Full Judgment Text & Judicial Ruling

2020 P T D (Trib.) 713 [Customs Appellate Tribunal] Before Jehanzaib Wahlah, Member Judicial-III Messrs K.B. CORPORATION and another Versus The DEPUTY COLLECTOR OF CUSTOMS, KARACHI and another Customs Appeals Nos. K-05 and K-39 of 2018, decided on 15th December, 2018. (a) Customs Act (IV of 1969)--- ----S. 180---Sales Tax Act (VII of 1990), S. 33---Income Tax Ordinance (XLIX of 2001), S. 148---Show-cause notice---Erroneous sections of law invocation of---Effect---Collection of tax at import stage---Scope---Section 33, Sales Tax Act, 1990 contains penal clauses and can only be invoked for contravention of respective provisions of Sales Tax Act, 1990---Section 148, Income Tax Ordinance, 2001 prescribes the procedure for collection of income tax at import stage by the authorities referred therein---Said sections are independent under which no charge can be invoked---Issuance of show cause notice by invoking irrelevant/erroneous sections renders it void ab initio and of no legal effect.

(b) Customs Act (IV of 1969)--- ----S. 32---Sales Tax Act (VII of 1990), Ss. 11, 30 & 48---Income Tax Ordinance (XLIX of 2001), Ss. 162, 228 & 140---Mis-declaration---Assessment of sales tax---Recovery of sales tax and income tax---Procedure---Scope---Availability of word "tax" in S.32, Customs Act, 1969 does not empower Customs Authorities to exercise powers under the provisions of Ss. 11(2) & (3) of Sales Tax Act, 1990 and S.162(1) of Income Tax Ordinance, 2001---Officers of customs cannot exercise said powers unless legislature appoints them as "Officer of Inland Revenue/Commissioner of Income Tax" under S. 30 of Sales Tax Act, 1990 and S. 228 of Income Tax Ordinance, 2001---Clearance Collectorate can recover the amount of sales tax and income tax upon receipt of notice from the officer of Inland Revenue/Commissioner of Income Tax in terms of S. 48 of Sales Tax Act, 1990 and S. 140 of Income Tax Ordinance, 2001---Officers of Customs have the authority to collect sales tax and income tax at import stage in the capacity of collecting agents but they have no powers to adjudicate the cases of short payment of sales tax and income tax. 2011 PTD (Trib) 110; 2010 PTD (Trib.) 2086; 2004 PTD 801; C.P. No. D-216/2013; 2014 PTD 1963; 2015 PTD 702; 2016 PTD (Trib.) 969; 2016 PTD (Trib.) 1008; 2016 PTD (Trib.) 2125; Appeal No. K-1635/2014; Appeal No. K-1029/2016; Appeal No. K-1030/2016; PTD (Trib.) 2463 and 2017 PTD (Trib.) 481 ref. (c) Customs Act (IV of 1969)--- ----Ss. 32, 79(1) & 156(1)(14)---Mis-declaration---Confiscation of goods---Scope---Appellant imported different parts of motorcycle and filed goods declaration---Department alleged that an excess quantity of 4060 kgs of crank case cover of PCT No. 8409.9110 was found in the consignment, as against the contention of appellant that it had declared that the said part in Item No. 3 of goods declaration which reads as "clutch inner and outer katora with cover set and plate kit and intake pipe of motorcycle" weighing 8900 kgs attracting PCT No. 8714.1090---Validity---Examining officer assessed Item No.2 by construing its quantity as 4640 kgs as against declared 8900 kgs and created a new item by segregating one of the integral part from Item No.3 which comprised of complete unit of the motorcycle component---Appellant had not imported "crank case cover" as an individual part rather imported a complete component namely "clutch inner and outer katora with cover set and plate kit and intake pipe of motorcycle"---Appellate Tribunal vacated the show cause notice and set aside the order passed thereon. Chairman, Federal Board of Revenue, Islamabad v. Al-Technique Corporation of Pakistan, Ltd. and others PLD 2017 SC 99 and Collector of Customs, Sales Tax and Central Now Federal Excise v. Haji Mahmood Essa and Co. and another 2017 SCMR 884 rel. (d) Customs Act (IV of 1969)--- ----Ss. 32 & 32A---Customs General Order No. 12 dated 12.06.2002, Para. 101(b)(ii)---Mis-declaration---Scope---Where a consignment was found to contain goods of description other than the one declared falling under separate PCT heading but chargeable to same rate of duty, S. 32 or 32A could not be invoked by virtue of the fact that no false declaration was submitted. Muhammad Waheed v. Customs Appellate Tribunal 2016 PTD 35 ref. (e) Customs Act (IV of 1969)--- ----Ss. 32 & 80---Customs Rules, 2001, R. 438---Mis-declaration---Checking of goods declaration by Customs---Assessment of Customs Authorities---Scope---No charge of mis-declaration could be invoked on the basis of either transmitting or mentioning erroneous PCT in the goods declaration. State Cement Corporation v. GOP 2002 MLD 180 and Sadaat Khan v. DG Intelligence and Investigation FBR 2014 PTD 1615 rel. (f) Customs Act (IV of 1969)--- ----S.25---Declaration---Connotation---Declaration referred to the nature, description and value of goods so that the assessing officer could apply appropriate tariff rates for assessment and charging. Vithoba Syamna v. Union of India AIR 1957 Bom. 321 foll. (g) Words and phrases--- ----Claim---Meaning---Claim meant a demand for something supposed due to or demanded as a right. (h) Customs Act (IV of 1969)--- ----S. 32---Mis-declaration---Conscious knowledge of fraud---Scope---Department must establish that the person who was alleged to have made any statement in a document, submitted to the Customs Authorities, had knowledge which would depend upon the facts and circumstances of each case.

Eastern Rice Syndicate v. Collector of Customs PLD 1959 SC 364 rel. (i) Customs Act (IV of 1969)--- ----Ss. 79 & 80---Declaration and assessment for home-consumption---Checking of goods declaration by the Customs---Scope---Importer or his agent has to file goods declaration for release of the goods on which assessing officer has to make an assessment---Any claim made by an importer is subject to scrutiny by the assessing officer who has been vested with unfettered powers to complete an assessment---Claim by an importer is a request subject to approval by a competent officer and where a competent authority grants or rejects the claim, no charge of fraud or otherwise can be linked to the agent or to the principal, whose duty is to submit relevant document for processing for release of consignment. (j) Customs Act (IV of 1969)--- ----Ss. 32, 207, 208 & 209---Mis-declaration---Liability of agent---Scope---Agent represents his principal and until and unless any direct evidence is attributed against agent or when department is not able to prove any criminal intent on his part, he cannot be penalized under the general provision of the Customs Act, 1969, unless he violates the governing conditions of his license. 2002 YLR 2651 rel. Nadeem Ahmed Mirza, Consultant for Appellants. Safdar Zaman Monen, Appraiser for Respondents. Date of hearing: 26th November, 2018. JUDGMENT JEHANZAIB WAHLAH, MEMBER JUDICIAL-III.----Through this order, I intend to dispose off Appeals Nos.K-05/2018 and K-39/2018 directed against the Order-in-Original No.801413 dated 19.12.2017 passed by Collector of Customs, Adjudication-I, Karachi (Respondent No.2). 2. Since, these appeals are directed against a single order and pertain to the importer and clearing agent as well as being based on identical facts sans grounds, facts of Appeal No. K-05/2018 are taken into consideration, which are that the appellant during the course of his business activities entered into contract with Messrs Chong Qing Aeronautic Bashan Motorcycle Manufacturing Co. Ltd., Chong Qing, China for import of motorcycle parts of PCT heading 8714.1090 valuing to US$. 176000/-, the said contract was registered with the Habib Metro Bank. Subsequently, the value of contract was enhanced by US$. 105,000.00/- and the contract registered with the Bank now read to the extent of value for US$. 281,000.00/-. The shipper in fulfillment of the contract, shipped partial shipment against Invoice and Packing List No.N356PK170519-4 dated 02.08.2017 and B/L No. COMSO11542 dated 02.08.2017. Upon receipt of import documents his clearing agent M/s. Khurram Brothers, Karachi (Appellant No. 2) for transmitting Goods Declaration (GD) with the MCC of PMBQ under the provision of Section 79(1) of the Customs Act, 1969 (Act) and Rule 433 of Sub-Chapter III of Chapter XXI of Customs Rules, 2001 (Rules) which he did and as per pre-requisite deposited upfront duty and taxes, consequent to which GD was numbered as KAPE-HC-39462-26-08-2017. The Assessing Officer on appearance of GD on his work station , instead of completing the assessment on the basis of declaration and scanned documents, opted to get the goods examined prior to assessment and to proceed with adduced his opinion and forwarded to the respondent No.1, who gave his ascent and transmitted the GD to the Deputy Collector of Customs, QICT, who nominated the examiner/Appraiser for physical verification of the imported goods as per the contemplation of Section 198 and Rule 435 of the Act/Rules, who carried out the same in terms of Examination Manual, 1996 in compliance of para 5 of CGO 12/2002 and report so prepared on 02.11.2017 was uploaded in the reservoir of GD reading as "Examined the goods on the basis of GD retrieved from system. Description motorcycle parts (1) flywheel rotor packed in CTN QTY: 2000 Nos. N.WT:1900 Kgs approx. (2) Piston Kit packed in CTNS N.WT: 150 Kgs approx. (3) Clutch Inner and Outter Katora W/Plate Kit, Cover Set and intake pipe packed in CTNS N.WT: 4450 Kgs approx (4) CDI packed in CTNS QTY: 2000 No's / N. WT: 460 Kgs approx. (5) Crank Shaft packed in CTNS QTY: 1000 No's / N.WT: 2342 Kgs approx. (6) Regulator packed in CTNS QTY: 2000 No 's/N.WT: 80 Kgs approx. (7) Main and Counter Transmission Shaft packed in CTNS QTY: 2000 No's N.WT: 2581 kgs approx. (8) Cyl SA ASSY Packed in CTNS QTY: 3100 kgs / Brand not shown. I/O not shown Checked weight 100% vide QICT slip No. 8627995 dated 02/Nov/2017 and found wight 15960 kgs. .. Group to check PCT value and all other aspects... images are attached .... This examination report pertain to only on container CM4U0925788." On the strength of which the assessing officer thereafter passed assessment orders dated 04.11.2017 under the provision of Section 80 and Rule 438 in the capacity of authority defined in Section 2(a) of the Act in exercise of the powers vested upon him through SRO 371(I)/2002 dated 15.06.2002 against each item and transmitted GD on the work station of Principal Appraiser, who despite of the fact the earlier examination report was comprehensive and was sufficient, on the strength of which the assessing officer passed assessment order dated 04.11. opted to get the goods re-examined, which was conducted on 14.11.2017 and report so prepared was again uploaded in the reservoir of GD, reading inter-alia "Examined the goods on the basis of GD retrieved from system. Description motorcycle parts (1) flywheel rotor packed in CTN QTY.: 2000 Nos./ N.WT:2082 Kgs approx. (2) Piston Kit packed in CTNS N.WT: 150 Kgs approx. (3) Clutch Inner and Outter Katora W/Plate Kit, approx wt: 3220 kgs (3-A) Crank Case Cover approx Wt: 2030 Kgs (3-B) Intake pipe packed in CTNS N.WT: 180 Kgs approx total weight : 4530 kgs (4) CDI packed in CTNS QTY: 2000 No's / N.WT: 460 Kgs approx. (5) Crank Shaft packed in CTNS QTY 1000 Sets / N.WT: 2342 Kgs approx. (6) Regulator packed in CTNS QTY: 2000 No's/N.WT: 80 Kgs approx. (7) Main and Counter Transmission Shaft with 03 gears packed in CTNS QTY: 2000 No's/ N.WT: 2581 kgs approx. (8) Cylinder Head complete packed in CTNS N.WT: 3100 kgs approx / Brand not shown. I/O not shown Checked weight 100% vide QICT Slip No. 8627995 dated 02/Nov/2017 and found weight 15960 kgs. .. Group to check PCT value and all other aspects... images are attached .... This examination report pertain to only on container CMAU0925788." Upon appearance of re-examination report on the work station of the Principal Appraiser, transmitted view message under Rule 437 to the appellant for uploading of FTA, in compliance he was abreast that no FTA benefit has been claimed, hence, cannot be uploaded due to suffer of lack of availability. He on 17.11.2017 once again transmitted view message through which he called for the documents in following words "Please upload the require documents as per the EIF information the amount shows US$. 281000/- , the invoice US$. 35200.00 Plz justify with the documentary proof about the discrepancy and submit the original L/C and performa invoice assessment." In compliance the appellant No. 2 uploaded letter dated 22.11.2017 of Habib Metro Bank , wherein they informed about the committed error in EIF and break up of different partial shipment was also mentioned therein. The Principal Appraiser despite not warranted in the given circumstances of the case, again on even date transmitted view message for uploading of copy of L/C. Appellant No. 2 replied to that by uploading with the submission that "this is part shipment as we had already declared A. First item of GD. the subordinate of respondent No.1 ignored the same and transmitted view message dated 23.11.2017 for submission of L/C No. HMBC/01/059/1798". The Principal Appraiser, thereafter despite availability of clarity in every aspect, termed the assessment passed by Assessing Officer as erroneous/invalid being not in conformity with the goods found in examination report, opted to framed contravention report with the allegation of misdeclaration of description quantity, PCT and value for causing loss to the exchequer to the extent of Rs.4,381,785.00 and this act of his falls under the ambit of the contravention of Sections 32(1), (2) and 79(1) of the Act Section 33 of the Sales Tax Act, 1990 (STA) and Section 148 of the Income Tax Ordinance, 2001 (ITO), punishable under clause (14) of Section 156(1) of the Act and transmitted the same to Additional Collector, Law for approval , who gave his ascent and transmitted the GD on the work station of respondent No. 2, who issued show-cause notice dated 29.11.2017 containing the narrated facts and contravened provision of the Act/FTA and ITO as narrated in contravention report. The Advocate of the appellant replied to the show-cause notice through letter dated 02.12.2017, which failed to satisfy him and he passed order dated 19.12.2017 through which he held the charges levelled in the show-cause notice as established and ordered confiscation of the goods subject to redemption of those on payment of 20% fine of Rs.1,032,742.00 penalty of Rs.100,000.00 on/by appellant No. 1 in addition to leviable duty and taxes shown in show cause notice. The respondent No. 2 also imposed a penalty of Rs.100,000.00 on appellant No. 2 for violation of above mention provision of law. Para 4 is relevant, which is reproduced here-in-under: "Having heard the arguments of the advocate of the respondents. It is observed that the respondent importer mis-declared PCT heading of the impugned goods chargeable to additional customs duty @ of 10% and also mis-declared quantity of Item No. 5 of the GD. Moreover, an additional undeclared item crank case cover was also found where the valuation ruling is applicable @ of 5.7/ per kg classifiable under PCT 8409.9110 where 10% Add. Custom Duty is applicable, which was declared as clutch inner and outer assessable at US$. 1.45/kg it is also observed that the quoted CGO 12/2002 dated 15.06.2002 is also not applicable to the specific imported goods as the goods are chargeable with additional customs duty at 10%. The arguments of the advocate of the respondent have no weight in the presence of clear misdeclaration of under reference goods. The respondent importer have not been able to produced any plausible justification with respect to misdeclaration of PCT heading/quantity and undeclared item found in the consignment. It is evident that the importer failed to make a correct declaration of imported goods as required under 79(1) of the Customs Act, 1969, which forms the basis of assessment of the imported goods. Hence, the charges levelled in the show-cause notice are established. I, therefore, order confiscation of the offending goods under clause (14) of Section 156(1) read with Sections 32(1),(2) and 79(1) of the Customs Act, 1969. However, an option under Section 181 of the Customs Act, 1969 is given to the importer to redeem the confiscated goods on payment of 20% redemption fine Rs.1032742/- (Rupees One million thirty two thousand seven hundred and forty two only) of the value of the offending goods in terms of SRO 499(I)/2009 dated 13.06.2009, in addition to payment of duty and taxes chargeable thereon. I also imposed a penalty of Rs.100,000/- (Rs.one hundred thousand only) each on the importer and the clearing agent for violation of above mention provision of law." 3. The appellants filed the appeals on the basis of grounds enumerated therein, the consultant/advocates on the date of hearing argued the case strictly in accordance with those. No cross objection under subsection (4) of Section 194A of the Act have been filed within the stipulated period of 30 days by the respondent No.1 against the appeals preferred by the appellants instead comments, which do not in any manner qualify as memo. of cross objection, to be termed as cross appeals filed under subsection (3) by the respondent No.1 as expressed in aforesaid section. Therefore, these are to be considered merely as opinion, having no binding force, however, are placed on record of the case for perusal and consideration. 4. Rival parties heard and case record perused and so the relied upon judgments. Consequently framed the following issues for decision: l Whether Sections 33 of STA and Section 148 of the ITO can be invoked by respondent No. 2 in the capacity of an Officer of Customs appointed under Section 3 of the Act in the show-cause notice and as to whether those were correctly invoked by the respondent No. 3 in the show-cause notice? l Whether respondent No. 2 has been appointed as officer of Inland Revenue under Section 30 of the STA or any section of ITO and as to whether he is empowered to issue show-cause notice and pass order-in-original in the matter of sales/income tax? l Whether any contravention of Section 79(1) of the Act has been committed by the appellant? l Whether any excess quantity was found in the consignment of the appellant No.1 as alleged by the respondents? l Whether provision of Section 32 of the Act can be invoked on imported goods when duty and taxes leviable under declared and ascertained PCT heading are one and the same in negation of the direction issued by the Board in para B (ii) of para 101 of CGO 12/2002 dated 15.06.2002? l Whether classification of the goods imported in the light of conducted examination report in consonance with the Examination Manual, 1996 in compliance of the direction issued by the Board in para 5 of CGO 12/2002 dated 15.06.2002 rest on the appellant in the presence of availability of provision of Section 80 and Rule 438 of the Act/Rules? l Whether charge of misdeclaration of value could be invoked on the basis of the value determined in valuation ruling by the Director, Directorate General of Valuation under the provision of Section 25A of the Act and as to whether assessment of the imported goods for levy of duty and taxes can be passed with the application of stale valuation ruling i.e. after 90 days from the date of its issuance? l Whether appellant No.2 acted contrary to defined duties in the respective provisions of the Act and Chapter VIII of the Rules? 5. That as regard to Issue No. (i) . That respondent No. 2 invoked Section 33 of the STA and 148 of ITO without going through their expression, and in negation of the ratio settled by the Supreme Court of Pakistan in reported judgment 2010 SCMR 1425 Section Officer Government of Punjab Finance Department and others v. Ghulam Shabbir that the Principle of Administration of Justice and Interpretation of Statute is that "the person who is performing the role of a judge, no matter even in quasi-judicial proceeding must wear all laws of the country on the sleeves of his robes and failure to do so by any reason is not an excuse" Section 33 contain penal clauses synonymous to Section 156(1) of the Act and it is invoked for the contravention of the respective provision of STA not the Customs Act, whereas, Section 148 prescribes the procedure for collection of Income Tax at import stage by the authorities referred therein. Meaning thereby that the said sections are independent under which no charge can be invoked. To the contrary, I am flabbergasted to note that respondent No. 2 invoked these for which I am unable to visualize the wisdom of respondent No. 2, who being an officer of customs appointed under Section 3 of the Act invoked for the offence allegedly committed by the appellant of the provision of section 32 of the Act. The sections of STA and ITO could only be invoked for the contravention of the respective provision of the STA and ITO not for the contravention of any provision of the Customs Act. These are independent Sections of STA/ITO and have no nexus whatsoever with any provision of the Act. Issuance of show-cause notice by invoking irrelevant/erroneous sections of independent statute by un authorized authority render it void and ab-initio and of no legal effect as held by the superior judicial fora in their judgments reported at Asst. Collector v. Khyber Elec. Lamps 2003 PTD 1275, D.G. Khan Cement v. Collector of Customs 2005 PTD 480, Caltex v. Collector (2003 PTD 1593), Union Playing Card Company v. Collector of Customs 2002 MLD 130, Atlas Tyres v. Addl. Collector 2002 MLD 180, State Cement v. Collector PTCL 2001 CL 558, Kashmir Sugar v. Collector 1992 SCMR 1898, Rose Color v. Chairman, CBR and 2013 PTD 813 Sarwar International v. Addl. Collector of Customs. The Issue No. (vi) is answered in negative. 6. That as regard to Issue No. (ii). I, have also noticed with great concern that Respondent No. 3 in the show cause notice have invoked Section 33 of STA and Section 148 of the ITO as contended by the Consultant/Advocate of the Appellant that Respondent No. 2 even has no mandate to issue show-cause notice in the matter of Sales Tax/Income Tax. Whereas, Respondents are of the view that incorporation of the word "tax" in Sections 32(2) and (3) and 179 of the Act is sufficient for assuming powers under the charging Sections of Section 11 of the STA and 162(1) of ITO. Upon perusal of Sections 32(2) and (3) of the Act, I have observed that although the word "tax" is available, this does not empowers the Respondent No. 3 to assume powers under the provision of Section 11(2) and (3) of the STA and 162(1) of the ITO unless Legislature appoint him as "Officer of Inland Revenue/Commissioner of Income Tax", who has powers under these Sections to take cognizance in the matter relating to Sales Tax and Income Tax. It is to be noted that the word "tax" inserted in Section 179 is for the purpose of assuming power on the basis of involved amount of duty and taxes by the adjudicating authority and likewise insertion of word "tax" in section 32 , empowers the adjudicating authority for issuance of show-cause notice for penalizing the importer under the provision of subsection (1) of Section 156 of the Act , availability of the word tax in both these section does not automatically empower an officer of Customs appointed under Section 3 to wield powers under the charging /respective provisions of STA and ITO , unless, they are appointed as officer of Inland Revenue by the legislature under the existing provision of Section 30 of STA and 228 of the ITO or by carving a new subsection of Section 30 of the STA and section 228 of the ITO or all together by inserting new sections in the STA/ITO. Therefore, despite of insertion of the word "tax" in Sections 179 and 32 of the Act, the adjudicating authority including the Respondent No. 2 can only issue show cause notice within the respective applicable provisions of the Act and not under any charging sections or section 11 of the STA and Section 162(1) of the ITO which are otherwise nonexistent in the show-cause notice and no charge against the Appellant has been levelled under any provision of the STA and ITO, rather Section 33 of STA and 148 of the ITO have been mentioned, despite erroneous /irrelevant. Even otherwise, the Respondent No.2 has also relied upon clauses (14) and (14A) of Section 156(1) of the Act, which are applicable in the case of mis-declaration falling within the ambit of Section 32 of the Act. These clauses cannot be invoked in the matter of Sales Tax and Income Tax falling under Sections 11 and 162(1) ibid. 7. For further clarity of the issue I have scrupulously gone through the provision of Section 30 of the STA and Section 228 of the ITO and observed that Respondent No.2 has not been appointed as an Officer of Inland Revenue under these Sections. Resultant, he is not…

Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.

Related Legal Research & Directories

• Browse all judgments from CUSTOMS-APPELLATE-TRIBUNAL-LAHORE
• Search Pakistani statutes: Constitution of Pakistan 1973, PPC, CrPC, CPC & Family Laws
• Analyze this case with Al Wakeelo AI Legal Assistant