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Petitioner: Messrs WATERLINK PAKISTAN (PVT.) LTD. and others VS Respondent: COLLECTOR OF CUSTOMS and others
Court Name: Customs Appellate Tribunal Judge(s): Muhammad Nazim Saleem, Tahir Zia Title:Messrs WATERLINK PAKISTAN (PVT.) LTD. and others vs COLLECTOR OF
CUSTOMS and others Case No.: Customs Appeals Nos,K-1117 and K-1559 of 2014 Date of Judgment:2016-07-30 Reported As: 2018 PTD (Trib.) 36 Result: Appeal allowed. Judgment ORDER MUHAMMAD NAZIM SALEEM, MEMBER TECHNICAL-II.--This order disposes of Customs Appeals Nos, K-1117/2014 and K-1559/ 2014 and Misc. Application dated 02.02.2016 filed under Rule No,1 of Order-1 of Civil Procedure Code (Acts of 1908) for Joining as party/appellant in Appeal No,K.1559 of 2014 filed against Order-in-Original No,77/2014-15 dated 29.08.2014 passed by the Collector of Customs (Adjudication-I), Karachi. Both the appeals involve identical issues of law and facts besides these cases were decided at adjudication stage through a single Order-in-Original No,77/2014-15 dated 20.01.2014. In view of aforementioned position, the same were heard together and are being disposed off simultaneously through this common order in the light of judgment of the Hon'ble High Court of Sindh in Customs Reference No,157 of 2008 - S.M.Nagi son of Syed Muhammad Hussain, Karachi v. Collector or Customs (Adjudication-I) and others. 2. Brief facts of the case are that in the year 2012, an MOU was signed between the US Government and the Pakistan Government for handling military cargo to and from Pakistan, SDDC (Department of Defense) USA nominated Ferrell Lines and Waterlink Pakistan (Pvt.) Ltd. for providing logistical support services for transit of military cargo through Pakistan. The contract to handle the US Military cargo (Non-classified) was assigned by Ferrell Lines to Waterlink Pakistan (Pvt.) Ltd vide e-mail dated 25.08.2013 for export from Afghanistan via Pakistan through Chaman and Port Qasim Customs Stations. The Cargo Manifest No,US/EXP/338/13 dated 30.09.2013 was filed with AC/DC Chaman by the US Consulate GD at Customs Station Chaman was filed by the Clearing Agent Tariq Enterprises. The Waterlink Pakistan (Pvt.) Ltd arranged truck/trawler No,TLG.778 through the Karachi Market broker for transport of container No,USAU-1742645 and USAU =1525824. After
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completion of all the formalities in terms of CGO 10/2012, the trawler/truck started its journey in November, 2013 and reached IC-3 Terminal at Port Qasim, Karachi on 13.11.2013 i,e, within time frame of 15 days specified in Rule 11 (viii) of CGO 10/2012. The containers arrived at IC-3 Terminal did not enter for export. On enquiry by the staff of Waterlink Pakistan (Pvt.) Ltd., it came to light that the contents / material inside the Container No, USAU-1525824 did not match the declared description. Waterlink Pakistan (Pvt.) Ltd vide its letter dated 18.11.2013 requested Deputy Collector Customs for examination of the impugned container to ascertain the factual position. The US Consulate vide their, letter dated 20.11.2013 addressed to Deputy Collector of Customs requested to conduct a joint inspection under supervision of Customs. In another similar case of pilferage of Afghan transit goods, a FIR No,139/2013 was lodged on 07.12.2013 with the Police Station Bin Qasim, Karachi. The police under Interim Challan dated 31.12.2013 had reported to have busted the gang and the investigation revealed that the same gangsters have also made thefts in other Afghan transit containers including the container loaded on truck/trailer No,TLG-778 in connivance with the concerned driver. Accordingly, an FIR No,6/2014 dated 17.01.2014 was lodged against the driver and other involved. The position was also brought to the notice of Customs authorities vide letter dated 04.02.2014 of Waterlink Pakistan (Pvt.) Ltd. The respondent company had reported the matter on 18.11.213 to the Customs authority as well as lodged FIR at Police Station Bin Qasim, Karachi resulting significant progress whereby busted gang of around 13 racketeers, whereas the custom authority conducted examination after about 04 months i,e, on 25.03.2014 in presence of the representative of Messrs Waterlink Pakistan (Pvt.) Ltd. and others. The Container No,USAU1742645 was found intact, the goods i,e, auto parts of heavy duty vehicles were found in accordance with the declaration whereas in Container No,USAU- 1525824 soil filled in bags was found stuffed in full container. A show cause notice has been issued to M/s. Waterlink Pakistan (Pvt.) Ltd. For recovery of duty and taxes and for violation of various provisions of law disregarding the fact that pilferage / theft had been made by the gangsters in collusion with the driver of the Trailer as un-earthed by the Police vide Charge Sheet No,9/2014 dated 02.07.2014. The said container was loaded on Trailer TLG-778 which belonged to other Bonded Carrier/probably M/s. Freight Solution allowed by the Customs. Therefore primarily the driver of the Trailer and the Bonded Carrier were responsible for safe transportation of the cargo, since the occurrence was beyond the limits of the respondent company and had no role whatsoever in the alleged pilferage/theft and violations. 3. The case was adjudicated by the learned Additional Collector of Customs (Adjudication-II), Karachi who passed the Order-In-Original No,77/2014-15 dated 20.01.2015. The operative part of the order is as under:-- "I have examined the case record and have considered the written as well as verbal arguments put forth by the respondent - and departmental representative. The contention of the department is that while the transit goods were enroute to IC 3 terminal at Port Qasim, container No USAU- 1525824 loaded on vehicle No TLG-778 has been pilfered. Thus, according to the particulars in Form A No, 178 the name of the bonded Carrier has been mentioned as M/s. Waterlink Pakistan (Pvt.) Ltd. The department has further referred to Rule 9 of CGO 10/2012 and Bonded Carrier Licensing Rules under Chapter XXV of Customs Rules and has demanded for recovery of duty/taxes leviable on pilfered goods besides penal action against the bonded carrier and clearing agent. The departmental representative produced copy of Order-in-Original No 7/2014-15 wherein huge penalty has been imposed upon M/s. Waterlink Pakistan (Pvt.) Ltd., for pilferage of transit cargo in another case. The departmental representative submitted that the respondents have not approached this forum with clean hands and they have a history of engaging in such malpractices. On the other hand, the respondent, Messrs Waterlink Pakistan (Pvt.) Ltd has taken the plea that
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they are not the bonded carrier in this case. The respondent has submitted that the contract to handle US military cargo (Non-Classified) was assigned by Ferrel Lines to. Messrs Waterlink Pakistan (Pvt.) Ltd., vide email dated 25.08.2013 for export from Afghanistan via Pakistan through Chaman and Port Qasim Customs Stations. They have stated that Messrs Waterlink Pakistan (Pvt.) Ltd., arranged trawler No,TLG-778 through Karachi Market broker for transport of container No,USAU-1742645 and USAU-1525824. Once they came to know that the containers have not been cleared for export they approached the Directorate of Transit Trade vide letter dated 18.11.2013 with the request to examine the containers. The contents of the letter dated 18.11.2013 are reproduced hereunder for reference:-- "We would like to draw your attention with above subject shipment that arrived at IC 3 on dated 13.11.2013 vide container No, USAU-1525824/20 and presently they are held up at IC 3 after the scanning process. We have been informed by IC 3 staff that contents / material inside the subject container is mismatched and they have forwarded the information which is in contradiction to the packing list pasted on container for further action to US military. In the light of the above development, we hereby request you officially as per order CGO-10 to please conduct physical examination of the subject container and get the exact picture/conclusion, as it has created tremendous doubts about, the whole shipment, transported from origin Kandahar Afghanistan through point of entry Chaman Pakistan and now having reached of the point of exit Port Qasim Karachi Pakistan. Your kind and quick response would enable us to determine the fault/negligence and identification of the culprits (driver and other associates) which would then help us to take appropriate legal action against them so as to determine the responsibility / liability if any". In continuance of this letter Messrs Waterlink Pakistan (Pvt.) Ltd., again approached the Directorate of Transit Trade vide letter dated 04.02.2014. The contents of the same are reproduce hereunder for reference; "Kindly refer to our earlier letter dated 18.11.2013 on the subject noted above. Further it is to inform that during investigation of case FIR 193/2013 of Police Station Bin Qasim, as per Interim Charge Sheet (annex A), the police made significant progress, one of the three arrested accused persons namely Meharban Shah under interrogation report disclosed had committed pilferage from different containers including loaded on TLG-778 inclusion with its driver namely Mohammad Hanif. The Police also busted a gang who inclusion with the concerned drivers of the Trailers had committed pilferage of cargo from the containers during transit by diverting the trailers to a particular yard/premises at new Saeedabad District Mityari, that also included the pilferage of cargo in the subject mentioned container loaded on trailer No, TLG-778. Therefore the police also had recommended for the registration of further cases. Consequently a case FIR No,06/2014 dated 17.01.2014 at Police Station Bin Qasim has been registered against the driver Mohammad Hanif and others (annex B). Further investigation is in process." The authorized representative submitted that the particulars in Form A No,178 showing M/s Waterlink Pakistan (Pvt.) Ltd. as bonded carrier have been wrongly filled in by the respective office. Since the Trailer No, TLG-778 is not registered in their name and belongs to another bonded carrier Messrs Freight Solutions. Furthermore, the authorized representative submitted that section 2(s) of the Customs Act, 1969 has been invoked in the Show Cause Notice which entails confiscation of goods so no demand for recovery of duty/taxes can be made. During hearing, the authorized representative was asked to provide any documentary evidence to substantiate his claim that the transport used in this case has been hired by them and belongs to another carrier, however, he reiterated the argument that they arranged the vithicle through a broker Thus, their stance that they are not the bonded carrier cannot be accepted given the fact
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that their name is clearly available in Form A No, 178. Furthermore, the police authorities have recorded the statement of manager logistics of Messrs Water link Pakistan (Pvt.) Ltd. in charge sheet No, 91/2014 where he has categorically stated that they have arranged trawler No,TLG-778 from local market to transport transit goods and no reference whatsoever has been made to any other bonded carrier. Even in the correspondence of the respondents with the Directorate of Transit Trade (Reproduced above) no reference has been made that the respondents are not bonded carrier. For arguments sake, if one accepts their contention that they are not bonded carrier of the consignment in question, no document has been placed on record wherein they have made any effort to get form A No, 178 (showing their name as bonded carrier) corrected. The Directorate of Transit Trade should however, investigate as to how the goods were allowed to be carried on trailer No,TLG-778 when it was not registered in the name of the carrier and fix responsibility for such lapse. Since the goods have been pilfered during transit, the provisions of Section 2(s) of the Customs Act, 1969 are attracted and as such the arguments of the respondent that Section 2(s) is not applicable is not valid. Now let us examine the provisions of Bonded Carrier Licensing Rules issued under Customs Rules, 2001 and CGO 10 of 2012. For ease of reference the relevant provisions are reproduced hereunder: Rule 329(1): Responsibility of the carrier:--Prior to submission of application for transshipment the carrier shall satisfy himself that the actual description, quantity and weight of the goods under transshipment are as per declaration in the IGM of the vessel. In case any mis-declaration or substitution is found at subsequent stage, the carrier shall be held responsible under sections 32 and 121 of the Act. Rule 484: Violation of rules: Where any violation of act or rules made there under including these rules is detected during the transit of cargo from port of entry to port of exit the carrier shall, in addition to any other action as is envisaged in the said Act or the rules, be liable to pay the duty and taxes as may be leviable on such cargo: Provided that no punitive action shall be taken against the carrier without affording the carrier an opportunity of being heard. The relevant clauses of CGO 10 of 2012 are reproduced hereunder: Clause 9 (IX):- The transportation of the cargo from the Port of entry to the Port of exit in a safe and secure manner shall be the responsibility of the concerned authorized carrier. Clause 11(IV):- If the goods are found missing, stolen or remove due to any reason penal action shall be taken against the concerned persons including the carrier, authorized agent and focal person along with recovery of the duty and taxes involved in accordance with the provisions of Customs Act, 1969. A plain reading of the afore-stated provisions makes it clear that the carrier is responsible for safe transportation of the goods from the port of entry to the port of exit and if any pilferage takes place he is liable to pay duty / taxes leviable thereon. Since in his case pilferage has been established through physical examination of goods, the carrier M/s Waterlink Pakistan (Pvt.) Ltd. has failed to safely transport goods form port of entry to port of exit thus, they are liable to pay duty/taxes leviable on the pilfered goods. In the light of the facts narrated above, the charges leveled in the Show-Cause Notice stand established. Messrs Waterlink Pakistan Ltd being bonded carrier is liable to pay duty and taxes amounting to Rs,21,88,224/- (Customs Duty amounting to Rs,1,115,100/, Sales Tax amounting to Rs,817,209/- and Income Tax of Rs,255,915/-) on the pilfered goods in terms of Rule 484 of the Customs Rules read with sections 32(1), 32(A) of the Customs Act, 1969. Besides a penalty of Rs,63,72,000/- (equivalent to the value of goods) is also imposed upon them under section 156(1) (8)(14)(64) of the Customs Act, 1969. No order as to the confiscation of Container No,USAU-
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1525827 and trawler No,TLG-778 is made since the same have not been seized by the detecting agency under Section 168 of the Customs Act, 1969, however, department is advised to prepare proper seizure-cum-contravention reports in future. A penalty of Rs,500,000/- (Rupees Five Hundred Thousand Only) is levied on the clearing agent Messrs Tariq Enterprises, Ram Chand Bazar Chaman, Quetta as he filed GD knowingly that the trailer No, 778 is not registered in the name of the bonded carrier under section 156(1), (8), (14), (14A), (47), (63) & (64) of the Customs Act, 1969." 4. The Appellants feeling aggrieved' filed appeals before this Tribunal on the grounds as under:-- That the respondent has passed the impugned order-in-original contrary to the facts of the case and law and as such the same is not maintainable at law. That Messrs Waterlink Pakistan (Pvt.) Ltd. had not submitted any carrier manifest on behalf of subject vehicle at the port of entry to the Customs. Goods Declaration (GD) was out of charge by the Customs on Truck No,TLG-778 purportedly registered with M/s. Freight Solution, as the bonded carrier. It was the primary responsibility of relevant Customs staff at the point of entry to scrutinize the documents properly along with other SOP's, set forth under DGO 10/2012. Therefore, in this case the responsibility for safe transit of cargo cannot be attributed to the appellant company. As per the SOP/terms and condition of the Licensing, the bonded Carrier / Freight Solution had understanding/responsibilities for safe transportation of the cargo hence, the said bonded carrier and truck driver/owner were responsible for any pilferage occurring during transit on this truck. The entire show cause notice is based on this fundamentally incorrect assumption that Messrs Waterlink Pakistan (Pvt.) Ltd. was the bonded carrier of Truck No,TLG-778 in the impugned case. The show-cause notice as well as the impugned Order-in-Original is liable to be quashed on this ground alone, otherwise the Customs authority should produce the relevant record of licensing showing enlistment of bonded carrier relating to the said Truck No,TLG-778. The two containers loaded on the trailer contained transit goods meant for transit to USA via Port Muhammad Bin Qasim at Karachi. The goods stuffed in the two containers were diverted to a place at New Saeedabad, District Mityari Interior Sindh by the drivers, where one of the two containers was pilfered/stolen and replaced with mud/sand bags to account for weight of the stolen goods. Thus, the transit goods pilfered/stolen at New Saeedabad as per investigation of police cases viz FIR Nos,193/2013, 04/2014 and 06/2014, whereby 13 gangster have been sent up for prosecution before the Court of Law. That from the police investigation it has been established that a gang of 13 racketeers was involved in pilfering the cargo as evident from Final Charge Sheets, charge framed by the Honorable 3rd Additional Session Judge, Malir, Karachi and the written arguments filed by the police investigator before the Court in Bail Application No,1944 of 2014 in respect of police cases viz 06/14 and others and none of the employees of Messrs Waterlink Pakistan (Pvt.) Ltd. was involved in the act of pilferage. That the confession of the driver of vehicle No,TLG-778 is a clear evidence that the pilferage was not done by the appellant. Thus, the acts of purportedly Messrs Freight Solution and driver are clear evidence/the Customs record of licensing to prove that purportedly Messrs Freight Solution was the real bonded carrier. That as regards the name of Messrs Waterlink Pakistan (Pvt.) Ltd. mentioned on "Form A No,1788", it is clarified that the "Form-A is a "Sealing Form" which contains requisite information to be duly signed by the "Sealing Agency i,e, Customs". The appellant/as well as US Consulate did not authorize Messrs Tariq Enterprises under authorization letter submitted to AC/DC customs at Port of Entry for any act in connection with this consignment/containers. Hence, appellant is not responsible for any wrongful entry made in Form-A. Neither the appellant nor the US Consulate authorized/requested the AC/DC Customs at port of entry for the authorization of M/s. Tariq
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Enterprises. Hence, appellant is not responsible for any wrongful entry made in Form-A. The filling and signing of Form-A is not an act of the appellant whosoever filled in such wrong entry, it was imperative for the Customs to check the veracity/true status of the carrier before signing the sealing documents. That normally entries in the Form-A are filled in carelessly with unauthentic information. Here we would like to put on record a sample Form-A which has been filled in with the CHAL Nos, of Clearing Agents instead of mentioning the name of bonded carrier. This vividly proves the stance of the appellant that merely putting name of the appellant in the Carrier column of Form-A does not make them responsible. The customs authority has to prove the actual bonded carrier by producing the relevant record of licensing. Therefore, holding the appellant responsible merely on this ground of Form-A is unlawful and unjust. Importantly the Customs authority, before fixing responsibilities upon the appellant company, had to refer / produce the relevant record of licensing, in order to determine the actual bonded carrier of the involved trailer TLG-778. The safe and secure transportation of the cargo was the responsibility of the bonded carrier as envisaged in Para-9(ix) of CGO-10. In the instant case the containers were transported on Trailer No,TLG-778, which belonged to purportedly M/s. Freight Solution. This fact can be verified with the information available with the customs licensing authority or the Assistant Collector, Import Section in terms of Rule-329(5) of Customs Rules, 2001. Thus in terms of above provisions of law, the bonded carrier i,e, purportedly M/s. Freight Solution is responsible for the pilferage of the containers. That the CGO-5 of 2013 dated 9th July, 2013 (Amendment in CGO-10, 2012) Clause-C (IV) provides that:- i."Before the goods are allowed "Gate out" by the terminal operator or the Customs staff as the case may be, they shall be presented to the Customs Containerize Sealing Unit (CCSU) or the Customs sealing staff for affixing of seals and feeding of the seal number and other relevant information in the system. The sealing staff shall verify the installation of tracking device in case of the container as well as on the vehicle and generate the "Transport Note" for handing over the cargo to the carrier." ii.Therefore, it was absolute responsibility of the Customs authority at ports of exit/Chaman and Torkham, to check veracity of the carrier as bonded carrier through official data record and proper documentation, before out of charge ensuring transiting the goods through bonded carrier to Karachi for onward shipment. That in terms of Rule-II (iv) of CGO-10/2012 if the goods are found missing, stolen or removed due to any reason, penal action shall be taken against the concerned person/bonded carrier, driver/owner of the truck and the persons involved in pilferage. The goods were transported on the Customs Bonded carrier purportedly M/s. Freight Solution Truck, but no punitive action has been taken against them. On the contrary a huge penalty (Rs, 6,372,000) has been imposed on Messrs Waterlink Pakistan (Pvt.) Ltd., along with demand for payment of duty / taxes amounting to Rs,21,88.224/-, although they had neither transported the impugned containers as bonded carrier of trailer No,TLG-778 nor were found involved in the theft / pilferage, carried out at New Saeedabad, District Mityari Interior Sindh as per Final Report of Police in the FIRs No,193/2013, 04/2014 and 06/2014, duly registered with them. That it was also responsibility of the NLC tracking / monitoring control room to ensure the monitoring of the movement of the consignments loaded on the trucks during transit till its shipments. Such incident should have been detected if the control room was properly monitored / supervised. That the Rules 327, 328 and 329 of the Customs Rules, 2001 relate to transshipment and are not related to transit trade. Rule-484 of the Customs Rules describes that where violation of Act / Rules
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is detected during the transit of cargo from the port of entry to the port of exit, the carrier shall, in addition to any other action as envisaged in the said Act, or the Rules, to pay the duty and taxes as may be liable on such cargo. This rule is not applicable to Messrs Waterlink Pakistan (Pvt.) Ltd. as they were not the bonded carrier of the Truck No, TLG-778 in the transportation of impugned containers. Therefore, no action is warranted against Messrs Waterlink Pakistan (Pvt.) Ltd. vide Rule- 484 of the Customs Rules, 2001. That Clause-II(IV) of CGO-10/2012 describes that if the goods are found missing / stolen or removed due to any reason, penal action shall be taken against the concerned person including the carrier, authorized agent and focal person along with recovery of the duty and taxes involved in accordance with the Customs Act, 1969. Here we would like to reiterate that the police has investigated the matter and un-earthed the gang which is responsible for theft/pilferage of transit goods. The action may be taken against the culprits involved in theft/pilferage of the transit goods. It has already been explained that M/s. Waterlink Pakistan (Pvt) Ltd was not the bonded carrier for transportation of the impugned these transit containers. The containers were transported on the bonded carrier Purportedly M/s. Freight Solution Truck No,TLG-778 and by the drivers / Owner, therefore, M/s. Waterlink Pakistan (Pvt) Ltd. are not liable to pay any duty/taxes on goods pilfered at New Saeedabad District Mityari Interior Sindh. Since no violation of sections 2(S), 16, 32(1), 32A, 128 and 129 of the Customs Act,1969 and the Rules framed there under was made,…
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