Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Petitioner: R.M. GULISTAN ENGINEERING AND CONSTRUCTORS (PVT.) LTD. VS Respondent: COLLECTOR OF CUSTOMS (APPEALS)Honorable Justice Muhammad Nadeem QureshiMuhammad Arif Moton and Muhammad Adnan Moton,Ghulam Yasin
2014 P T D (Trib.) 76
[Customs Appellate Tribunal, Karachi]
Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Ghulam Ahmed, Member (Technical-II)
R.M. GULISTAN ENGINEERING AND CONSTRUCTORS (PVT.) LTD. through Chief Executive
Versus
COLLECTOR OF CUSTOMS (APPEALS) and another
Customs Appeal No.K-230 of 2013, decided on 19th September, 2013.
(a) Words and phrases---
----"Plant"---Definition.
Collector of Customs (Appraisement) Karachi and others v. Fauji Fertilizer Co. Ltd. PLD 2005 SC 577 rel.
(b) Customs Act (IV of 1969)---
----S.32----"plant" and "other appliances"---What includes---Plant in combination with other appliances in the business effectuated and perpetuated the trade commerce in question---Induction or introduction of plant should be deemed to be such that they were placed in a position for service or use in the business---Catalyst, Epoxy Grout, especiality paints, dump trucks, fiber cans, roving bobbins, drawings, designs charts, pre-fabricated building structures, PVC Conduit pipes, Housing Electrical Wiring, etc. imported either for initial installation, balancing, modernization, replacement or expansion were either equipment or a part of the plant.
DG. Khan Cement Company Ltd. v. Deputy Collector of Customs, Appraisement, Group-VII, Custom House, Karachi 2003 PTD 986; Aisha Steel Mills Ltd. v. Federation of Pakistan and others 2011 PTD 569; Moro Textile Mills Ltd. v. Central Board of Revenue 2007 PTD 60 and Scientific Engineering House (Pvt.) Ltd., v. Commission of Income Tax AIR 1986 SC 388 fol.
(c) Words and phrases---
----"Equipment"---Definition.
(d) Customs Act (IV of 1969)---
----S. 32---General Clauses Act (X of 1897), S.24-A---Recovery of short levied customs duties---Non-speaking adjudication orders---Natural justice, principles of---Scope---Appellant was charged for mis-declaration---Contention of the appellant was that impugned order, in-original was illegal as the same was non-speaking and did not address all the issues put forth by him---Validity---Impugned order by the Adjudication Officer suffered from want of application of mind to the various submissions made before them at length by appellant---Respondent was not enjoined to fully dilate upon the legal and factual issues raised and agitated before him by the appellant, therefore impugned orders so issued by adjudicating authorities had not considered as "speaking orders"---Sketchy, slip-shod and unreasoned judicial order was not sustainable under law---Judicial order must be a "speaking order" reflecting the application of judicial mind by court to issues and point of controversy involved in the case.
2005 PTD 2566; PLD 1959 SC 272; PLD 1970 SC 158, 173; 1994 SCMR 1014 and 2009 SCMR 1407 rel.
(e) Customs Act (IV of 1969)---
----Ss. 32 (3) & 32(3A)---Recovery of short levied customs duties---Time barred show-cause notice---Scope---Show-cause notice was issued after an expiry of three years from the date of clearance of consignments---Time prescribed for re-opening of case on the basis of scrutiny of the record of tax-payers on the basis of post clearance audit was three years---Show-cause notice issued beyond the period of limitation as stipulated in the relevant statute was time-barred---Inordinate delay in issuing show-cause notice could not be ignored and factum of delay being a mandatory requirement of law had to be strictly implemented which otherwise make the demand without jurisdiction being issued beyond the period of limitation---Orders passed on the basis of time barred show-cause notice were set aside---Appeal was allowed.
2009 SCMR 1126; 2002 MLD 180; 2003 PTD 1354; 2003 PTD 1797; 2008 PTD 578; 2009 PTD 762; 2009 PTD (Trib.) 107; (2010) 109 Taxation 221; 2011 PTD (Trib) 79; 2011 PTD (Trib) 987; 2011 PTD (Trib) 1010; 2011 PTD (Trib) 146; PTCL 2012 CL 47; Collector of Customs (Preventive) Karachi v. (sic) 2011 SCMR 1279; Federation of Pakistan v. Messrs Ibrahim Textile Mills (Pvt.) Ltd., 1992 SCMR 1898; 2011 PTD 2220 and Messrs Cargilll Pakistan Seeds (Pvt.) Ltd. v. Customs, Excise and Sales Tax Appellate Tribunal Lahore 2004 PTD 26 rel.
(f) Interpretation of statutes---
----Amendment in statute---Scope---Amendment in any statute, notification or an executive order would be deemed to take effect prospectively and not retrospectively.
2005 SCMR 492; PLD 2001 SC 340 and 1984 PTD 216 rel.
(g) Customs Act (IV of 1969)---
----S. 32---Mis-declaration---Show-cause notice---Pre-requisites---Short assessed duty, recovery of---Scope---Before issuing show-cause notice on account of mis-declaration, the customs authorities were bound to determine mens rea---Show-cause notice could not be issued without proving any guilty intention, knowledge, mens-rea on the part of maker of statement---In the present case, element of mens rea was not visible and guilty intention was not proved, therefore provisions of S.32 of Customs Act, 1969 could not be invoked.
Omalsons Corporation v. The Deputy Collector of Customs (Adjudication) Karachi 2002 PTD (Trib.) 3053; Moon International v. Collector of Customs (Appraisement) Lahore 2001 PTD 2097 = 2001 SCMR 1376; Union Sport Playing Card Co. v. Collector 2002 YLR 2651; Al-Hamd Edible Oil Ltd. v. Collector 2003 PTD 552; A.R. Hosiery v. Collector of Customs (Export) 2004 PTD 2977; Ibrahim Textile Mills Ltd. v. F.O.P. PLD 1989 Lah. 47; Central Board of Revenue v. Jalil Sheep Co. 1987 SCMR 630; State Cement Corporation v. G.O.P.C.A. 43 of 1999 and Cargil Pakistan Seeds (Pvt.) v. Tribunal 2004 PTD 26 rel.
(h) Customs Act (IV of 1969)---
----Ss. 32(2) & 32(3A)---Mis-declaration---Show-cause notice---Pre-requisites---Short assessed duty, recovery of---Requirements of law to be adhered to by the Authority issuing show-cause notice---Scope---Defective show-cause notice---Effect---Contention of the appellant importer was that respondent customs authorities invoked two different penal provisions of law simultaneously as stated in the show-cause notice---Both the penal provisions of law were separate and required different implications, therefore the show-cause notice was defective consequently the order-in-original passed on the basis of the same was also illegal---Validity---Where show-cause notice was defective, all subsequent proceedings would be void including the appellate orders---Respondent had invoked two different penal provisions of law simultaneously in the show-cause notice, which reflected a stereo-type and mechanically worded approach without due application of judicial mind---Both the penal provisions of law were separately defined having different implications of law and circumstances---Respondents were required to invoke only relevant provision of law applicable to the facts and merits of the case in the show-cause notice, which in the present case to the contrary had vitiated the whole proceedings---Authority issuing a show-cause notice had required to make out a case in the show-cause notice itself as to under which provision of Act, the case had followed---Respondent was under obligation to incorporate the grounds and reasons in the show-cause notice very clearly and explicitly---Impugned orders followed by defective show-cause notice were set aside---Appeal was allowed.
Messrs Kamran Industries v. Collector of Customs PLD 1996 Kar. 68 and DG Khan Cement Co. Lahore v. Collector of Customs, Sales and Central Excise Multan 2003 PTD 1797 rel.
Mansab Ali Amir and 3 others's case PLD 1971 SC 124 ref.
(i) Administration of justice---
----If the statute enacts that certain action shall be taken in a certain manner and in no other manner, such requirement was absolute and non-compliance will invalidate the whole.
Messrs Khyber Electric Lamp MFG Company Ltd.'s case 2001 SCMR 838; PLD 1995 Kar. 687; PLD 1975 SC 331; PLD 1971 SC 197 and PLD 1973 SC 236 rel.
(j) Jurisdiction---
----Question of jurisdiction in forum is always considered to be very important and no order passed by a Court or a forum having no jurisdiction, even it is found to be correct on merits, is not sustainable---Jurisdiction of a Court lays down a foundation stone and no sooner the question of jurisdiction is determined in negative, whole edifice of such defective proceedings is bound to crumble down---If the mandatory condition of exercising of jurisdiction by a Court, Tribunal or Authority is not fulfilled then the entire proceedings become illegal and suffer from want of jurisdiction---Any order passed in continuation of such proceedings equally suffers from want of jurisdiction.
Khyber Tractors (Pvt.) Ltd. v. Government of Pakistan PLD 2005 SC 842 rel.
(k) Customs Act (IV of 1969)---
----Ss. 32, 79, & 223---Incorrect classification of PCT heading in goods declaration---Charge of mis-declaration---Show-cause notice---Scope---Appellant imported a consignment and while submitting goods declaration, classified the goods in PCT heading, which was not attracted to subject goods---Customs authorities charged the appellant for mis-declaration and directed the payment of short levied customs duty along with penalty---Contention of the appellant was that he filed goods declaration in good faith and correctly provided all the relevant details required for clearance of such goods---Details provided by appellant were not false, therefore appellant could not be proceeded on account of mis-declaration, merely for invoking incorrect PCT heading---Validity---Determination of appropriate PCT heading or an incorrect claim to PCT heading would not constitute an advertant, intentional and deliberate act of mis-declaration---Tax payer had declared all other material particulars correctly in all commercial and customs documents including the goods declaration and such incorrect claim to PCT was always construed to be in good faith---Incorrect claim to PCT heading whether under self automation clearance system or otherwise would not constitute an act of mis-declaration---Importer had declared all the material particulars viz description, value, quantity or weight, origin, etc. in commercial and customs documents including goods declaration presented to customs authorities---Appellant could not be charged for mis-declaration, in circumstances---Impugned order in original and appellate order were set aside---Appeal was allowed.
Collector of Customs Karachi v. Messrs Power Electronic Pakistan (Pvt.) Ltd. Lahore 2011 PTD 2837 rel.
Muhammad Arif Moton and Muhammad Adnan Moton for Appellants.
Ghulam Yasin P.A. for Respondent.
ORDER
MUHAMMAD NADEEM QURESHI, MEMBER (JUDICIAL-I).--We intend to dispose of the instant appeal filed by Messrs R.M Gulistan Engineering and Constructors (Pvt.) Ltd., against the Order-in-Appeal No.7001 of 2012 dated 23-1-2013 passed by the Collector of Customs (Appeals) Karachi, against the Order-in-Original No. 110 of 2012 dated 29-5-2012 passed by the Additional Collector Model Customs Collectorate of PaCCS, Customs House, Karachi.
2. Brief facts of the case as stated in the impugned order are that the Directorate of Post Clearance Audit (PCA), Lahore reported vide Contravention Report C. No. (Case No. 2/2011) PCA/LHR/Audit-C/148/2011/667 dated 25-11-2011, that in order to check the application of value determined by the Director General of Customs Valuation Karachi, vide Valuation Ruling N.S.No.25-A-29 dated 21-5-2007, Directorate of Post Clearance Audit, Lahore conducted audit of PaCCS data of import clearances of "Seamless Pipe/Tubes classified under HS Code 7304. It was observed that the appellants got assessed/cleared their goods under the above said H.S. Code at lower customs value than the value determined by the Director General Valuation Karachi under section 25A of the Customs Act, 1969. Therefore, an audit observation was issued to the respondents advising therein to deposit the short paid amount of duty and taxes, vide C.No.PCA/NLHR/C/44/15/2010/1439 dated 12-8-2010, in term of Para 1 (iii) (c) of CGO 03 of 2009, dated 13-6-2009. The appellants vide letter bearing reference No.RMG/ PCA/2010/980 dated 18-9-2010, appellants that they had imported "Ductile Cast Iron Pipes" which were correctly classifiable under H.S. Code 7303.0000 and not Seamless Steel Pipes or Iron Steel Pipes (H.S. Code 7304). They also provided copies of import documents. The reply of the appellants was examined in the light of documents provided by the respondents. It emerged that while valuation ruling No.25-A-29 dated 21-5-2007 was not applicable to their imported goods, however, exemption of Customs duty and Sales Tax under S.R.O. 575(I)/2006 dated 5-6-2006 was claimed and extended to their imported goods unlawfully, which caused huge loss to the national exchequer. Accordingly revised Audit observation No. 2 was issued to the appellants vide C.No.PCA/LHRIC/48/2010/1984 dated 3-11-2010, in which they were intimated that they had wrongly got cleared/assessed their imported goods i.e. Ductile Cast Iron Pipes, under PCT heading 7304.3900, attracting lower rate of Customs duty instead of appropriate PCT heading 7308.0000, and also Availed exemption of Customs duty, and Sales Tax against Serial No. 6 of the S.R.O. 575(I)/2006, dated 5-6-2006 unlawfully by treating their goods as machinery and equipment, despite fact that their goods do not fall within the ambit of machinery and equipment. The appellants vide their faxed letter dated 9-12-2010 and subsequently vide letter No.EMG/AC/PCN2011/1611 dated 31-1-2011 requested for the withdrawal of audit observation on the following grounds:---
(i) To avail the S.R.O. 575(I)/2006 dated 5-6-2006, under Serial No.6 as machinery and equipment for initial installation, balancing, modernization, replacement or extension of Desalination Plant, Coal Firing System, Gas processing plants, they imported Ductile Cast Iron pipes and fittings classifiable under H.S Code 7303.0000 and not Seamless Steel Pipes Tubes falling under H. S. Code 7304.2900.
(ii) The S.R.O. states in the preamble that import of machinery, equipment and other capital goods imported as PLANT for setting up of new industrial unit, provided the imports are made against valid contract (s) or L/C (s).
(iii) The same S.R.O. under the heading explanation further clarifies that Capital goods mean any plant, machinery, equipment, spares and accessories, classified under Chapters 84 and 85 or any other chapter of the Pakistan Customs Tariff, required for,- Manufacturer or production of any goods are entitled for the benefits as envisaged under S.R.O. 575(I)/06.
(v) In the case of Desalination plant, various types of pipes and fittings are the essential components accessories to set up any plant related to Oil, Gas or any other liquid without the use of pipes is simply inconceivable to set up any such plant.
(vi) An attempt to exclude pipes/ fittings from the scope of S.R.O. 575(I)/06 will be total negation of the policy of the legislature as envisaged in the S.R.O.
(vii) The importers also objected on the jurisdiction of PCA, Lahore. The contentions of the respondents viz a viz documents submitted by them were examined which led to conclude as under;
(I) They have imported four consignments consisting of Ductile cast iron pipes and fittings from China bearing CRN Nos. (i) I-HC-198818; dated 27-2-2007, (ii) I-HC-242380 dated 16-4-2007, (iii) I-HC-437769 dated 1-11-2007 and (iv) I-HC-605886 dated 10-4-2008.
(II) Despite the fact that the goods were classifiable under HS.7303.0000 and the same H.S. Code was duly mentioned on the import documents but they wrongly claimed assessment under HS.7304.
(III) GD No. 198818 dated 27-2-2007 Benefit of S.R.O. 575(I)/2006 dated 5-6-2006 Sr. Nos.24 and 26 granted wrongly on item Nos. 1-5 of the GD only while benefit on the rest of the item of GD was not granted.
(IV) GD No.242380 dated 16-4-2007
Ductile cast iron pipe appearing at Sr. Nos.1, 15 and 28 of the GD assessed under HS code 7304.3900 @ 15% CD instead of HS code 7303.0000 attracting CD @ 20%. Benefit of S.R.O. 575 (l)/2006 dated 5-6-2006 Sr. No.6 extended wrongly on item Nos. 1-26
(V) GD No. 437768 dated 1-11-2007
Benefit of S.R.O. 575(I)/2006 dated 5-6-2006 Sr.No.6 and Sr.No.1 (J) was granted wrongly on item Nos.1 and 2 of the GD respectively only.
(VI) GD No. 605886 dated 10-4-2008
Ductile cast iron pipes were assessed under HS code 7304.3900 CD @ 15% instead of HS code 7303.0000 CD @ 20%. Benefit of S.R.O. 575(I)/2006 dated 5-6-2006 Sr.No.6 was ended wrongly. Freight Charges amounting to Rs.6,930,565 were not included in the customs value which should have been added as per section 25(2) of the Customs Act, 1969.
The appellants were then requested to deposit the short paid amount of duty and taxes. Finally Syed Hafeez Ahmed, appeared on the behalf of appellants and reiterated the following arguments in their defense:--
(a) That the Directorate is not authorized to raise audit observation in respect of transactions effected from Karachi.
(b) That the goods consisting mainly pipes and fittings were correctly granted benefit of Sr. No.(6) to S.R.O. 575(I)/06 dated 5-6-2006.
(c) That their earlier replies on the issue may also be considered while disposing of the matter.
Whereas in term of para. l(iii) (c) of C.G.O.3 of 2009 dated 13-6-2009 the Director General PCA, Islamabad is authorized to assign any audit to any Directorate and in this case special authorization was granted to conduct audit of the appellants by the DG, PCA to Director PCA, Lahore vide order dated 6-10-2010. It is evident that the appellants with the active connivance of appraisement staff of MCC, PaCCS, Customs House, Karachi, knowingly and deliberately had got assessed/ cleared their imported goods i.e. Ductile Cast iron pipes and fittings classifiable under PCT heading 7303.0000, against PCT heading 7304.3900 at lower rate of Customs duty along with inadmissible benefit of Serial No.1 (J) and 6 of S.R.O. 575(I)/2006 dated 5-6-2006, despite the fact that the impugned goods do not fall within the ambit of machinery and equipment; and even freight charges were also not included in the Customs value for assessment of duty and taxes. Thus the appellants willfully, intentionally and knowingly evaded duty and taxes to the tune of Rs.2, 33, 35,392, (Customs duty Rs. 10417619, Sales Tax Rs.11531519, and Income Tax Rs. 1316948, Federal excise duty Rs. 69306), by contravening the relevant provisions of law.
3. The Adjudication Officer held that the charges against the appellant had been established. The operative part of the impugned order as under:--
"I have examined record of the case, written replies of the respondents, and comments of the Department. It has been alleged that the respondents imported "Ductile Cast Iron Pipes" got assessed/cleared these under PCT Heading 7304.3900, and availed exemption of Customs Duty and Sales Tax against Serial No. 1(J) and 6 of Notification No. S.R.O. 575(I)/2006, dated 5-6-2006 by treating the impugned goods as machinery and equipment whereas, the impugned good squarely fall under PCT Heading 7303.0000 and exemption of Customs Duty and Sales Tax is not leviable. The respondents have denied the allegation. The contended that the subject case, being past and closed transactions cannot be subject of roving inquiry by the department. The departmental representative argued that the case has been instituted on the basis of misdeclaration of description, value and quantity of the impugned goods by the respondents. The respondents were required to file true/correct declaration under section 79(1) which they failed. The impugned goods were undervalued and Valuation Ruling was not applied. The arguments of the departmental representative has standing in the eyes of law. Scrutiny of case record indicates that the respondents availed inadmissible benefit of S.R.O. 575(I)/2006 dated 6-6-2006 on the basis declaring impugned goods under HS Code 7304.3700, whereas, the impugned goods are appropriately classifiable under HS Code 7303.0000. The charge, therefore, stands established. Accordingly, the demand of Rs. 2,33,35,392, (Customs duty Rs. 1,04,17,619, Sales Tax, Rs. 1,15,31,519 and Income Tax Rs. 13,16,948 , Federal Excise duty Rs. 69,306), is in order and the respondents are ordered to pay the same along with default surcharge payable under the provision of the Sales Tax Act, 1990. Further, a penalty of Rs. 100,000 is also imposed on the respondents under clause 14 of section 156(1) of the Customs Act, 1969."
4. Dis-satisfied with the Order-in-Original the appellant filed an appeal before the Collector (Appeals), Karachi, who vide Order-in-Appeal hold the order of the adjudicating officer and rejected the said appeal.
5. Being aggrieved and dis-satisfied with the impugned orders the appellant filed the instant appeal before this Tribunal on the grounds incorporated in the Memo. of Appeal.
6. On the date of hearing Mr. Muhammad Arif Moton along with Mr. Muhammad Adnan Moton, Advocates, appeared on behalf of the appellant while Mr. Ghulam Yasin, P.A, appeared on behalf of the respondents. Mr. Muhammad Arif Moton, Advocate On the date of hearing Mr. Muhammad Arif Moton, learned Counsel for the appellant reiterated the ground of the appeal, specifically placed and emphasized on the following points:--
(i) The subject imported goods are Ductile Cast Iron Pipes and Fittings classified under H.S Code 7303.0000. The appellants correctly declared their description as Ductile Cast Iron Pipes in all the Commercial Import Documents including Letter of Credit, Bill of Lading, Commercial Invoice, Packing List and Goods Declarations submitted to Respondent Collectorate at the time of clearance of goods. No misdeclaration whatsoever was committed by the appellants with reference to "Material Particulars" that is Description, Quantity, Origin, Value etc. Only PCT Heading 7304.2900 meant for Seamless Steel Pipes was inadvertently claimed in respect of the subject Ductile Cast Iron Pipes classifiable under PCT Heading 7303.0000 due to both commodities having a similar generic description of Pipes. The subject clearance though being under automated clearance system still does not attract mischief of misdeclaration within the ambit of section 32(1)(2) of the Customs Act, 1969 as contended by respondents throughout earlier proceedings before forums below since in this case Show-Cause Notice dated 29-12-2011 has been issued on the basis of Contravention Report dated 25-11-2011 issued by Appraiser Directorate of Post Clearance Audit Lahore on the basis of Audit of the appellants and where specific section 32(3A) of the Customs Act, 1969 is solely applicable in conjunction with section 32(1) ibid for purpose of issuance of Show-Cause Notice. As such the Show-Cause Notice dated 29-12-2011 in terms of the relevant section 32(3A) of the Customs Act, 1969 is hopelessly time barred being issued beyond the stipulated period of three years. Reliance is placed on the judgment of the Honourable Supreme Court of Pakistan in the case of Collector of Customs (Preventive), Karachi v. Messrs Pakistan State Oil reported as 2011 PTD 2220 "wherein the Honourable Supreme Court has observed that such an Ordinate Delay could not be ignored where a specific period had been provided under section 32(3) of the Customs Act, 1969".
(b) Reliance is also placed upon the judgment of the Honourable Supreme Court of Pakistan in the case of Messrs Dewan Cement Limited v. Collector of Customs and Sales Tax and another reported as 2009 SCMR 1126 wherein their lordships have observed:
"There is nothing on record to demonstrate any such misdeclaration, false information or collusion. In the circumstances, we are very clear in our mind that indeed the levy of the duty in question was by reason of misconstruction of law, which squarely brings the case within the ambit of Rule 10(1) of the Rules in which even the show-cause notices are time barred. Since we have reached that the same are time-barred, hence we do not feel the necessity of discussing the merits of the case. Consequently, these petitions are converted into appeals and allowed. The impugned judgments passed by the learned High Court as well as by the forums below are set aside and the show-cause notices are vacated."
(c) Reliance is placed upon the judgment of the Honourable High Court of Sindh at Karachi in Special Customs Reference Application No.466 of 2011 dated 20-12-2012 in the case of Messrs Sarwar International and Messrs Telecard Limited v. Additional Collector of Customs MCC, Preventive, AFU and others held in Para 11 of the order which is reproduced below:-
"However, since admittedly, the show-cause notice has been issued after a lapse of about four years i.e. beyond the period of limitation of three years as provided under subsection (3) of section 32 of the Customs Act, the said provisions could not be invoked in the case of present applicant. We are of the view that the show-cause notice…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.