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Petitioner: M. NADEEM TRADING COMPANY VS Respondent: COLLECTOR OF CUSTOMS (EXPORTS)Honorable Justice Adnan AhmedNadeem Ahmed Mirza,Tariq Mehmood
2016 P T D (Trib.) 1613
[Customs Appellate Tribunal]
Before Adnan Ahmed, Member Judicial-II
M. NADEEM TRADING COMPANY and another
Versus
COLLECTOR OF CUSTOMS (EXPORTS)
Customs Appeals Nos.K-1586 and K-1587 of 2014, decided on 27th February, 2015.
(a) Customs Act (IV of 1969)---
----S. 180 ---Show-cause notice---Essentials and scope---Show-cause notice was a basic document which should be prepared with utmost care as foundation of entire proceedings stand on show-cause notice---If show-cause notice was defective, sketchy and vague, subsequent proceedings ought to crumble down---Show-cause notice had to be issued well supported by tangible evidence as the same was a fundamental document which comprehensively described the case made a out against tax payer by making reference to evidence collected in support of same and with narration of facts along with supportive evidence which determined an offence attracted to a particular case---Show-cause notice was not a casual correspondence or a tool or a license to commence a rowing inquiry into the affair based on assumption and speculation but was a fundamental document that carried definitive legal and factual position of department against tax payer, legal enforceability and jurisdictional validity of a show-cause notice vested from its context ---Show-cause notice, in the present case, was very sketchy and vague as evident from fact that inspite of levelling allegation of mis-declaration under S. 32 of Customs Act, 1969, nothing had been said as to how an importer mis-declared transmitted declaration therewith---Such type of show-cause notice was palpably illegal and without any lawful authority and jurisdiction.
Case-law referred.
(b) Customs Act (IV of 1969)---
----S.131---Customs Rules, 2001, R.444---Clearance for exportation---Procedure---Owner of any goods to be exported had to make a Goods Declaration for export under S. 131(a)(1) of Customs Act, 1969 and transmit it online in terms of R. 444 of Customs Rules, 2001---Principles.
(c) Customs Act (IV of 1969)---
----S.25(15)---Foreign Exchange Regulation Act (VII of 1947), S. 12---Valuation of exported goods---Determination---Scope---Matter of valuation was between seller and buyer to agree to prices----Scheduled Bank, State Bank of Pakistan or customs department had no authority to dispute the declared value---Determination of export value fell within the ambit of State Bank of Pakistan under S. 12, Foreign Exchange Regulation Act, 1947---If it was found that export value was not in accordance with specification of goods, department could only issue order to Terminal to retain consignment as enunciated in S. 12(5) of Foreign Exchange Regulation Act, 1947---Department was also empowered to determine value of exported goods under S. 25(15) of Customs Act, 1969 which laid down the concept of "open market" value of goods at prescribed time---Term "open market" had laid down parameters as to what was a sale in "open market" between buyer and seller independent of each other---In view of such specific provisions regarding method and mechanism for determination of value of export consignment, value in the present case, had been determined in arbitrary/unilateral manner which was alien to provision of S. 25(15) of Customs Act, 1969.
Case law referred.
(d) Customs Act (IV of 1969)---
----Ss. 26, 29, 130, 131 & 205---Customs Rules, 2001, Rr. 444, 450(2) & 450(3)---Information to be furnished---Re-assesment---Scope---According to S. 26 of Customs Act, 1969, Department could ask for supply of documents or information corresponding to any import or export for determination of its veracity/correctness---No documents or information were sought by Department under S. 26 of Customs Act, 1969, instead demand was made for submission of another Form "E" for US$ 117,526.00---Scheduled Bank was not authorized to issue a supplementary Form "E" to already attested Form "E" through which shipment was affected---Issuing of supplementary Form "E" was not permitted under Foreign Exchange Regulation Act, 1947 ---Demand made by Department was unrealistic and of no lawful authority---Department tried to amend goods declaration which was not permitted under S.29 of Customs Act, 1969 and R. 444 of Customs Rules, 2001---No amendment under S. 205 of Customs Act, 1969 was allowed in column of declared value, quantity or description after removal of goods from customs area---Exporter was barred to obtain amendment post-filing of Goods Declaration and after shipment of goods---Term "assessed for duty" laid restriction on department not to amend the contents of Goods Declaration after shipment under S. 130 of Customs Act, 1969 on strength of valid assessment order by appropriate authority under S. 131 and R. 450 of Customs Rules, 2001---Such acts and omissions of department were without lawful authority being in derogation of S. 131(c) of Customs Act, 1969---Intention of Legislature was not as interpreted by the Department---Once goods were cleared for shipment, no reassessment was permitted under S. 131 of Customs Act, 1969---Reassessment was permitted prior to passing of order of clearance under S. 131 and R.450(2) of Customs Rules, 2001 upon filing of review by exporter under R.450(3) of Customs Rules, 2001 against assessment orders of Appraiser/Principal Appraiser and Assistant/ Deputy/ Collector as the case may be.
(e) Customs Act (IV of 1969)---
----S. 131(c)---Customs Rules 2001, R. 450(2)---Clearance for exportation---If it was considered that Department was empowered to reassess Goods Declaration after shipment in terms of R.450(2) of Customs Rules, 2001, it would render S. 131(c) of Customs Act, 1969 redundant---Section 131(c) of Customs Act, 1969 had to prevail over R.450(2) of Customs Rules, 2001.
Case-law referred.
(f) Customs Act (IV of 1969)---
---Ss. 26 & 215---Information to be furnished---Scope---Contention of importer was that department had referred S. 26 of Customs Act, 1969 in show-cause notice but no copy of notice had been placed on record confirming that neither inquiry was initiated, nor a notice was served within meaning of S. 215 of Customs Act, 1969---Held, that Department was shooting in dark and making fishing and rowing inquiry through the show-cause notice which was not permitted by law---Appeal was allowed in circumstance.
Case-law referred.
(g) Interpretation of statutes---
----Conflict of Rules with parent Act---Act to prevail.
Nadeem Ahmed Mirza, Obayd Mirza and Mirza Muhammad Abeer Nadeem for Appellants.
Tariq Mehmood, Appraiser for Respondent.
Date of hearing: 17th December, 2014.
JUDGMENT
ADNAN AHMED, MEMBER (JUDICIAL-II).---Through this common order, I intend to dispose off Appeals Nos. K-1586 and 1587 of 2014 filed under section 194-A of the Customs Act, 1969 against the Order No.266214 dated 24.09.2014 of the Collector of Customs, Exports (here-in-after to be referred as respondent).
2. Briefly, facts of the case as stated in the impugned order by the respondent are that Messrs Nadeem Trading Company, Offices No.38-A/3, Latif Cloth Market, Saleh Muhammad Street, (NTN 0093892) filed Goods Declaration (GD) No.KEPX-SB-110159/07-04-2014, through this authorization clearing agent M/s. O.K. International CHAL 1851 for export of cotton dyed /Printed Boys/girls Trousers and Shirts Cap and Under Garments Man Made Dyed/Printed Fabric (Assorted under PCT 6201.9200. cotton dyed/printed boys/Girls Trousers and Shirts and PCT 5512.1900 (Man Made Dyed /printed Fabric 50/52") PCT 6214.9090 (Cap and Under Garments at Total US$. 17809.80. form E No. SMBL0016812 and dated 07/04/2014 for stuffed in one containers to Jabel Ali (UAE). On examination/assessment the goods were found as per declaration. However, total declared value US$. 17809.80 for Cotton dyed/Printed Boys/Girls, Trousers and Shirts Cap and Under Garments Man Made Dyed/Printed Fabric. Accessories and total assessed value US$. 135336.00. The difference of value is US$. 117526.00 which become 660% under invoiced. The exporter has failed to submit additional form "E" for the difference of value. The under invoicing and non submission of Form E attracts the provisions of Section 26 and Sections 32-1(a) and 32-1 (c) of the Customs Act, 1969, read with Section 22 Foreign Exchange Regulation Act, 1947, which is punishable under clause 14 of Section 156(1) of the Customs Act 1969 read with section 23 Foreign Exchange Regulation Act, 1947. Had this gone undetected the national exchequer would have suffered a loss of Foreign Exchange to the tune of US$. 117526 (Rs.11517548). Whereas M/s. M. Nadeem Trading Company, Office at No. 38-A/3, Latif Cloth Market, Saleh Muhammad Street, (NTN 0093892) filed Goods Declaration (GD) No.KEPX-SB110159/07-04-2014, through their authorization clearing agent M/s. O.K. International CHAL 1851, are hereby called upon to show cause as to why penal action under the aforesaid provisions of the Customs Act, 1969 should not be taken against them for committing of aforesaid acts. A written reply to the show cause notice may reach this office within seven days from the date of issuance. The appellant consultant submitted the reply to the show cause notice vide letter dated 12.06.2014 through which he controverted the allegation as of no substance and so the jurisdiction of the respondent. Similarly, attended the hearing fixed for 12.06.2014 with that the hearing stood concluded the respondent on 24.09.2014 passed order-in-original against the appellant, while holding in para 4 that:--
"Hearing in this were fixed on 12.06.2014, 14.07.2014 and 04.06.2014. Neither any reply to the show cause notice was received nor did anyone appear for hearing to defend the case since the case cannot be kept pending indefinitely in the presence of Section 179 of the Customs Act, 1969. I am therefore, constrained to decide the matter ex-parte on the basis of available evidence and record. The contention of the department against the exporter is found tenable on the basis that even on per kg basis i.e. US$. 1.46/kg, the declaration of value is very low. Hence the charge of under invoicing stands established against the exporter and the clearing agent under subsection (14) of Section 156(1) of the Customs Act, 1969. I, therefore, hereby order the exporter to submit additional Form "E" amounting to US$. 117,526.00 i.e. Total Form "E"s shall amount to US$. 135,336.00 (US$. 11.10/kg). a penalty of Rs.100000/- (rupees one hundred thousand) is also imposed upon the exporter for violating the provisions of law as quoted above. A penalty of Rs. 25,000.00 (rupees twenty five thousand) is also imposed upon the clearing agent for colluding with the exporter in violating the provisions of law. Furthermore, the PA- Examination /Assessment is directed to ensure that for "E" is submitted within 30 days of issuance of this order and both the form -Es are verified from the concerned Bank. In case of non-compliance of this order in the aforesaid period recovery proceedings under Section 202 of the Customs Act, 1969 shall be initiated."
3. The appellant Messrs M. Nadeem Trading Company, Karachi has challenged the order of the respondent No.3 by way of the instant appeal the consultants/advocates argued on the strength of the grounds incorporated in the memo of appeal and which are inter aliea:
(i) That the show cause notice is self proves inefficiency and malice as evident from the fact that the show cause notice contained the name of Magic Pearl General Trading, UAE (who is importer and to whom no show cause notice can be issued) under the provision of Customs Act, 1969. Whereas, no show cause notice has been issued in principle as evident from the name of the respondent to the appellant. Resultant, no order can be passed in the absence of non serving of show cause notice as this is not permitted under law.
(ii) The impugned Order-in-Original has been passed by Dr. Wasif Ali Memon Collector of Customs Export Karachi on 24.09.2014, irrespective of the fact that he stood transferred through Notification No. 1387-C-1/2014 dated 18.07.2014 to Collector, Model Customs Collectorate, Hyderabad and he relinquished the charge on 07.08.2014 as evident from Notification No.1536-C-1/2014. And Mr. Mansoor Hussain Memon who was also transferred through the referred notification assumed the charge of the Collector, Model Custom Collectorate of Export on 06.08.2014 vide Notification No.1518-C-1/2014. Confirming that the Order has not been passed by Dr. Wasif Ali Memon instead by a ghost authority, rendering it of no legal effect and as such void and ab-initio and holds no grounds for enforcement.
(iii) The Government of Pakistan in exercise of power conferred under section 3 of Customs Act, 1969 (VI of 1969) read with Section 179 thereof has withdrawn the power of adjudication from the Executive Collectorate and has formed Collectorate of Customs (Adjudication) vide S.R.O. No. 886(I)/2012 dated 18.07.2012, which is effective from 01.08.2012, Meaning thereby that every adjudication wherein loss of revenue is visible or calculated even on the basis of presumption has to be done by the officer of Collectorate of Customs (Adjudication) after 01.08.2012 and not by the Executive Collectorate. While issuing Show Cause Notice and passing order-in-original dated 04.06.2014 and 24.09.2014 respectively, the respondent has transgressed the authority vested with the Collectorate of Customs (Adjudication II), who are empowered to adjudicate the case corresponding to the MCC of Export, Karachi rendering both being issued and passed in-flagrant violation of law and as such coram non judice, hence void and ab-initio.
(iv) Upon scrupulous study of the show cause notice it has been observed that your authority issued the subject show cause notice on wrong presumption i.e. since the appellant has not submitted Form "E" for the additional amount, he as stated under declared the value of the exported goods, which should had been US$.135, 336.00 as against declared US$. 17,809.80 which is contravention of Sections 32(1)(a) and 32(1)(c) of the Customs Act, 1969 read with Section 22 of Foreign Exchange Regulation Act, 1947 punishable under clause 14 of Section 156(1) of the Customs Act, 1969 read with Section 23 of the Foreign Exchange Regulation Act, 1947 and the said act of his resulted in impugned loss of Foreign Exchange to the tune of US$. 117,526.00.
(v) That the demand of amended Form-E post Shipment by the Respondent is not warranted and neither it is possible as this is not permitted under Foreign Exchange Regulation Act, 1947. Beside, the Respondent lost sight of Section 29 of the Customs Act, 1969, under which amendment in value of the goods is not permitted after the goods have been allowed for Shipment/out of charge. Rendering the direction of submitting Form-E for the excess amount to the declared value in form "E" and Goods Declaration is in derogation of the explicit expression of Section 29 of the Customs Act, 1969, rendering it nullity to law as of no legal effect.
(vi) That the Respondent's opinion in regards to value based on presumption and had no legal force by virtue of the fact that for leveling such type of allegation, it is mandated upon him to annex with the show cause notice evidential invoice of the same product as were exported by the appellant of the period expressed in Rule 107(a) of Customs Rules, 2001 as directed in para 78 of CGO 12/2002 dated 15.06.2002 of the country of import confirming that the goods exported from Pakistan were cleared in UAE on the value relied upon in the show cause notice served on the appellant. No evidential invoice as per mandated requirement of law is annexed, rendering the show cause notice deficient and as of no substance, hence void and ab-initio and as such of no legal effect.
(vii) Notwithstanding to the above legal proposition, if the Respondent's subordinate has determined the value on their own then on what basis in the absence of availability of samples, which are pre-requisite for determining the price of the exported goods as expressed in Section 25(15) of the Customs Act, 1969, which read as follows:--
25(15) Customs Value of the exported goods:---The custom value of any exported goods shall be the value at the prescribed time on a sale in open market for exportation to the country to which the goods are consigned having regards to the following provisions, namely :-
(a) That the goods are treated as having been delivered to the buyer on Board the conveyance in which they are exported and,
(b) That the seller will bear all packing, commission, transport loading and other cost, charges and expenses including any regulatory duty which may be chargeable under subsection (3) of Section 18 incidental to the sale and to the delivery of the goods on Board the conveyance in which they are to be exported and will be included in the customs value;
(c) That where goods are manufactured in accordance with any patented invention or are goods to which any protected design has been applied, the custom value shall be determined taken into consideration of the value of right to use design in respect of the goods;
(d) That where goods are exported for sale, other disposal or use, whether or not after further manufacture, under a Pakistani Trademark the customs value shall be determined taken into consideration the value of the right to use patent, design or trademark in respect of the goods.
That since the value of the goods exported by the appellant has to be determined in accordance with clauses (a) and (b) of Section 25(15) of the Customs Act, 1969. The break up needs to be annexed with the show cause notice, to be prepared in association with the appellant no exercise can be under taken at the back of the appellant, rendering the determination of the value nullity to the Section 25(15) and fail the test of judicial scrutiny and no charge on the basis of said determined value can be leveled as held by Superior Judicial Fora in umpteenth reported judgment.
(viii) That the Respondent has also invoked the provision of Section 22 of the Foreign Exchange Regulation Act, 1947, which read as:--
S. 22: False Statement:---No person shall, when complying to any order or direction under Section 19, or when making any application or declaration to any authority or person for any purpose under this Act, give any information or make any statement which he knows or has reasonable cause to believe to be false, or not to in any material particular
That the said section revolve around section 19 which speaks about to call for information and under the said section the appropriate authority is Federal Government or State Bank of Pakistan which can ask the appellant to submit the desired information and by none else. The authority to adjudicate the contravention of both the section has been defined in Section 23B, which read as follows:
23B. Authorization of Adjudication Officer and their Powers etc.:----(1) the Federal Government may by notification in the official Gazette, authorized in relation to any area specified in the notification any officer of the State Bank to act as the Director of Adjudication an Additional Director of Adjudication, a Senior Deputy Director of Adjudication, a Deputy Director of Adjudication and Assistant Director of Adjudication ( in this Act refer to as the adjudicating officer)
(viii) That in terms of Section 23B, the Respondent is not empowered to issue show cause notice. It is for the authorities defined therein, rendering the show cause notice under Section 22 of the Foreign Exchange Regulation Act, 1947 without power/jurisdiction, hence null, void and ab-initio and as such coram non judice. The assuming of jurisdiction is of great importance and power has to be exercised within the allotted sphere, acting contrary to that is incurable rather fatal for the health of the case and this has been countless time held by the Hon'ble Supreme Court of Pakistan that in case of assuming wrong jurisdiction, the structure built thereon ought to crumble down, reference is placed on the reported judgment 2001 SCMR 1822 Ali Muhammad v. Chief Settlement Commissioner, wherein the Hon'ble Chief Justice of Pakistan Mr. Iftikhar Muhammad Choudhry presiding a bench in the capacity of Judge of Supreme Court held that :-
"whenever order are passed by an officer without caring whether jurisdiction vests in him or not, it is prima facie reflect on his conduct as well as competency. It is also to be noted that whenever authority is exercise in such a manner then no other inference can be drawn except that the functionary has transgressed his jurisdiction for the consideration other than judicial one and the Courts seized with such orders may recommend any action against the said officer because neither the executive authorities nor judicial forum will pass a wrong order because the jurisdiction in both the capacities is conferred upon such authorities to discharge their function in accordance with law which has bestowed upon them to function in that capacity and if there is abuse of power by such officer then no hesitation should be felt in passing stringent stricture against officer keeping in view of norms of justice."
Their lordship also held in reported judgment PLD 2004 Supreme Court 600 All Pakistan Newspaper Society and others v. FOP and others that "determination of jurisdiction by Court seized with the matters is one of the important element in administration of justice as if justice has been provided basing upon corum non judice order then same would have no legal sanction behind." And in PLD 2005 Supreme Court 842 Khyber Tractor (Pvt). Ltd., v. Pakistan Through Ministry of Finance, Revenue and Economic Affairs that "question of jurisdiction of a forum is always considered to be very important and any order passed by a Court or a forum having no jurisdiction, even if it is found to be correct on merit is not sustainable. Jurisdiction of a Court lays down a foundation stone for a judicial or a quasi judicial functionary to exercise its power/authority and no sooner the question of jurisdiction is determined in negative the whole edifice built on such defective proceeding, is bound to crumble down."
(ix) That invoking of Section 32(1)(a) & (c) of the Customs Act, 1969 by the Respondent are also erroneous by virtue of the fact that subsection (1) is not to be read in isolation, instead in conjunction with Section 32(2) or (3), i.e. due to the mis-declaration within the meaning of section 32(1), there should be revenue loss and when due to mis-statement or misdeclaration no injury is being inflicted to the exchequer, no charge for misdeclaration under the provision of Section 32(1) can be invoked and the case of the appellant is on the same pedestal. The said stance stood validated from the reported judgment 2003 PTD 552 Messrs Al-Hamd Edible Oil Ltd. and others v. Collector of Customs and others wherein, their lordship held:
"A bare reading of Section clearly indicate that it relates to a situation where a person makes any statement or files any documents which is false in any material particular by reason of which any duty or charge is not levied or is short levied or refunded. In such event/Customs authorities is empowered to issue to the person concerned a notice to show cause that why he should not pay the loss of revenue suffered by the department and after giving him a hearing, beside any other action under law order payment of the same, if a case is made out. The entire provision revolves around the central point of loss of revenue suffered by the Customs Department on account of the conduct of any person. Mr. Iqbal has not urged that the Department has suffered any loss on account of the conduct of the Appellant. The question of applicability of Section 32 in the present circumstances apparently does not arise."
The Hon'ble High Court of Sindh in another Landmark judgment reported at PLD 1996 Karachi 68 Messrs Kamran Industry v. the Collector of Customs (Export) and 4 others held in un-equivocal terms:
"In the present case the accused has categorically taken the stand that any mis-declaration or under valuation was of no fiscal consequence. Such is also the admitted position which is not disputed where a person submit a declaration in the context of customs clearance and there can possibility be no fiscal consequence contingent upon his declaration and that contingency of no fiscal consequence is either undeniable or regarding which the accused has demonstrated his knowledge or reason to belief that he thought no tax was leviable, by no figment of imagination could it be said that the said person had any knowledge or reason to believe that his declaration/ statement was false or untrue in any material particular. In this context the contention that no penalty under Section 32(1) is leviable for any alleged…
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