melting point and other standard specifications. The samples were sent to PCSIR Lab., H.E.J. Research Institute of Chemistry, Karachi and Central Testing Laboratories of the Custom Department. The Test Reports received from PCSIR Lab H.E.J. Research Institute of Chemistry confirmed that the samples-were R.B.D. Stearin and were, not fit for human consumption. However, the Test Report received from Central Testing Laboratories showed that it was fit for human consumption. The Collector of Customs formed opinion that the appellant and other importers managed to get the imported oil, released by manipulation of the test report in collusion with laboratory staff. It was further found that the declaration Ned by the appellant that the oil imported was RBD Palm Oil was untrue and thus there was a mis-declaration on the part of the appellant/importer. The Collector of Customs further formed opinion that the mis-declaration contravened the provisions of sections 16 and 32 of the Customs Act, 1969 read with section 3(1) of the Import and Export (Control) Act, 1950 as untrue statement was made with reference to the description, quality and specification of goods imported. Such act was violation of the provisions contained in the Customs Act and were punishable under sections 156(1), 9 and 14 of the .Customs Act, 1969. A show-cause notice was therefore, issued to the Appellant/importer Iram Ghee Mills as to why the remaining Oil (2000) M.Ts. Which was unfit for human consumption should not be confiscated and penalties for the violation of the above said provisions of law may not be imposed. The Appellant/Importer submitted their reply and their General Manager Mr. A. Tariq appeared before Collector of Customs. The Appellant/Importer did not dispute the findings contained in various test reports furnished by Laboratories. However, the appellant altogether denied the ownership of the goods contending that they had opened a letter of credit for 1000 M.T. Of oil but the supplier exported 3000 M.. Ts. Of oil. However, the appellant admitted that into bond bill of entry was filed by them for the entire quantity of 3000 M.T. The learned Collector of Customs framed the following issues:- (i) Whether or not the goods are as per declaration of the importer? (ii) Whether or not an untrue statement has been made by the importer? (iii) Whether or not the goods arrived at port Qasim per "S.S. Fuji Hoshi" on 23-4-1999 and in pursuance of the Manifest No,190 of 1999, Index Nos. 49 to 54; do attract the provisions of Customs Act for levy of duty? (iv) Who owns the goods and stands responsible for making untrue statement to deceive the mechanism of law? The Collector of Customs held that, the importer made a declaration in respect of nature of goods as RBD Palm Oil and placed reliance on two tests reports containing findings in his favour. One test report was sent by the supplier and the other one was obtained from Chemical Laboratory of Customs. On examination of both reports the Collector found that there was a clear cut manipulation for obtaining the desired result. He further held that the supplier and importer in this case are one party as Directors of Messrs Iram Ghee Mills (Pvt.) Ltd., own Messrs Kulai of Malaysia and therefore, intent in manipulation of customs declaration by submitting wrong results in the form of a chemical analysis report Was quite understandable. The learned Collector considered as to how the manipulation was made to obtain the desired result and arrived at the conclusion that the goods imported were not of standard quality as the
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melting point of the imported goods was far greater than 37C. He further held that the importers obtained the manipulated results from Customs Lab as well which was found to be incorrect on account of testing reports from two independent Chemical Labs. He specifically held that the importer furnished no explanation in respect of the test reports furnished by two independent Chemical Labs and to the effect that the imported oil was unfit for human consumption which amounts to conceding the fact. Consequent to the above findings of fact, the learned Collector held that it is evident from the facts that the importer wilfully made a statement before Customs, which was untrue in its material particulars, thereby attracting the mischief of section 32 of the Customs Act, 1969. It also amounted to contravention of the provision of section 16 of the Customs Act, 1969 as the goods were imported in violation of the existing rules for the import and export of the goods. The learned Collector further held that the imported goods were owned by Messrs Iram Ghee Mills (Pvt.) Ltd., and not by Kulai Edible Oil. He further observed that after receiving of adverse reports from PCSIR Lab. The appellant started disowning the ownership of the goods which showed that the appellant was not able to defend the case on merits and therefore, took a plea that, the goods were owned by the supplier of Malaysia. He concluded that the goods were owned by the appellant who had submitted application also for the release of remaining 2000 M.Ts. Of Oil. He observed that since the importer did not contest the veracity of test reports of the two independent chemical labs. And instead attempted to disown the goods imported by him establishes that importer committed the offence of making an untrue statement in respect of customs affairs which is an offence in terms of section 32 of the Customs Act, 1969, read with section 3(1) of the Import and Export (Control) Act, 1950. He therefore, confiscated 2000 M.Ts. Of Oil stored in the bonded terminal because of having found unfit for human consumption. The remaining quantity of oil was confiscated under sections 9 and 14 of section 156(1) of the Customs Act. He further held that the appellant/importer got released 1000 M. Ts. Of oil which was unfit for human consumption knowingly and with intent to violate the provisions of existing laws. The appellant committed acts of misdeclaration and getting the oil unfit for human consumption released with the intent to hoodwink with laws and to defraud the Government. He therefore, imposed a penalty amounting to Rs,25 Millions (Twenty Five Millions) in terms of the provisions contained in subsection 9 and 14 of section 156(1), being equivalent to the value of 1000 M.Ts. Of oil already got released. The penalty was to be paid by the Directors of Messrs Iram Ghee Mills (Pvt.) Ltd. Being aggrieved with the above findings of the Collector, the appellant filed appeal before the Customs, Excise and Sales Tax Appellate Tribunal Karachi, (hereinafter referred to as the Tribunal) being Appeal No, K-23 of 2000. The supplier Messrs Kulai Edible Oil also preferred appeal before the Tribunal being Appeal No, K-97 of 2000, assailing the finding of the Collector that the imported oil was owned by Iram Ghee Mills (Pvt.) Ltd,. And not by the Messrs Kulai Edible Oil the suppliers in Malaysia. Both the appeals were dismissed and the importer (present appellant) as well the supplier preferred appeals before this Court against the orders of the Tribunal. The appeal preferred by the supplier was withdrawn. With the decision of the Tribunal, to the effect that the entire quantity of 3000 M.T of Palm Oil was imported by the appellant and that the appellant declared the imported oil as RBD Palm Oil in the bill of entry and other documents and that in the wake of test reports furnished by PCSIR and HEJ Research Institute of Chemistry, it was established that the imported oil was RBD Palm Stearin and not RBD Palm Oil, the questions of facts attained finality. The question of fact that the declaration made by the appellant in the bill of entry was untrue also attained finality. Now the, sole point which has been agitated before us is, whether on the basis of facts obtained on record the offence
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envisaged under section 32 of the Customs Act, 1969 has been made out and whether the penalty imposed under section 156(1)(14) of the Customs Act, 1969 is justified. We have heard Mr. Shaiq. Osmany, learned counsel for the appellant and Mr. Raja M. Lqbal, learned counsel for respondent No,2. Mr. Shaiq Osmany, learned counsel for the appellant has frankly conceded to the proposition qf law that the findings of fact given by the Tribunal are final and while exercising appellant jurisdiction under section 196 of the Customs Act, 1969, this court can decide a question of law arising out of the order of Tribunal and can deliver decision thereon. The findings of fact given by the Tribunal cannot be disturbed by this Court in exercise of advisory jurisdiction under section 196 of the Customs Act, 1969. Thus, the learned counsel for the appellant has commenced his arguments on the basis of finding of fact given by the Tribunal. His sole contention is that in order to constitute an offence under section 32 of the Customs Act, the mens rea on the part of a declarant is to be established. He has contended that a mere misdeclaration is not sufficient per se to constitute offence under section 32(1) and the Adjudicating Officer is required to find out that the declarant had the direct knowledge or guilty mind while making the alleged misdeclaration and then only consequential penal provision contained in section 156(1)(14) of the Customs Act, can be invoked which provides for imposition of penalty. At this juncture, we would like to clarify that the leaned Collector of Customs directed for outright confiscation of 2000 M.Ts of the imported oil which was notreleased and further imposed a penalty of Rs,25 Millions (Twenty Five Millions) which is equivalent to the value of 1000 M.Ts of oil which was already got released. The appeal has been admitted to consider a question of law, the tenor whereof shows that the appellant has assailed the imposition of penalty only. So far, the outright, confiscation of 2000 M.Ts of oil which was not released has thus, attained finality. We therefore, propose to consider the sole point of law relating to, the ingredients of section 32 of the Customs Act, and the imposition of penalty in consequence thereof. Advancing his arguments, the learned counsel for the appellant has submitted that the learned Collector of Customs and the learned Tribunal have not given any finding that the appellant while making a declaration in the bill of entry that the imported oil was RBD Palm Oil had any knowledge or reason to believe that it was not so and was RBD stearin, which is not fit for human consumption and thus, have failed to give a finding that the appellant had any guilty mind/intent. He has submitted that the finding on the point of mens rea/guilty intent is lacking in the orders of the learned two forums and therefore, provisions contained in section 32 are not attracted. Consequently, the penalty imposed under section 156 (1)(14) of the Customs Act, is not sustainable in law. At this stage, we would further like to clarify that the learned Collector has imposed the penalty under clause (9) as well asclause (14) of subsection (1) of section 156 of the Customs Act, and no objection has been raised before us to the imposition of penalty under clause (9). The sole + objection raised is to the penalty imposed under clause (14) of section 156(1) of the Customs Act. Clause (14) of section 156(1) deals with the commission of offence under section 32, which pertains to misdeclaration or misstatement knowing or having reason to believe that such document containing declaration or statement is false in any material particular, while clause (9) provides for confiscation of goods and imposition of penalty with reference to the acts committed in violation of provisions contained in sections 15 and 16 of the Customs Act, The two provisions are independent and separate of each other. They are not mutually exclusive and the penalty provided in clause (9) of section '156(1) of the Customs Act, is not dependent or contingent on establishing of an offence under section 32 of the Customs Act and relates to the violation of the provisions contained in sections 15 and 16 of the Customs Act. Now we revert back to the contention raised by the learned counsel for the appellant. In support of his submission that a finding on the point of mens rea is a condition precedent for constituting
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offence under section 32 of the Customs Act and imposition of penalty under section 156(1)'(14), he has placed reliance on the judgment of Hon'ble Supreme Court, in the case of Pakistan v. Hardcastle, PLD 1967 SC 1. He has placed reliance on the opinion of Hamoodur Rahman, J. (as his Lordship then was) to the effect that Item 37-B of section 167 of the Sea Customs Act, 1878 does not create an offence of absolute liability and is an exception to the general rule that mens rea is an essential element in the commission of a criminal offence. His Lordship further held that even in the case of statutory offence the assumption is that mens rea is an essential ingredient unless the statute creating the offence by express terms or by necessary implication rules it out. We have gone through the above judgment of Hon'b e Supreme Count and we find that his Lordship Justice Hamoodur Rahman, recorded a note of dissent on sole point contained in the majority judgment that the language of section 167(37-B) suggest that this is a case of absolute liability. However, . His Lordship agreed with the majority view that there was enough material on record to justify the conclusion that the element of mens rea was also present. A perusal of the judgment recorded by his Lordship Justice S.A. Rahman, with whom his Lordship Cornelius, C.J. Concurred, shows that in pursuance of the findings of fact the Collector of Customs ordered confiscation of the imported goods and imposed fine as well as personal penalty. The appeals and revisions were dismissed. The importers invoked writ jurisdiction of the High Court of West Pakistan Karachi Bench. The learned Judges of the High Court held that, the Customs Authorities "have not proved or established that the false declaration, or the fraud practised upon them, was false to the knowledge of the petitioners". It was therefore, held that no liability was incurred by the petitioners under section 39 of the Sea Customs Act. The Hon'ble Supreme Court observed that, `no attempt seems to have been made in the High Court to determine whether, on the facts and the circumstances of this case as found by the Collector, any mens rea could be imputed to the respondents or not even if the principle of the authority cited, was attracted. Nor was the question examined whether the other provisions of law referred to in the Collector's order beside section 39 of the Act, required a guilty intention to be proved or not. The Hon'ble Supreme Court thereafter examined the provisions contained in section 39 of the Sea Customs Act, (which is similar to section 32 of the Customs Act, 1969) and the provisions contained in section 167 clauses (8), (8-A), (9-B) and (37-B) of the Sea Customs Act, 1878. Clause (9) of section 156(1) of the Customs Act, 1969 corresponds to clause (8) of section 167 of the Sea Customs Act and clause 14 of section 156(1) of the Customs Act, 1969, corresponds to clause (9-B) of section 167 of Sea Customs Act. In the present case, section 3 of the Import and Export (Control) Act, 1950 has been considered by the learned two forums below and in the cited case also the Hon'ble Supreme Court took notice of the same provisions. The High Court had allowed the writ by placing reliance on an earlier judgment of the Hon'ble Supreme Court in the case of Messrs Eastern Rice Syndicate v. Central Board of Revenue. The Hon'ble Supreme Court observed that, even if the principle of the authority cited, was attracted the facts and circumstances as found by the Collector were required to be examined to find out if any mens rea could be imputed to the respondents. - The Hon'ble Supreme Court further observed that the question whether other provisions of law referred to in the Collector's order beside section 39 of the Act, required a guilty intention to be proved or not was not examined. The Hon'ble Supreme Court then itself examined all the relevant provisions in the Sea Customs Act, which are analogous to the provisions in the Customs Act, 1969 requiring considering by us in this appeal. The Hon'ble Supreme Court thereafter, held as follows:- "The interpretation, placed on section 39 of the Act in the Eastern Rice Syndicate case by this Court was that in order to attract this penal provision; it must be established that the person who is alleged to have made any statement in a document, submitted to the Customs Authorities must be false to the knowledge of the person concerned. It is obvious that such knowledge would
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depend upon the facts and circumstances of each case. It is not disputed that the statement made in the customs documents in the instant case regarding the nature and value of the goods imported were in fact false. The High Court, in the present case seems to have thought that unless the Customs Collector had recorded an express finding that the persons concerned had guilty knowledge of the false declarations made in the relevant documents, no penal action could be taken against them. With respect, it may be pointed out, that the Collector need not have stated in so many words that the false statements were made in the relevant documents, consciously and deliberately, by the respondents. It is sufficient if the Collector recorded findings of fact, from which such an inference necessarily followed. In the instant case, before the Customs Authorities, as well as in this Court, the importers on one side and the Indenting Agents on the other hand tried to pass on the blame for the wrong statements to each other. The importers were responsible, according to the Indenting Agentsposition for all the statements, and the Indenting Agents were the real culprits, according to the stand of the importers. The relevant documents were all signed by the importers. The goods were cleared through the clearing agents of the Indenting Agents who also provided the insurance cover for them. The indents had been sent to the exporters by latter and they obtained the invoices. They were also the purchasers of the goods on forward contracts. After examining the record, we have reached the conclusion that this attempt on the part of the importers and the ,Indenting Agents, to exculpate themselves and to make out that the other party was the villain of the piece, was incompatible with the facts found by the Collector of Customs.' After examining the facts obtaining in the cited case, the Hon'ble Supreme Court observed that, "all this material was before the Customs Authorities and justified their conclusions implied in the penalties, that they regarded both the importers as well as the Intending Agents to be guilty of deliberate fraud. Section 39 of the Act, consequently was applicable with full force to both of them." The Hon'ble Supreme Court further held that, on the basis of material available with the Customs Authorities, the offence, specified in section 167(9-B) (equivalent to section 156(1)(14) of the Customs Act, 1969) was brought home to the importers in whose name the false declarations were filed with the Customs Authorities and on the basis of material available it was clear that the importers were conscious that they were making false statements in those documents. The goods in question therefore, were liable to be confiscated and every person concerned, was liable to a penalty. The penalties imposed under this provision were therefore, lawful. The Hon'ble Supreme Court thereafter examined the provisions contained in Item 37-B of section 167 of the Sea Customs Act, which pertained to the declaration of goods on a bill of entry of shipping bill and it was found that the goods not so declared were concealed in or mixed with the goods so declared (equivalent to section 156(1) (45) of the Customs Act, 1969). It was further held that the importer made misdeclaration not only as to the nature of the goods imported but also about their value and therefore, the provision was directly applicable. The contention that mens rea was required to he proved before penal action could be taken against a person concerned was repelled. The Hon'ble Supreme Court held that, the language of section 167(37-B) suggested that this was a case of absolute statutory liability. It was further held that, the only condition of the attachment of liability was the fact of misdeclaration and there were no words in this item which may justify placing it on a par with section 39 of the Act which requires that an oral or written statement in a document should be "untrue" and not merely false. The Hon'ble Supreme Court further observed that the inference derivable from the language of Item 37-B that the legislature intended this to be a case of absolute liability, for which no mental ingredients need be proved. With these findings and observations the Hon'ble Supreme Court set-aside the judgment of the High Court and restored the confiscation of goods and penalty imposed.
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Mr. Shaiq Osmani, learned counsel for the appellant has contended that, no evasion of customs- duty and taxes is involved and therefore, the Customs Authorities were not justified to levy penalty under section 32(1). In this regard, he has placed reliance on the judgment by a Division Bench of this Court in the case of Kamran Industries v. Collector of Customs (Exports) PLD 1996 Karachi 68. "(29) As already underscored in the preceding paragraph No,26, allied to the objection raised by Mr. S. Tariq Ali decided above was the argument formulated by Mr. Farogh Naseem that the Customs Authorities were not justified to levy penalty under section 32(1) when admittedly there was no motive on part of the petitioner to evade tax due to the exemption in the field. He has cited copious case-law on the point which has already been referred. In order to examine the merits of this argument it is patient to scrutinize the provisions of section 32(1) which are reproduced as under:-- "(32) Statement error etc.---(1) If any person, in connection with any…
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