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Petitioner: Messrs M.I. TRADERS, LAHORE VS Respondent: ADDITIONAL COLLECTOR OF CUSTOMS
Court Name: Customs Appellate Tribunal Judge(s): Muhammad Nadeem Qureshi Title: Messrs M.I. TRADERS, LAHORE vs ADDITIONAL COLLECTOR OF CUSTOMS Case No.: Customs Appeal No.K-460 of 2012 Date of Judgment:2013-11-25 Reported As: 2014 PTD (Trib.) 299 Result: Appeal accepted
Judgment ORDER MUHAMMAD NADEEM QURESHI MEMBER (JUDICIAL-I).--By this order, I will dispose off Customs Appeal No.K-460 of 2013 filed by the appellant against Order-in-Original No.40800 dated 10-9-2012, passed by the respondent, Karachi. 2. Brief facts of the case are that the appellant Messrs M.I. Traders, Lahore imported a consignment declared to contain assorted Choco Toffee and Candy 17901.90 kg at US$. 1.00 per kg declaring total (net weight) 17901.90 kg) at declared value US$ 17901.90/from Messrs Alpha Shipping Ltd. Fern Wood Avenue Hao 2HFW London, United Kingdom vide 1GM No..321 dated 14-8-2012, Index No. 173 arrival as per S.S Vessel "Hnajan Venezia". They filed GD No. KPPI-HC-6629 dated 16-8-2012 through "WeBOC" System" through clearing agent M/s. K.S.K Enterprises. They sought release thereof under PCT Heading 1704,9090 carrying CD @ 30% Sales Tax @ 16% Additional Sales Tax 3% Income Tax @ 5%. The goods were stuffed in a container No. MWCU-6681334.In order to verify the importers declaration the GD was referred for physical examination through WeBOC System. The Examination staff reported the misdeclaration in description and undeclared item which are endorsed as under: (1) CADBURY/NESTLE BRAND CHOCOLATE BAR/CANDIES, ASSORTED FLAVOUR AND PACKING, APPROX NET WEIGHT: 7414. KGS DATE OF EXPIRY 2/3/5/6-2013 , I/O U.K. (2)CADBURY/NESTLE BRAND TOFEE and CANDIES, ASSORTED FLAVOUR AND PACKING, APPROX NET WEIGHT: 5906 KGS DATE OF EXPIRY 5/6/10-2013 , I/O U.K. (3)RED BULL SOFT DRINK , MODE OF PACKING 1X250 GRMS EACH, 1X24 TIN EACH CARTON , QTY 720 CARTONS, APPROX. QTY, 4320 LTRS, DATE OF EXPIRY 01/2014 APPROX. WEIGHT 4320 KGS , I/O UK CHECKED WEIGHT 100% AT QICT VIDE WEIGHMENT SLIP NO. 1821634 DATED 17-8-2012 AND TOTAL
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WEIGHT FOUND 21240 KGS. APPROX. From above it is clear that, at per physical examination report (1) The Cadbury Nestle Brand. Chocolate (7414 kg) has been found which is appropriately classifiable under PCT heading 1806.9000 carrying CD @ 30% Sales Tax @ 16% Additional Sales Tax @ 3%, Income Tax @ 5% assessable at US$. 5.00 per kg vide Valuation Ruling US /25A 347 (No. Reg. Misc/07/2009-1 dated 25-6-2011). Beside Item No. 3 Red bull (4320 kg) has been found as undeclared which is appropriately assessable under PCT heading 2202.1010 carrying CD@30% Sales Tax @ 16%. Additional Sales Tax @ 3% Income Tax @ 5%. The ascertained value of the offending good is worked out at Rs.3985751. Therefore, the importer has attempted to get clear the Cadbury Nestle Brand Chocolate (7414 kg) & Red Bull (4320 Kg) under the garb of Assorted Choco Toffee and Cadbury. Had this mis-declaration in description and undeclared goods been no detected, the Exchequer would have been suffer a loss of revenue to the tune of Rs.1463914. This act of th importer constitute an offence of mis-declaration within the meaning o sections 16 and 32(1) and (2) of the Customs Act, 1969 read with section 3(1) of the Import and Export (Control) Act, 1950. This offence is punishable under clause (9) of section 156(1) of the Customs Act, 1969 read with section 3(3) of the Imports and Exports (Control) Act, 1950. 3. The appellant controverted the allegation through reply to 'show cause notice, the respondent after consideration of that passed Order-inOriginal No. 40800 dated 10-9-2012, Para 3 of the order is relevant and which states inter-alia:-- "The contention stated above has been examined. Mr. Madan Lal, Principal Appraiser was asked to explain the department view point. As framed in the contravention report he stated there was a wilful attempt to evade duty/taxes by mis-declaration PCT, Classification and by giving vague description of the goods to avoid application of valuation ruling on chocolate of PCT 1806.9000, moreover, Red Bull drink was found undeclared which is inter-alia is chargeable to Federal Excise duty as well. The contention of the department is found to be on merits and there is a clear attempt to evade duty and taxes by the modus operandi stated above. Therefore, the charges framed in the show cause notice are established under section 32 of the Customs Act, 1969 read with section 3 of the Import and Export Act, 1950 punishable under clause 14 of section 156(1) of the Customs Act, 1969 and section 3(3) of Imports and Exports (Control) Act, 1950. However, the departmental representative stated that the correct offending value of goods is Rs.2,830,575 instead of Rs.3985751 as stated in the contravention report. I, therefore order confiscation of the offending goods under the penal clauses mentioned above. However, an option is given to importer to redeem the goods upon payment of 35% of the redemption fine of the ascertained value of the offending goods beside payment of duty/taxes leviable thereon. As the importer has been sufficiently penalized through imposition of 35% redemption fine I see no need to imposed further penalty on him. However, the importer and clearing agent are warned to be careful in future." 4. On the date of Mr. Nadeem Ahmed Mirza, Consultant appeared on behalf of the appellant, reiterated the arguments incorporated in the memo. of the appeal and further argued that the Government of Pakistan in exercise of power conferred under section 3 of Customs Act, 1969 (IV 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 18-7-2012, which is effective from 1-8-2012, Meaning thereby that every adjudication after 1- 8-2012 has to be done by the officer of Collectorate of Customs (Adjudication) and not by the Executive Collectorate. While issuing show cause notice dated 4-9-2012 the respondent has transgressed the authority vested with the Collectorate of Customs (Adjudication) rendering the issuance of show cause notice being in-flagrant violation of law and as such coram non judice, hence void and ab-initio. He further argued that, it is mandated upon the respondent to pass
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order-in-original within four corners of show cause notice which revolves around section 32(1) and (2) of the Customs Act, 1969 without mention of any section of Sales Tax Act, 1990 or Income Tax Ordinance, 2001. Contrary, the respondent passed order-in-original for the payment of Sales Tax and Income Tax in the instant case by travelling beyond the charter of show cause notice. Such orders are being termed palpably illegal. Reliance is placed on the reported judgment 1987 SCMR 1840. The Collector of Central Excise and Land Customs and others v. Rahm Din. Wherein their lordship of Supreme Court held that, "Order being ultimately based on a ground which was not mentioned in the show cause notice or earlier taken was palpably illegal on face of its." He contended that, no charges for mis-classification or PCT heading can be invoked under the provision of section 32(1) and (2) of the Customs Act, 1969 as per direction contained in Sub-para (B) of para 101 of CGO, 12/2002 dated 15-6-2002, which is mandated to be adhered by the field formation under the provision of section 223 of the Customs Act, 1969. He further contended that, it makes no difference that whether the goods in question were found "Cadbury Nestle Brand Chocolate Bars/Candies or Cadbury/Nestle Brand Toffee and Candies or Red Bull Soft drink" falling under PCT heading 1704.9090 or 1806.9000 or 2202.1010 because all attracts levy of custom duty @30%, sales tax @16% and income tax @5%. Hence, no mis-declaration in material particular to the extent of description/PCT heading. No charge of value misdeclaration can be levelled unless direct evidence of import is available which has to be supplied in support of allegation as per direction contained in para 78 of CGO, 12/2002 dated 15-6-2002. Thereafter in such like situation the difference should be more than 30% between declared and the evidence. Simultaneously no charge of misdeclaration has ever been levelled by any Collectorate against any Importer when assessm ent of the consignment is made on the basis of Valuation Ruling issued by Directorate General of Valuation under section 25A of the Customs Act, 1969 or on data maintained by the Collectorate under Rule 110 of the period expressed in Sub-Rule (a) of Rule 107 of Customs Rules, 2001, if that would had been the case, not a single consignment would had been cleared by any Collectorate because in every case the value is enhanced on the basis of Valuation Ruling or data without the charges of misdeclaration. Therefore, the charge of misdeclaration of value is without any substance and nullity, to the provision of Act and existing practice and as such hold no ground. 5. Mr. Ehtasham Paracha, appraising Officer appeared on behalf of the department/respondent submitted and reiterated the comments on the memo. of appeal and argued, in accordance with the same. He further argued that, the appeal is not maintainable for the reason that the person who has filed the appeal is not authorized by the appellant to file instant appeal on behalf of the appellant. No such specific authorization and/or power of attorney is available with the memo. of appeal. The person who had authorized the consultant to file appeal himself had not placed on record any authorization from the appellant to file appeal and/or to further authorized to file such appeals. The appeal is therefore liable to dismiss on this ground alone. He rebutted and argued that at the time of commencement of quasi-judicial proceeding in the matter newly formed Collectorate of Customs (Adjudication) has not been functional. During the period when the Adjudicating Collectorate was not functional, matter could not be kept pending and where there was any illegality found it ought to have been treated in the same manner as it would be dealt before issuance of S.R.O. No. 886(1)/2001 dated 18-7-2012. The Federal Board of Revenue, in view to save importers from undue delay in finalization of such matter and to remove difficulties and hardship, vide letter C.No. 2(2) L&P/89(PT) dated 6-8-2012 specifically authorized the respondent to adjudicated such matter. He further contended that till the time the Adjudication Collectorate became functional, the Federal Board of Revenue extend the aforesaid specific authorization from time to time. Therefore respondent acted under the direction of Board adjudicated upon the matter and passed the impugned order, which order in all fairness is legal and valid order. He further contended that respondent had all the powers to adjudicated upon the matter, which
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relates to levy of Sales Tax and Income Tax at import stage and the learned respondent did not commit any legality as alleged by the appellant. The case-law of the Superior Courts cited by the appellant is therefore not applicable. He further contended and argued that no one was allowed to violate the law and if any one found involved in any offence committed by him, an action in accordance with law was taken against him as in the case of the appellant. The respondent had not deviated from the prescribed procedure and power conferred upon him under the Act. He also argued that the show cause notice was issued on glaring misdeclaration on actual description of the goods, which is an offence under section 32(1) of the Customs Act, 1969. The leviable duty, sales tax and income tax was accordingly recoverable under the relevant provision of the Customs Act, 1969, Sales Tax Act, 1990 and Income Tax Ordinance, 2001 leviable there upon at import stage. He further argued that the appellant mis-declared the physical description to get the clearance of the goods on lower value as against the actual value in terms of the Valuation Ruling. The imported goods (as per found description) were assessable on higher value as per the valuation ruling as against the declared description. The appellant has misdeclared the actual description of the goods in order to evade legitimate revenue of the government exchequer and had made a clear attempt to get the goods on lower value by way of this evident misdeclaration. He further stated that the Show Cause Notice and order passed thereon are well within the ambit of law and passed after the detail scrutiny of the evidence available on record and as such observations made thereon by the learned Collector Customs at the time of passing the order-in-original are in conformity with the legal requirements and needs not to be interfere and pray to maintain the ,order-in-original and reject the appeal in better interest of justice. 6. Rival parties heard and case records perused prior to dilating upon other issues the objection raised into maintainability of the appeal is taken for decision. Upon perusal of the record of the appeal, it has been found that the appellant himself and for arguing the case before the Tribunal, the learned Consultant has been duly authorized by the appellant, hence the preliminary objection raised by the respondent is without any substance and overruled as the appeal has been vakdly filed under the provision of section 194-A of the Customs Act, 1969. 7. The Government of Pakistan in exercise of power conferred under section 3 of Customs Act, 1969 (IV 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(1)/2012 dated 18-7-2012, which is effective from 1-8-2012, copy of which is available as Exhibit "H" at pages 25-27 of the memo. of appeal. The respondent in the capacity of Additional Collector of Customs, MCC of PMBQ (Executive Collectorate) is non-existent authority in the S.R.O. 886(1)/2012 dated 18-7-2012 w.e.f. 1-8-201?, instead he issued show cause notice dated 4-9-2012 beyond 31-7- 2012, when he was empowered to adjudicate the cases of such type. Rendering, the whole exercise is coram-non-judice as contended by the appellant consultant carries weight. Resultant, he is non-existent authority under section 179 of the Customs Act, 1969. Such authority cannot adjudicate the case opted to issue show cause notice to the appellant, despite not warranted. The argument that the Board has issued directions through letters to adjudicate cases beyond 1-8- 2012, hold no ground as order so issued by the Board is also illegal by virtue of the fact that a notification can be amended through a subsequent notification and not by any executive order. On this issue we have already held in Customs Appeal No. K-24/2013 Messrs Paramount Corporation v. Additional Collector of Customs (Adjudication) MCC (PaCCS) and Customs Appeal No. K-471/2012 Messis S.S. Trading v Additional Collector of Customs (Adjudication) MCC (PaCCS) that "the Board can only amend a notification in terms of section 5(1) read with section 179(2) of the Customs Act, through notification for dispensation of the powers, to overcome the exceptional circumstances caused during the transitional period faced by the respondent Collectorate. The subject legal infirmities were communicated officially through official correspondence to the Board by the
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Executive Collectorate even then the Board has not made any compliance, the Board had not made any plausible efforts to address the said situation and never tried to issue notification for entrustment of powers for conducting the adjudication proceeding in accordance with law. Further stood validated from the reported judgments 2002 PTD 2457, PLD 1971 Supreme Court 61, PLI). 1973 Supreme Court 236, PLD 1964 SC 536, 2001 SCMR 838, 2003 SCMR 1505, 2006 SCMR 129, PLD 1996 Karachi 68, 2006 PTD 978 and PLD 1971 Supreme Court 184. The respondent is not designated an Officer of Inland Revenue under the provision of, Clause (c) of subsection (3) of section 25 of the Sales Tax Act, 1990 and Section 120 of the Income Tax Ordinance, 2001 and as such is not empowered to issue show cause notice and pass order-in-original in respect of matter relating to Sales Tax and Income Tax and section 36 of the Sales Tax Act, 1990 and sections 192 and 195 of Income Tax Ordinance, 2001. Hence, by issuing show cause notice and passing order-in-original the respondent usurped the power of Officer of Inland Revenue to which he is not vested, Rendering the issuance of show cause notice and order-in-original being a flagrant violation of law and as such coram non-judice. The action is taken in the absence of availability of powers or show cause notice or order-in-original has been passed without jurisdiction/ power, such order are of no legal effect as held by their Lordship of Supreme Court of Pakistan that "it is an element to principle that if a mandatory condition for the exercise of jurisdiction by Court, Tribunal or Authority is not fulfilled then the entire proceeding which follows become illegal and suffer from want of jurisdiction/powers. Any order passed in continuation of these proceedings in appeals or revisions equally suffers from illegality and are without jurisdiction" Major Syed Walayat Shah v. Muzaffar Khan and 2 others (PLD 1971 SC 184), Omer and Company v. Controller of Customs, (Valuation): (1992 ALD 449 (1) Karachi AAA Steel Mills Ltd. v. Collector of Sales Tax and Central Excise Collectorate of Sales Tax (2004 PTD 624), PLD 1976 Supreme Court 514 Ali Muhammad v. Hussain Buksh and others and PLD 2001 Supreme Court 514 Land Acquisition Collector, Noshehra and others v. Sarfraz Khan and others, S.T.A. 444/03, S.T.A. 465/07, 2010 PTD (Trib.) 1636, [(2010) 101 TAX 221 (H.C. Kar)] and 2010 PTD 465,2010 PTD (Trib.) 2158, 2011 PTD (Trib.) 1010, 2011 PTD (Trib.) 1680, 2011 PTD (Trib.) 2086. It is well settled principle of law that, if the law had prescribed method for doing of a thing in a particular manner such provision of law is to be followed in letter and spirit and achieving or attaining the objectives of performing or doing of a thing in a manner other than provided by law would not be permitted as declared in the landmark judgment of Director, Directorate General of Intelligence and Investigations and others v. Messrs Al-Faiz Industries (Pvt.) Ltd., and others reported as 2006 SCMR 129. For invoking provisions of misdeclaration under section 32 of the Customs Act, 1969 prima facie, an element of "mens rea" should be present i.e. there should be an attempt of wilful and deliberate false declaration. The importers may not be charged for mis- declaration under section 32 of the Customs, Act, 1969, in the following situation:-- (a) Where an importer makes a correct declaration on bill of entry or opts for 1st appraisement for determination of correct description, PCT heading of quantity of goods. (b) When a consignment is found to contain goods for description other than the one declared falling under separate PCT heading but chargeable to same rate of duty. (c)Where the description of goods is as per declaration but incorrect PCT heading has been mentioned in the bill of entry no mis-declaration case under section 32 of the Customs Act, 1969, be made out provided there is no change in the rate of customs duty as a result of ascertained PCT heading. 8. By virtue of the said fact appellants case falls within the four corners of sub-para (B) (ii) of para 101 of CGO. 12/2002 dated 15-6-2002 and judgment in field of CESAT, Bench III in Customs Appeal No.K-151/2006 dated 28-1-2008 and reported judgment 2010 PTD (Trib.). 1983 Messrs Khawaja Metals v. Collector of Customs (Appeals) and 2010 PTD (Trib.) 2576 of Messrs Iqbal Traders v. Collector of Customs (Appeals) supports the same preposition.
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9. Perusal of show cause notice and comments of the respondent's representative, it has been noticed that the respondent has taken into account the leviable amount of Sales Tax, Income Tax and Federal Excise duty, but no provision of the Act/Ordinance has been spelled out in the show cause notice due to the reason that he was well aware of the fact that the Customs has only the power to collect sales tax at import stage under section 6 of the Sales Tax Act, 1990, section 148 of the Income Tax Ordinance and section 3 of the Federal Excise Act, 2005, but not empowered to adjudicate the cases of Sales Tax, Income Tax and Federal Excise Duty under section 11 of Sales Tax Act, 1990, section 162(1) of the Income Tax Ordinance, 2001 and section 14 of Federal Excise Act, 2005 and this stood validated from the expression of these Sections reproduced herein-below:-- Section 6 of the Sales Tax Act 1990. Time and manner of paym ent:---(1) The tax in respect of goods imported into Pakistan shall be charged and paid in the same manner and at the same time as if it were a duty of customs payable under the Customs Act, 1969 (and the provisions of the said Act (including section 31A thereof) shall so far as they relate to collection, payment and enforcement of tax under this Act on such goods where no specific provisions exist in the Act apply;" Section 148 of the Income Tax Ordinance 2001:- Imports.---(1) The Collector of Customs shall collect advance tax from every importer of goods on the value of the goods at the rate specified in Part II of the First Schedule. (2) Nothing contained in subsection (1) shall apply to any goods or class of goods or persons or class of persons importing such goods or class of goods as may be specified by the Board. (5) Advance tax shall be collected in the same manner and at the same time as the customs duty payable in respect of the import or, if the goods are exempt from customs duty; at the time customs duty would be payable if the goods were dutiable. (6) The provisions of the Customs Act, 1969 (IV of 1969), in so far as relevant, shall apply to the collection of tax under the section. (7) The tax collected under this section shall be final tax on the income of the importer arising from the importer subject to subsection (1) and this subsection shall not apply in the case of import of :- (a) raw material, plant, machinery, equipment and parts by an industrial undertaking for its own use; (b) fertilizer by manufacturer of fertilizer and (c) {motor vehicles in CBU condition by manufacturer of {motor. vehicles} (d) Large import houses , who--- (i) Have paid-up capital of exceeding Rs.{250} millions (ii) Have imports exceeding Rs.500 million during the tax year; (iii) Own total assets exceeding Rs. {350} millions at the close of the tax year. (iv) Is single object company (v) Maintain computerized records of imports and sale of goods; (vi)Maintain a system for issuance of 100% cash receipts on sales. (vii) Present accounts for tax audit every year (viii)Is registered with Sales Tax Department; and (ix) Make sales of industrial raw material of manufacturer registered for sales tax purposes) (8) the tax collected from a person under this section on the import of edible oil {and packing material for a tax year shall be (minimum tax) (9) In this section-- "Collector of Customs" means the person appointed as Collector of Customs under section 3 of the Customs Act, 1969 (IV of 1969), and includes a Deputy Collector of Customs in Additional Collector of Customs or an officer of customs appointed as such under the aforesaid section; [Value of goods" means the value of the goods as determined under the Customs Act, 1969 (IV of
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1969), as if the goods were subject to ad valorem duty increased by the customs duty federal excise duty and sales tax, if any payable in respect of the import of the goods. "Section 3 of Federal Excise Act, 2005: Duties specified in the First Schedule to be leveled.---(I) Subject to the provisions of this Act and rules made there-under, there shall be levied and collected in such manner as may be prescribed duties of excise on---- (a)goods produced or manufactured in Pakistan, (b)goods imported into Pakistan, (c)such goods as the Federal Government may, by notification in the official Gazette, specify as are produced or manufactured in the non-tariff areas for sale or consumption therein ; and (d)[services provided in Pakistan including the services originated outside but rendered in Pakistan] At the rate of [fifteen] per cent of ad valorem except the goods and services specified in the First Schedule, which shall be charged to Federal Excise duty as , and at the rates, set forth therein. (2)duty in respect of goods imported into Pakistan shall be levied and collected in the same manner and at the same time as if it were a duty of customs payable under the Customs Act, 1969 (IV of 1969) and the provisions of the said Act including section 31A thereof shall apply. (3)The Board…
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