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Petitioner: MASROOR HUSSAIN VS Respondent: DIRECTOR GENERAL OF P.C.A.Honorable Justice Muhammad Nazim SaleemNadeem Ahmed Mirza,Rizwan Mahmood
2019 P T D (Trib.) 615 [Customs Appellate Tribunal] Before Muhammad Nadeem Qureshi, Member Judicial-I, Tahir Zia, Member Judicial-II and Muhammad Nazim Saleem, Member Technical-II Messrs MASROOR HUSSAIN and 4 others Versus DIRECTOR GENERAL OF P.C.A. and 2 others Customs Appeals Nos.K-928 to K-931 and K-971 of 2013, decided on 13th July, 2016. Per Muhammad Nazim Saleem, Member Technical-II; Tahir Zia, Judicial Member-II dissenting. [Minority View] (a) Customs Act (IV of 1969)--- ----Ss. 25, 32, 79, 80 & 83---S.R.O. No.165(I)/2011, dated 3-3-2011---S.R.O. No. 42(I)/2010 dated 23-1-2010---Pakistan Customs Tarrif Heading 2202.1010, & Heading 2202.9000---Determination of customs value of goods---Misdeclaration of classification of goods---Import of "Aerated Water/Drinks" against goods declaration, which were correctly classified under PCT Heading 2202.1010 chargeable to Federal Excise Duty at 12% of the retail price---Goods were imported through Collectorate of MCC of "Pakistan Automated Customs Clearance System" (PACCS) by declaring incorrect PCT 2202.9000 without payment of Federal Excise Duty---Additional Collector of Customs adjudicated the case and passed order-in-original holding that importer by misdeclaring the classification had deprived the Government of its legitimate revenue and ordered importer to deposit all taxes under the law with penalty within specified period---Appeal against order-in-original was rejected by Collector of Customs (Appeals)---Central issue involved in the case pertained to classification of soft drink (Pepsi, Dew, 7-Up etc.)---Importer classified the same under PCT Heading 2202.9000; whereas the department's contention was that same were classified under PCT Heading 2202.1010, which besides duty and taxes also attracted Federal Excise Duty at 12% of the retail price---Department's case was that importer deliberately misdeclared classification in order to avoid payment of Federal Excise Duty, despite the fact that there was clear PCT classification (by description) of aerated water viz 2202.1010---Department's contention was that the imported goods namely soft drink fell under PCT Heading 2202.1010 attracting Federal Excise Duty at 12% of the retail price---Plea of the importer was that system of 'Paccs' had cleared their goods declarations which would mean that declaration made in goods declaration were correct---Validity---Importers had not given technical point/reason to justify their claim for PCT Heading 2202.9000 whereas department laid emphasis that "Soft drinks" passed through process of inclusion of carbon dioxide, were aerated waters which had specific PCT classification namely 2202.1010 attracting levy of Federal Excise Duty at 12% of the retail price besides duty/taxes---Importer had contended that S.32(2) of the Customs Act, 1969, was not attracted in the case as there was no misdeclaration on their part---Importer had filed goods declaration and self-assessed their goods as per S.79(1)(b) of the Customs Act, 1969 and then the inbuilt system of "PaCCs" had cleared the same under S.80 of the Customs Act, 1969 without any allegation---Impugned order-in-appeal was upheld, in circumstances. [Minority View] [Case-law referred]. Per Tahir Zia, Member (Judicial-II); Muhammad Nadeem Qureshi, Judicial-I, agreeing. [Majority View] (b) Customs Act (IV of 1969)--- ----Ss. 25, 32, 79, 80, 83, 193 & 198---PCT Heading 2202.1010, PCT Heading 2202.9000---Customs Rules, 2001, Rr.433, 435 & 438---Determination of customs value of goods---Mis-declaration of classification of goods---Importers transmitted goods declaration under S.79(1) of the Customs Act, 1969 and R.433 of Customs Rules, 2001 with the MCC of 'PaCCs', containing description of goods as aerated soft drink, under PCT Heading 2202.9000 which were selected either by the system directly for assessment or examination in terms of S.198 of the Customs Act, 1969 and R.435 of Customs Rules, 2001---Assessing Officer passed assessment order under S.80 of the Customs Act, 1969 and R.438 of Customs Rules, 2001 and communicated the messages to the importers for payment of additional amount of duty and taxes or filing review against the assessment order---Assessing Officer had doubt about the declaration, and suggested for conduction of examination under the respective section/Rule and referred the same to the Assistant/Deputy Collector of the Group for endorcement after affirmation of the said fact---Goods declaration were referred for examination and the officer of the Customs posted at the Terminal, after examining of the goods physically, posted the report in the system, prominently indicating the drinks namely Pepsi, Dew, Miranda, 7-Up etc. for perusal of the Assessing Officer---Assessing orders in the goods declaration corresponding to appeals had been passed by the competent authority under S.80 of the Customs Act, 1969 on the basis of entire declaration after receipt of examination report---Assessment order was validly passed by competent authority---Collector of Customs of clearance Collectorate and Additional Collector of Customs were not allowed to take a complete U-turn at belated stage start adjudication of past and closed transactions through issuance of show-cause notices and adjudication orders under S.179 of the Customs Act, 1969, where a lawful course had been prescribed by the legislature in S.195 of the Customs Act, 1969 for reopening of such decisions or orders by Board of Collectors---Order or decision passed or taken by the subordinate Officer could only be corrected in revisional power and not under S.32 of the Customs Act, 1969---When the consignments were released on the basis of commercial documents and physical examination by the examining and assessing officer, the charge subsequently levelled against the importers under S.32 of the Customs Act, 1969 were unsubstantiated---Framing of contravention report by Director General, and forwarding that to Collectorate as well as issuance of show-cause notice and subsequently passing order-in-original were act of assumption of wrong jurisdiction---Order-in-appeal passed by Collector of Customs (Appeal), had no nexus with the show-cause notice or grounds of memo. of appeal---Said act of Collector of Customs (Appeal) was sufficient to prove that he had travelled beyond the scope of show-cause notice, which was not permitted under the law---Decisions on the basis of fact, not incorporated in the show-cause notice and grounds of appeal, would be deemed to be palpably illegal---Whole proceedings were infested with inherent legal infirmities and substantive illegalities, tantamounted to patent violation of mandatory statutory provisions---Order passed by Collector of Customs (Appeal) was without power/jurisdiction, hence, ab initio void and coram non judice by virtue of the fact that all of them ignored provisions of law and law settled by superior courts---Conduction of audit and preparation of contravention report by Director General, PCA, and show-cause notice and passing of order-in-original as well as order-in-appeal by Additional Collector of Customs and Collector of Customs (Appeal) respectively, were ab initio, illegal and void and of no legal effect---Same were annulled and set aside---Appeals were allowed accordingly. [Majority View] [Case-law referred]. Per Muhammad Nadeem Qureshi, Member Judicial-I agreeing with Tahir Zia, Judicial Member II. [Majority View] (c) Customs Act (IV of 1969)--- ----Ss. 25, 32, 79, 80, 83, 193, 194 & 194-A---Constitution of Pakistan, Art.4---Determination of customs value of goods---Mis-declaration of classification of goods---Passing order in excess of jurisdiction---Provisions of Ss.193(1) & 194(1) of Customs Act, 1969, were amended through Finance Act, 2012; by virtue of said amendment, appeals filed against the order passed by Additional Collector stood ousted from the Collector of Customs (Appeals) jurisdiction w.e.f. 1-7-2012; resultantly, appeal lying with Collector of Customs (Appeals) against the orders of Additional Collector, had to be decided by him on or before 30-6-2012, and in case of non-decision by 30-6-2012, it was mandated upon him to transfer the appeals to Customs Appellate Tribunal to whom jurisdiction was assigned by the legislature under S.194-A of the Customs Act, 1969 w.e.f. 1-7-2012---Collector of Cusoms (Appeals) to the contrary, passed order dated 4-7-2013; rendering the order so passed in excess of jurisdiction and as such void ab initio and coram non judice---Assumption of jurisdiction by Collector of Customs (Appeals) in the present matter, was against said provision of law---No forum could take cognizance of a matter beyond its jurisdiction, prescribed in the relevant law---Inherent defect, could not be cured to defeat the provisions of statute or enactments effecting the jurisdiction of the forum---Every citizen had in alienable right to have protection of law and be treated in accordance with law in terms of Art.4 of the Constitution---Order passed against a person by any forum against express provisions of law on the subject, if allowed to be stayed in tact, would cause serious prejudice to the legal right of citizen---When a forum/court would suffer from want of inherent jurisdiction, no act or consent or acquiescence in the proceedings could vest such forum/court with such jurisdiction---No question of waiver or estopal was attracted in such circumstances---Order passed or an act done by the court or the Tribunal, incompetent to entertain proceedings, was without jurisdiction---Jurisdictional defect could not be removed by mere conclusion of proceedings of passing of order-in-original and order-in-appeal---Decision on the basis of facts/grounds not incorporated in the show-cause notice, would be deemed to be palpably illegal---Collector of Customs (Appeals) passed order-in-appeal on alien facts which had no nexus, either with charter of show-cause notice or the grounds of memo of appeal---Case of importers revolved around the import of cold drinks (aerated water) and the order of Collector of Customs (Appeals) spoke out "Non Alocoholic Bear"---Said act of Collector of Customs (Appeals) proved that he travelled outside the charter of show-cause notice, not permitted under law. [Majority View] [Case-law referred]. (d) Administration of justice--- ----When a law required an act to be done in a particular manner, it had to be done in that manner alone, not otherwise---Being custodian of law, it was the duty of the court to follow the legal obligation and interpretation made thereon by the courts as well as the legislature---Observations of the higher Courts and the intention of the Legislature and interpretations, which led to manifest the absurdity, was to be avoided---Courts were under statutory obligations to supply the omission with a view to prevent the defeat of the very objects of the rules, and could fill in the gaps, in a piece of legislature, when plain construction would lead to absurd results---Responsibility of the Court to give effect to the true and patent intentions of law makers and to supply the omissions in order to avoid and prevent the manifest and try to follow undoubted intentions of the legislation. [Case-law referred]. (e) Interpretation of statutes--- ----Interpretation which was more in consonance with the avowed policy decipherable from its title and Preamble of the statute, was to be preferred to an interpretation with a view to avoid to abridge abrogate or infringe those rights which had accrued in favour of the parties by any mean. Nadeem Ahmed Mirza for Appellant. Rizwan Mahmood, Deputy Collector, Arif Maqbool, Senior Auditor and Faiz Mudassir, A.O. for Respondents. Date of hearing: 19th January, 2016. JUDGMENT MUHAMMAD NAZIM SALEEM, MEMBER TECHNICAL-II.--By this order, we dispose of Customs Appeals Nos. K-928/2013, K-929/2013, K-930/2013, K-931/2013 and K-971/2013 filed by the appellants against Order-in-Appeals Nos. 7564 to 7570/2013 dated 04.07.2013, passed by Collector of Customs (Appeals), Karachi in appeal filed by Messrs Abdul Hai, Tayab and Company and made applicable mutatis mutandis to 6 more appeals including that filed by the instant appellant.
2. Brief facts leading to the above appeals are that the respondent No.1 conducted audit of the imported consignment of the appellants on the strength of data available in the system and observed that the appellant had imported ten (10) consignments of Aerated Water/Drinks against the Goods Declaration bearing CR Nos. (i) I-HC-1400471-04052010, (ii) I-HC-1522036-30082010, (iii) 1576926-21102010 (iv) I-HC-1589317-01112011 (v) I-HC-1604729-15112010 (vi) I-HC-1644192-21122010 (vii) I-HC-1708253-08042011 (viii) I-HC-1743938-08032011 (ix) I-HC-1792094-18042011 and (x) I-HC-1804186-28042011, which are correctly classified under Pakistan Customs Tariff Heading 2202.1010, chargeable to Federal Excise Duty @ 12% of the retail price. Messrs Masroor Hussain (NTN-1035010) imported above-mentioned goods through the Collectorate of MCC of PaCCS by declaring incorrect PCT 2202.9000 without payment of Federal Excise Duty due thereon. These consignments valuing Rs.1,56,89,527.00 were chargeable to Federal Excise duty @ 12% of the Retail Price amounting to Rs.18,82,743.00, additional amount of sales tax Rs.666,567.00 and withholding tax Rs.917,837.00.The respondent No. 1 issued audit observation vide C.No. PCA/2269/2011/Audit dated 26.09.2011 to Messrs Masroor Hussain (NTN 1035010) F-43, Block B, North Nazimabad, Karachi, at their address, and requested for reply to the findings of the department and further asked to deposit the amount of Federal Excise Duty, Sales Tax and Withholding Tax, calculated in the sheet annexed to the Audit Observation. Messrs Masroor Hussain (NTN 1035010), F-43, Block-B, North Nazimabad, Karachi did not respond to the Audit Observation.
A
3. Non-reply of Audit Observation resulted in formulation of Contravention Report No. PCA/2269/2011/Audit dated 26.09.2011. On the strength of Contravention Report, the Respondent No.2 issued Show-Cause Notice No. MCC/SCN/27/PCA-2269/Aerated Water/Masroor Hussain/ADC-Adj/ PaCCS/2012 dated 13.01.2012 to the appellant under sections 32(1), 32(2) 32 (3A) of the Customs Act, 1969, section 36 of the Sales Tax Act, 1990, section 148 of the Income Tax Ordinance, 2001, sections 8 and 14 of the Federal Excise Act, 2005, requiring the appellant as to why the evaded/short paid amount of Rs.34,67,147/- (Federal Excise Duty: Rs.18,82,743.00, Additional Sales Tax: Rs.6,66,567.00, Withholding Tax Rs.9,17,837.00) may not be recovered from them and penal action may not be taken under clause 14 of section 156(1) of the Customs Act, 1969, sections 33(5), 34 of the Sales Tax Act, 1990, section 19 of the Federal Excise Act, 2005, section 148 of the Income Tax Ordinance, 2001. Neither reply to Show-Cause Notice was submitted nor hearing was attended on the dates 27.01.2012, 13.02.2012 and 05.03.2012. Resultantly, the Respondent No. 2 adjudicated the case and passed Order-in-Original No.97/2012 dated 07.05.2012. Para 7 of the said Order-in-Original is reproduced hereunder:-- "I have gone through facts and record of the case. The importers have imported various known brand of soft drinks Essential ingredient of these drinks is carbonated/aerated water and hence these drinks are rightly classifiable under PCT heading 2202.1010. The importer in these cases, by mis-declaring the classification have deprived the Government of its legitimate revenue amounting Rs.34,67,147/- (Federal Excise Duty @ 12% Rs.18,82,743/-, Additional Sales Tax Rs.6,66,567/-, Withholding Income Tax Rs.9,17,837/- which is to be deposited under the provisions of laws referred in the show-cause notice within 30 days of issuance of this order. Failing which recovery proceedings under Section 202 of the Customs Act, 1969, should be initiated. A penalty of Rs.17,00,000/- is also imposed on the importer under clause 14 of Section 156(1) of the Customs Act, 1969." 4. The appellant being aggrieved from the above Order-in- Original filed an appeal before the respondent No.3 who rejected the appeal along with 04 other appeals of different importers through a common Order-in-Appeals Nos.7564 to 7570 dated 04.07.2013. The operative paras thereof are reproduced as under:-- "5. I have carefully examined the record of the case and heard the rival parties patiently. It is noteworthy to clarify here that in the past non-alcoholic and alcohol free beers were being classified and cleared under PCT heading 2202.9000 i.e. on the basis that the same were "aerated water" and that these did not go through the process of inclusion of "carbon dioxide" and were thus termed to be non aerated and since such beers were out of the purview of "aerated beverage" these were not liable for the payment of the additional 12% FED which was levied on aerated waters/beverages of PCT 2202.1010. However, some customs formation held the view that the same were in fact "aerated waters" and were therefore correctly classifiable under the PCT heading 2202.1010 as "aerated waters" attracting 12% FED however no documentary evidence was provided to substantiate their claim. 6. Subsequently, however, some importers of these goods voluntarily started clearing these non alcoholic beers under PCT heading 2202.1010 as "aerated Waters" and the DR has stated that all such beers along with other soft drinks etc., where carbonation is involved, are being classified under 2202.1010 thus 12% FED is being levied on their import in addition to customs duty and taxes. The DR also provided data to the effect that non alcoholic beers as well as soft drinks, energy drinks and beverages were all being cleared under the PCT heading 2202.1010. This relevant data is placed on file. 7. Therefore, in order to be concrete and precise, information was obtained from the internet regarding the making of "non alcoholic" beer which is re-produced as under: How non alcoholic beer is made: The conversion from a traditional alcoholic beer to a non alcoholic beer takes place after the seventh step and preceding the finishing step. The un-carbonated beer is brought up to the boiling point of alcohol boils around 78.3 "C (173.5 "F). This temperature will vary slightly with altitude "barometric pressure" higher temperature at lower altitude and lower temperature at higher altitude. Another method of removing the alcohol is to decrease the pressure so the alcohol boils at room temperature. This is the preferred method because the addition of heat this late in the brewing process can greatly affect the flavor of the brew. If brewers decide to convert their brew to a non alcoholic brew they must consider the volume of liquid they have lost from the removal of the alcohol. Typically the volume is reduced by roughly 4% to compensate simply add water. Because water is a key ingredient in beer it will not alter the flavor. Another tip would be avoiding using corn sugars; corn sugars simply increase the alcohol content without adding to the flavor or body of the beer. Once the alcohol is removed proceed with the normal finished process where the beers is carbonated and bottled. 8. Other sources were also tapped which yielded the same result. Hence, in view of the import data produced by the DR and information obtained from the internet, I am of the considered view that non alcoholic and alcohol free beer are correctly classifiable under PCT heading 2202.1010 as "aerated water" and attract 12% FED in addition to leviable duty and taxes. Accordingly, the impugned Order-in-Original No. 98 of 2012 (Manual one Case) dated 07.05.2012 is upheld and the Appeal is not accepted." 5. Being aggrieved and dissatisfied with Order-in-Appeals Nos.7564 to 7570 dated 04.07.2013, passed by the Collector of Customs (Appeals), Karachi, the appellants filed instant appeal before this Tribunal on the grounds which are incorporated in the memo. of appeal as detailed hereunder:-- (i) "That the respondent No. 1 (Directorate General of Post Clearance Audit) are not designated as officer of Inland Revenue under the provision of Section 29 of the Federal Excise Act, 2005. Irrespective of this, the Board delegated power to respondent vide Notification No. 165(I)/2011 dated 03.03.2011 under section 29 of the Act, without realizing that under subsection (3) of Section 29 is empowered to delegate power by name or designation the person/authority listed at clauses (a) to (d) only in these Director General, Director, Additional Director, Deputy Director/Assistant Director figure no where, rendering the notification delegating the power being in contradiction to the provision of Section 29 and as such ultra vires and of no legal effect. Thus the whole exercise conducted by the respondent No. 1 under the provision of Section 46 of the Federal Excise Act, 2005 is coram non judice, hence void and ab-initio. (ii) That similarly, the respondent No. 1 are not designated as officer of Inland Revenue under Section 228 or any other section of the Income Tax Ordinance, 2001 and as such are not empowered to carry out audit in respect of Section 177 of the Income Tax Ordinance, 2001, rendering the exercise conducted by them in the case of appellant as of no legal effect instead coram non judice, hence void and ab-initio. (iii) That the respondent No. 1 are indeed designated as officer of Inland Revenue under section 30DD of Sales Tax Act, 1990 and they are delegated with the powers of an officer of Inland Revenue through Notification No. S.R.O. 42(I)/2010 dated 23.01.2010, subject to exercise those powers in the capacity of Chief Commissioner/ Additional Commissioner Inland Revenue/ Assistant Commissioner Inland Revenue under the provision of the Sales Tax Act, 1990 listed in column (4) of the notification but not in the capacity of Director General, Director, Additional Director, Deputy Director and Assistant Director. In the instant case of the appellant the respondent No. 1 exercise the power under the provision of Sales Tax Act, 1990 in the capacity of Deputy Director, rendering his act nullity to the provision of Section 30DD and Notification No. S.R.O. 42(I)/2010 dated 23.01.2010, without power/jurisdiction, hence void and ab-initio as held in the reported judgments PLD 1971 SC 197 Chittaranjan Cotton Mills Ltd v. Staff Union, Raunaq Ali's PLD 1973 SC 236, 2002 PTD (Trib.) 889 in Messrs Unitex Tower Factory v. The Collector of Customs (Appeals) and others, K-106/03 in Messrs Silver Corporation v. The Additional Collector of Sales Tax (Adjudication), Karachi III, 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 37 Ali Muhammad v. Hussain Buksh and others and PLD 2001 SC 514 Land Acquisition Collector, Noshehra and others v. Sarfraz Khan and others. (iv) That the respondent No. 2 is also not designated as officer of Inland Revenue under the provision of Section 14 of the Federal Excise Act, 2005, Clause (c) of subsection (3) of Section 25 of the Sales Tax Act, 1990 and Section 207 of the Income Tax Ordinance, 2001 and as such is not empowered to issue show-cause notice and pass order-in-original in respect of matter relating to Federal Excise Duty, Sales Tax and Income Tax under the provision of Section 19 of the Federal Excise Act, 2005, Section 36 of the Sales Tax Act, 1990 and Section 162(1) of Income Tax Ordinance, 2001. Hence, by issuing show-cause notice and passing order-in-original the respondent No. 2 usurped the power of officer of Inland Revenue to which he is not vested, rendering the show-cause notice and subsequently passed order-in-original without power/jurisdiction, hence void ab-initio. Rendering the issuance of show-cause notice and order-in-original being in flagrant violation of law and as such coram non-judice. (v) That wherein any action is taken in the absence of availability of powers or show-cause notice or order-in-original has been passed without jurisdiction/power, such order and so the subsequent order are of no legal effect as held by their Lordship of Supreme Court of Pakistan that "it is an element to principle that if a mandatory condition for the exercise of jurisdiction by Court, Tribunal or Authority is not fulfilled then the entire proceeding which follows become illegal and suffer from want of jurisdiction/powers. Any order passed in continuation of these proceedings in appeals or revisions equally suffers from illegality and are without jurisdiction" 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…
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