Full Judgment Text & Judicial Ruling

2019 P T D (Trib.) 212 [Customs Appellate Tribunal] Before Muhammad Nadeem Qureshi (Member Judicial-I) and Muhammad Nazim Saleem (Member Technical-II) Messrs AL-AMNA INTERNATIONAL Versus The DIRECTOR, DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATIONS, FBR-KARACHI and 2 others Customs Appeal No.K-150 of 2014, decided on 16th April, 2018. (a) Sales Tax Act (VII of 1990)--- ----S. 13 & Sched. VI, Table 1, Sr. Nos.15 & 61---Exemption---Bottled and canned fruits---Scope---Appellant imported bottled and canned fruits and sought exemption from payment of sales tax under Serial No.15 of Table 1 of Schedule VI of Sales Tax Act, 1990---Software of PaCCS and WeBOC accepted the goods declarations for exemption---Director Project of software WeBOC, later on, restricted the software to the extent of PCTs mentioned in column No. 3 of Table 1---Appellant filed representation against the said act of Director Project of software WeBOC---Appellant was then advised to claim exemption under Serial No.61 of Table 1 which was to be amended by the Assessing Officer at the time of passing orders under S.80, Customs Act, 1969---Appellant started transmitting goods declarations under Serial No. 61 and Assessing Officer upon review allowed the exemption under Serial No. 15---Deputy Collector (Assessment), after release of goods, passed reassessment order and Directorate General Intelligence and Investigations (FBR) forwarded the contravention report to Collector of Customs (Adjudication), who issued show cause notice and thereafter directed appellant to pay sales tax, additional sales tax, income tax and imposed penalty---Plea of department was that exemption of sales tax claimed by appellant under Serial No. 61 only covered re-import of Pakistan goods and there was no exemption available to imported goods/fruits (except imported from Afghanistan)---Validity---Table No.1 is for import and supply and had to be read in conjunction with Note 1, which stipulated that exemption would be admissible on the basis of description of the goods as mentioned in column No. 2 of the Schedule---Pakistan Customs Tarrif (PCT) classification of heading was provided for ease of reference and commodity classification purpose only, meaning thereby that if any PCT was not incorporated in column No.3 and the goods so imported answered the description of the goods as mentioned in column No. 2 of the Schedule, exemption was available to those under respective serial number of Table 1 of Sixth Schedule to the Sales Tax Act, 1990 without any exception---Legislature, through Serial No. 15 had denied exemption on the imported fruit whether fresh, frozen or preserved with the exception of bottled or canned meaning thereby that imported canned or bottled fruits were exempt from the payment of sales tax---Even if it was presumed for sake of arguments that there existed anomaly or ambiguity in Serial No. 15 same would lead to two or more interpretations, even then it had to be resolved in favour of the appellant---Appellate Tribunal set aside the orders passed by customs authorities and allowed the appeal. 1989 CLC 146 and 2011 PTD (Trib.) 79 fol. 1993 SCMR 274; 2005 SCMR 728; 2007 PTD 1656; 2008 PTD 1227 and Messrs General Food Corporation's case 2016 PTD (Trib.) 277 ref. (b) Customs Act (IV of 1969)--- ----Ss. 32, 80, 83, 193 & 180---Customs Rules, 2001, R. 442---SRO No.371(I)/2001 dated: 15.06.2001---SRO No.486(I)/2007 dated 09.06.2007---Show-cause notice---Post clearance audit---Procedure---Jurisdiction---Past and closed transaction---Scope---Directorate General Intelligence and Investigations (FBR) after clearance of imported goods prepared contravention report and forwarded the same to Collector of Customs (Adjudication)---Collector of Customs (Adjudication) issued show cause notice and thereafter directed recovery of sales tax, additional sales tax, income tax and imposed penalty---Validity---Directorate General Intelligence and Investigations (FBR) assumed the powers to conduct post clearance audit---Directorate of Post Clearance Audit was entitled to revise every aspect of declaration and assessment order---If after completion of audit any discrepancy or ambiguity was found in the documents it had to prepare audit observation and serve on the importer for justification, if he failed to justify, contravention report had to be framed under S.32(2A), Customs Act, 1969---Contravention report had to be forwarded to the Collector of Clearance Collectorate who then was to forward the same to Collectorate of Customs (Adjudication) for issuance of show cause notice---Official of Directorate General Intelligence and Investigations (FBR) after passing of assessment order and thereafter passing of clearance orders could not prepare contravention report---Only course left to the officials of Directorate General Intelligence and Investigations (FBR) was to challenge clearance order before Collector of Customs (Appeals) through an appeal---Collector of Customs (Appeals) could issue show cause notice to the importer under S.32, Customs Act, 1969---No appeal having been filed against the assessment order passed by the appropriate officer within the stipulated period of 30 days, resultantly said order attained finality and could not be disturbed being a past and closed transaction---Preparation of contravention report was held to be null, void ab initio and corum non judice. Messrs Paramount International (Pvt.) Ltd., Karachi v. Secretary Revenue Division 2014 PTD 1256 and Waseem Ahmed and others v. FOP and another 2014 PTD 1733 fol. Messrs Mustafa Impex v. Government of Pakistan through Secretary Finance, Islamabad PLD 2016 SC 808 = 2016 PTD 2269 ref. (c) Customs Act (IV of 1969)--- ----Preamble---"Import stage"---Meaning and scope---Import stage means the time of clearance of the goods so imported not those which have been released/cleared. (d) Customs Act (IV of 1969)--- ----S.195---Federal Board of Revenue has no mandate to interpret the provision of the Act or amend the provision; it could only give opinion; it is for the judicial fora to interpret the provision of statute. Central Insurance Co. v. Central Board of Revenue 1993 SCMR 1232; Messrs Lever Brother Pakistan Ltd. v. Customs Sales Tax and Central Excise Appellate Tribunal, Karachi 2005 PTD 2462 and Qazi CNG Station, Gujrat and another v. Directorate General of Intelligence and Investigation-FBR, Karachi and 2 others 2016 PTD (Trib.) 107 fol. (e) Customs Act (IV of 1969)--- ----Ss. 18, 202 & 180---Sales Tax Act (VII of 1990), Ss. 6 & 11---Income Tax Ordinance (XLIX of 2001), Ss. 148 & 162---Recovery of Sales Tax and Income Tax at import stage---Jurisdiction---Power to adjudicate---Show-cause notice---Scope---Clearance Collectorates have the authority to collect Sales Tax and Income Tax at import stage in the capacity of collecting agents in terms of S.6 of Sales Tax Act, 1990 and S.148 of Income Tax Ordinance, 2001 sans recovery proceedings---Clearance Collectorates are also empowered to recover escaped/short paid customs duty and regulatory duty levied on the imported goods under S.18, Customs Act, 1969 in exercise of the powers conferred under S. 202, Customs Act, 1969 after due process of law, but have no powers in any case to adjudicate the cases of short recovery of sales tax and income tax under S. 11 of Sales Tax Act, 1990 and S. 162(1), Income Tax Ordinance, 2001. (f) Customs Act (IV of 1969)--- ----Ss. 32 & 180---Show-cause notice---Jurisdiction---Recovery of other taxes before addition of "taxes" in S.32---Scope---Collector of Customs (Adjudication) issued show-cause notice and thereafter directed recovery of sales tax, additional sales tax, income tax and imposed penalty---Purportedly offending import transactions took place during the years 2012 to 2013--- Expression "taxes" was added in S. 32(2), Customs Act, 1969 with effect from 01.07.2014 by virtue of Finance Act, 2014, meaning thereby that before the referred date it was only the evasion of customs duty which fell within the mischief of S. 32, Customs Act, 1969---Invocation of S. 32, Customs Act, 1969 for recovery of sales tax, and other consequential taxes, on the imports, which took place in the year 2012 to 2013 before coming into being of the said provision, was neither warranted nor permissible under the law. Nadeem Ahmed Mirza, Consultant for Appellant. Saud Hassan Khan, I/O for Respondent No.1. Ashfaq Ahmed, Principal Appraiser for Respondent No.2. Date of hearing: 31st January, 2018. JUDGMENT MUHAMMAD NADEEM QURESHI, MEMBER (JUDICIAL-I).--Through this order, We dispose off Appeal No. K-150/2014 filed under Section 194-A of the Customs Act 1969 (Act) directed against impugned Order-in-Original No. 13/2013 dated 17.12.2013 passed by the Collector of Customs, Adjudication-II (respondent No. 3). 2. Brief, facts of the case, the appellant is importer and distributor of bottled and canned fruits namely "mix fruits with syrup" and "Pine Apple Choice slice in heavy syrup etc." of different origins and at the time of transmitting Goods Declaration (GD) with the MCC of Appraisement-East (respondent No.2) claiming exemption from payment of sales tax under Serial No. 15 of Table 1 to be read in conjunction with Note 1 to the Sixth Schedule of the Sales Tax Act, 1990, the software of PaCCS and WeBOC accordingly accepted the GDs for exemption. Subsequently, the Director Project of the WeBOC revisited the uploaded software and restricted it to the extent of PCTs mentioned in column 3 of Table-I only, as against its essence and spirit outlined in Note-I. This act off his blocked the exemption available to the importers of bottled/canned fruit under Serial No. 15 of Table-1 of the Sixth Schedule. Resultant, the appellant approached, the Director Project with the representation that why existing software of WeBOC was revisited, despite being correct in law and abreast him about the problem faced by him in claiming exemption under Serial No. 15 due to feeding of PCTs incorporated in Column 3 of the Table 1 sans description, while ignoring the expression of Note 1 to the Schedule. The respective official of the Directorate of Project advised the importer to claim exemption under Serial No. 61 while ignoring the fact that the same is irrelevant, in the transmitted GD, which shall be corrected/amended accordingly by the respective assessing officials at the time of passing orders under Section 80 of the Act and Rule 438 of Sub-Chapter III of Chapter XXI of Custom Rules 2001 (Rules). The appellant accordingly started transmitting GDs under Serial No.61 of the Sixth Schedule to the Sales Tax Act, 1990. The assessing officer upon receipt of review under Rule 441 used to complete the GD while allowing the exemption under Serial No.15 with the remarks "goods are covered by the description given in Serial 15 of Schedule VI , whereas corresponding PCT heading have not been given. The PCT headings are just for reference purpose and the benefit if any is allowed to the described product. In view of the situation Serial No. 61 is used GD assessed accordingly with the benefit of Schedule Sixth is admissible" and the appellant accordingly upon receipt of view message for payment of additional duty and taxes paid those and his consignments were allowed release for obtaining delivery by the competent authority under section 83 of the Act, and Rule 442 of Rules. On 13.03.2013 Karachi Chamber of Commerce and Industry forwarded a letter to Chief Collector of Customs with the submission that as to whether bottled and canned fresh fruits falling under PCT 2008,2000 and 2008, 9700 are exempted under Serial No.15 to the Sixth Schedule or not and through the said letter provided a list of importer whose consignments were released while granting the exemption contrary to the Importers of the identical product who neither claimed the exemption nor were allowed and sought clarification in this regard enabling it to disseminate the same to their Members. The Deputy Collector-Group I of the MCC Appraisement-East (subordinate of respondent No. 2) moved a file and after seeking approval of the Additional Collector passed reassessment orders on 23.03.2013 in 30 GDs listed in contravention report/show cause notice with the remarks "during monitoring it was found that the benefit of Sales Tax is extended by the assessing officer. I put forward the cases of the same in the file to ADC on 11.03.2013. The GD is reassessed to create recovery, the importer is directed to pay the amount. The issue was already taken by the Collectorate before contravention submitted by the Customs Intelligence on 18th March 2013." The appellant in exercise of their guaranteed right under Section 193(1) of the Act, assailed the said order before the Collector of Customs-Appeals on 12.04.2013 vide Nos.4633/ 2013 to 4659/2013 and the matter became sub-judice. despite of the said fact the Officials of respondent No.2 harassed the appellant for payment of Rs. 12,500,000.00, against which he deposited pay orders equivalent to Rs. 2,500,000.00 and post dated cheques for Rs.10,000,000.00 under cover of letter dated 25.03.2013. Meanwhile the Director, Directorate General of Intelligence and Investigation-FBR, Karachi (respondent No.1) forwarded contravention report dated 18.03.2013 to the respondent No. 3, who issued show cause notice dated 24.06.2013 despite not warranted under law as reassessment orders had already been passed under Section 80(3) of the Act, which were assailed by the appellant before the Collector of Customs Appeal on 12.04.2013, with the allegation that the appellant by importing and clearing under reference consignments of canned pineapple, fruit mix, fruit cocktails of PCT 2008,2000 and 2008,9700 through undue claim of exemption of Sales Tax under S.No.61 of the Sixth Schedule to the Sales Tax Act, 1990, evading thereby government legitimate revenue to the tune of Rs.13,129,556.00 (Sales Tax of Rs. 10,446,374.00, Additional Sales Tax amounting to Rs.1,958,695.00 and Income Tax Rs.724,486.00) have committed offence of mis-declaration and fiscal fraud under sections 32(1) and (2), 32A, 79 and 80 of the Act, read with Sections 3, 6 and 7A of the Sales Tax Act, 1990 further read with Section 148 of the Income Tax Ordinance, 2001, punishable under clauses (14) and (14A) of Section 156(1) of the Act, read with Sections 33, 34, and 36 of the Sales Tax Act, 1990. The appellants opposed the formed opinion and so the contravening provision of the Act/Ordinance, through reply dated 29.10.2013, which failed to impress the respondent No. 3 and he passed order-in-original dated 17.12.2013, paras 6 and 7 are relevant, which is reproduced here-in-below:- "6- Record of the case been examined and thoughtful consideration has been given to the submission of the case making agency as well as Messrs Al-Amna International. Reply submitted by Messrs Al-Amna International (NTN-2532634), Karachi, mainly challenges the issuance of show-cause notice being without power/jurisdiction. It is also argued that on behalf of the importer that the exemption of Sales Tax under Sixth Schedule of the Sales Tax Act, 1990, was granted with reference to the description of the goods as specified in column No. 2 of the said Schedule and a faulty interpretation of the same has been made by the case making agency. 7- After going through the reply to the show-cause notice on behalf of Messrs Al-Amna International, (NTN-2532634), Karachi, submission made by the departmental representative i.e. Directorate General of Intelligence and Investigation-FBR, Regional Office, Karachi, during the course of hearing and judgment of the Hon'ble High Court of Sindh, Karachi vide C.P. No. 1249 of 2013 dated 13.11.2013 as perused by the departmental representative, the charges levelled in the show-cause notice stand fully established against Messrs Al-Amna International, (NTN-2532634), Karachi. Therefore, I order to recover the Government legitimate revenue to the tune of Rs. 13,129,556/- (Sales Tax of Rs. 10,446,374/- Additional Sales Tax amounting to Rs. 1,958,695/- and Income Tax Rs. 724,486/-) from the importer Messrs Al-Amna International, (NTN-2532634), Karachi. A personal penalty of Rs. 1,000,000/- (Rupees Ten Lacs Only) is also imposed on Messrs Al-Amna International, (NTN-2532634), Karachi in terms of clauses (14) and (14A) of Section 156(1) of Act." 3. The appellant has now challenged the order by way of instant appeal, the Advocates/Consultant argued the case on the date of hearing strictly in accordance with the grounds incorporated in memo. of appeal and placed reliance on plethora of judgment copies of which were supplied, and are made part and parcel of the case for perusal. 4. No cross objection were submitted within the stipulated period given in subsection (4) of Section 194A of the Act, either by respondent No.1 or 2, instead parawise comments dated nil were submitted, which are made part of the case. The representatives of the respondents argued during the course of hearing in the light of those, while laying emphasis that exemption under Serial No. 15 is not available to the appellant and the judgments passed by the respondent No. 3 is therefore correct in law and fact, as evident from the judgment of the High Court of Sindh, which ought not had to be relied upon or considered as ordered by the Hon'ble Supreme Court of Pakistan at the time of passing the judgment by the Tribunal vide dated 03.02.2014, spirit and interpretation of Serial No.15 of Table 1 of 6th Schedule to the Sales Tax Act, 1990 remains the same, hence, appeal is without merit and be dismissed. 5. Arguments heard and concluded. After perusal of the record as well as arguments extended by both the parties, it has been noticed and observed that the appellant's consignments according to the impugned show-cause notice dated 24.06.2013 cleared without payment of sales tax by claiming the exemption on import stage under Sixth Schedule of Sales Tax Act, 1990. The relevant import data stated from period June, 2012 to February, 2013 was accordingly analyzed and total 29 consignments of import and exemption claiming thereon at the import stage were found. The exemption of sales tax claiming against Sr. No.61 of Sixth Schedule which only covered re-import of Pakistani goods and there is no exemption available to imported goods/fruits (except fruits imported from Afghanistan). As per show-cause notice, the appellant was charged under provision of Sections 32(1) and (2), 32A, 79 and 80 of the Customs Act, 1969 read with Sections 3, 6 and 7A of the Sales Tax Act, 1990, further read with Section 148 of the Income Tax Ordinance, 2001 punishable under Clauses (14) and (14A) of Section 156(1) of the Customs Act, 1969, read with Sections 33, 34 and 36 of the Sales Tax Act, 1990. 6. Prior to dilating upon other factual and legal aspect of the case, it is of vital importance for us to dilate upon the vital aspect of assumption of jurisdiction under what law the Director General Intelligence and Investigation (FBR) Regional Office, Karachi assumed the powers to conduct the post clearance audit of the selected 29 GDs. The only jurisdiction lies, if otherwise, with the Director General of Post Clearance Audit. The Officials of Directorate General of Post Clearance Audit (DGPCA) have been delegated powers through Notification No.500(I)/2009 dated 13.06.2009, which includes every aspects of the declaration made by the importer and assessment orders passed by the competent authorities of the Clearance Collectorate under Section 80 of the Act and Rule 438 of Rules and after completion of audit if any discrepancy or ambiguity is found in the submitted/scanned documents and which contravened the provision of the Act/Notification, prepare audit observation and serves that on the importer for clarification/ justification, if he fails to reply or justify, contravention report is framed under Section 32(3A) of the Act, and forward that to the Collector of Clearance Collectorate, which onward forward/transmit to the respective Collectorate of Customs, Adjudication for issuance of show-cause notice under section 180 of the Act, by the competent authority enunciated in Section 179 ibid. The officials of respondents Nos.1 and 2 are not Officials of Post Clearance Audit and therefore cannot conduct audit of transaction of import of Post Clearance. The Tribunal has observed with great concern time and again in its judgments that the respondents Nos. 1 and 2 are running parallel departments to the DGPCA and Inland Revenue Services. This is not permitted under law because their act is instrumental in creating a situation of anarchy within the different organs of FBR, who will left no stone unturned for exceeding their jurisdiction, while encroaching the powers/jurisdiction of the other sovereign organs of the FBR. These type of act cannot be allowed to be perpetuated, under any circumstances instead have to thwart from the very beginning for sustaining the integrity and independence of the different sovereign organs of FBR. Therefore, the re-assessment made by the officials of respondent No. 2 of the (29) Goods Declarations of the appellant after clearance and preparation of contravention report dated 18.03.2013 by the officials of respondent No.1 is held to be without any lawful authority, the contravention report speaks about sections 32(1), (2), 32A, 79 and 80 of the Act, which are for "False statement, error etc.", "Fiscal fraud", "Declaration and Assessment for Home Consumption Warehousing", "Checking of goods declaration by the Customs". Powers invoked under Sections 32 and 32A have not been delegated to the respondent No.1 or his subordinates, in regards to Section 79, it is a machinery Section and defines the procedure for filing of GD by the importers, Section 80 empowers a Customs Officer to pass Assessment Order for the imported goods, for levy of duty and taxes etc. Irrespective of the fact the officials of respondent No. 1 has no powers under the said sections, laid hand on the GD for preparation of contravention, which had been lawfully released by the Competent Officer under the provision of Section 83 and Rule 442 ibid after passing of valid and legal Assessment Orders under Section 80 and Rule 438 ibid. The representative of respondent No.1 has stated in negation of the provision of law and the notification that the respondent No. 1 is fully empowered to report any case of evasion of duty and taxes at import stage and can act for the contravention of sections 32 and 32A of the Act at import stage. 7. The emphasis laid by the official of respondent No. 1 on the phrase "import stage" is worth considering, import stage mean at the time of clearance of the goods so imported not those which has been released/cleared under section 83 of the Act, and Rule 442 Rules. The case of appellant least correspond to the "import stage" instead "post clearance". Therefore, the Officials of respondent No. 1 has no powers to lay hand on the said case of appellant, they transgressed the powers of the authority defined in sections 32, 32A, 80 of the Act, and Notification No.371(I)/2002 dated 15.06.2002, rendering the preparation of contravention report without power/jurisdiction being in derogation of the referred sections of the Act and Notification No. 486(I)/2007 dated 09.06.2007 and as such null and void, ab-initio and corum non judice. Upon passing of assessment orders under section 80 of the Act, and Rule 442 of Rules and thereafter passing of clearance orders under section 83 and Rule 442 ibid by the authority defined in section 2(a) of the Act, and Notification No.371(I)/2001 dated 15.06.2001, it cannot be disturbed by any authority including officials of respondent No.1 for preparing contravention report and connecting proceedings therewith. The only course left for the subordinate of respondent Nos.1 and 2 was to challenge the said orders before the Collector of Customs (Appeals) under Section 193 of the Act, which empowers the officer of respondent No. 1 and so the official of respondent No.2 in terms of Notification No. SRO-486(I)/2007 dated 09.06.2007 to file an appeal and in that they could incorporate all of their apprehensions, misreading of the facts and contravention of the provision of the Act/Rules. The Collector of Customs, upon receipt of the appeal and after going through the facts and grounds, if thinks fit that the contention of the respondent Nos. 1 and 2 seems to be correct and the duty and taxes has not been either not levied or short paid on the basis of the goods assessed earlier for clearance, is empowered to issue show-cause notice under Section 32 of the Customs Act, 1969 to the respondent (importer) as expressed in 3rd proviso to the subsection (3) of Section 193A of the Act. Instead of the prescribed method, the subordinate of respondent No. 2 and respondent No. 1 simultaneously reopened…

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