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Petitioner: TRIUMPH TRADERS VS Respondent: The ADDITIONAL COLLECTOR OF CUSTOMSHonorable Justice Muhammad Nadeem QureshiNadeem Ahmed Mirza,Ghulam Yasin
2014 P T D 145
[Customs Appellate Tribunal, Karachi]
Before Muhammad Nadeem Qureshi, Member Judicial-I
Messrs TRIUMPH TRADERS
Versus
The ADDITIONAL COLLECTOR OF CUSTOMS, and another
Customs Appeal No.K-340 of 2012, decided on 24th September, 2013.
(a) Words and Phrases---
----Impregnation---Meaning.
(b) Customs Act (IV of 1969)---
----Ss. 32, 179 & 223---Pakistan Customs Tariff, Chap. 39(21)---Mis-declaration of description of goods---Misleading specification/ classification of goods under PCT heading---Appellant imported artificial leather and filed goods declaration under PCT 5603.9400 of textile fabric, in pursuance of same he determined tax liability on his own and sought clearance thereof---Goods declaration submitted by appellant was selected for scrutiny, in the light of examination report, it was revealed that the appellant had declared the goods as artificial leather with woven backing in rolls which was classifiable under PCT 5903.9000 attracting customs duty 25% ad.val---After serving show-cause notice, fine and penalty were imposed upon appellant---Appellant filed appeal before Collector of Customs (Appeals), who maintained order-in-original---Contention of the appellant was that primary material of artificial leather was Polyurethane and affixed below to that was mesh of textile whether non-woven or woven---Validity---Reference to goods of a given material or substance should be taken to include a reference to goods consisting wholly or partly of such material and the heading which provide the most specific description should be preferred to the heading providing a more general description---Two or more headings each referred to part only of the material or substance contained in mixed or composite goods or to part only of the material or substance contained in mixed or composite goods or to part only of the items in a setup for retail sale, such headings were to be regarded as equally specific in addition to those goods, even if one of them had given a more or complete or precise description of the goods respectively---Major components of artificial leather was Poly Vinyl Chloride and Polyurethane or allied synthetic, the same did not fall within the ambit of either PCT heading 56.03 or 59.03---Impugned goods had to be sold in wholesale and retail as artificial leather and not as textile---Description of artificial leather being the most specific had to be preferred.
(c) Customs Act (IV of 1969)---
----Ss. 32, 179 & 223---General Rules of Interpretation of Schedule, Rr.2(b) & 3(a)---Pakistan Customs Tariff, Chap. 39(21)---PCT heading of artificial leather---Erroneous classification on the basis of past practice---Authority of classification of goods rested with Federal Board of Revenue---Scope---Artificial leather was manufactured/produced from Poly vinyl chloride, Polyurethane or allied polymer which fell under sub-chapter 21 of chapter 39 of Section VII of Pakistan Customs Tariff under PCT 3921.1300---Federal Board of Revenue classified the artificial leather under PCT 3921.1300 in the capacity of final authority for determining the correct classification---Classification made by the Federal Board of Revenue was binding on the hierarchy of Customs---Artificial leather had to be classified for all practical purposes including assessment in future---Classification of artificial leather under PCT heading 56.03 or 59.03 on the garb of non-woven or woven textile backing or on the plea of past practice was to be stopped--Wrong classification was not to be ignored on the pretext of past practice---Goods should be classified under the appropriate PCT heading given in the Customs Tariff.
Messrs P & G International, Lahore v. Assistant Collector of Customs (Appraisement), GR-II), Karachi and 3 others 2010 PTD 870 and Collector of Customs v. Sheikh Shakeel Ahmed 2011 PTD 495 rel.
(d) Customs Act (IV of 1969)---
----Ss. 2(kka), 32, & 79(1)---Customs Rules, Rr.433, 437 & 438---Declaration of goods---Charge of mis-declaration---Recovery of short levied customs duty---Scanned copies of additional documents, admissibility---Appellant was charged for mis-declaration---Contention of the appellant was that after filing goods declaration, he was asked to submit further documents to justify his claim---Appellant submitted scanned copies of other relevant documents to justify his claim, the same matched the examination report---Scanned documents were also part of declaration, therefore charge of mis-declaration was not justified---Validity---Principal Appraiser after receipt of examination report on his desktop, required the appellant to justify declaration/ classification---Appellant scanned all supporting documents including printed matter/literature, invoice detail and all other relevant important documents---Unit of measurement and the sizes of the goods matched with the examination report based on the assessing officer---Scanned documents were part of declaration---Charge of mis-declaration of unit of measurement was misplaced---Impugned order-in-original and appellate order of Collector of Customs (Appeals) was set aside---Appeal was allowed.
2011 PTD (Trib.) 22 and 2011 PTD (Trib.) 987 rel.
(e) Customs Act (IV of 1969)---
----Ss. 32 & 80(1)---Customs Rules, Rr.433, 437 & 438---Declaration of goods---Erroneous PCT heading---Charge of mis-declaration---Recovery of short assessed customs duty---Responsibilities and duties of assessing officer---Scope---Appellant importer submitted goods declaration mentioning erroneous PCT heading---Customs authorities after serving show-cause notice for mis-declaration imposed penalty on appellant---Contention of the appellant was that he had been charged for mis-declaration on account of transmitting wrong PCT heading whereas official who had suggested wrong PCT heading had been let free despite standing on the same pedestal and that Official opinion considered valid by Collectorate of Customs without going through respective PCT headings was ridiculous and absurd---Validity---Customs authorities were responsible to check the declaration of importer while completing assessment, which included correctness of the particulars of import including declaration, assessment and in case of Customs Computerized System, payment of customs duty and taxes and other charges thereon---Determination of PCT heading was duty of Customs officials for levy of customs duty and taxes as the importer fill the PCT column for assistance of the assessing officer---PCT heading submitted by importer could be either accepted or rejected by the assessing officer at the time of completion of assessment---Erroneous interpretation of statutory notification could not be deemed to be a false declaration---Appellant could not be charged for mis-declaration on account of transmitting erroneous PCT heading---Impugned order-in-original and appellate order was set aside---Appeal was allowed.
2003 PTD (Trib.) 293 and State Cement Corporation of Pakistan v. Collector of Customs and another 2002 MLD 180 rel.
(f) Customs Act (IV of 1969)---
----S. 32---Constitution of Pakistan, Arts. 4 & 25---Recovery of short assessed customs duty---Show cause notice---Discrimination---Appellant submitted declaration of artificial leather in units of packing i.e. in rolls---Other importers also declared the artificial leather quantity in rolls but neither contravention report was framed nor any show-cause notice/order-in-original was issued---Consignments of other importers were completed on the basis of weight confirmed in the examination reports---Appellant was given discriminating treatment---Validity---Customs authorities were supposed to adhere to their own precedent in administering taxing statute---Authorities could not give a differential treatment to appellant---Vacating show-cause notice in one case and taking action against another person in similar situation amounted to discrimination---Customs authorities had no power to target incidence of tax in such a way that similarly placed person be dealt not only dissimilarly, but discriminatingly---Facility allowed to someone and denied to other was discrimination---Impugned orders were set aside---Appeal was allowed.
Nazir Ahmed Tajdin v. Deputy Collector of Customs, Lahore and 2 others PLD 1977 Lah. 1392; 2002 PTD 976; 2002 SCMR 312; 2009 PTD 1507; 2005 SCMR 72 and 2010 SCMR 431 rel.
(g) Customs Act (IV of 1969)---
----S. 32---Show-cause notice---Short assessed duty, recovery of---Decision of case outside the scope of show-cause notice---Effect---Order of adjudication had been passed on a ground not mentioned in the show-cause notice which was palpably illegal.
Collector of Customs v. Rahm Din 1987 SCMR 1840 and Exide Pakistan (Pvt.) Ltd., v. Deputy Collector of Customs 2004 PTD 1449 rel.
(h) Customs Act (IV of 1969)---
----Ss. 32 & 180---Show-cause notice---Proceedings before customs authorities, nature and scope---Proceedings before Adjudication Officer were in the nature of quasi judicial and issuance of show-cause notice was very important ---Decision to issue show-cause notice was to be taken by the Collector, Adjudication by application of independent mind and not merely signing the draft show-cause notice submitted by investing agency separate from the Adjudication Department---Each category of Customs Officers was required to perform their respective functions/duties under the law---Practice to submit draft show-cause notice by the Director General of Intelligence and Investigation to the Collector Adjudication was deprecated.
Messrs Zeb Traders, Karachi v. Federation of Pakistan 2004 PTD 369 rel.
(i) Customs Act (IV of 1969)---
----S. 32---General Clauses Act, (X of 1897), S.24-A---Short assessed customs duty, recovery of---Non speaking adjudication order---Scope---Contention of the appellant was that adjudicating and appellate officer had not rebutted the grounds advanced in the memo. of appeal/additional arguments and decision/judgments relied upon by the appellant were given with substantial reasons---Impugned orders were non-speaking, therefore liable to be quashed---Validity---Impugned orders had not been passed on objective consideration and the same were treated as illegal, void, arbitrary and a result of misuse of authority vested in public functionary---No room was available for illegal, void and arbitrarily orders in any system of law---Finding of fact given by Authority Court or Tribunal not based on material available on record was illegal, arbitrary---Findings given without discussing and considering the material available on record were perverse---Perverse finding of fact was violative of the established principles of appreciation of evidence on record, therefore the same was not sustainable in law---Every judicial or quasi judicial finding should be based on reasons containing the justification for the finding in the order itself---Adjudication/appellate orders being violation of basic principles of good governance was not only illegal but also not sustainable under law---Appeal was allowed.
2005 YLR 1019; 2007 PTD 2500; 2004 PTD 1973; 2005 YLR 1719; 2003 PTD 777; 2003 PTD (Trib.) 2369; 2002 MLD 357; 1983 CLC 2882; 2005 PTD 2519; 2005 PTD 1189; PLD 1995 SC (Pak) 272; PLD 1970 SC 158; PLD 1970 SC 173; 1984 SCMR 1014 and 2012 PTD (Trib.) 619 rel.
Nadeem Ahmed Mirza for Appellant.
Ghulam Yasin, Appraising Officer, for Respondents.
Date of hearing: 24th September, 2013.
ORDER
MUHAMMAD NADEEM QURESHI (MEMBER JUDICIAL-I).--The appeal, filed by the appellant, is directed against Order-in-Appeal No. 6096 of 2012 dated 31-5-2012 passed by the Collector of Customs Appeal maintaining the Order-in-Original No. 92325 of 2012 dated 25-1-2012 passed by the Additional Collector of Customs , Model Customs Collectorate of PaCCS, Custom House, Karachi.
2. Brief facts of the case as reported are that the appellant electronically filed goods declaration, declared to contain Artificial leather Total quantity 1758 Rolls under PCT 5603.9400 of total invoice value of US$. 2500.0518. They determined his tax liability on his own and sought clearance thereof under section 79(I) of the Customs Act, 1969 (hereinafter the Act). However, in order to check as to whether the appellant had paid correct amount of duties/taxes the aforesaid GD was selected for scrutiny in terms of section 80 of the Act scrutiny of the goods declaration in the light of examination report revealed that the appellant had declared the goods as Artificial Leather with woven backing in rolls (assorted colors/designs) I/O not shown in (N.Wt.25800 Kg) Approx Correctly classifiable under PCT 5903.9000 attracting customs duty 25% ad.val it is further pointed out that the Artificial Leather with Woven Backing origin China are assessable in terms of data at US$ 3.0/Kf. The offending value of misdeclared description/ specification/classification and wrong UOM is Rs.6,703,007.00. Therefore, the appellant had attempted to get the goods released on lower value by declaring misleading description/specifications and classification. In addition to above, it is further noticed that the appellant had declared the unit of measurement as "Rols" to mislead customs besides declaring unit value of the goods as low as US$ 0.097/kg, if taken in kilograms. However, the correct unit of measurement is "Kilograms". Whereas the goods are assessable @ US$ 3.0/kgs on the basis of actual weight determined by examination staff i.e. 25800 Kilograms. The offending value of mis declared UOM amounts to Rs.6,703,007.00. The appellant was accordingly charged under the relevant provisions of law for deliberately mis-declared the description, specification an classification and attempted to defrauding the Government from its legitimate revenue amounting to Rs.1,729,073.00. The appellant controverted the levelled allegation through reply dated Nil and addendum dated 29-1-2012. The respondent No.1 disagreed to the stance of appellant and passed order-in-original 25-1-2012 holding the charges levelled in the show-cause notice as proved. The operative part of the impugned order read as under:--
"I have gone through the record of the case, replies to the show-cause notice and the comments of the department on these replies. Mr. Nadeem Ahmed Mirza consultant in reply to the show-cause notice has contended that the adjudication officer has not applied his independent mind on the allegation levelled in the show-cause notice. This contention of the consultant is a mere assumption and is baseless. The show-cause notice was issued after proper application of mind. The consultant has further suggested a new PCT heading for the classification of the imported consignment. Without going into the merit of suggested PCT Heading if at least confirms that the importer had not declared the correct classification of the time of filing of the goods declaration. The suggested PCT heading by the consultant relates to the plastic sheets etc. and does not cover the product declared as well as product found undeclared during examination. The initial allegations against the importer were mis-declaration of description value and the unit of measurement. The consignment was re-examined for the exact determination of the quantity goods for which wrong description was declared. Upon re-examination 7500 kg of imported consignment was found to be with woven back, which is classified under PCT heading 5903.9000. The remaining consignment was found as per declared description. The rate of duty chargeable on the artificial leather with woven back (PCT heading 5903.9000) is 25 % as against 15% chargeable on the declared description. Both the replies to the show-cause notice submitted on behalf of importer do not comment on this aspect. Hence the charge of mis-declaration of description to the extent of 7500 kgs is established. The Pakistan Customs Tariff has laid down the unit of measurement of the artificial leather classified under chapters 56 and 59 as kg. The representative of the importer during hearing pointed out that they had declared the quantity in rolls as per the past practice for which he showed a long list of previously filed GD's. The learned consultant in reply to the show-cause notice has refereed to previous evidences where rolls were declared as the unit of measurement. This plea of past practice which is against the existing instruction cannot be accepted in view of the reported judgments of the Honourable High Court in the case of Messrs P&G International v. Assistant Collector of Customs, Appraisement, Karachi (2010 PTD 870) and Collector of Customs v. Shaikh Shakil Ahmed (2011 PTD 495) where in it has been held that on unlawful practice cannot over ride the law. In all such cases, where the unit of measurement has not been declared correctly with the intention to defraud the government of its legitimate revenue has taken uniform decision without discrimination. The instant case can not be an exception. The weight of the consignment was also found 5.6% more than the declared weight. This again established the intention of the importer to defraud the government of its legitimate revenue by not declaring the correct unit of measurement. In the light of this discussion I am convinced that the charge of mis-declaration of unit of measurement with the intention to evade the duty and taxes is also established. Accordingly, the consignment is confiscated under clauses 14, 14(A) and 45 of section 156(1) of the Customs Act, 1969 for violation of sections 32(1), 32(2), 32(A) and 79 ibid however, an option is given to the importer under section 181 of the Customs Act, 1969 to redeem 7500 kgs of artificial leather with woven backing (PCT heading 5903.9000) on a fine of 35% of the ascertained value of offending goods as prescribed under S.R.O. 499(I)/2009 dated 13-6-2009 to the tune of Rs.681,992.00 in addition to the duty and taxes leviable on this part of the consignment. The remaining consignment can the redeemed under section 181 of the Customs Act, 1969 on a fine equal to 20% of the ascertained value of offending goods. A penalty of Rs.150,000.00 is also imposed under clauses (14) and (14A) of section 156(I) of Customs Act, 1969 on the importer/NTN holder."
3. The appellant being aggrieved from the Order-in-Originals passed by the respondent No.1 filed appeal before the Collector of Customs, Appeals. The Learned Collector of Customs (Appeals), who maintained order-in-original being correct in law but reduced the imposed penalty to Rs.50,000.00, the operative paras 7 and 8 of the impugned order read as under:--
"I have carefully considered the written and verbal submission made from both sides in the instant case it is observed that appellant imported a consignment declared to contain ARTIFICIAL LEATHER under PCT 5603.9400, during the examination of impugned goods it revealed that the appellant had declared the goods of Artificial Leather under HS Code 5603.9400 chargeable to custom duty import 15% advice. However on examination the goods had been identified as Artificial Leather with Woven Backing in rolls (Assorted Colors/designs ) I/O Not shown (N.WT: 25800 Kg) Approx" correctly classifiable under PCT 5903.9000 attracting customs duty 25% ad.val. it was further pointed out that appellant declared the lower value of goods by mis-declaring the description, specification, classification and wrong UOM of the imported goods. The learned counsel for the appellant pleaded that the appellant considered his imported artificial leather to be falling under PCT heading 5603.9400 meant for non woven textile fabric whether or not impregnated, whereas principal Appraiser/respondent of customs MCC of PaCCS classified a part of that under PCT heading 5903.9000 under which "Textile fabric impregnated, coated, cover or laminated with plastic under then those of heading 5902". In both the PCT heading the primary material is textile i.e. PCT heading 5603.9400 and 5903.9000 with the exception in later, which is impregnated coated covered or laminated with plastic and these cannot be seen through naked eyes as evident from Word Customs Organization Explanatory Notes. That it is pertinent to add that for transmission of erroneous PCT heading, the appellant had been charged for mis-declaration whereas, official who also suggested on erroneous PCT heading has not been charged for any offence that as regards the charge of unit of measurement i.e. also without any substance by virtue of the fact that the Principal Appraiser offer receipt of examination report on his desktop transmitted a view message dated 28-11-2011 under rule 437 of Customs Rules, 2001 to appellant reading as "please justify declaration/classification and scan all supporting documents including printed matter/literature showing constituents material composition and showing all specification, FTA if applicable invoice, detail container wise packing list, B/L and all other relevant import documents. "Which were scanned and those were containing the unit of measurement and the sizes of the goods and that matched with the examination report.
Under the foregoing facts and circumstances I am of the view that from the record of the case as well as the arguments advanced by the rivals it transpires that the appellant mis-declared the classification, value and UOM of the impugned goods to the extent of 7500 kgs. The impugned item is correctly classifiable under HS 5903.9000 to be measured in kilograms since such items are conveniently measured by weight rather than rolls. Infact the first Schedule to the Customs Act, 1969 i.e. the Pakistan Customs Tariff also envisages the item to be assessed for value in terms of weight only, which thus becomes binding on the appellant as held by the Supreme Court in judgments quoted by the respondents. It must be admitted here that the learned counsel for the appellants has filed an exhaustive memo. of appeal however the counsel in his grounds of appeal has placed reliance on points which I do not find convincing. As a matter of fact, as stated in the order-in-original, he has admitted that the appellants suggested a different PCT heading for the impugned goods rather than the declared by him. This it self shows that the appellants were not sure about the correct classification of the impugned goods. In addition citing of judgments of the Superior Courts are very general in nature and do not relate to the inefficacy of this particular case, specially when the GD was electronically filed using the PaCCS facility which is based on self assessment and all declaration are made by the importer himself. Evidentially, any mistakes/error made by the importer cannot be taken for granted by the concerned customs authorities. However, considering all the aspects of the case, I am inclined to rule that whereas the impugned order-in-original has been correctly passed to the extent of imposition of redemption fine and levy of duty and taxes on the impugned goods however the personal penalty imposed on the importer is harsh and the same is accordingly reduced to Rs.50,000.00 only. The impugned Order-in-Original No.92325 of 2012 dated 25-1-2012 is modified to this extent only and the appeal is disposed off accordingly."
4. The appellant has now challenged the above order by way of this appeal. The consultant Nadeem Ahmed Mirza appeared on behalf of the appellant who reiterated the arguments incorporated in the memo. of the appeal and emphasized that:--
(1) The appellant considered his imported artificial leather to be falling under PCT heading 5603.9400 meant for non woven textile fabric whether or not impregnated. Whereas, Principal Appraiser/Respondents of Customs, MCC of PaCCS classified a part of that under PCT heading 5903.9000 under which "Textile Fabric impregnated, coated, cover or laminated with Plastic other than those of heading 5902" falls. In both the PCT heading the primary material is textile i.e. PCT heading 5603.9400 and 5903.9000 with the exception of fact in later, which is impregnated, coated, covered or laminated with plastic and these cannot be seen through naked eyes as evident from World Customs Organization, Explanatory Notes reading as "Textile Fabric in which the impregnation, coating or covering cannot be seen with the naked eyes instead can be seen only by reason of a resulting change of colour usually fall in Chapters 50 to 55, 58 or 60. Examples of such fabrics are those impregnated with substances designed solely to render them crease proof, moth proof un-shrinkable or waterproof (e.g. waterproof gabardines and poplins). Textile fabric partially coated or partially covered with plastics and bearing design resulting from these treatments are also classified in Chapters 50 to 55, 58 or 60."
(2) That in artificial leather the primary material is Polyurethane and affixed below to that is mesh of textile whether non-woven or woven and by virtue of its…
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