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Petitioner: DEWAN SALMAN FIBER LTD. VS Respondent: The COLLECTOR (APPEALS)Honorable Justice Ghulam AhmedJunaid Ghaffar,Ghulam Yasin
2014 P T D (Trib.) 52
[Customs Appellate Tribunal, Karachi]
Before Adnan Ahmed Member (Judicial-II) and Ghulam Ahmed Member (Technical-II)
Messrs DEWAN SALMAN FIBER LTD.
Versus
The COLLECTOR (APPEALS) and 2 others
Customs Appeal No.K-1306 of 2011, decided on 19th July, 2013.
(a) Customs Act (IV of 1969)---
----Ss. 32 (1), (2), (3) & 194-A---Appeal before Appellate Tribunal---Misdeclaration---Short assessed duty, recovery of---Show-cause notice---Prerequisites---Appellant/importer was served with a show-cause notice by the customs authorities---Allegation against the appellant was that he imported ester of Acrylic Acid attracting customs duty, sales tax but with a view to availing inadmissible benefits of zero percent/exemption from customs duty he misdeclared the imported items as Methyl Acrylate---Customs authorities found the appellant guilty of deliberate mis-declaration and passed an order for recovery of exempted amount of customs duty, sales tax and income tax and Collector of Customs (Appeals) dismissed the appeal of the appellant---Appellant in filing goods declaration had not made any false statement regarding the description, quantity of the goods---Appellant was not charged with allegation of any collusion by the customs authorities, therefore show-cause notice under S. 32(2) of the Customs Act, 1969 could not be acted upon---Validity---Appellant transmitted goods declaration with the Model Customs Collectorate (MCC) of Pakistan Customs Computerized System (PACCS) containing description "Methyl Acryalate" on the basis of commodity name in letter of credit, invoice, B/L, certificate of origin and he incorporated the said information of the Goods Declaration (GD) under Pakistan Customs Tariff (PCT) heading with the exemption of customs duty, Sales tax on the basis of infield notifications and Income Tax against certificate issued by the Commissioner of Income Tax---Software of the Pakistan Customs Computerized System (PACCS) had been designed by the agility in such a manner that upon receipt of the goods declaration the system co-relates each declaration with the corresponding Pakistan Customs Tariff (PCT) heading, the claimed notifications and the exemption certificate, which were fed therein either by the FBR/Project Director or Commissioner of Income Tax at their own and after finding those in accordance with the declaration the system pass assessment/clearance order in exercise of its inbuilt vested authority, such fact stood validated from examination of the import documents and goods declaration---Appellant had made no misdeclaration in material and invoking the provisions of S. 32 by customs authorities was erroneous in circumstances---Show-cause notice issued to appellant did not remotely hint the submission of any false documents or statement while transmitting goods declaration with the Model Customs Collectorate (MCC) of Pakistan Customs Computerized System (PACCS) or about the collusion with the project official of Pakistan Customs Computerized System (PACCS) rendering the show-cause notice and the subsequent proceeding void ab initio---Order-in-original passed by customs authorities and order-in-appeal passed by the Collector of Customs (Appeals) was set aside---Appeal was allowed.
Asst. Collector v. Khyber Elec. Lamps 2003 PTD 1275; D.G. Khan Cement v. Collector of Customs 2005 PTD 480; Caltex v. Collector 2003 PTD 1593; Union Playing Card Company v. Collector of Customs 2002 MLD 130; Atlas Tyres v. Additional Collector 2002 MLD 180; Kashmir Sugar v. Collector 1992 SCMR 1898 and Sarwar International v. Additional Collector of Customs 2013 PTD 813 rel.
(b) Customs Act (IV of 1969)---
----Ss. 32 (1), (2), (3), 3-A & 180-A---Short-levied Customs duties on account of inadvertence, error or misconstruction---Show-cause notice was served in pursuance of contravention report of Directorate of Post-Clearance Audit---Contention was that Customs authorities were not authorized to issue show-cause notice under the provisions of S. 32(1) and (2) of the Customs Act, 1969---Validity---Show-cause notice had been issued under S. 32 (1) and (2) of the Customs Act, 1969, whereas the applicable provision of the Act was S. 32(3A)---No charge had been levelled in the show-cause notice on the basis of the provisions of S.32(1) and (2) of the Customs Act, 1969---Show-cause notice was manifestly defective and without lawful authority in circumstances---No order for creating demand could be passed on the basis of such show-cause notice---Section 180-A of the Customs Act, 1969, provided that it was mandatory requirement upon the competent authority for mentioning the grounds on which proposed action was taken against the appellant/incumbent---Principles of natural justice also imposed condition that all the legal and factual material particulars and applicable provisions of the Customs Act, 1969 must be brought to the notice of the importer---Contravention report/show-cause notice and order in original were patently beyond the expression of Customs Act, 1969 as well as the principles of natural justice---Impugned orders were set aside---Appeal was allowed.
(c) Customs Act (IV of 1969)---
----Ss. 32(1), (2), (3) & 3-A---Show-cause notice---Non-observance of mandatory requirements of law---Effect---Appellant was served with a show-cause notice in pursuance of contravention report of Directorate of Post-Clearance Audit---Customs authorities issued show-cause notice under S. 32(1) and (2) of the Customs Act, 1969 instead of 32 (3-A)---Scope---Adjudication on the basis of entire section instead of the applicable provisions of the Customs Act, 1969 rendered the show-cause notice and subsequent order passed as defective and against law---Non observance of mandatory requirement of specific provisions of law was not a commission of technical discrepancy or procedural lapse which was a curable lacuna, it was a substantive illegality which would vitiate all the case proceedings on which the superstructure was built by different quasi-judicial and judicial authorities---Impugned orders were set aside---Appeal was allowed.
Asst. Collector v. Khyber Elec. Lamps 2003 PTD 1275; D.G. Khan Cement v. Collector of Customs 2005 PTD 480; Caltex v. Collector 2003 PTD 1593; Union Playing Card Company v. Collector of Customs 2002 MLD 130; Atlas Tyres v. Addl. Collector 2002 MLD 180; State Cement v. Collector PTCL 2001 CL 558; Kashmir Sugar v. Collector 1992 SCMR 1898 and Sarwar International v. Addl: Collector of Customs 2013 PTD 813 rel.
(d) Customs Act (IV of 1969)---
----Ss. 32 (3) & 3-A---Short-levied customs duties on account of inadvertence, error or misconstruction---Recovery notice to be served "within three years"---Show-cause notice issued after the expiry of stipulated period of three years was time-barred and as such not enforceable.
Dadabuoy Sack Ltd. v. The Collector of Customs, Sales Tax and Federal Excise (Appeals) Hyderabad and others 2009 PTD (Trib.) 500; Shah Murad Sugar Mills and others's case 2007 PTD 117; Messrs Ghandhara Nissan Diesel Ltd., v. The Collector of Customs, Karachi 2005 PTD 2453; PSIC Cutlery, Wazirabad v. Collector of Sales Tax and Central Excise, Gujranwala and others 2008 PTD 981; Joyla Sadat Cotton Industries v. Collector of Customs 1992 SCMR 1898 and Federation of Pakistan v. Messrs Ebrahim Textile Mils Ltd. and others 2006 PTD 537 rel.
(e) Customs Act (IV of 1969)---
----S. 193-A(3)---Extension of time in passing order by Collector of Customs (Appeals)---Scope---Extension given without serving notice to the appellant/incumbent importer---Effect---Order on appeal should have been passed within 120 days from the date of filing of appeal or within further extended period of 60 days prior to expiry of initial period of 120 days with reasons to be recorded for extension in writing---Order of extension was passed after the expiry of initial period with the reasoning that the proceedings in the case could not be finalized within the stipulated time limit due to adjournment obtained by the appellant/counsel---Extension granted by Collector (Appeals) was without any lawful authority as he could not extend the time, unless a notice to the appellant had been served---Impugned orders were set aside---Appeal filed by the appellant/importer was allowed.
Khalid Mehmood v. Collector of Customs, Customs House, Lahore 1999 SCMR 1881 rel.
(f) Customs Act (IV of 1969)---
----Ss. 193-A(3) & 194-A---Appeal before Appellate Tribunal---Collector of Customs (Appeals) passed order in appeal after the expiry of prescribed initial time period of 120 days---Scope---Order of extension in time period for the decision of appeal was not passed prior to the expiry of initial period of 120 days---Extension in time period granted after the expiry of initial period was unlawful and without jurisdiction---Extension in time period was given without answering the condition prescribed for exercising such powers i.e. Collector (Appeals) had to apply his mind and after making an objective assessment, if it came to the conclusion that the extension of time was to be granted, he had to grant the same prior to expiry of the initial period and not merely on the basis of his personal opinion---Where exercise of jurisdiction by any Authority or Court or Tribunal was made subject to existence of specific condition, then such power could not be exercised in the absence of that condition---Extension of time in passing order in appeal was akin to giving a new lease of life into dead entity and was tantamount to flogging a dead horse---If an event or documents had become dead on account of non-timely extension of time period, the same was legally considered dead and new spirit could not be infused into it by means or on account of any reason whatsoever.
2007 PTD 117; 2008 PTD 60; 2007 PTD 2092; 2010 PTD (Trib.) 1636; 2010 PTD (Trib.) 2117; 2009 SCMR 1126; 2002 MLD 180; 2003 PTD 1354; 2003 PTD 1797; 2008 PTD 578; 2009 PTD 762; 2009 PTD (Trib.) 107; 2010 PTD 465; 2011 PTD (Trib.) 79; 2011 PTD (Trib.) 987; 2011 PTD (Trib.) 1010; 2011 PTD (Trib.) 1146 and 2012 PTD (Trib.) 1650 rel.
(g) Customs Act (IV of 1969)---
----S. 194-A---Constitution of Pakistan, Art.25---Appeal before Appellate Tribunal---Discriminatory treatment---Facility allowed by the other Collectorate of Customs of the country was denied by the Model Customs Collectorate (MCC) of Pakistan Computerized Collectorate of Customs (PACCS)---Effect---Treatment given to the appellant was against the principles enshrined in Art. 25 of the Constitution---Impugned orders were set aside---Appeal of the importer was allowed.
1990 SCMR 1059; 2002 SCMR 312; 2002 PTD 976; 2007 PTD 361 and 2009 PTD 1507 rel.
Messrs P&G International, Lahore v. Assistant Collector of Customs, Appraisement, Gr-11, Karachi and 3 others 2010 PTD 870; Collector of Customs v. Shaikh Shakeel Ahmad 2011 PTD 495; Assistant Collector of Customs v. Khyber Electric Lamps 2001 SCMR 838; Union Sport Playing Cards Company v. Collector of Customs 2002 MLD 130; PIA v. CBR 1990 CLC 868; Messrs Sarwar International v. Addl: Collector of Customs 2013 PTD 813; Messrs Super Industries (Pvt.) Ltd. v. Central Board of Revenue and others 2002 PTD 955; Messrs Colgate Palmolive Pakistan Ltd. v. Federation of Pakistan 2004 PTD 2516; Collector of Customs v. Power Electronic Pakistan 2011 PTD 2837 and State Cement Corporation of Pakistan v. Collector of Customs and others 2002 MLD 180 ref.
Junaid Ghaffar for Appellant.
Ghulam Yasin for the Respondents Nos.1 and 2.
Fiaz Modassar for Respondent No.3.
Date of hearing: 25th June, 2013.
ORDER
GHULAM AHMED, MEMBER (TECHNICAL-II).---By this order, we will dispose off Customs Appeal No.K-1306/2011 filed by the appellant against Order-in-Appeal No.5794/2011 dated 9-9-2011, passed by the Collector of Customs (Appeals), Karachi.
2. Brief facts of the case as reported that Directorate of Post Clearance Audit, 5th floor, State Life Building, I.I Chundrigar Road Karachi has reported vide its Contravention Report C.No. PCA/958/2009/782 dated 25-5-2010, Messrs Dewan Salman Fiber Limited, Dewan Center, 3-A, Lalazar Beach Hotel Road, Karachi have imported thirty nine (39) consignments of Methyl Acrylate vide Goods Declaration (GD) CRN Nos.(1)1902, (2) 2051, (3) 2186, (4) 6148, (5) 10800, (6) 33500, (7) 33520, (8) 34137, (9) 36137, (10) 37316, (11) 38802, (12) 52750, (13) 55424, (14) 60505, (15) 71667, (16) 79753, (17) 89107, (18) 93721, (19) 107529, (20) 112425, (21) 123864, (22) 129411, (23) 146038, (24) 133,143, (25) 175685, (26) 227405, (27) 232209, (28) 282766, (29) 297660, (30) 325400, (31) 336757 (32) 442659 (33) 398762, (34) 3532201, (35) (36) 617175, (37) 631959, (38) 631972 and (39) 749092 and filed the Goods Declarations through their clearing agent namely Messrs Javaid Umar Enterprises, Clearing Agent (CHAL-18), statute at 205, 212, 2nd Floor, Commerce Centre, Hasrat Mohani Road, Karachi misdeclaring the tariff classification of the goods under HS Code 2916,1400 for availing the inadmissible benefits of zero percent / exemption from Customs Duty under S.R.Os. e.g 567(I)/2005 dated 6-6-2005 etc as well as zero sales tax, under different S.R.Os. e.g S.R.O. 536(I)/2005, S.R.O. 621(I)/2005, S.R.O. 525(I)/2006 and S.R.O. 509(I)/2007 etc. The item Methyl Acrylate is appropriately classifiable under HS Code 2916.1200 as ester of Acrylic Acid attracting Customs duty @ 5% and sales tax @ 15%. The items falling under PCT head 2916,1400, liable to zero percent / exempted Customs Duty and zero rated sales tax are esters of Methacrylic Acid whereas the imported item is ester of Acrylic Acid of HS Code 2916.1200. Because of wrong classification of the referred goods, an amount of Rs.5,59,21,363 is found to have been short paid in respect of duties and taxes pertaining to these consignments. Details of the said consignment and calculation of short levied amount are given in the contravention report enclosed herewith.
3. The Additional Collector of Customs, MCC PaCCs Karachi, did not agree with replies of respondent and passed the Order-in-Original No. 13 of 2011 dated 14-2-2011 reproduced as under:--
"I have gone through facts of the case and submissions made by both the sides. The respondents in the initial stages did not contest the classification determined by the department. Instead they maintained that there was a governmental decision to grant exemption to methyl acrylate and requested to get a confirmation from the Federal Board of Revenue. However, the Board's letter does not confirm that the exemption from customs duty and other taxes was available to methyl acrylate. It simply says that exemption is available to "esters of methacrylic acid" falling under PCT heading 2916.1400. The question then to be examined is whether or not methyl acrylate is classified under 2916.1400. Since this heading relates to esters of methacrylic acid, methyl acrylate shall be entitled to claimed benefit if it is established that it is ester of methacrylic acid. At the final hearing, the respondents argued that the departmental determination that methyl acrylate is ester of acrylic acid is not correct. Their only contention is that laboratory tests established that imported item was ester of methacrylic acid. However, when asked to produce such report they stated that the same can be seen from the departmental record. The record relating to five of the Goods Declarations involved 1-HC-146038-1 11206, 1-HC-325400-130707, I-HC-123864-301006, l-HC-617175-190408 and 1-HC-63 1972-050508 was seen on the computerized system and all of these Goods Declarations were not subjected to any examination. Therefore, no question of a laboratory test arises for these Goods Declarations. In any case, the burden lies on the respondents to proof that a lab report confirmed that imported goods were esters of methacrylic aide. However, on the request of the respondents, the opinion of Mr. Naseer Siddique, Deputy Chemical Examiner, of Custom House laboratory was requested, who attended the hearing and confirmed that methyl acrylate is ester of acrylic and not that of methacrylic acid. He also submitted his view in writing as under: "As per declaration the product is Methyl Acrylate, which comply to the description of ester of acrylic acid and attracts PCT 2916.1200". The question of classification of methyl acrylate has been further examined. Following are some findings: (i) The departmental case is based on the classification of methyl acrylate as provided in European Customs Inventory of Chemicals which is a guide to the tariff classification of chemicals. A copy of this document has been provided by the department which confirms that methyl acrylate ism classified in PCT heading 2916.1200. This is further confirmed by website of European Customs Inventory of Chemicals Substances (ECICS) of European Commission which identifies the H-S code of Methyl Acrylate (CAS 96-33-3) as 2916.1200. (source.http://ec.europa.eu/taxationcustoms/dd52/ecic5/chemiesubstancc.jsp? Langen and redirection Date 110214. (ii) The web page at <http://www.chemicalland21.com/industrialchem/ functional%20Monomer>!METHYL%20ACR YLATE.htm suggest the HS code of Methyl Acrylate as 291612. It further states that "Acrylic acid undergoes the typical reactions of a carboxylic acid and forms acrylic esters basic alkyl esters are methyl, butyl, ethyl acrylate, and 2-ethylhexyl acrylate" This confirms that methyl acrylate is formed from acrylic acid and thus is an ester of acrylic acid and falls under heading 2916.1200. (iii) An entry relating to "Acrylates" was seen on the Wikipedia, the online encyclopedia, at http://en.wikipeclia.orglwiki/Acrylate. This pages states as under. "The acrylate ion (C H2=CHCOO-) is the ion of acrylic acid. Acrylates are the salts and esters of acrylic acid." The above statement clearly confirms that methyl acrylate, being an acrylate, is ester of acrylic acid and thus is classified under HS code 2916.1200. Above findings along with the opinion of Mr. Naseer Siddiqui of Customs Laboratory clearly lead to the conclusion that methyl acrylate is an ester of acrylic acid and is classified under PCT heading 2916.1200. Since this PCT heading is not specified in any of the notifications, the benefit of which was claimed by the respondents, therefore, it is held that methyl acryalte falling in PCT heading 2916.1200 is not entitled to benefit of the exemption of customs duty, zero-rating of sales tax and exemption of income tax as claimed and availed under various notifications referred to above. The question relating to demand being time barred in respect of Goods Declarations older; than three years has been examined. Under section 32(2) of the Customs Act, 1969 and 36(1) of the Sales Tax Act, 1990, the demand of short-paid or unpaid duties and taxes can be raised within five years. The respondents maintain that mis-declaration was result of inadvertence and therefore the demand can be raised only in relation to Goods filed within three year period. However, it is observed that the respondents being an established manufacturing unit and importer and user of various chemicals should have been aware of the fact that methyl acrylate is ester of acrylic acid and should have taken due care in declaring its classification. They have failed to provide any reasonable ground or justification for inadvertently considering Methyl Acrylate as ester of methacrylic acid. This leads to the conclusion that they deliberately chose to mis-declare the description of the imported item so that they could avail the benefit of S.R.Os. referred to above. In view of findings and conclusion above, it is established that the exemption claimed by the respondents was not in order and thus the demand of Rs.55,921,363 (Rs.13,273,657 as customs duty, Its. 41,943,169 as sales tax and Rs.667,542 as income tax) is upheld and ordered to be recovered from the respondents along with surcharge under section 202A of the Customs Act, 1969" and section 34 of the Sales Tax Act, 1990, to be calculated till the time of payment. Further, a penalty of Rs.2,097,158 is imposed on the importer under clauses 1,10A and 14 of section 156(1) of the Customs Act, 1969 and clause 11(c) of section 33 of the Sales Tax Act, 1990."
4. The appellant being aggrieved with Order-in-Original No. 13 of 2011 dated 14-2-2001, filed an appeal before the Collector of Customs, (Appeals) Karachi. The Collector of Customs (Appeals) rejected the appeals as under:--
I have thoroughly examined the entire case record and given very careful consideration to the arguments advanced before me. The learned counsel has pleaded for keeping the instant proceedings pending till receipt of Hon'ble President's decision on the representation filed by the department against findings dated 7-5-2011 of the Hon'ble Federal Tax Ombudsman in Complaint No. 110/KHI/CUSTOMS (42)/261/2011: the learned counsel neither presented a copy of Hon'ble FTO's findings nor a copy of the representation filed against the same. The afore stated plea is untenable because no such directive has been received from any quarter and even the extended time limit stipulated under first proviso to subsection (3) of section 193 of the Act, is close to expiry. I, therefore, take up the case for decision on the basis of the evidence on record. The goods imported in this case, as per the appellant's own declaration, were methyl acrylate which, being ester of acrylic acid, was correctly classifiable under PCT heading 2916.1200 whereas under customs Notification S.R.O. 567(I)/2005 and sales tax Notification S.R.Os. 536(I)/2005 (as amended), the exemption from payment of customs duty and zero rating of sales tax were available to esters of methylacrylic acid classifiable under JCT heading 2916.1400. The above -stated position was clarified by the FBR as well vide letter No. 3(20)/Ta-I/90-Fiber dated 10-2-2011. Therefore, there is no doubt that the exemption from payment of Customs duty and zero rating of sales tax was not available to the goods imported in this case. It is apparent from the record that the appellant deliberately misdeclared classification of the goods and on the basis of misdeclared classification unlawfully availing benefit of the above-referred concessionary notifications: it also stands established from record that neither the goods were examined by Customs nor any laboratory test of the same was conducted. Thus, the appellant deliberately, and with mala fide intent, kept on cheating the system of self-assessment and automated clearance of goods operative under PaCCS over an extended period of time. I observe that the extent of penal action taken in this case is not harsh in view of the gravity of the offence committed by the appellant. I, therefore, rule that the arguments advanced as grounds of appeal, reproduced at para 3 above, do not find any support form the evidence on record. Consequently, I hold that the impugned order is correct in law and on facts and there is no reason to interfere with the same. The appeal, being absolutely devoid of any merit, is rejected accordingly.
5. Being aggrieved and dissatisfied with the Order-in-Appeal, the appellant filed the Instant appeal before this Tribunal on the grounds as under:--
(A) That firstly the learned respondent No.1 has failed to consider the orders of the Honorable Federal Tax Ombudsman in Complaint No.110/KHI/CUSTOMS(42)/261/2011 wherein the Order-in-Original No.13 of 2011 dated 14-2-2011 issued by respondent No.2 has been reopened under section 195 of the Customs Act, 1969 hence the impugned Order-in-Appeal No.5794 dated 9-9-2011 passed by respondent No.1 became infractuous under the law and is liable to be set aside on this ground alone.
(B) That secondly the learned adjudicating officer has seriously erred to invoke such liability which is hit by limitation under the Customs Act, 1969. There is no deliberate or mala fide nor any false statement given by the Appellants Company hence invoke of sections 32(1) and (2) is illegal. What has been imported has been declared on Goods Declaration. The goods were released after proper laboratory test and after application of mind by customs officials hence the impugned order is liable to be set aside.
(C) That the respondents have failed to implement the decision of the Federal Government wherein it was decided that following raw materials shall be exempted for the manufacture of "Acrylic Fibre"
(i) ACN Acrylonitrile Monomer. (ii) MA Methyl Acrylate.
(iii) Malic Acid.
(iv) Dyes.
(v) Amps Acrylamido Methyl Porpone Sulphonic Acid.
(D) That the respondents are subservient to Federal Government and is under huge legal obligation under Federal Board of Revenue Act, 1924 and Federal Board of Revenue Act, 2007 to implement the decision of the Federal Government. In this case the decision of the Federal Government is to allow exemption of customs…
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