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Petitioner: Al-Khair Traders VS Respondent: Collector Customs
Court Name: Peshawar High Court Judge(s): Yahya Afridi Title: Al-Khair Traders vs Collector Customs Case No.: Customs Reference No. 49-P of 2013 Date of Judgment:2015-07-15 Reported As: 2015 PTD 2114, 2015 P.C.T.L.R. 1283 Result: Office accordingly
JUDGMENT
JUDGMENT ' YAHYA AFRIDI, J. --- M/s. Al-Khair Traders, Shengus Market, Khar Bazar, Bajaur Agency through its Sole Proprietor Haji Khairullah son of Haji Muhammadullah, the present petitioner, has filed the present Customs Reference under Section 196 of the Customs Act, 1969 ("Act"), seeking opinion on ten legal issues, has challenged the judgment dated 19.9.2013 passed by the Customs Appellate Tribunal, Peshawar Bench, whereby the appeal filed by the petitioner was dismissed and maintained the order of the Collector Customs Peshawar passed in Order-in-Original No. 345 of 2012. 2. Before this Court proceeds to render its opinion on the legal questions of law raised by the petitioner in the instant Reference, it would be appropriate to state, in chronological order, the events as they unfolded and finally led the petitioner to file the instant Reference. The same are as follows:- ' 1st July till 30th July, 2010. ' The present petitioner, imported 50 consignments of Polyester Fabrics. Based on Valuation Ruling No. 259 dated 3.6.2010, the imported goods were cleared on payment of Rs. 88.303 million as taxes and duties. ' 14th October, 2010. ' An audit team was constituted, which after its examination reported that, "the declared weight and systems were available in each case and the same weight was required to have been made basis for the purpose of appraisement of assessable value and assessment of duty/tax." It was also pointed therein that, the unit for weighing the Polyester fabric was Kg but the same was not
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followed, thus action led to under weighment of imported fabric and thus the short payment of duties and taxes. ' 9th December, 2010. ' Demand-cum-Show Cause Notice ("First Notice") was served upon the petitioner and Messrs Al- Salco the Customs Agency, under sub-sections (1), (2), (3) and (3-A) of Section 32 read with Section 156 (14) of the Act, by the Deputy Collector, for recovery of duties and taxes totaling Rs. 21.101 Million. ' 10th October, 2011. ' The Assistant Collector passed the Order-In-Original No. 8 of 2011 ("Order-In-Original No. 8 of 2011") holding that:- "Keeping in view the facts of the case, it is clear that the respondents have evaded sufficient amount of Government revenue knowingly, I, therefore, order the respondent to pay the short paid amount of Customs duty Rs. 15,417,259/- and Advance Income Tax Rs. 1,144,291/-, whereas an amount of Rs. 4,586,586/- has erroneously been deposited by the importer as Special Excise duty, which is exempted in terms of the said SRO. Therefore the said amount is adjusted in the short levied amount thus, the remaining total short paid amount of Rs. 11,975,664/- is recoverable from the importer and he is directed to produce treasury challans forthwith. M/s. Al-Salco Customs Agency Peshawar stayed behind during the entire proceedings and did not attend any hearing or submitted a single word in their defense and remained totally aloof during the entire proceedings. For the reason of non-fulfilment of their responsibilities under relevant Custom House Licensing Agent Rules, 2001, a penalty of Rs. 10,000/- is hereby imposed upon M/s. Al-Salco Customs Agency Peshawar." ' The decision was impugned in appeal by the present petitioner before Collector (Appeals) under Section 193 of the Act. ' 26th October, 2011. ' The record of the First Notice and the Order-In-Original No. 08 of 2011 was called for and examined by the Collector of Customs; and in consequence thereof, "four infirmities" were found, which further led the Collector of Customs to seek from the petitioner vide Show-Cause Notice, the payment of the evaded/short paid amount of duty/taxes to the tune of Rs. 21.101 Million for violation of sub-section (3A) of Section 32 read with Section 156(14) of the Act ("Final Notice"). The said four infirmities were as follows: i ' Certain irrelevant Sections of the Customs Act, 1969 were invoked in' the demand-cum-show- cause notice. ii ' In Para 6 of the Order-In-Original it is mentioned that Special Excise Duty amounting to Rs. 1,205,301/- has erroneously been made from the importer contrary to S.No. 2 of SRO 655(1)/2007, dated 29.6.2007. The said amount was thus termed adjustable/refundable. In Para 9 of the Order-In-Original adjustment of a sum of Rs. 4,586,586/-, collected on account of special excise duty, has been allowed against the recoverable amount of other duties/taxes. The adjustment/refund so allowed was found contrary to the provisions of Section 11 of the Federal Excise Act, 2005. iii. In Paras 8-9 of the Order-In-Original the charges of evasion of huge amount of duty/taxes, were established, however, the importer was not penalized for the offence committed by him. Iv. In Para-2 of the Order-In-Original the adjudicating authority has penalized the Customs Clearing Agent for not discharging his responsibilities as envisaged under the Customs Agents Licensing Rules, 2001. The cape of the said clearing agency should have been referred to the Licensing Authority in terms of Rule 90(1) of the Customs Rules 2001 for appropriate action." ' 14th December, 2012. ' Order-In-Original No. 345 of 2012 was passed holding and finally directing that:---
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i.M/s. Al-Khair Traders (Importer) should deposit Rs. 15,374,344/- as customs duty, Rs. 1165498/- as A.I.T, aggregating to a total of Rs. 16,539,842/- (Rupees Sixteen Million, Five hundred Thirty Nine Thousand, Eight Hundred Forty Two only) in terms of Section 32(3A) of. The Customs Act, 1969. ii. No action against the Customs Clearing Agency is warranted as no charge of mis-declaration as per documents furnished by them exists on the case file. Iii. Refund of FED is also hereby disallowed as elaborated in preceding paras. Iv. The Incharge Post Clearance Audit MCC Peshawar is directed to conduct audit of imported consignments of Polyester Fabric for the remaining period as permissible under the law and frame contravention cases, if identical discrepancies are observed, within thirty days of this order." ' 19th September, 2013. ' The appeal of present petitioner was dismissed by the worthy Customs Appellate Tribunal, Peshawar Bench. 3. Now moving on to the questions of law raised in the instant Reference. ' Question of law No. 1 "Whether under the facts and circumstances of the case, the impugned proceedings are nullity in the eyes of law for being coram non judice as the learned Assistant/Deputy Collector adjudicated the cause of alleged short levy (Rs.18,455,657) on 6.10.2011, beyond their pecuniary limits (Rs. 800,000) prescribed u/s. 179 of the Customs Act, 1969. The worthy counsel for petitioner vehemently argued that the First Notice issued by the Deputy Collector of Customs and the Order-In-Original No. 8/2011, passed in consequence thereof, by the Assistant Collector of Customs, are coram non judice, as the maker thereof did not have the pecuniary jurisdiction to pass the same, as per the provisions of Section 179(1) of the Act. In rebuttal, the worthy counsel for the Revenue contended that the instant issue was not relevant since the Collector of Customs, Peshawar had, vide Final Notice dated 26.10.2011, initiated, proceedings under Section 195 of the Act, and in pursuance thereof, Order-in-Original No. 345/2012 was passed on 14.12.2012, whereby the proceedings initiated by the First Notice and Order-In- Original No. 8 of 2011 passed by Assistant Collector were quashed. In this regard, the worthy counsel pointed out the findings recorded in the Order-In-Original No. 345/2012 (Paragraph 10 of the order 4th line from the top). It was in this context that, the learned counsel for Revenue asserted that the issue raised in Question No. 1 has became irrelevant and redundant, as the Order-In-Original No. 8 of 2011 passed by Assistant Collector did not exist after being quashed by the Collector of Customs under Section 195 of the Act. ' OPINION. ' Let us first consider the contention of the worthy counsel for the Revenue that the First Notice and the Order-In-Original No. 8 of 2011 were inconsequential, as the same had been quashed by the Collector of Customs vide Order-In-Original No. 234 of 2011 under Section 195 of the Act. ' Canvassing the provisions of the Act, it becomes very evident that the legislature had envisaged three distinct regimes for regulating and carrying out the essential aims embodied in the Act. The same can generally be categorized as follows:--- i. Administrative or Executive Authority. ii. Quasi-Judicial adjudicating Authority. iii. Judicial Authority trying penal provisions. ' The issue in hand relates to the first two categories mentioned above. The stark distinction between the said two regimes has been extensively discussed in Khan Trading Company's case (PTCL 2001 CL 615) in terms that:- "In the adjudicator)/ scheme, which has been incorporated in the Customs Act by the Finance Ordinance of 2000, an hierarchy has been established for adjudication of disputes between the
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Customs department and persons dealing with it such as importers. Such hierarchy is separate and distinct from the Collectorate of Customs exercising the function of administering the Customs Act and effecting recoveries thereunder, on the executive side. The Collectorate on the executive side, entrusted with the collection of revenue has been deliberately and consciously removed from the adjudicatory process. ' Section 195 of the Customs Act, which has been relied upon by learned counsel for the respondents to oppose the present petition and to provide justification for the issuance of the impugned Show-Cause Notice, has to be read in the context of the adjudicatory scheme which now forms part of the judicial process under the Customs Act. The revisional power set out in Section 195 also needs to be examined and circumscribed in the light of various statutory provisions including Section 179 of the Customs Act and the Notification No. SRO 448(1)/2000 issued thereunder by the CBR. It is clear from the aforesaid Notification read in the context of Section 179 and Section 5 of the Customs Act that adjudication authorities have been created to deal with matters of contention between the customs department and those having dealing with it such as the petitioner. ' The distinction between the two species of Collector which are envisaged by the various provisions of the Customs Act and in particular Section 194-A, Section 179, Section 5 and Section thereof. The aforesaid distinction between the two is now very much and essential feature of the Customs department. ' In the light of the segregation of functions between collection and adjudication which now forms an integral part of the Customs Act, the officers of Customs designated as adjudication authorities have to remain conscious of the fact that they are no longer Collectors of revenue but are meant to be impartial adjudicators whose decisions are subject only to the appellate jurisdiction of the Appellate Tribunal and of this Court as provided for in the Customs Act. ' The power of revision in general terms, which has been provided for in Section 195 of the Customs Act, has to be read in the,context of the Customs Act as amended by the Finance Ordinance, 2000. In this respect, as noted above, the distinction between an adjudicating authority on the one has and a Collector or other Customs functionaries has been well recognized in the legal provisions referred to above and in particular." ' This Court is in accord with the general principle laid down in the above-cited case that the Administrative/Executive and Adjudicatory Authorities, are not only distinct and independent of each other but have been assigned separate role in the Act. ' Surely, like all other authorities, the two authorities presently under review, have to remain within their assigned legal jurisdictions; the Adjudicatory Authority is to decide impartially, the disputes which arise between persons and the Executive Authority, while the latter is carrying on its functions, as the collecting arm of the Revenue; the Executive/Administrative Authority, on the other hand, apart from passing administrative decisions, relating to matters concerning export, import, preventive or anti-smuggling operations has to also decide, whether the decisions so made by the Adjudicatory Authorities, require any correction for it to be assailed before the appellate forums provided in the Act. In this regard, the intent of the legislature is very clear, as is witnessed in the express provisions assigning the dominant decision making role to the Collector of Customs, under sub-section (5) of Section 193, sub-sections (4) and (5) of Section 194-A and sub-sections (2) and (3) of Section 194-B of the Act. In addition, it is also noted in the said provisions of the Act that the period of limitation to file an appeal commences, inter alia, from the date, the impugned decision is received by the Collector of Customs, so as to provide him with adequate opportunity to seek appropriate appellate remedy. ' In this general background, when we review the role of Collector of Customs envisaged under Section 195 of the Act, it is but clear that initially, he exercises Executive Authority, and only if the
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conditions precedent stated therein are fulfilled, he assumes the role of an Adjudicatory Authority. For ease of Reference, let us review the provision of Section 195 of the Act, which reads as under:--- "Powers of Board or Collector, to pass certain orders. (1) The Board or the Collector of Customs may, within his jurisdiction, call for and examine the records of any proceedings under this Act for the purpose of satisfying itself or, as the case may be, himself as to the legality or propriety of any decision or order passed by a subordinate officer and may pass such order as it or he may think fit: ' Provided that no order confiscating goods of greater value or enhancing any fine in lieu of confiscation, or imposing or enhancing any penalty, or requiring payment of any duty not levied or shortlevied shall be passed unless the person affected thereby has been given an opportunity of showing cause against it and of being heard in person or through a counsel or other person duly authorized by him. (2) No record of any proceedings relating to any decision or order passed by an officer of customs shall be called for or examined under sub-section (1) after the expiry of two years from the date of such decision or order." (emphasis provided) ' The careful reading of the afore-mentioned section, reveals that the intent of the legislature was to provide a "corrective mechanism" to ensure proper and fair administration of taxation, at every rung of the executive/administrative authority of FBR. The most crucial aspect of this power of 'reopening' of cases vested in the FBR and the Collector of Customs under Section 195 of the Act, is that it is not to be viewed as a coercive tool, rather it is a corrective tool to ensure proper administration of taxation; preventing loss of duties and taxes on the one hand, and to avoid harm of excess recovery of duties and taxes by the Revenue from the taxpayers, on the other hand. ' Thus, a closer review of the provisions provided under Section 195 of the Act, clearly brings to light the distinct stages and the well-defined conditions precedent, for FBR or a Collector of Customs to finally invoke his authority for passing any order affecting the decision or order passed by a subordinate Customs Officer. As the issue in hand relates to the decision of the Collector of Customs, or opinion shall mainly emphasize on his powers to adjudge the legality of the decisions impugned and the opinion so sought in the instant Reference. ' Now to the various stages, which can be summarized are as follows: STAGE-I: To call and examine record. ' The Collector of Customs, who is at the pinnacle of the Executive Authority of the Customs Collectorate, may call and examine the record of any order or decision passed by his subordinate officer in his Collectorate. STAGE-II: Reviewing decision/orders of subordinate officers. ' The Collector of Customs on receipt of the record of the decision or orders passed by a subordinate Custom Officer has to adjudge the same on the touchstone of its propriety and legality. The said terms have not been defined in the Act, hence, reliance has to be made to the general dictionary meaning of the said terms. In this regard, some of the definitions rendered are as follows: LEGALITY. Oxford English Dictionary. 1. The quality or state of being legal. 2. Obligations imposed by law. Legal person n. Law an individual, company, or other entity which has legal rights and is subject to obligation. Black's Law Dictionary. 1. Strict adherence to law, prescription, or doctrine, the quality of being legal.
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2. The principle that a person may not be prosecuted under a criminal law that has not been previously published. Also termed (in sense 2) principle of legality. 21st Century Dictionary. 1. The state of being legal; lawfulness. 2. A legal obligation. Webster's New Explorer Encyclopedic Dictionary. 1. Attachment to or observance of law. 2. The quality or state of being legal; lawfulness. PROPRIETY. Oxford English Dictionary. ' Correctness concerning standards of behaviour or morals. The details or rules of conventionally accepted behaviour. Appropriateness; rightness. 21st Century Dictionary. 1. Conformity to socially acceptable behaviour especially between the sexes, modesty or decorum. 2. Correctness; moral acceptability. 3. (proprieties) the details of correct behaviour, accepted standards of conduct, from French propriete, from latin proprietas , from proprius own. Webster's New Explorer Encyclopedic Dictionary 1. Obsolete: true nature. 2. Obsolete: a special characteristic; peculiarity. 3. The quality or state of being proper; appropriateness. 4. a. Conformity to what is socially acceptable in conduct or speech. b. Fear of offending against conventional rules of behaviour especially between the sexes. c. Plural: the customs and manners of polite society. STAGE-III: Orders passed by the Collector of Customs. 'It would be appropriate to reiterate the conditions precedent for the Collector of Customs to assume jurisdiction and pass orders, as envisaged under Section 195 of the Act. The same are as follows:--- i. There should be a decision of a subordinate Custom Officer. ii. The said decision of the subordinate Customs Officer should lack legality or propriety. iii. The decision of the subordinate Customs Officer should have been passed within two years of it being examined by the Collector of Customs, and iv. In cases, where confiscation of goods or increase in duties and taxes from the taxpayer is to be sought, the Collector of Custom should serve a notice upon the person, who is to be affected by the proposed decision. ' Thus, reviewing the role of the Collector of Customs in the three stages, stated hereinabove, it is noted that, the Collector of Customs in the STAGES-I & II acts as the Executive Authority being the head of the Customs Collectorate, supervises the activities of his subordinate Customs Officers. It is only in STAGE-III and that too, if the conditions precedent as provided in Section 195 of the Act, and explained hereinabove, are fulfilled that he would assume the role of an Adjudicating Authority to decide the matter, as mandated under the law. ' In the present case, it is noted that all four conditions precedent were fulfilled and thus the Collector of Customs had the jurisdiction to exercise the revisional authority vested in him under Section 195 of the Act; the decision under revision was passed by a subordinate Customs Officer, the decision lacked legality and not propriety of the subordinate Custom Officers, the decision of the subordinate officer was examined by the Collector within statutory period of two years, and that the Final Notice was served upon the present petitioner, as the Collector of Customs found that duties and taxes required to be paid.
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' Moving on to other limb of the argument asserted by the learned counsel for the Revenue that, the Collector of Customs "quashed" the Order-In-Original No. 8 of 2011, vide Order-In-Original No. 234 of 2012, while exercising his powers vested under Section 195 of the Act. ' In this regard, the worthy counsel for the Revenue, vehemently contended that sub-section (1) of Section 195 clearly authorized the Collector of Customs to pass such order as he may think fit. Thus, the Final Notice and the Order-In-Original No. 345 of 2012, was intra vires. ' This Court is not in consonance with this assertion of the worthy counsel for the Revenue. ' Firstly, there can be no absolute or unbridled power vested in any authority; may it be Executive or Quasi-Judicial or Judicial. The discretion has to be subject to reason and the law. In this regard, this Court in Danish's case (Writ Petition No. 2713 of 2009 decided on 10.6.2010) has elaborated the mode, manner and the pitfalls of the exercise of discretion by an authority under a law in terms that:- "Discretion vested in any authority is a sacred trust, which is never to be betrayed for extraneous reasons. Arbitrariness would always creep in when authority and discretion are unguided or un-structured. ' The august Supreme Court has in Amanullah Khan and others v. The Federal Government of Pakistan (PLD 1990 SC 1092) has held that:--- "whenever wide-worded powers conferring discretion exist, there remains always the need to structure the discretion and it has been pointed out in the Administrative Law Text by Kenneth Culp Davis (page 94) that the structuring of discretion only means regularizing it, organizing it, producing order in it so that decision will achieve the high quality of justice. The seven instruments that are most useful in the structuring/of discretionary per are open plans, open policy statements, open rules, open findings, open reasons, open precedents and fair informal procedure. Somehow, in our context, the wide worded conferment of discretionary powers or reservation of discretion, without framing rules to regulate its exercise, has been taken to be an enhancement of the power and it gives that impression in the first instance but where the authorities fail to rationalize it and regulate it by Rules, or Policy statements or precedents, the Courts have to intervene more often, than is necessary, apart from the exercise of such power appearing arbitrary and capricious at times". ' This principle has been consistently followed by the Hon'ble Supreme Court in Chairman RTA v. Pakistan Mutual Insurance Company Ltd. (PLD 1991 SC 14), Director Food N. W.F.P. v. Madina Flour Mills (PLD 2001 SC 1), Chief Secretary Punjab v. Abdul Raoof Dasti (2006 SCM R 1876) and Abdul Wahab v. Secretary Govt. Of Baluchistan (2009 SCM R 1354). ' In a more recent judgment, the august Supreme Court has in Tariq Azizuddin's case (HRC No. 8340, 9504-G, 13936-G, 13635-P and 14306-G to 14309-G of 2009) reaffirmed the principle of structuring of discretion by stating that:- "The above principle of structuring of discretion has been derived from the concept of rule of law which inter alia, emphasizes that action must be based on fair, open and just consideration to decide the matters more particularly when such powers are to be exercised on discretion. In other words, arbitrariness in any manner is to be avoided to ensure that the action based on discretion is fair and transparent "...Expression 'merit' includes limitation prescribed under the law. Discretion is to be exercised according to rational reasons which means that (a) there be finding of primary facts based on goods evidence and (b) decision about facts be made for reasons which serve the purpose of statutes in an intelligible and reasonable manner. Actions which do not need these threshold requirements are considered arbitrary and misuse of power " All judicial, quasi-judicial and administrative authorities must exercise power in reasonable manner and also must ensure justice as per spirit of law and seven instruments which have
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already been referred to above regarding exercise of discretion. The obligation to act fairly on the part of the administrative authority has been evolved to ensure the rule of law and to prevent failure of justice [Mansukhlal Vithaldas Chauhan v. State of Gujrat (1997 (7) 622)..." ' Secondly, the words, "as he deems fit" cannot be viewed myopically and thereby be exaggerated in isolation. The intent of the legislature, is for the same to be exercised fairly,…
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