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Petitioner: VENUS PAKISTAN (PVT.) LTD. VS Respondent: ADDITIONAL COLLECTOR CUSTOMS PREVENTIVE, MCC CUSTOMS HOUSEHonorable Justice Ghulam AhmedIsaac Ali Qazi,Atif Aijaz
2014 P T D (Trib.) 108
[Customs Appellate Tribunal, Karachi]
Before Ch. Niamatullah, Chairman/Member Judicial-I, Ghulam Ahmed, Member (Technical-II) and Muhammad Nadeem Qureshi, Member (Judicial-I)
Messrs VENUS PAKISTAN (PVT.) LTD.
Versus
ADDITIONAL COLLECTOR CUSTOMS PREVENTIVE, MCC CUSTOMS HOUSE and another
Customs Appeal No.K-461 of 2011, decided on 28th May, 2013.
(a) "Force majeure" doctrine of---
----Meaning.
(b) Customs Act (IV of 1969)---
----Ss. 27, 108, 110, 115, 121, 128, 129, 156(1)(64), 209 & 219---Customs Rules, 2001, R.566---Customs General Order (6 of 2010), Cl. (f)(vii)---Transshipment of goods to foreign country/Afghanistan---Goods destroyed by terrorist attack---Doctrine of "force majeure"---Scope---Charge of customs duties upon non-delivery of goods to consignee in Afghanistan---Scope---NATO/ISAF forces deployed in Afghanistan imported "Low Sulphur Diesel", which arrived at Karachi Port for onward transit to Afghanistan---Appellant/clearing agent got cleared the subject goods from Customs for its safe transportation in transit to Afghanistan---Goods cleared by appellant was lost within Pakistan territory while en-route to Afghanistan---Appellant/carrier was responsible for safe transportation of the cargo and its onward delievery to ISAF/NATO forces in Afghanistan against proper acknowledgment---Customs authorities found the appellant guilty of non-delivery of goods to Afghanistan, therefore he was directed to deposit customs duties and other taxes on the subject goods lost by appellant within the territory of Pakistan---Contention of the appellant/carrier/clearing agent was that the impugned goods were destroyed by the terrorist attack, non-delivery of consignment was not on account of tampering, pilferage, damage, breakdown or accident, therefore he could not be directed for payment of customs duties---Validity---Fuel tanker/impugned goods destined for ISAF/NATO supply in Afghanistan had been destroyed by terrorists and such attacks were neither controllable nor predictable by the appellant/clearing agent---Terrorist attacks had not resistible by the drivers or conductors of trucks---Impugned goods destroyed by terrorist attack had been well covered under the act of "force majeure"---Customs duties on goods destroyed by an act of "force majeure" had not been chargeable in many statutes of the world and if had been charged, the same were liable to be refundable---Impugned goods had proven to be destroyed in unavoidable accidents, fire or act of terrorism, etc., therefore the principal importer, exporter or the respondent clearing agent could not be held liable for the recovery of customs duties and taxes---Impugned order in original and appellate order, directing the appellant for payment of customs duties and taxes were set aside---Appeal was allowed.
Messrs Crescent Sugar Mills v. CIT Lahore (1981) 49 Tax 1; Messrs Kashmir Pottry Work's case (1973) 28 Tax 172; 2002 PTD 804 and 2002 PTD 2169 ref.
(c) Words and phrases---
----"Un-avoidable accident"---Definition.
(d) Words and phrases---
----"Un-avoidable cause"---Definition.
(e) Customs Act (IV of 1969)---
----Ss. 25, 27, 110 & 115---World Trade Organization (WTO) Valuation Agreement/General Agreement on Tariffs and Trade (GATT), Art.VII---Agreements/Valuation of WTO, applicability on member countries---Importation of damaged goods---Element of "force majeure"---Diminished value of imported goods, charging of customs duties---Procedure and scope---Diminished value of imported goods on account of destruction, loss, theft were exempted from the charge of customs duties in Pakistan---Pakistan had implemented dictates of Technical Committee of WCO on Valuations, the instruments, agreements and protocols to which Pakistan being a member of WTO and WCO was a signatory---Provisions of Ss. 27, 110 & 115 of Customs Act, 1969 had provided to waive off the customs duties on account of diminishing of value of imported goods due to any reason including "force majeure" while in bond or at stage of importation---Customs duties and taxes could not be charged on imported goods damaged/destroyed on account of diminishing value of such goods resulting from terrorist attacks.
Isaac Ali Qazi for Appellant.
Atif Aijaz (A.O.) for Respondents.
Date of hearing: 22nd April, 2013.
ORDER
GHULAM AHMED, MEMBER (TECHNICAL-II).---This judgment will dispose of Customs Appeal No. K-461/2011 filed by the appellant against Order-in-Appeals Nos. 5136 to 5140/2011 dated 1-4-2011 passed by the Collector of Customs (Appeals) Karachi.
2. Brief facts giving rise to the filing of this appeal are that Messrs ISAF/NATO Forces deployed in Afghanistan imported 10003.430 M. Tons Low Sulphur Diesel which arrived at Karachi Port per S.S. M.T "SORRELLE" IGM No.1 051 dated 23-7-2010 Index No.01. The consignee appointed Messrs New Pak Trading Company as their Customs Agent for clearance of the subject goods from Customs and Messrs Venus Pakistan (Pvt.) Limited Customs Agent Licence No.2527 as their carrier for its safe transportation in transit to Afghanistan via Land Route in accordance with the procedure laid down by FBR vide CGO No.06/2010 dated 20-8-2010. The appellant/carrier also produced NOC dated 6-8-2010 from NLC Dry Port Keamari, Karachi for transportation of the subject cargo on 200 tank lorries. The numbers of tanker lorry were subsequently increased from 200 to 230 tankers vide NOC dated 16-9-2010. After assignment of free number 01 dated 17-8-2010 to GD (AT) filed vide Machine No. KOIL 01 dated 4-8-2010 by Customs Agent Messrs New Pak Trading Company and electronically out of charge from Customs, the appellant started lifting of subject cargo from Customs Bonded Tanks Terminals of Messrs Karachi Bulk Storage and Terminal (Pvt.) Limited and Messrs Panama Trading Company (Pvt.) Limited for its onward transportation to Afghanistan w.e.f. 29-8-2010 after obtaining vehicle wise transportation permits for the same from Customs Authorities in terms of aforementioned CGO. The appellant has now informed that seven tanker lorries have either been attacked or met accident within Pakistan territory while en-route to Afghanistan resultantly the cargo loaded thereon was lost. Since the appellant/carrier was responsible for safe transportation of the cargo and its onward delivery to ISAF/NATO forces in Kandhar (Afghanistan) against proper acknowledgement in terms of CGO 6/2010, he is therefore, directed to deposit Rs.9,107,853 recoverable as customs duty and other taxes on the goods admittedly lost by the appellant within the Pakistan Territory within seven days from the receipt of this notice in the Government treasury failing which penal action should be taken for violation of section 129 of the Customs Act, 1969 read with CGO 06/2010 punishable under clause 64 of section 156(i) ibid. The adjudicating officer ordered the appellant to deposit the amount of Rs.9, 107,853 and passed the Order-in-Original. No. 05/2010 (K-Oil Afghan) which is reproduced as under:--
I have gone through the written reply furnished by the respondent's advocate, departmental comments on the same and rejoinder filed by the advocate besides hearing verbal arguments advanced during the course of hearing by both the parties. Role and responsibilities of Customs Licensed carrier are clearly defined under Chapter XXII of Customs Rules, 2001 and Custom General Order (CGO) 12 of 2002 dated 15-6-2002 amended vide CG0.06/2010 dated 20-8-2010. The relevant Clauses of CGO are reproduced as under:-
Clause (f) (iv) The carrier shall be responsible and bound to carry the goods to its final destination in Afghanistan without any delay and with utmost haste. The carrier shall also be bound to deliver the goods at final destination within the prescribed time-limit, using the transport route duly approved by the Collector, Model Customs Collectorate Preventive, Custom House, Karachi. Any change in route by the Carrier should be notified and consent of the Collectorate obtained in advance.
Clause (f) (vii) In case of non delivery of cargo at final destination in Afghanistan to the consignees within stipulated time or mis-appropriation of the same while en-route to Afghanistan the carrier shall be responsible for payment of all leviable duty and other taxes on the said goods besides penal action initiated against them under the relevant provisions of Customs Act, 1969 and Sales Tax Act, 1990.
In view of the above explicit clauses of "Procedure for transportation of imported Bulk Cargo for exclusive use of ISAF/NATO Forces in Afghanistan" notified vide CG0.12 of dated 15-6-2002, amended vide CG0.06 of 2010 dated 20-8-2010 and acceptance of role and responsibilities by the respondent carrier under the same, I, therefore, order and direct Messrs Venus Pakistan Limited Customs Agent and Carrier License No.2527 to deposit the amount of Rs. 9,107,853/= in Government Exchequer within 07 (seven) days of the issuance of this order. They are also warned to be careful in future.
3. Being aggrieved and dissatisfied with the Order-in-Original No.5 of 2010 dated 24-12-2010, the appellant filed an appeal before the Collector of Customs (Appeals) Karachi. The learned Collector rejected the appeal vide Order-in-Appeals Nos.5136 to 5140/2011 dated 1-4-2011 as under:-
I have thoroughly examined the entire case record and given very careful consideration to the arguments advanced before me. It is an admitted position that the 10008.101 M. Tons of low sulphure diesel involving duty/taxes to the tune of Rs.101.201 million, given in the custody of the appellant for delivery to NATO/ISAF forces in Afghanistan, had not been delivered at the aforesaid destination and as per the provisions of law contained in sub-Para (vii) of Para (f) of the CGO the above-mentioned amount of duty/taxes is chargeable from the appellant. The above-mentioned provisions of law are reproduced as under for ease of reference:-
Sub-para (vii) of para (f) of the Customs General Order No. 06 of 2010
(f) (vii) In case of non delivery of cargo at final destination in Afghanistan to the consignees within stipulated time or mis-appropriation of the same while, enroute to Afghanistan the carrier shall be responsible for payment of all leviable duty and other taxes on the said goods besides penal action initiated against the under the relevant provisions of Customs Act, 1969 and Sales Tax Act 1990.
Thus, the letter in law is very clear to the effect that the appellant is liable to pay duty/taxes in case of non-delivery or the cargo at the final destination and it is immaterial whether non-delivery is causal by the act of nature or the act of the carrier.
At the time of removal of the goods for transportation to Afghanistan, the CGO was at the draft stage and the appellant had submitted an undertaking to the effect that he would abide by the provisions of the CGO in letter and spirit when issued. Obviously, the CGO had been issued/drafted in consultation with the appellant and he was fully aware that consequence of non-delivery of the cargo at the final destination, for any reason, would mean that he would be charged leviable duty/ taxes. The relevant part of the undertaking dalcd 17-8-2010 is reproduced below:-
UNDERTAKING DATED l7-5-2011
"In consideration of Collector of Customs, Preventive, Custom House, Karachi allowing loading and transportation of bulk liquid cargo imported for ISAF/NATO Forces in Afghanistan. I, Rahel Zuberi son of Maj * M. Aslam Zuberi NIC No. 42301-0822674-5 resident of C-G, Marine Heights-II, Clifton Block 2, Karachi on behalf of Messrs Venus Pakistan (Pvt.) Ltd., Karachi do hereby undertake that we will follow the outlined draft procedure for transportation of imported liquid bulk cargo for exclusive use of ISAF/NATO Forces in Afghanistan. Which has been forwarded to HlR vide Model Customs Collectorate Preventive Custom House, Karachi's letter No. SS/Misc/08/201-Oil dated 10-8-2010 for final approval and notification."
Subsequently, the appellant submitted a revolving insurance guarantee dated 24-8-2010, issued by Messrs The United Insurance Co. of Pakistan Ltd, to the effect that any amount of duty/taxes and/or penalty chargeable in respect of the lost goods/cargo shall be paid forthwith. The relevant part of the aforesaid guarantee is reproduced as under:--
REVOLVING 1NSORANCE GUARANTEE DATED 24-1-2010
"Whereas in accordance with the draft procedure for transportation of liquid bulk cargo imported for exclusive use of ISAF/NATO Forces in Afghanistan. Which has been forwarded to FBR for approvals vide Model Custom Collectorate Preventive, Custom House, Karachi's letter No. S5/Misc/08/ 2010-0il, dated 10-8-2010 and the collector of Customs (Preventive), Customs House, Karachi's permission for transportation of imported Liquid Bulk Cargo by Carries Messrs Venus Pakistan (Pvt.) Ltd., 9/1, K-28, Hawksbay Road, P.A.F, Maripur, Karachi, 111-836-871 licensed under Chapter XXII of Custom Rules 2001, pending approval of procedure from FBR, we Messrs The United Insurance Co. of Pakistan Ltd., 5111 Floor, Nizam Chambers, Shahrah-e-Fatima Jinnah, Lahore do hereby bind ourselves and our heirs successors and assignees jointly and severely to pay to the Collector of Customs (Preventive) any amount payable on goods (if lost, damaged, misappropriated within Pakistan territory while enroute to Afghanistan) as Custom Duty, Sales Tax, Surcharge, Regulatory duty or any other levy in the time in force in addition to fine and penalties which may be imposed by the said collector for contravention of the conditions contained in the said draft procedure by the said carrier as referred herein above."
The above-quoted letter of law, the undertaking submitted by the appellant in pursuance of Pakistan make it absolutely clear that in case or non-delivery of the goods/cargo at the destination, the duty/taxes involved on the same shall be paid by the carrier or the guarantor and that the reason for non-delivery is immaterial. Therefore, the principle of force majeure is not relevant in the context of goods/cargo taken over by the carriers for delivery to NATO/ISAF Forces and particularly in the instant case. There is a rationale behind the above-quoted provision of law that anyone undertaking such a huge business and making big profits would have such cargo/goods insured and if the goods remain undelivered to the NATO/ISAF Forces in Afghanistan for having been lost in Pakistan for any reason the duty/taxes chargeable thereon would be made good to the Government of Pakistan and, obviously, if the person undertaking to carry such goods does not bother to have the same insured it is understood that he would pay the amount of duty/taxes on his own. Therefore, the argument of appellant's counsel that since the control of the appellant and consequently had not been delivered to the NATO/ISAF Forces, he should not be asked to pay the duty/taxes chargeable thereon is untenable and the case-law quoted by him in this regard (PLD 1978 Karachi 585. 1988 CLC 299 and PLD 1980 (sic) has been found to be irrelevant to the facts and circumstances of the instant case. The principle of force majeure, referred to by the learned counsel, is also not relevant to the instant case for a number of reasons: one, it is not a contract between two private parties, instead it is a case of delivery of non-duty paid goods, involving tens of millions of rupees in duty/taxes, into the custody of the appellant for delivery to NATO/ISAF forces subject to specific conditions duly agreed upon by the appellant and stipulated through the clear letter of law; two, the consequence of non-delivery of the cargo/goods to the NATO/ISAF' Forces has been specifically mentioned in the undertaking (reinforced by the revolving insurance guarantee) and that consequence is that in case of non-delivery of the cargo at the final destination the appellant shall pay the duty/taxes chargeable thereon. The reference to various provisions of the Customs Act, 1969 such as sections 18, 27, 115 etc made by the learned counsel is equally irrelevant because transit goods are governed by Chapter XIII (sections 126 to 129) of the Act and the rest of the provisions of the Act become irrelevant in case of transit goods, as has been categorically held by a Division Bench of the Honble High Court of Sindh at Karachi vide its judgment dated 27-10-2010 in Constitutional Petition No. D-2410 of 2010. The learned counsel has also contended that since the NLC was the principal party, the duty/taxes chargeable on the lost goods/ cargo should be charged from them. The aforesaid argument, too, is negated by the specific provisions of law contained in Clauses (f) (iv) of the CGO which state that it is the actual carrier (the appellant in this case) who shall be responsible to make good the duty/taxes in such eventualities. The abovementioned provisions are also reproduced below for ease of reference:-
Clauses (f) (iv) of CGO 06/2010
Clauses (f) (iv) The carrier shall be responsible; and bound to carry the goods to its final destination in Afghanistan without any delay and with utmost haste. The carrier shall also be bound to deliver the goods at final destination within the prescribed time-limit, using the transport route duly approved by the Collector, Model Customs Collectorate Preventive, Customs House Karachi. An change in route Carrier should be notified and consent of the Collectorate obtained in advance.
The other objection raised by the learned counsel is that specific provisions/section of the Act have not been quoted either in the show-cause notices or the impugned orders. This plea is also belied by the evidence on record as well as the law by which such issues are governed. In fact specific provisions of the CGO have been quoted and reproduced in the show-cause notice as well as the impugned orders. Even otherwise, the superior courts of law have repeatedly held (for example, the Hon'ble Supreme Court of Pakistan vide judgment dated 9-12-2003 in Civil Petition No.775-K of 2003) that cases should be: decided on merit and not on the basis of technicalities. In the case reported as PTCL 2007 CL 260, the Honourable Supreme Court of Pakistan comprising four judges including the Hon'ble Chief Justice Iftikhar Muhammad Chaudhry has specifically held that mention of a particular subsection of law in the show-cause notice would not weaken the departmental case if offence committed by the tax per has been communicated in reasonable details and substantial compliance of law has been made. In the instant case, I observe that substantial compliance of law has been made. Therefore, the technical issues raised by the learned counsel are ruled to be untenable. I further observe that if the appellant or his guarantor does not make payment of the Government revenue of Rs.101.201 million and the undertaking/ insurance guarantee is not honored, strict action should be taken against them and the appellant should be stopped forthwith to play havoc with Government revenue.
For the reasons explained above, I rule that the arguments advanced by the learned counsel, reproduced at paras 3 and 5, do not find any support from the evidence on record and the case-law quoted by him is not relevant to the facts and circumstances of the instant cases. Consequently, I hold that the impugned orders are correct in law and on facts and there is no reason to interfere with the same. The appeals are rejected accordingly.
4. Being aggrieved and dissatisfied with the Order-in-Appeal, the appellant filed the Instant appeal before this Tribunal on the grounds as under:--
(i) That impugned Order is erred both in law and facts, hence, not sustainable in the eyes of law.
(ii) That entire proceedings against the appellant are without any lawful authority and legal effect as no section of law has been invoked neither in the impugned Order-in-Original nor in the Order-in-Appeal which authorize the adjudicating authority to demand duty and taxes on goods in transit which have been destroyed either in war against terrorism or natural calamity or in an accident beyond the control of human capacity, hence, the entire proceedings are void ab initio for being coram non judice, arbitrary, thus, liable to be set aside.
(iii) That impugned Order of the learned Collector Appeals is not only based on conjecture and surmises but also based on misapplication of the case-law of superior courts with mala fide intention to sustain the impugned Order-in-Original which is without lawful authority.
(iv) That impugned Order is non-speaking as it remained sub silentio over the issues raised by the appellant in reply to the Show-Cause Notice and appellant's rejoinder to the Collectorate's para wise comments, hence, liable to be set aside on this score alone.
(v) That impugned Order is bad for non joinder as National Logistics Cell (NLC) is a necessary party to the cause, hence, impugned Order I show-cause notice are not sustainable on this score.
(vi) That in the instant Show-Cause Notice, it has been alleged that out of seven (7) tankers lorries 3 tankers (details as per attached list) involving amounting to Rs. 3,958,283 have been completely ambushed.
(vii) That four (4) tankers (details as per attached list) apparently has been included erroneously in the Annex-I of the Show-Cause Notice as the said vehicle has neither been am bushed nor accidented rather decanted at its destination in Afghanistan without any hassle and trouble. Therefore, the duty/taxes involving amounting to Rs.5,149,570 rating to the aforesaid content are liable to be (sic) from the alleged demand amount.
(viii) That WITHOUT PREJUDICE to the merit of the cause of the Show-Cause Notice, the duty and taxes involved in the two tankers i.e. Rs. 6,071,843 is liable to be deleted from the alleged demanded amount of Rs. 73,270,021 being not covered by the cause of the Show-Cause Noticed. Copies of 7 Trucks TPs/incident report/ police report(s)/Survey report etc. at Annexure-XIV
(ix) The delay is at times is beyond the control of the respondent as there are lot of uncertainties and due to danger en-route, the tankers remain stranded, otherwise once it has been admitted that the tankers had reached to its destination safely and the delivery is accepted by the consignee, the element of duty and taxes obviated. Attention is invited to case of Messrs Blue Horizon reported in PTCL. Otherwise the delay which creates hardship as in the instant case is condonable under section 224 of the Customs Act, 1969 and it is humbly requested that this cause may please be placed before the Collector Customs for condonation.
(x) That cause of ambushed vehicles in terrorist attack cannot be made as a legitimate cause for recovery as at first place it is out of the scope of CGO 6/ 2010, secondly, any attempt to bring such cause within the purview of CGO 6/2010 would be hit by force majeure as vehicles are victim in a declared WAR ON TERROR.
(xi) That it is humbly submitted that the aforesaid circumstances, Without Prejudice have not only frustrated the obligations under the CGO but also created a force majeure situation where after the appellant can not be compelled to perform their obligation under the CGO.
(xii) That the aforesaid principle of law that is the frustration of agreement and force majeure has been positively recognized by law, inter-alia, under section 56 of Contract Act, 1872.
(xiii) That now this principle has been recognized in the newly signed Afghan Transit Trade Agreement, 2010. Article 28 ibid is quo tam verbatim:
"Article 28: Loss, Destruction, or shortage of the cargo en route.
When it is established to the satisfaction of the Customs Authorities that goods specified in the Transit documents/GD have been destroyed or have been irretrievably lost by accident or other unforeseen events en route or that they are short by reason of their nature, payment of duties and taxes normally due, shall be waived."
(xiv) That it is well established principle of law that proclamation of war in an area by State or States rendered the or agreement void as in the instant case the appellant could not be asked to perform their part under the void agreement.
(xv) That here it is worth to add that primarily it is the duty of the State to safeguard the citizens and their properties from the terrorists and miscreants and there are incidents where the State came to the rescue of victims of terrorism and the victims had been aptly compensated by the State, therefore, under the circumstances on no moral and legal ground the State can be allowed to capitalize over the misfortune of the appellant Carrier agent mainly caused by the failure of the State to protect them in a most imminent terrorist prone areas such as en route to i.e. Torkham/Chaman Customs Stations situated Pak-Afghan Border.
(xvi) That impugned Order, humbly submitted is…
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