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Petitioner: Messrs Mian Shadi Agricultural Material, Mamoon Kanjan, Tandlia Wala, Faislabad VS Respondent: The Deputy Collector (R&D) MCC of Appraisement-East, Customs House, Karachi and 2 others
Court Name: Customs Appellate Tribunal Judge(s): Jehanzaib Wahlah Title:Messrs Mian Shadi Agricultural Material, Mamoon Kanjan, Tandlia Wala,
Faislabad vs The Deputy Collector (R&D) MCC of Appraisement-East, Customs House, Karachi and 2 others Case No.: Custom Appeals Nos.K-1499 to 1502 of 2018 Date of Judgment:2019-08-06 Reported As: 2020 PTD (Trib.) 877 Result: Appeal allowed Judgment ORDER JEHANZAIB WAHLAH, MEMBER JUDICIAL-III.----Through this common order, I intend to dispose off 04 appeals bearing Nos. K-1499 to K-1502/2018 directed against the Orders-inOriginal Nos.43 to 46/2018-2019 dated 15.11.2018 passed by Additional Collector of Customs (Adjudication-II), Karachi. 2. Since, these 04 appeals pertains to same appellant and are based on identical fact and grounds. Hence, it is needless to reproduce facts and so the grounds of each case separately. Therefore, facts of Appeal No.K-1499/2018 are taken into consideration for deliberation/decision, which are appellant is a commercial importer and stockiest of agricultural products, during the course of his business activities he imported a consignment of 25 MT Nutrifol 2-0-57 (KCI), 25 MT Nutrifol 19-19-19+TE & 25MT Agrosign 20-20-20 + TE from Messrs International Ferti Technology, Amman, Jordan, upon receipt of shipping documents he transmitted Goods Declaration with the MCC of Appraisement-East, under the provision of Section 79(1) of the Customs Act, 1969 (Act) and Rule 433 of Sub-Chapter III of Chapter XXI of Customs Rules, 2001 (Rules) and as per pre-requisite deposited upfront duty and taxes in NBP on the basis of declaration. Consequent to which GD was numbered as KAPE-HC-197469-12062017, which was selected for examination in terms of Section 198 and Rules 435 of the Act/Rules, wherein declaration was confirmed and report so prepared was uploaded in the reservoir of the GD , upon receipt of which on his workstation, the Assessing Officer, Group-II, MCC of Appraisement-East (Respondent No.2) passed assessment orders dated 09.08.2016 under Section 80 and Rule 438 of the Act/Rules after accepting the declaration in all aspects including the claimed exemption of sales tax under entry 99 of the Sixth Schedule to the
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Sales Tax Act, 1990 (STA), consequent to which the inbuilt authority of Customs Computerized System (CCS) passed clearance order under Section 83 and Rule 442 of the Act/Rules and the appellant obtained delivery of the goods from Terminal. After lapse of about an year, the Deputy Collector of Customs (R&D), MCC of Appraisement-East, (Respondent No.1) conducted audit on his own under section 26(2) of the Act of the scanned documents and GD of the appellant and thereafter framed contravention report with the allegation that the appellant availed the benefit of Sales Tax, which was otherwise not available on the imported goods, hence, caused loss to the exchequer to the extent of Rs.1,034,150.00 , which is an act of contravention of the provisions of Sections 32(1)(2), 32(3A), 79 of the Act, Sections 3, 6, 7 and 11 of the STA and Section 148 of the Income Tax Ordinance, 2001 (ITO) and forwarded that to the Collector of Customs, MCC of Appraisement-East, who after approving that forwarded it to respondent No. 3, who issued show- cause notice emanating the same facts and contravening provision as were narrated in the contravention report with the exception of the word "misinterpretation". An apt reply to which was submitted vide dated 17.09.2018, through which his jurisdiction and power under the provision of Section 32(3), in the matter of sales/income tax was challenged among rebuttal on the charges levelled in the show-cause notice. The respondent No.3 without rebutting a single grounds of the reply passed order dated 15.11.2018 holding the charges against the appellant established as levelled in the show-cause notice and ordering payment of short paid amount of taxes along with imposed penalty of Rs.500,000.00. Paras 6 to 9 of the order are relevant which are reproduced here-in-under for easement: "6. I have thoroughly examined the case record and have carefully considered all the written and verbal arguments put forth by respondents. Case of the department is that, Messrs Mian Shadi Agricultural Material, Chuk No.510, Gb, Mamoon Kanjan, Tandilia Wala, Faisalabad imported goods "Natural Fertilizer Nutrifol" from Jordan under PCT 3105.9000 vide GD No. KAPE-HC-197469- 12062017 and availed, benefit of 6th Schedule vide S.No.99 which is not admissible on import stage. The exemption of Sales Tax and Additional Sales Tax is available to (composite) non chemical fertilizer) produced and supplied locally. This mis-interpretation resulted to short realization of government revenue of Rs. 1,572,306/- in terms of duty and taxes. The offending value of the goods amounts to the tune of Rs.7,416,536/- 7. The importer negated the charges and stated that Serial No.99 of the 6th Schedule pertains to Table No. I which carries the heading "Imports or Supplies" while Table No. II its for "Local Supplies Only". Admittedly, Serial No.99 is defined as "Compost (non-commercial fertilizer produced and supplied locally" which has led to mis-interpretation but not on the part of our client and custom authorities who examined, assessed and cleared the consignment but rather on the part of contravention framing authority and your authority. The exemption is available on import of the instant good by virtue of being included in the table for import or supplies, if the same was meant to be available on the goods that are meant to be supplied locally then it would have been included in Table-II , which is for "Local supplies only". 8. After detailed examination of the fact of the case, the undersigned is of the view that M/s. Mian Shadi Agricultural Material, Chuk No.510, Gb, Mamoon Kanjan, Tandilia Wala, Faisalabad, imported goods "Natural Fertilizer Nutrifol from Jordan under PCT 3105.9000 vide GD No.KAPE-HC-197469- 12062017 and availed inadmissible benefit of 6th Schedule vide Serial No. S.No.99. As it is evident at S.No. 99 of the sixth schedule the benefit is admissible to (composite non chemical fertilizer) produced and supplied locally and not to the imported one, therefore, the presence of the goods in Table of the import sixth schedule cannot justify the exemption. Moreover, imposed data of the same importer for the very same goods shows that he had time and again attempted to clear his goods claiming the same benefit of the sixth schedule and whenever the assessing officer withdrew the exemption, he straight away paid the sales tax without any objection or protest. For
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instance in five consignments of identical goods imported by the same importer from the same source vide GDs bearing Nos. KAPE-HC-75575- 26102017, KAPE-HC-137988-03022018, KAPE-HC- 124462- 12012018, KAPE-HC-132204-29032016 and KAPE-HC-176377- 03022018 exemption of Sales Tax under Serial No. 99 of the 6th Schedule was denied by the assessing officer and the importer paid the leviable Sales Tax immediately without questioning the reason of denial , which indicates that importer was not only well aware of the non admissibility of the claimed exemption but his attempt was with mala fide intention of inflicting loss to the exchequer. 9. Having said that, based on these observations and factual as well as legal position, charges of taking undue benefit of S.No.99 of the 6th Schedule has been established. Accordingly, M/s. Mian Shadi Agricultural Material , Chuk No. 510, Gb,- Mamoon Kanjan , Tandilia Wala, Faisalabad is hereby directed to deposit the evaded amount of duty and taxes amounting to Rs.1572306/- (Sales Tax: 1260811/- Additional Sales Tax Rs.222496/- Income Tax: Rs. 88999/-) , into national exchequer immediately for violation of the provision of Sections 32(1), (2) and 79 of the Customs Act, 1969, read with Sections 3, 6 and 7 of the Sales Tax Act, 1990, further read with Section 148 of the Income Tax Ordinance, 2001. A penalty of Rs. 500,000/- on importer under clauses (10) and (14) of Section 156(1) of the Customs Act, 1969 and Sections 33 and 34 of the Sales Tax Act, 1990. 3. The appellant preferred the instant appeal on the basis of grounds enumerated therein, the consultant/advocates on the date of hearing argued the case strictly in accordance with those. No cross objections under Section 194A(4) of the Act have been filed within the stipulated period of 30 days, resultant, lost their right of filing cross appeal within the contemplation of subsection (3) of aforesaid section. However, on the date of hearing DR submitted comments which least qualify the definition of cross appeal instead as opinion observation having no legal force are kept in record of the case. 4. Argument heard and record perused the record and the relied upon citations by the appellant's. Prior to dilating upon other factual and legal aspect of the case, it is of vital importance for me to deliberate that as to whether respondent No.1 and his subordinates are empowered to conduct audit of the record of the importer under the provision of Section 26(2) of the Act, while encroaching the jurisdiction of Directorate General of Post Clearance Audit (DGPCA) established by the legislature under Section 3DD of the Act and power vested upon its officials through SRO 500(1)/2009 dated 13.06.2009 and under Section 25 of the STA and 177 of ITO and as to whether respondent No.3 has been appointed as an officer of Inland Revenue under Section 30 of STA and respective Section of ITO and is empowered to adjudicate the cases corresponding to the contravention of Section 11 of the STA and Section 162(1) of the ITO as objection qua jurisdiction is a basic lacuna on assumption of jurisdiction which can be raised at any stage of proceeding including appeal in as much as it goes to the very roots of the matter and render entire proceeding coram non judice. Beside, jurisdictional defect could not be removed by mere conclusion of proceeding and passing of order-in-original and order-in-appeal 2017 PTD 196 Collector of Sales Tax v, Khursheed Spinning Mills Ltd. and 2 others. 5. In order to decide first part of my observation recorded in para supra, Section 3DD of the Act has been examined by me, through which legislature formed /established DGPCA and its officers have been delegated powers through SRO 500(1)/2009 dated 13.06.2009 for conducting audit of the importer books of account maintained under Section 211 of the Act under the provision of Section 26(2) after serving notice/summon under clause (a) of Section 26A of the Act, they are empowered to look into every aspects of the declaration made by the importer and assessment order passed by the competent authority of the Clearance Collectorate under Section 80 and Rule 438 of Act/Rules and prepare audit observation and forwarded that to the importer for clarification, if the reply fails to settle the issue, frames contravention report and forward it to the Clearance Collectorate which onward forward to the respective Collectorate of Customs Adjudication for
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issuance of show-cause notice under Section 180 of the Act, and passing of order-in-original by the authority defined in Section 179 ibid. The respondent No. 1 assumed the powers of officials of DGPCA and conducted the Audit Post Clearance of the GD of the appellant under Section 26(2) while exercising the powers specifically delegated to the officials of the DGPCA. Neither respondent No. 1 nor his higher / subordinates are empowered to encroach the sovereign jurisdiction of DGPCA under any circumstances, as this will render the formation of DGPCA by the legislature under Section 3DD of the Act, and the powers delegated through SRO 500(1)/2009 dated 13.06.2009 redundant. Additionally, the respondent No.1 and his subordinates are also not appointed/designated as an "Officer of Inland Revenue" under Section 30 of the STA and Section 228 of the ITO. Resultant, are not empowered to conduct audit in the matter of Sales/Income Tax under the provision of B Section 25 of the STA and Section 177 of the ITO. Hence, respondent No 1 and his subordinates acted without power/jurisdiction, in conduction of audit of sales tax and income tax as evident from the contents of show-cause notice and order, rendering the act of conduction of audit and framing of contravention report ab-initio, null, void. It has been observed by me with great concerned that respondent No.1 and his subordinates are running a parallel department to the DGPCA and Directorate General of Internal Audit. This is not permitted under law, if it is left to be perpetuated, anarchy will prevail within the different organs of FBR to encroach powers/jurisdiction of each other, despite having no lawful authority/jurisdiction. This type of intention/act cannot be validated under any circumstances and has to be crushed in the initial stages for maintaining the integrity and sanctity of the different sovereign organs of FBR. Therefore, the conduction of audit post clearance of the GDs of the appellant under Section 26(2) of the Act, Section 25 of the STA and Section 177 of the ITO by the respondent No. 1 or his subordinates, for determination of short levied /collected amount of Sales Tax, Additional Sales Tax and Income Tax on the imported goods is without lawful authority/jurisdiction. Hence, ab-initio null and void and as such coram non judice. The superstructure built thereupon ought to be crumble down no matter how strong it may be. 6. The respondent No.3 invoked certain provision of STA and ITO without going through their expressions, and in negation of the ratio settled by the Supreme Court of Pakistan in reported judgment 2010 SCMR 1425 Section Officer Government of Punjab Finance Department and others v. Ghulam Shabbir that the Principle of Administration of Justice and Interpretation of Statute is that "the person who is performing the role of a judge, no matter even in quasi-judicial proceeding must wear all laws of the country on the sleeves of his robes and failure to do so by any reason is not an excuse". Sections 3, 6, 7, 33 and 34 STA and 148 of the ITO have been invoked. Section 3 is indeed a charging Section, under this Section the appropriate authority is Officer of Inland Revenue, whereas Section 6 defines mode and manners of collection of Sales Tax at import stage by the customs authority and on supply by the manufacturer/seller, resultant it is not a charging instead a machinery section. The liability to taxation of a registered person is determined for a tax period under Section 7, which stipulates that subject to the bar contained under Section 8, a registered person is entitled to deduct the input tax. that has already been paid from the output tax. The net amount arising thereby is paid along with the monthly return under section 26 in the Treasury. Section 33 contains penal clauses synonymous to Section 156(1) of the Act and Section 34 speaks about default surcharge to be paid upon establishing the charges under the charging sections. Likewise, Section 148 prescribes the procedure for collection of Income Tax at import stage by the authorities referred therein. Meaning thereby that these sections are independent, no charge could be invoked under these. Nevertheless, respondent No.3 invoked these despite irrelevant and so the section containing penal clauses/default surcharge. I have no words for this sort of ignorance, putting a big question mark on the competency of the respondent No.3. No show-cause notice can be issued under the aforesaid sections, which are independent and have no nexus D with each
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other. In the absence of invoking of relevant charging and applicable sections in the light of act and commission of the importer/ manufacturer/supplier of the STA and ITO. Renders it void and ab-initio and of no legal effect as held by the superior judicial fora in their judgments reported at Asst. Collector v. Khyber Elec. Lamps 2003 PTD 1275, DG 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, Rose Color v. Chairman, CBR and 2013 PTD 813 Sarwar International v. Addl. Collector of Customs. 7. It has been forcefully contended by the Consultant/ Advocate of the Appellant that Respondent No.2 even has no mandate to issue show-cause notice in the matter of Sales Tax/Income Tax. Whereas, Respondents are of the view that incorporation of the word "tax" in Sections 32(2) and (3) and 179 of the Act and the clarification issued by the Board vide C.No.3(32)Tar-1/90 dated 06.08.2012 and legal opinion of Ministry of Law vide No. F.242/2012-Law.I dated 11.07.2012 is sufficient for assuming powers under the charging Sections of Section 11 of the STA and 162(1) of ITO. Upon perusal of Section 32(2) and (3) of the Act, I have observed that although the word "tax" is available, this does not automatically empowers the Respondent No.3 to assume powers under the provision of Section 11(2) and (3) of the STA and 162(1) of the ITO, unless Legislature appoint officer of Customs/ respondent No.2 as "Officer of Inland Revenue/Commissioner of Income Tax", who has powers under these Sections to take cognizance in the matter relating to Sales Tax and Income Tax. It is to he noted that the word tax inserted in Sections 179 and 32 of the Act are only for assumption of powers of adjudication on the basis of involved duty and taxes by the appropriate adjudicating authority defined in Section 179(1) and in Section 32, for empowering the Officer of Customs to charge the tax payer under the said provision on the basis of amount of duty and taxes, punishable under the respective provision of Section 156(1) of the Act. Therefore, despite of insertion of the word taxes in both the Sections adjudicating authority including the Respondent No.3 have to issue show-cause notice within E the respective applicable provision of the Act only and not under any charging or Section 11 of the STA and Section 162(I) of the ITO, which are otherwise non existence in the show-cause notice and charge against the Appellant has been levelled under Sections 3, 6, 7, 33 and 34 of STA and 148 of the ITO, which are irrelevant. Even otherwise, the Respondent No.3 has also relied upon clauses (14) and (14A) of Section 156(1) of the Act, applicable in the case of mis-declaration falling within the ambit of Section 32 of the Act. These clauses cannot invoked in the matter of Sales Tax and Income Tax falling under sections 11 and 162(1) ibid. 8. For lending further clarity to the issue, I have scrupulously gone through the provision of Section 30 of the STA and Section 228 of the ITO and observed that Respondents have not been appointed as an Officer of Inland Revenue under these Sections. Resultant, they are not empowered to exercise the powers under Section 11 of the STA and Section 162 (1) of the ITO, which empowers Officer of Inland Revenue / Commissioner of Income Tax to initiate adjudication proceeding for recovery of short collected/paid Sales Tax/ Income Tax either due to collusion or connivance or inadvertent, error or misconstruction. Hence, Respondents are not empowered to lay hands on any matter falling under the ambit of Section 11 of the STA and Section 162(1) of the ITO. Reliance on the clarification of the Board vide C.No.3(32)Tar-1/90 dated 06.08.2012 and opinion of the Ministry of Law vide No. O.M.No.F.242/2012- Law-I dated 11.07.2012 lend no help to the Respondent No. 2 as Board and Ministry of Law and Justice have no mandate to interpret the provision of the Act or amend the provision. It can only give opinion, it is for the judicial Fora to interpret the provision of statute and my opinion stand validated from the reported judgment 2005 PTD 2462 Messrs Lever Brother Pakistan Ltd. v. Customs Sales Tax and Central Excise Appellate Tribunal, Karachi that "CBR has no place to in the Scheme of Law, conferred with the jurisdiction to interpret any law,
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statutory or in exercise of any deliberate authority i.e. subordinate legislation". Whereas in reported judgment 2016 PTD (Trib.) 107 Qazi CNG Station, Gujrat and another v. Directorate General of Intelligence and Investigation-FBR, Karachi and 02 others, this Tribunal held that "statute can be amended by the Parliament and a notification not through notification not through any communication. In the absence of amendment of notification, clarification issued by the department could only be termed as opinion and it would not at all amend the notification". Assuming powers on the strength of letter of the Ministry of Law and Justice is palpably illegal beside fatal to the health of the case. Even otherwise, the letter of the Ministry- of Law and Justice speaks about collection of Federal Excise Duty at import stage in the same manner and at the same time, as if it is a duty of customs payable under the Act, (IV of 1969) and for collection of the same the provision of Section 31A also apply. Reference of Section 7 of the Federal Excise Act, 2005 has also been given simply for clarification that for collection of Federal Excise Duty provision of STA is applicable. The emphasis in the O.M. is levy and collection. Therefore, to further elaborate and settling the issue to its logical conclusion, I add while referring to Section 6 of the STA and 148 of the ITO under which the Clearance Collectorates are empowered to collect the taxes on the imported goods as like customs duty. These sections least empowers the Officers of Customs including Respondent No. 3 to initiate adjudication / recovery proceeding for the short collected/paid, Sales Tax and Income Tax either due to collusion or connivance or inadvertent, error or misconstruction. For proceeding with these type of recoveries a show-cause notice has to be issued under the Provision of, Section 11 of the STA and Section 162(1) of the ITO , by the authority expressed therein i.e. Officer of Inland Revenue/Commissioner of Income Tax under subsections (3) and (4) of Section 11 of the STA and Section 162(1) of the ITO. In these sections neither Officer of Customs and Respondent No. 2 figures anywhere. He assumed the power not vested with him under the provision of Sections 11 and 162(1) of the STA and ITO. Resultant, the Customs Collectorates does have powers to collect, Sales Tax and Income Tax as duty at import stage, conversely, to the plea that Customs is empowered to recover the short paid amount of sales tax and income tax at the import stage under Section 202 of the Act is based on mistaken belief, infact the Customs Collectorate could recover the amount of Sales Tax and Income Tax upon receipt of notice from the Officer of Inland Revenue and Commissioner of Income Tax in terms Section 48 of the STA and Section 140 of the ITO for recovery of the adjudged amount of Sales Tax and Income Tax after due process of law. Therefore, it is my considered opinion that the Clearance Collectorates does have the authority to collect Sales Tax and Income Tax at import stage in the capacity of collecting agent and can recover escaped/short payment paid Custom Duty and Regulatory Duty levied on the imported goods under Section 18 of the Act under section 202 ibid., after due process of law, but have no powers to adjudicate the cases of short recovery of Sales Tax and Income Tax under sections 11 and 162(1) ibid. and this stood validated from reported/unreported judgments 2011 PTD (Trib.) 110 Messrs AGP (Pvt.) Ltd. v. Additional Collector of Customs, Karachi 2010 PTD (Trib.) 2086, Messrs Global Marketing Service and another v. Model Customs Collectorate and another, SCRA No. 01/2010 Collector of Customs, Islamabad v. Global Marketing Services and another v. Model Customs Collectorate and another 2004 PTD 801 Al-Haaj Industrial Corporation (Pvt.) Ltd., Peshawar v. Collector of Customs (Appraisement). C.P. No. D-216/2013 Messrs Lucky Cement Ltd. v. Federation of Pakistan and others, 2014 PTD 1963 Shujabad Agro Industry (Pvt.) Ltd. v. Collector of Customs and 8 others, 2015 PTD 702 Muhammad Measum and others v. FOP and 02 others, 2016 PTD (Trib.) 969 Asif Textile Trading v. Directorate General I&I-FBR, 2016 PTD (Trib.) 1008 Phillip Morris (Pakistan) Ltd., Karachi v. Additional Collector of Customs, 2016 PTD (Trib.) 2125 Al-Fajer Associates v. Directorate General of Intelligence and Investigations-FBR, Appeal No. K-1635/2014 Pepsi Cola Export Corporation, Karachi v. Directorate General of Post Clearance Audit and 2 others, Appeal No.K-1029/2016 Messrs M.R. Sons, Karachi v. Directorate General of Intelligence and Investigations-
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FBR, Appeal No. K-1030/2016 Messrs Muhammad Imran, Karachi v. Directorate General of…
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