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Petitioner: AUTOMOTIVE PRODUCTS (PVT.) LTD. VS Respondent: MUHAMMAD IJAZHonorable Justice Ch. Muhammad Asghar PaswalMian Abdul Ghaffar Malik Muhammad Arshad,S.M. Abbas Jafferi
2013 P T D (Trib.) 1835
[Customs Appellate Tribunal, Lahore]
Before Ch. Niamat Ullah Chairman/Member Judicial and Ch. Muhammad Asghar Paswal Members Judicial
Messrs AUTOMOTIVE PRODUCTS (PVT.) LTD. and others
Versus
MUHAMMAD IJAZ and others
Custom Appeals Nos.237/LB and 238/LB of 2012 and C.As. Nos. 30/LB, 31/LB of 2013, decided on 28th July, 2013.
(a) Customs Act (IV of 1969)---
----S. 179(3)(4)---Order of Collector extending time for decision of case by Adjudicating Officer after expiry of period of limitation prescribed therefor---Validity---Proceedings before Adjudicating Officer had already abated due to expiry of limitation---Collector could pass such order within limitation period prescribed under S. 179(3) of Customs Act, 1969---Such extension of time would be immaterial in circumstances.
Abdul Zaheer and others v. Director-General, Pakistan Coast Guards and 4 others PLD 1990 Kar. 412; Haji Noor-ul-Haq v. Collector of Customs and others 1998 MLD 650; Messrs Super Asia Muhammad Din and Sons (Pvt.) Ltd. v. The Collector Sales Tax Gujranwala and another 2008 PTD 60; Messrs Pace International Rawalpindi v. Secretary Revenue Division Islamabad 2006 PTD 340; CBR/Sales Tax Department v. Messrs Pace International Rawalpindi PTCL 2005 CL 841; Messrs Tanvir Weaving Mills v. Dy. Collector Sales Tax and 4 others 2009 PTD 762; Messrs Miraj Din v. Collector of Customs (Appeals), Excise and Sales Tax, Lahore and 2 others 2009 PTD 2004 and Irshad Ahmed and another v. Deputy Superintendent Customs (AIB) Lahore and 6 others 2012 PTD (Trib.) 47 ref.
(b) Customs Act (IV of 1969)---
----S. 179(3)(4)---Decision of case by Adjudicating Officer---Extension of time by Collector without giving any reason therefor---Validity---Such order of Collector for being short of statutory requirements could not be termed as a valid order---Illustration.
Abdul Zaheer and another v. Director-General Pakistan Coast Guards and 4 others PLD 1990 Kar. 412; Haji Noor-ul-Haq v. Collector of Customs and others 1998 MLD 650 and Irshad Ahmed and another v. Faiz Ahmed Chaudhry, Deputy Superintendent Customs (AIB Lahore) and 6 others 2012 PTD (Trib.) 47 rel.
(c) Customs Act (IV of 1969)---
----Ss. 32, 32-A, 162, 163 & 168(1)---Criminal Procedure Code (V of 1898), S. 58---S.R.O. 486(I)/2007, dated 9-6-2007---Mis-declaration of transactional value of imported goods by under-invoicing same---Search warrants obtained from Court at Karachi, raid conducted and record seized at Karachi by Superintendent, Intelligence and Investigation-FBR of Lahore Directorate---Validity---According to S.R.O. 486(I)/2007, dated 9-6-2007, officers of Directorate could exercise powers and discharge duties of officers of Customs within areas of their respective jurisdiction---Neither any case was registered nor any investigation was pending at Lahore against appellant at time of such raid, search and seizure of his record at Karachi by Superintendent of Lahore Directorate---Staff of Lahore Directorate in such circumstances were not competent to conduct such raid at Karachi for being outside their territorial jurisdiction---Delegation of powers to Superintendent of Lahore Directorate under S. 168 of Customs Act, 1969 would not be helpful as powers under charging Ss. 32 & 32-A thereof were not vested with him under S.R.O. 486(I)/2007---Such record seized in illegal manner by Superintendent of Lahore Directorate could not be used against appellant for any purpose.
Messrs Ahsan Yousaf Textile Mills (Pvt.) Ltd. Faisalabad v. Federation of Pakistan 2003 PTD 2037; Food Consults (Pvt.) Ltd. Lahore and another v. Collector (Central Excise and Sales Tax) Lahore and 2 others 2004 PTD 1731; Federation of Pakistan through Secretary Ministry of Finance Islamabad v. Messrs Master Enterprises (Pvt.) Ltd. 2003 PTD 1034; Messrs Zakria Enterprises v. Muhammad Musharaf and 7 others 2005 PTD 1200; Chairman Centred Board of Revenue v. Messrs Haq Cotton Mills (Pvt.) Ltd. Burewala 2007 SCMR 1039; Collector of Sales Tax and others v. Messrs Food Consults (Pvt.) Ltd. and another 2007 PTD 2356; 2004 PTD 2994 and 2005 PTD 23 ref.
Messrs Ahsan Yousaf Textile Mills (Pvt.) Ltd. Faisalabad v. Federation of Pakistan 2003 PTD 2037; Food Consults (Pvt.) Ltd. Lahore and another v. Collector (Central Excise and Sales Tax) Lahore and 2 others 2004 PTD 1731; Federation of Pakistan through Secretary Ministry of Finance Islamabad v. Messrs Master Enterprises (Pvt.) Ltd. 2003 PTD 1034; Messrs Zakria Enterprises v. Muhammad Musharaf and 7 others 2005 PTD 1200; Chairman Central Board of Revenue v. Messrs Haq Cotton Mills (Pvt.) Ltd. Burewala 2007 SCMR 1039 and Collector of Sales Tax and others v. Messrs Food Consults (Pvt.) Ltd. and another 2007 PTD 2356 rel.
Mian Abdul Ghaffar Malik Muhammad Arshad, Raza Ahmed and Abdul Salam Sajid for Appellants.
S.M. Abbas Jafferi, I.O. for Respondent.
Date of hearing: 28th May, 2013.
JUDGMENT
CH. MUHAMMAD ASGHAR PASWAL (MEMBER JUDICIAL).---This judgment shall dispose of Customs Appeals Nos.237/LB of 2012 and 238/LB of 2012 filed by the Appellants Nos.1 to 5 (Appellants) against Order-in-Appeals Nos. 359 to 360 of 2012 dated 19-11-2012 and Appeals Nos.30/LB of 2013 and 31/LB of 2013 filed by the Director of Intelligence and Investigation-FBR, Lahore (Department) against the same impugned order but only relating to remission of penalties imposed upon Mr. Roohi Chaudhri, one of the respondents in the original proceedings.
2. Briefly stated the case of the department is that an information was received that Messrs Automotive Products (Pvt.) Limited, Worldwide House, C-17, Korangi Road, DHA, Phase-II, Karachi one of the largest importers of auto spare parts have indulged in gross mis-declaration of value of imported auto spare parts deliberately to evade duties/taxes leviable thereon and in this way have caused colossal loss to the Exchequer. The said importer had imported a large number of consignments containing huge quantity of auto spare parts in the past on grossly under invoiced value in league with clearing agents as well as in connivance with concerned Customs staff. It was further alleged that the modus operandi adopted by the said importer in committing fiscal fraud was that LCs were opened on under invoiced value and commercial invoices presented to the Customs authorities only covered the partial amount remitted through LCs opened with the authorized banks and transactions were known within the company as 1st LC. The balance amounts required to be paid to the foreign suppliers were arranged through money changers/forex agents and were known as 2nd LC. The duties and taxes were paid against the value of 1st LC only. It was further alleged that according to informer, private record of all such transactions was lying at the Head Office of the said importer situated at Worldwide House, C-17, Korangi Road, DHA, Phase-II, Karachi. On receipt of aforesaid information, a party headed by Mr. Muhammad Ijaz, Superintendent was constituted by the Director and Additional Director of Intelligence and Investigation-FBR, Lahore Mr. Muhammad Ijaz, Superintendent filed an application on 18-3-2009 in the Court of learned Judicial Magistrate, South Karachi under section 162 of the Customs Act, 1969 and sought search warrant of the premises of the importer situated at Worldwide House, C-17, Korangi Road, DHA, Phase-II, Karachi and on the basis thereof the said premises was raided and searched which led to the recovery of relevant record which was taken into possession in term of section 168(1) of the Customs Act, 1969. It was further alleged that at the time of search, Adrees Khokhar, Muhammad Zahid and Muhammad Irfan, appellants were present and their statements were recorded in which they admitted that the said importer was engaged in under invoicing of auto parts since long. After making the inventory and recovery memo, the seized record was shifted to the office of Directorate of Intelligence and Investigation-FBR, Lahore where scrutiny thereof revealed that the said importer clandestinely paid more than USD 10.00 millions against the imported goods during the period December, 1997 to February, 2009 but the same was not declared before the Customs authorities in term of section 25(1) of the Customs Act, 1969. It was further alleged that the scrutiny of 22 Goods Declarations filed at Dry Port Mughalpura Lahore as well as CFS Dry Port, Lahore revealed that in respect of said 22 consignments, an amount of USD 526698 were paid to foreign suppliers through money changers but the same was not declared to the Customs authorities for the purpose of assessment which caused evasion of duties and taxes to the tune of Rs.2,30,89,137 which demonstrated that the aforesaid importer through its directors/managers and assignees knowingly, willfully and deliberately created a scheme for evasion of duty and taxes and thereafter mis-declared the value of the goods and were involved in under invoicing of the imported goods in connivance with concerned Customs staff and clearing agents and thus caused the aforesaid loss to the Government Revenue by contravening the provisions of sections 18, 25(1), 32(1), (2), 32-A, 79, 80, 178 and 192 punishable under clauses (9) (14) (14-A) (43) (77) and (86) of the Customs Act, 1969. The facts of Customs Appeal No.238/LB of 2012 filed by the appellants are also same except that it pertained to 48 GDs and the amount of duty and taxes evaded was Rs.5,13,84,251. A criminal case was also registered against the importer and its directors/managers and assignees under the aforesaid provisions of Customs Act, 1969 vide F.I.R. No.8 of 2009 dated 7-4-2009.
3. On the basis of aforesaid allegations, the appellants and respondent No.1 in appeals filed by the department were served with show cause notices dated 25-7-2009 and 22-8-2009 by the Additional Collector of Customs (Adjudication), MCC, Customs House, Lahore which were replied but by not satisfying with the reply filed by the appellants the culminated in consolidated Order-in-Original No.38 of 2012 dated 5-5-2012, where-under the Additional Collector (Adjudication), MCC, Lahore burdened the importer with the liability as mentioned in the show cause notices on account of evasion of duly and taxes in respect of 22 and 48 consignments of auto spare parts and also imposed penalty of one million rupees on the importer and penalty of Rs.2,00,000 on each of the appellants as well as Mrs. Rohi Chaudhri, respondent No.1 in appeals filed by the department under section 156(1)(14) of the Customs Act, 1969. Aggrieved by the original order the appellants as well as Mr. Roohi Chaudhri filed appeal before the Collector of Customs (Appeals), Customs House, Lahore who up-held the original order except remission of penalty imposed upon Mrs. Roohi Chaudhri, widow director of importing company in both the cases vide impugned order dated 19-11-2012. Being aggrieved and dis-satisfied with the impugned order in appeal passed by the learned Collector of Customs (Appeals), Lahore as well as the original order passed by the Additional Collector Customs (Adjudication), Lahore, the appellants filed appeals while the department also filed appeals against the remission of penalty imposed on widow director Mrs. Roohi Chaudhri by the Collector of Customs (Appeals), Lahore. The appellants filed instant appeals against the impugned order passed by the Collector of Customs (Appeals), Lahore on the following grounds:--
(a) That the plea taken by the appellants in Para-7(a) to (e) that the original order passed by respondent No.4 was not containing his finings in respect of any issue was found VALID by respondent No.5 but instead of referring the case back to the adjudicating authority for deciding it afresh after addressing all the factual and legal issues raised by the appellants in reply to the show cause notice has passed the impugned order on the ground that he (respondent No.5) was empowered to inquire the issues and that he has conducted inquiry, scrutinized the record and heard both sides in term of section 193-A (3) which reads as under:--
(3) The Collector (Appeals) may, after making such further inquiry as may be necessary pass an order, within one hundred and twenty days from the date of filing of appeal or within such extended period as the Collector (Appeals) may for reasons to be recorded in writing, extend, confirm, modify or annul the decision or order appealed against:
(b) That respondent No.5 never conducted any inquiry in this case nor he provided an opportunity of cross-examining the prosecution witnesses to the appellants nor he associated the appellants in any such inquiry. Moreover, according to section 193-A(3), no doubt the Collector of Customs (Appeals) may, after making such further inquiry as may be necessary pass an order but in this case no further inquiry, whatsoever, was made and just to ignore the valid objection raised by the appellants referred to the powers entrusted to him under the aforesaid provision of law.
(c) That perusal of the entire order of respondent No.5 as contained in Para-7 to 12 of the impugned order revealed that neither the record was called nor any witness was summoned and examined nor the appellants were provided an opportunity to cross-examine such witnesses nor any inquiry was made. Thus, the observation of respondent No.5 is misconceived and frivolous which alone makes the impugned order void, illegal, arbitrary and mechanical in nature.
(d) That had respondent No.5 been satisfied with the objections of the appellants that the adjudicating authority has not addressed any of the factual and legal issue, the case would have been remanded back to respondent No.4 with the direction to re-adjudicate and pass speaking reasoned order after hearing all the concerned parties but no such action was taken by respondent No.5 who passed the impugned order wrongly by mentioning that he had discharged the duty of the original adjudicating authority by making inquiry at his level which is otherwise factual incorrect.
(e) That as per Section 179 of the Customs Act, 1969, respondent No. 4 was required to complete adjudication proceedings and pass an order within 120 days of the issuance of show cause notice or within such period extended by the Collector of Customs for which reasons shall be recorded in writing but such extended period shall in no case exceed 60 days provided that the period during which the proceedings were adjourned on account of any stay order or ADRC proceedings or the time taking through adjournments not exceeding 30 days shall be excluded from commutation of aforesaid period. Subsection (3) of section 179 of the Customs Act, 1969 reads as under:-
"179. Power of adjudication:--
(1) xxxxxxxx x xxxxxxxxxxxxxxxxxxxxxxx
(2) xxxxxxxxxxxxxxxxxx xxxxxxxxxxx xx
(3) The case shall be decided within one hundred and twenty days of the issuance of show cause notice or within such period extended by the Collector for which reasons shall be recorded in writing but such extended period shall in no case exceed sixty days:
Provided that any period during which the proceedings are adjourned on account of stay order or alternative dispute resolution proceedings or the time taken through adjournment by the appellant not exceeding thirty days, shall be excluded for the computation of aforesaid periods."
(f) That in this case, show cause notice was issued on 25-7-2009. The appellant filed Constitutional Petition in the Hon'ble Lahore High Court, Lahore on 28-9-2009 and respondent No.4 was restrained from passing final order on 30-9-2009 i.e. after 65 days of issuance of show cause notice. The stay granted by the Hon'ble Lahore High Court, Lahore was vacated on 25-8-2011 and thereafter the impugned order was passed by respondent No.4 on 5-5-2012 i.e. after lapse of 253 days of the vacation of stay order. Thus, by including 65 days consumed before grant of stay order, respondent No.4 took 316 days in passing the impugned order whereas only 150 (120 initial days plus 30 days of adjournments) or as the case may be 210 days (120 initial days plus 30 days of adjournments and 60 days of extension granted by the Collector) were available with respondent No.4. Hence, the original order being barred by limitation by 107 days was nullity in the eyes of law.
(g) That although an extension of 60 days was granted by the Collector of Customs under section 179(3) of the Customs Act, 1969 vide order dated 27-1-2012 (Annex. "M") but the said order cannot be termed as an order granting extension under the aforesaid provision of law because no reasons in writing of the exceptional circumstances were recoded by the Collector himself. The word "extension allowed as requested" cannot be taken recording of reasons of exceptional circumstances and as such the so-called extension granted by the Collector of Customs in term of section 179(3) of the Customs Act, 1969 was void and illegal and respondent No.2 was required to pass the original order within 150 days (120 initial days plus 30 days of adjournments) resultantly the original order is barred by 167 days.
(h) That as regards the extension sought from FBR vide letter dated 30-3-2012 (Annex. "N"), it is pointed out that FBR has to regulate the system of adjudication including transfer of cases and extension of time-limit in exceptional circumstances in term of subsection (4) of section 179 of the Customs Act, 1969. There is lot of difference in between "regulating system" and "granting extension". Subsection (4) of section 179 reads as under:--
"(4) The Board shall have the powers to regulate the system of adjudication including transfer of cases and extension of time-limit in exceptional circumstance."
(i) That if for the sake of arguments, not conceding it is accepted that "regulating the system" also includes grant of extension then FBR shall also be competent to conduct original adjudication of any case whereas the entire system provided under the Customs Act, 1969 does not authorize FBR to conduct original adjudication of any matter but to regulate system for the same. Hence, FBR has no authority under subsection (4) of section 179 to grant extension for passing adjudication orders.
(j) That the aforesaid issue regarding grant of extension by FBR stood clarified on bare reading of first Proviso to subsection (3) of section 193-A of the Customs Act, 1969 according to which the Board has been empowered to extend the period for decision of any appeal. Said Proviso reads as under:--
"Provided that such extended period shall not exceed sixty days unless the Board further extends at any time during the pendency of appeal."
(k) That had the intention of the legislature been to empower FBR to grant extension in time under subsection (4) of section 179 of the Customs Act, 1969, it would have been mentioned that the Board may "extend" the time for adjudication instead of using words "to regulate the system". This proves that FBR can regulate system but cannot grant extension in time under sub-section (4) of section 179 for completion of adjudication proceedings. Hence, the order dated 30-3-2012 passed by FBR is nullity in the eyes of law. Moreover, the letter dated 30-3-2012 issued by the Board is totally silent about the exceptional circumstances involved in this case which compelled the Board to grant extension.
(l) That by making the appellant No.1 to pay huge amount and imposing penalty upon appellants, respondent No.4 had created a liability against them and in such a situation the limitation prescribed under section 179(3) of the Customs Act, 1969 would be mandatory in nature and any order passed after expiry of such limitation would be void and illegal. Reliance is placed on "Messrs Super Asia Muhammad Din and Sons (Pvt.) Ltd. v. The Collector Sales Tax Gujranwala and another" 2008 PTD 60, "Messrs Pace International Rawalpindi v. Secretary Revenue Division Islamabad" 2006 PTD 340, "CBR/Sales Tax Department v. Messrs Pace International Rawalpindi" (PTCL 2005 CL 841), "Messrs Tanvir Weaving Mills v. Dy. Collector Sales Tax and 4 others" 2009 PTD 762, "Messrs Miraj Din v. Collector of Customs (Appeals), Excise and Sales Tax, Lahore and 2 others" 2009 PTD 2004, "Irshad Ahmed and another v. Deputy Superintendent Customs (AIB) Lahore and 6 others" (2012 PTD (Trib.) 47) and "Messrs Yasir Enterprises, Multan v. Deputy/Additional Collector, Multan" (2012 PTD 1788).
(m) That respondent No.5 while passing the impugned order though incorporated the legal issue of limitation as mentioned in Para-7(f) to (m) raised by the appellants in his order but did not utter a single word to address the said crucial issue involved in this case.
(n) That the findings of respondent No.5 are contained in Paras 6 to 12 in the impugned order, perusal of which revealed that not a single word has been uttered by him to address the legal issues incorporated by him in his order at Para-4(f) to (o). This has intentionally been ignored because respondent No.5 was fully aware that the original order was badly barred by limitation. So much so respondent No.5 has also mentioned the case-law relied upon by the appellants in this behalf but again he has not mentioned a single word as to whether the case-law was applicable or as the case may be distinguishable. This makes the impugned order void, illegal, un-just, arbitrary and not sustainable at law.
(o) That as per section 162 of the Customs Act, 1969, any Judicial Magistrate may, on application by a gazetted officer of Customs containing the ground of belief may issue search warrant. If section 162 is read in juxta-position with Section 163 of the Customs Act, 1969, it would be crystal clear that the gazetted officer shall not be below the rank of an Assistant Collector or any other officer of like a rank but in this case the application was filed and the search warrant was obtained by Mr. Muhammad Ijaz, Superintendent who was admittedly below the rank of Assistant Collector and thus not competent to take any action under sections 162/163 of the Customs Act, 1969.
(p) That the respondent No.1 stated that he had received a credible information that the record of valuable nature has been secreted in the premises applied for search but the requirements of section 162 is that he should state "that I entertain reasonable belief that the contraband documents are concealed in the premises applied for search" so that the Judicial Magistrate having jurisdiction in the area, be guided by the reasonable belief of the Customs Authorities for issuance of the search warrant. Mere information, how much correct it may be, but it does not replace "the reasonable belief of the Customs Officer". The Judicial Magistrate before issuing the search warrant may examine whether the Customs Officer has really "entertained the reasonable belief or there is any mala-fide action." Thus, in the absence of reasonable belief of the Customs Officer, the search warrant would be violative to section 162 of the Customs Act, 1969 and the search so conducted and documents or things so seized would be without lawful authority, hence illegal and void ab-initio. Section 162 is reproduced below for ready reference:-
"Section 162. Power to issue search-warrant.---(1) Any [Judicial Magistrate] may, on application by a gazetted officer of Customs, stating, the grounds of his belief, that goods liable to confiscation or documents or things which in his opinion will be useful as evidence in any proceeding under this Act are secreted in any place within the local limits of the jurisdiction of such Magistrate, issue a warrant to search for goods documents or things.
(2) Such warrant shall be executed in the same way any will have the same effect, as a search warrant issued under the Code of Criminal Procedure, 1898."
(q) That in similar situation where the warrant was obtained without entertaining reasonable belief, such action was not approved by superior Courts and it was repeatedly held as under:--
"Application for search.---There is a clear distinction between learning and belief. A person may learn or get information which he may not believe to be correct. Therefore, where a Customs Collector merely states that he has learnt but does not state that he entertains the belief that dutiable or prohibited goods are secreted as mentioned in his application, the application does not comply with the provision of Section 162 in terms. AIR 1958 Bom. 367 + ILR 1957 Bom. 774 + 1958 Cri. L.Jour. 1157 (DB). But where Magistrate states in the body of the warrant that he Customs Collector has expressed a belief that prohibited or dutiable goods are secreted at some place though in fact he has not done so, then if the warrants, on the face of them, are valid it is wrong for the same Magistrate to hold that the warrants were illegal much less void ab initio, simply because he holds later on that the…
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