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Petitioner: Messrs GENERAL FOOD CORPORATION, KARACHI and another VS Respondent: DIRECTORATE GENERAL OF INTELLIGENCE and Investigation-FBR, Karachi and 2 others
Court Name: Customs, Excise and Sales Tax Appellate Tribunal Judge(s): Adnan Ahmed Title:Messrs GENERAL FOOD CORPORATION, KARACHI and another vs
DIRECTORATE GENERAL OF INTELLIGENCE and Investigation-FBR, Karachi and 2 others Case No.: Appeals Nos.K-151 and K-152 of 2014 Date of Judgment:2014-12-09 Reported As: 2016 PTD (Trib.) 2777 Result: Appeals accepted Judgment ORDER ADNAN AHMED, MEMBER (JUDICIAL-II).---Through this common order, I intend to dispose off Appeals Nos. K-151 and 152/2014 filed under Section 194-A of the Customs Act, 1969 against the order of the Additional Collector of Customs, Adjudication-II (here-in-after to be referred as respondent No,3) vide No, 14/2013 dated 17.12.2013 based on similar facts. 2. Brief, facts of the case, the appellant is importer and distributor of bottled or canned fruits namely "mix fruits with syrup" and "Pine apple choice, slice in heavy syrup etc." have been importing these items from different countries and was claiming sales tax exemption under serial No, 15 to be read with Table 1 of Note 1 to the Sixth Schedule of the Sales Tax Act, 1990, the software of PaCCS and WeBOC accordingly accepted the Goods Declaration for exemption. Subsequently, the Director Project of the WeBOC amended the software and fed the Serial No, 15 to the extent of PCT mentioned in column 3 of Table, this act of his blocked the exemption available to the importer of fruit under serial No, 15 of Table 1 of the sixth Schedule. Resultant, the appellant/his clearing agent approached the Director Project with the complaint that why existing software was amended despite being correct in law and abreast him about the problem faced by them in claiming exemption under Serial No, 15 due to restriction of feeding PCT available in serial No 3 of the Table 1 while ignoring Note 1 to the Schedule. The respective official of the Directorate of Project advised the importer/clearing agent to claim exemption under serial No, 61 while ignoring the fact that the same is irrelevant, only for filing good declaration, which has to be corrected/amended accordingly by the respective assessing official at the time of passing order under section 80 of the
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Customs Act, 1969 and Rule 438 of Sub-Chapter III of Chapter XXI of Custom Rules, 2001. The appellant accordingly started filing goods declaration under serial No,61 of the Sixth Schedule to the Sales Tax Act, 1990. The assessing officer upon receipt of review under Rule 441 use to complete the goods declaration 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 Customs Act, 1969 and Rule 442 of Customs Rules, 2001. That 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 (here-in-after to be referred as respondent No, 2) moved a file and after seeking approval of the ADC passed assessm ent order on 23.03.2013 in 7 goods declaration bearing Nos. KCSI-HC-15328-02022012, KCSI-HC-3447-15032012, KCSI-HC-69337-26052012 KCSI-HC-76836-11062012, KCSI-HC85286- 27062012 KCSI-HC-85287-27062012, KCSI-HC- 3176-24072012 and KCSI-HC-4142-26092012 with the remaiks "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 of the Customs Act, 1969 assailed the said order before the Collector of Customs-Appeals on 12.04.2013 vide No, 4627/2013 to 4632/2013 and the matter became sub-judice. Inspite of this fact that that matter was sub-judice the official of respondent No, 2 harassed the appellant for payment of Rs, 2780663.00, which he paid through pay orders .. Under cover letter dated 27.03.2013. Meanwhile the respondent No 1 forwarded contravention report dated 18.03.2013 to the respondent No, 2, who forwarded the same for issuance of show cause notice to the respondent No, 3 despite not warranted under law as reassessm ent orders had already been passed under Section 80(3) of the Customs Act, 1969, which was assailed by the appellant before the Collector of Customs Appeal No, 12.04.2013. Upon receipt of contravention report the respondent No, 3 issued show cause notice dated 25.03.2013 with the allegation that Messrs General Food Corporation, Karachi (NTN 06711497) 305-306, Al- Rehman Trade Centre, Shahra-e-Liaquat, Karachi 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,2,780,663.00 (Sales Tax of Rs, 2,230,107.00, Additional Sales Tax amounting to Rs,481,145.00 and Income Tax Rs, 132,411.00) have committed offence of mis-declaration and fiscal fraud under 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) & (14A) of Section 156(1) of the Customs Act, 1969, read with Sections 33, 34, and 36 of the Sales Tax Act, 1990. The appellants controverted the allegation of the show cause notice through reply dated 01.07.2013 on which the official of respondent No, 1 submitted comments dated 08.10.2013, in exercise of right
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to rebut the appellant submitted additional arguments through letter dated 16.11.2013 on the comments, which failed to impress the respondent No, 3 and he passed order-in-original dated 17.12.2013, paras 9 to 16 are relevant, which is reproduced here-in-below:-- "9. I have gone through the record of the case, written reply of the respondents as well as verbal heard arguments of both sides:-- 10. Mr. Saud Hassan Khan, Intelligent Officer, attended as department representative i,e, Directorate General of Intelligence and Investigations - FBR, Regional Office, Karachi appeared before the undersigned and produced the copy of the Hon'ble High Court of Sindh, Karachi Judgment dated 13.11.2013 and stated Messrs General Food Corporation, have been given no relief by the Hon'ble High Court of Sindh Karachi as their petition in this regards has been dismissed. 11. In view of it, the plea of the respondent taken in his reply to the show cause notice that by virtue of filing Constitutional petition the matter stood sub-judice is no more relevant as the Hon'ble High Court of Sindh, Karachi vide judgment dated 13.11.2013 along with declaring the petitions of the respondent not maintainable has also decided the issue of availability of exemption of Sales Tax and withholding tax on imported canned fruits against the respondent. Therefore the issue which is at the core of the whole controversy involved in this case stands settled to this extent. 12. As regard the plea of the respondent that by virtue of reassessing the GDs involved in this case, the issuance of instant show cause notice amounts to double jeopardy, it is observed that reassessm ent of already cleared GDs is the jurisdiction of the clearance Collectorate under Section 80(2)(3) of the Customs Act, 19694 where it informed the importer electronically about the reassessed duties and taxes without any imposition of fine and penalty. Where the instant show cause notice has been issue in terms of Section 179 ibid read with sections 32, 156, 180, 181 of the Customs Act, 1969 for the purpose of chargeability of additional duties and taxes along with fine and penalty if any so determined by the adjudicating authority. Therefore the arguments of the respondent in this regard does not hold water when examined in the context of powers vested under Customs Act, 1969, in the hands of the Customs officers and staff. 13. Similarly the arguments of the respondent that the Directorate General of Intelligence and Investigations (Customs)-FBR does not has the powers under the Sales Tax Act, 1990 and Income Tax Laws in this regard is also not based on proper understanding of the legal scheme in this regard. The case law quoted by the respondent in this regard is in the context of initiation of criminal proceedings by lodging FIR by the department whereas the instant case pertains to assessm ent of duties and taxes not paid by the importer on the eve of import of cannot fruit consignment in automated environment of the customs clearance system where GD is prepared and filed by the importer himself after determining his liability of paying duties and taxes. It is pertinent to mention here that the automation of the customs clearance system has lead to a paradigm shift in this regard where the whole system has been designed around self assessment of duties and taxes by the importers himself against the previous system where the department used to determine the liability of duties and taxes by this context, it is gross simplification on the part of the respondent to assert that the customs is entrusted with only collection of duties and taxes other than customs. Moreover, the said judgment has been appealed against in the Supreme Court of Pakistan by the concerned Collectorate of Customs. 14. It is further observed that the respondent has alleged in his reply that the instant complaint was lodged by people of his business fraternity, who were paying sales and income tax on the import of the said item but the respondent was not paying the same despite knowing this fact. He instead challenged the leviability of these taxes and duties in the Honourable High Court, which, as stated above has decided the matter against the respondent. This shows that the respondent did not want to pay these legitimate duties and taxes and went to the extent of challenging their imposition and now vehemently contesting the same by questioning the legal powers of this
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department in this regard. This attitude of the respondent exhibits that he is not interested to discharged his liability to pay legitimate government revenue. 15. In the light of above, I am convinced that the charge enumerated in the show cause notice against the trader established. Therefore, the respondent is directed to pay evaded revenue amounting to Rs,418,145.00 and Income Tax Rs, 132,411/-. Since, the offending goods in this case have already been released, therefore the same cannot be confiscated at this stage. However, a penalty of Rs,500,000.00 is also imposed under Clauses (14) and (14A) of Section 156(1) of Customs Act, 1969 on the importer. 16. The clearing agent involved in this case namely Messrs AlNaseeb Traders (CHAL No, 1310), 305- 306, Al-Rehman Trade Centre, Shahrae-e-Liaquat, Karachi was also made respondent in this case. But he neither submitted reply to the show cause notice nor appeared for hearing in view of it, the MCC (East), Karachi is advised to initiate necessary action against under the licensing rules for this delinquent attitude. Therefore, a penalty of Rs,100,000.00 is also imposed under clauses (14) and (14A) of Section 156(1) of Customs Act, 1969 on the said clearing agent." 3. The appellant Messrs General Food Corporation, Karachi has challenged the orders of the forum below by way of Appeal No, 151/2014 through Mr. Obayd Mirza/Nadeem Ahmed Mirza (Advocates/Consultants) on the strength of the grounds incorporated in the memo of appeal and which are inter alia:-- (i) The respondent No, 1 is not designated an "Officer of Inland Revenue" under Section 30A of the. Sales Tax Act, 1990 and Section 230 of the Income Tax Ordinance, 2001 under which "Directorate General Investigation, Inland Revenue" has been designated as officer of Inland Revenue and they had been delegated powers under different section of the Sales Tax Act, 1990 through Notification No,S.R.0.77600/2011 dated 19.08.2011 and Section 207 of the Income Tax Ordinance 2001. Resultant, respondent No, I acted without powers/jurisdiction, rendering their act of preparation of contravention report, without power and jurisdiction, hence "corum non-judice" as held in reported judgment Major Syed Walayat Shah v. Muzaffar Khan and 2 others (PLD 1971 SC 184), Omer and Company v. Controller of Customs, (Valuation): (1992 ALD 449 (1) Karachi AAA Steel Mills Ltd. v. Collector of Sales Tax and Central Excise Collectorate of Sales Tax (2004 PTD 624), PLD 1976 Supreme Court 514 Ali Muhammad v. Hussain Buksh and others and PLD 2001 Supreme Court 514 Land Acquisition Collector, Noshehra and others v. Sarfraz Khan and others, 2006 PTD 2237, Pak Suzuki Motors Company Ltd, Karachi v. Collector of Customs, Karachi, 2009 PTD (Trib.) 1996 and 2010 PTD (Trib.) 832. (ii) The action of the respondent No, 1 was also patently without legal mandate in terms of Notification No, 486(1)/2007 dated 9.6.2007, this notification does not empower them to exercise powers under Sections 32, 80, 83 and 195 of the Customs Act, 1969. Alleging 'clearance' of the imported consignments by way of mis-declaration in terms of section 32 ibid after the assessm ent/clearance orders were passed by the authority defined in section 2(a) and sections 80 and 83 of the Customs Act, 1969, and Rules 438 and 442 of Sub-Chapter III of Chapter XXI of Customs Rules, 2001, strictly making the whole transaction a past and closed transaction. Resultant, respondent No, 1 acted without powers/jurisdiction, rendering their act of preparation of contravention report, without power and jurisdiction, hence "coram non-judice" as held in reported judgment Major Syed Walayat Shah v. Muzaffar Khan and 2 others (PLD 1971 SC 184), Omer and Company v. Controller of Customs, (Valuation): (1992 ALD 449(1) Karachi AAA Steel Mills Ltd. v. Collector of Sales Tax and Central Excise Collectorate of Sales Tax (2004 PTD 624), PLD 1976 Supreme Court 514 Ali Muhammad v. Hussain Buksh and others and PLD 2001 Supreme Court 514 Land Acquisition Collector, Noshehra and others v. Sarfraz Khan and others, 2006 PTD 2237, Pak Suzuki Motors Company Ltd, Karachi v. Collector of Customs, Karachi, 2009 PTD (Trib.) 1996 and 2010 PTD (Trib.) 832.
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(iii) That after passing of clearance and assessment order under Sections 80 and 83 Rules 438 and 442 of Sub-Chapter III of Chapter XXI of Customs Rules, 2001 by the authority defined in Section 2(a) ibid and 'out of charge' of the consignments, the only appropriate authority to conduct audit of the so cleared consignments rests with the 'Directorate General of Post Clearance Audit', formed under the provision of section 3DD of the Customs Act, 1969, and empowered under Notification No,500(I)/2009 dated 13.06.2009 and to issue audit observation and thereafter prepare contravention report for the purpose of adjudication by the competent authority empowered under the provision of section 179 of the Customs Act, 1969, after issuance of proper Show Cause Notice under section 180 ibid. The respondents figure nowhere in the respective provision of the Customs Act, 1969, nor in the Notification No, 500(1)/2009 dated 13.06.2009. By laying hands on the consignments which have been cleared after passing of valid assessment and clearance order by the competent authority under the referred in above provisions of the Act/Rules, 2001, the respondents tried to conduct audit of the consignments after clearance for which they are not empowered. By transgressing the powers and jurisdiction of the Directorate General of Post Clearance Audit, they acted without powers/jurisdiction rendering their acts abinitio void and as such corum-non-judice. Reliance is placed on PLD 2001 Supreme Court 514, PLD 1976 Supreme Court 514, PLD 1971 SC 184, 2006 PTD 2237, 2001 SCMR 1822, PLD 2004 Supreme Court 600, PLD 2005 Supreme Court 842, 2009 PTD 1083, PLD 1995 Kar. 587, PLD 1973 SC 236 and PLD 1971 SC 197. (iv) That apart from the above issue of jurisdiction of the respondents Nos.1 and 2, even respondent No,3 is not designated as officer of 'Inland Revenue' under the provisions of clause (c) subsection (3) of section 25 of the Sales Tax Act, 1990 and Section 207 of the Income Tax Ordinance, 2001 thus not empowered to issue a 'Show Cause Notice' (SCN), in the matters of Sales Tax under Section 11. (erroneously mentioned as 36 as it stood deleted through Finance Act, 2012) of Sales Tax Act, 1990 and Section 162(1) of the Income Tax Ordinance, 2001. By doing so, the respondent No, 3 usurped the powers of officers of 'Inland Revenue'. In other words, even very issuance of SCNs and then Orders-in-Original are flagrant violations of law. Hence corum non judice and ab initio null and void and of no legal effect/consequences. Reliance is placed upon PLD 1971 SC 184 Major Syed Walayat Shah v. Muzaffar Khan and 2 others, 1992 ALD 449(1) Omer and Company v. Controller of Customs (Valuation) Ali Muhammad v. Hussain Buksh and others PLD 1976 Supreme Court 514 and PLD 2001 SC 514, PTCL 2008 CL 37(sic) Messrs Al-Faiz Industries (Pvt.) Ltd. And others, C.P. No,D- 216/2013 Messrs Lucky Cement Ltd. Karachi v. Federation of Pakistan and others: "The word emphasized could be regarded as being in the nature of deeming provisions. If so, then (subject to the rules of interpretation that apply in such a situation) that nature of sales tax or excise duty on imports, for purpose of levy, charge or collection (as the case may be), may be regarded as a customs duty. Clearly, this would be a materially different situation than that which obtains in relation to advance income tax on imports. In our view, the jurisdiction of the customs authorities (i,e, the Collector of Customs) is limited to only the collection of the advance income tax. Furthermore, subsection (6) of section 148 emphasizes that provisions of the Customs Act apply only to the Collection of the tax and that too, only in so far as is relevant. Since there is a clear distinction between the collection of a tax on the one hand and its recovery or enforcement on the other, in our view, the provision of the Customs Act as relate to the latter are not applicable in relation to the jurisdiction conferred on the Customs Authorities under section 148." (v) That it is also of great importance for the appellant to state that after the transmitting of the Assessm ent Orders (AOs) against 07 consignments of the appellant SCN No, ADJ-II/Add. Coll/DITKHI/CONT-APPG-9/General Food/2013/02 dated 25.06.2013 and Order-in-Original No, 04 of 2013 dated 11.12.2013 are nullity in the eyes of law as under the provision of Section 193 of the Customs Act, 1969, as amended through Finance Act, 2012, an Officer of Customs is also given the
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right to file an appeal before the Collector of Customs (Appeal), under section 193 ibid against an assessm ent/clearance order passed under sections 80 and 83 of Customs Act, 1969, and Rules 438 and 442 of Sub-Chapter III of Chapter XXI of the Customs Rules, 2001, by the authority as defined in section 2(a) ibid and the proper course of action available with the respondent No, 2 was to file appeals against the AOs, within 30 days, which was not done thus the AOs attained finality and the transaction stood passed and closed and no authority or the Court is empowered to disturb that as held by this Honourable Court in judgment reported as Director, Directorate General of Intelligence and Investigation and others v. Messrs AL-Faiz Industries (Pvt.) and others (PTCL 2008 CL 37(sic)). (vi) That even otherwise the reassessment under subsection (3) of section 80 of the Customs Act, 1969, is only permitted after calling for the documents as per section 2 ibid, after release of the goods and the declaration or documents or any information or statement so furnished is found to be incorrect in respect of earlier assessment. In the absence of availability of any mis-declaration, mis-statement false documents/statement, reassessment is not permitted as evident from assessm ent note dated 23.03.2013 of the subordinate of respondents Nos. 2 that no mis- declaration in material particular was found in the declaration or documents scanned forming part of the declaration in terms of Section 2(kka) after receipt of view messages from the subordinate of Respondent No,2 under Rule 437 ibid by the petitioner, rendering the reassessment orders passed by the Deputy Collector (Group-I), a subordinate respondent 2, as nullity and against the provisions of section 80 of the Customs Act, 1969. (vii) That with the passing/transmitting of "Assessment/Clearance Orders" by the authority defined in section 2(a) of the Customs Act, 1969, under sections 80 and 83 ibid and Rules 438 and 442 of the Customs Act/Rules, 2001, the transaction stood 'past and closed' in every aspect, and the said order could had been assailed by the officers of Customs under Section 193(1) of the Customs Act, 1969, which was not done. Instead the Deputy Collector of Customs, Group-1, a subordinate of respondent No,2, passed 2nd AOs, substituting the infield orders, which is not permitted as a subsequent order cannot be allowed to pile upon existing orders, as it is not permitted under law besides the said exercise amounts to "double jeopardy" and negates the provisions and safeguards of Article 13 of the Constitution and as per law laid down in reported judgment 1989 MLD 4310 World Trade Corporation v. Central Board of Revenue and 2004 PTD 3020 Smith Kline French v. Pakistan. (viii) That, without prejudice, it is imperative for the appellant to state that where the words are plain and unambiguous, the intent can be best judged by giving full effect to the ordinary grammatical meaning of those words, meaning there by that where the context and the language resolve the meaning, resort to object and purposes is uncalled for, as held in many reported judgments; e.g. NLR 1989 SCJ 29(sic), 1987 SCMR 1107. (ix) It is also golden principle of interpretation of statue that until and unless any contrary intention can be inferred expressedly or impliedly the word used in the statue are to be given their plain meaning in the ordinary course, as per which imported fruits, bottled or canned, are exempted from the payment of sales tax. Under Serial No, 15 of Table 1 read with Note 1 (meant for imports only) and the same reads as under:-- "Edible Fruits excluding imported fruits (except fruits imported from Afghanistan) whether fresh, frozen or otherwise preserved but excluding those bottled or canned, and (x) That despite plain language of the Serial No, 15 of Table 1, without examining the Note 1 and Table II (for supply) of the Sixth Schedule to the Sales Tax Act, 1990, the respondents while merging the Table II in Table I implied extra words in the Serial No, 15 interpreted it as 'exemption is applicable to local supply and not imports, but import from Afghanistan are exempted, exemption is applicable irrespective of preservation method, but local supply and Afghan imports are not
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exempted if bottled or canned," through their own adopted principle of interpretation while ignoring the well settled law that the tax statutes are to be interpreted in light of what is clearly expressed. In case of ambiguity or doubt arising from construction, benefit must go to the tax payer. Thus no other meaning can be given to the said Serial Number 15 of Table 1 read with Note 1 with the exception of its spirit and nothing can be added or subtracted, meaning thereby that "in interpreting the taxing statute the customs must look to the words of the statute and interpret in the light of what is clearly expressed. It cannot imply anything which is not expressed, it…
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