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Petitioner: Messrs AZHAR BROTHERS VS Respondent: ASSISTANT COLLECTOR (IMPORTS) and 3 others
Court Name: Customs, Excise and Sales Tax Appellate Tribunal Judge(s): Ghulam Murtaza Bhatti, Khawaja Umar Mehdi Title: Messrs AZHAR BROTHERS vs ASSISTANT COLLECTOR (IMPORTS) and 3 others Case No.: Customs Appeal No.9/LB of 2015 Date of Judgment:2015-07-27 Reported As: 2016 PTD (Trib.) 169 Result: Order accordingly
JUDGMENT
JUDGMENT KHAWAJA UMAR MEHDI, MEMBER (TECHNICAL).---This appeal is directed against Order in Case No.CR Nos.27 to 29/2011 issued vide C.47/Cus/Imp/2011/5670 dated 19-12-2014 passed by Collector of Customs Model Customs Collectorate, Faisalabad. 2. Brief facts of the case are that M/s. Azhar Brothers, 66-B, Gulistan Colony, Faisalabad imported. 12 units of Used Hino Truck Mounted Crane" in three (3) consignments and sought clearance thereof vide GD No.FDRY-HC-1139 dated: 03.06.2008 (3 units in IX 40' container), FDRY-HC-1143 dated: 06.06.2008 (3 units in 1x40' container) and GD No.FDRY-HC-1144 dated: 07.06.2008 (6 units in 2x40' containers) in terms of Para-6 of the import Policy Order 20072008 issued vide Notification No.S.R.0.1020(0/2007 dated; 08.10.2007. The importer claimed assessment under H.S. Code 8705.1000 Crane Lorries which covers "special purpose motor vehicles, other than those principally designed for the transport of persons or goods." The Customs staff of the Import Section Dry Port Faisalabad, on the contrary held that as per physical condition of the vehicles in question, the same are not special purpose motor vehicles, principally designed as crane lorries and hence cannot be classified under the aforesaid heading. Instead, the vehicles were found classifiable under H.S. Code 87.04 of Pakistan Customs Tariff, import of which is restricted vide S. No.10 of the Appendix "C" of the Import Policy Order, 2007-2008. 3. Consequently show cause notice(s) C. No. 8, 9 and 10 all dated: 07.07.2008 were issued to the importer as to why the vehicles imported may not be confiscated for the offence under sections 16 and 32(1) of the Customs Act, 1969 read with clauses 9 and 14 of Subsection (1) of. Section 156 ibid, read with Para-16(A)(ii) and serial No.10 of Appendix "C" of the Import Policy Order, 2007-2008. The aforesaid show cause notices were issued by the then competent authority i.e. The Additional
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Collector Customs, MCC, Faisalabad. The adjudicating officer after hearing the case passed Order- in-Original No.01-03/2008 dated: 19.08.2008. The concluding para is as under:-- "I therefore, find no merit in the respondent's contention for classifying the vehicles under HS Code 87.05, which are in fact, classifiable under HS Code 87.04 on the basis of their original and current configuration. Since these vehicles are more than eight years old, as computed from the year of their manufacture they are hit by the restriction for import as stipulated under serial No.10 of Appendix "C" of the Import Policy Order, 2007-08, I, therefore, confiscate the subject vehicles under clauses 9 and 14 of Subsection (1) of Section 156 of the Customs Act, 1969, read with section 32(1) ibid, for violation of section 16 ibid read with para 16(A)(ii), and serial No.10 of Appendix "C" of the Import Policy Order, 2007-2008. As for the cranes imported in conjunction with the subject vehicles, I find no restriction on their import. Hence, they are allowed release on payment of leviable duties and taxes to be computed by the import Section on receipt of this order." 4. Having been aggrieved by Order-in-Original .No.01-03/2008 dated: 19.08.2008 passed by the Additional Collector Customs, MCC, Faisalabad, the importer filed an appeal with the Collector Customs (Appeals), Faisalabad. The learned Collector Customs (Appeals), Faisalabad rejected the appeals vide Order-in-Appeal No.43-45/2009 dated: 07.10.2008 (issued on 24.10.2008). Then the importer filed appeals before the Customs Appellate Tribunal, Lahore vide C.A. Nos. 48, 49 and 50/LB/2009. The learned Tribunal too dismissed the appeals vide judgment dated: 04.10.2010 passed by a Special Bench of the Customs Appellate Tribunal, Lahore. 5. Subsequently, the importer filed Customs Reference Nos. 27, 28 and 29/2011 before the Hon'ble Lahore High Court, Lahore under section 196 of the Customs Act, 1969. It is also pertinent to mention here that during pendency of the case before Hon'ble High Court, the importer sought resolution of the dispute through Alternate Dispute Resolution Committee (ADRC) under section 195-C of the Customs Act, 1969. However, the Federal Board of Revenue vide Order C.No.1(3)Cus.Jud/2011 dated: 18.01.2013 declined to accept the recommendations of A DR Committee. It is also pertinent to mention that the ADR Committee recommended the release of the vehicles under PCT Heading 8705.1000 on payment of leviable duty and taxes. 6. Finally the Hon'ble High Court passed Order(s) dated: 28.05.2013 in Customs Reference Nos. 27 to 29/2011 with the direction to the Collector Customs, Faisalabad to pass a fresh order after reexamining the matter in the light of the clarification on the subject matter issued by the Ministry of Commerce vide its letter dated 12.03.2012. 7. In compliance of the Hon'ble High Court Orders, remand proceedings were initiated. Both the parties have been heard and finally the learned Collector has held as under:-- "In view of the above discussion, the undersigned bolds that the vehicles in question are not Truck Mounted Crane/Crane lorries in their essential character and thus the importer's reliance on Ministry of Commerce's letter dated; 12.03.2012 is misplaced and misconceived. In fact the importer attempted to circumvent the import restrictions imposed on the second hand old and used trucks (meant for transportation of goods) falling under HS Code 87.04 of Pakistan Customs Tariff, import of which is restricted vide S.No.10 of the Appendix "C" of the Import Policy Order, 2007 and hence are liable to outright confiscation. I, therefore, order to confiscate the subject vehicles under clauses 9 and 14 of subsection (1) of Section 156 of the Customs Act, 1969 read with Section 32(1) ibid for violation of Section 16 ibid, read with para 16(A)(ii) and Serial No.10 of Appendix C of the Import Policy Order, 2007-08. However, separate cranes in used condition do not attract import prohibition or restriction. Therefore, these separate cranes are allowed release on payment of leviable duty and taxes to be calculated by the Import Section." 8. Being aggrieved of the above order, the appellant preferred appeal before this Tribunal on the following grounds :-
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(a) That as per paragraph-6 (i) of IPO 2008, construction companies duly registered with the Engineering Council of Pakistan were allowed to import second hand machinery detailed of which was given in Appendix-I on payment of leviable duty and taxes. According to Appendix-I Trucks mounted cranes/crane lorries in second hand/used condition were importable by the construction companies. Since the description as given as Appendix-I was Trucks mounted cranes/crane lorries, thus, separate classification of trucks and cranes is totally unjustified. (b) That identical Trucks mounted cranes were imported by another construction company namely Shaheen Builder Islamabad and released thereof was denied by the customs authorities and as such the matter was referred to Ministry of Commerce for clarification. Ministry of Commerce, Government of Pakistan, Islamabad vide its letter No. 12(21)/2005-Imp-I dated: 12.03.2012 clarified that stipulations of IPO, 2009 stand fulfilled when the condition mentioned therein are duly met. The specialized vehicles being imported or to meet the standards etc. Mentioned in the IPO and should be classified as the vehicles described therein. IPO, 2009 does not restrict the import to factory fitted specialized vehicle only. Paras 2 and 3 of the said clarification read as under :- (2) It is again clarified that the stipulations of IPO, 2009 stand fulfilled when the conditions mentioned therein (para-9(ii) (5) in the instant case) are duly met. The specialized vehicles being imported are to meet the standards etc. Mentioned in the IPO and should be classified as the vehicle described therein; Truck Mounted Crane/Crane Lorry in this case. The IPO, 2009 does not restrict this import to factory fitted specialized vehicles only. The conditions regarding used ambulances, waste disposal trucks, firefighting equipment (S Nos. 19-20, Part-II of Appendix-B of IPO may be seen as an analogy). (3) In view of above the truck-mounted crane imported by Shaheen Builders Islamabad, GD # KCSI-HC-11298 and KCSIHC-11302, dated; 25.01.2012 may be released if it fulfills the conditions mentioned in the IPO and is otherwise in order. (c) That during pendency of the case of the appellant, Collector of Customs (Paccs) Model Customs Collectorate, Karachi sought further clarification as to whether the clarification contained in letter dated: 12.03.2012 was importer specific or otherwise and the Ministry of Commerce vide its letter dated: 03.05.2012 also applies mutatis mutandis to all other types of used specialized machinery. Para-2 of letter dated: 03.05.2012 reads as under :- 2. It is to inform that the explanation/clarification vide this Ministry letter No.12(21)/2005-Imp-I dated: 12th March, 2012 applies mutatis mutandis to all other types of used specialized machinery mentioned in para No.9 (ii) 5 of the IPO unless otherwise specified. (d) That the customs authorities sought clarification from FBR as to whether trucks mounted cranes and other machinery be released in term of clarification issued by Ministry of Commerce and in respondent there to FBR vide letter dated: (sic)134.09.2012 clarified that Ministry of Commerce being the Regulatory Ministry has to implement the IPO. Moreover, as parent legislation is the domain of Ministry of Commerce, therefore, any clarification in respect of any aspects of the IPO is also the domain of the said Ministry and as such the clarifications and instructions should be followed but surprisingly enough respondent No. 4 has violated the directive of FBR which action on his part is patently void and illegal. (e) That according to letter dated: 12.03.2012 the Trucks mounted cranes were duly covered in para-9 (ii) (5) read with Appendix-I of the relevant IPO and respondent No.4 has wrongly violated the instructions/clarifications issued by the Regulatory Ministry which were binding upon him. Hence, the impugned order is void, illegal and liable to be struck down. (f) That truck chassis with a cab and rotating crane mounted therein is a special purpose vehicle falling under PCT heading 8705.1000 importable in term of Appendix-I to paragraph-6 (i) of relevant IPO and denial release thereof on the part of respondent No.4 is patently void and illegal.
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(g) That Trucks mounted cranes is described in Appendix-I and as such machinery imported by the appellant does fall within the said description and cannot be termed as vehicle principally designed for transportation of goods or persons merely on the basis of crane can be detached. (h) That the observation of respondent No.4 that since crane mounted on truck is operated manually, thus, it cannot be termed as Trucks mounted cranes falling under PCT Heading- 8705.1000 is totally frivolous and baseless because the description of importable cranes is mentioned in Appendix-I as Trucks mounted cranes which obviously means that the cranes should have been mounted with crane/vehicle. (i) That once the truck is mounted with crane thereon, the same can neither be truck only nor can be classified separately under PCT Heading-8704.2190 because the machinery in whole i.e. Truck alongwith crane should have been classified as one unit under PCT Heading 8705.1000. (j) That other observation that since crane dismounted and loaded in the container separately, thus, the same shall be classified separately is also frivolous, misconceived and baseless for the simple reason that any vehicle imported and dismounted condition in same container shall be classified as vehicle and not separate parts. Respondent No.4 lost sight that crane duly mounted on the truck could not be loaded in 40' container without dismounting. Thus, the loading of truck mounting crane by dismounting would not change classification thereof. (k) That all other customs stations were classifying identical trucks mounted cranes under PCT heading-8705.1000 and releasing the same regularly as is evident from the perusal of the GDs enclosed with this appeal. Allowing release of identical Trucks mounted cranes to other importers and denying such facility to the appellant is also discrimination not permissible in term of Article 25 of the Constitution of Islamic Republic of Pakistan. (I) That respondent No.4 had not applied independent judicial mind while passing the impugned order. He has not only violated the instructions of Regulatory Ministry but contravened the directions of FBR which were binding upon him in term of Section 223 of the Customs Act, 1969. Hence, the impugned order is being void, illegal and unjustified is liable to be struck down. It is result of misinterpretation of the explanatory notes, IPO, documentary evidences placed on record by the appellant and the instructions issued by Ministry of Commerce, Government of Pakistan, Islamabad as well as FBR, Islamabad. 9. On the other hand, the respondent/department has filed para wise comments which are re- produced as under:-- Para-I. Admitted to the extent of the impugned order passed by the Respondent No.4. It is explained that the said order relates to 3 GDs i.e. FDRY-HC-1139 dated:03.06.2008 (3 units 1x40). FDRY HC-1143 dated: 06.06.2008 (3 units 1x40) and FDRYHC-1144 dated: 07.06.2008 (6 units 2x40). Para-2. Admitted to the extent of contravention report. Para-3. Admitted to the extent of Order-in- Original No.01- 03/2008 dated: 19.08.2008 passed by the respondent No.2. Para-4. Admitted, the first and second appeal by the appellant were dismissed by the Collector (Appeals) and Customs Appellant Tribunal, Lahore respectively. Para-5. The respondent No.4 issued Order dated: 19.12.2014 in compliance of the directions by the Honourable Lahore High Court, Lahore after having heard the counsel representative of the party. Para-6. Admitted to the extent of the order dated: 19.12.2014 passed by the respondent No.4 after having considered the Ministry of Commerce Clarification dated: 12.03.2012 as to whether it covers the case of the present appellant importer or not, in the specific context of the physical description/tariff classification as well as importability status of this case. Para-7. Not admitted the impugned order is based on factual and legal position of this particular case. (a) Not admitted. The vehicles in question do not meet the technical parameters/criteria to be treated as Truck Mounted Cranes/Lorry. Cranes, as per physical attributes of these vehicles as well
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as_ description/classifications as per Pakistan Customs Tariff and Explanatory Notes vastly discussed and elaborated by the adjudicating officer (the respondent No.2) vide paras-7 to 14 of Order-in-Original No.01-03/2008 and subsequently upheld by the Collector (Appeals) the respondent No.3 and this Honourable forum of Customs Tribunal as well. (b) Admitted to the extent of the relevant provisions of the Import Policy, the duly registered construction companies are allowed to import second hand plant, machinery and equipment, actually required for their projects in Pakistan, including those as specified at Appendix-I subject to fulfillment of certain conditions such as certification by Pre-Shipment Inspection Companies listed at Appendix-II. Truck mounted cranes/crane lories is mentioned in the Appendix-I. Nevertheless the crux of the issue in the subject case is whether the vehicles in question meets the technical parameters and physical attributes for being treated as Truck mounted cranes/crane lorries in view of examination findings. Customs Tariff and Explanatory Notes which was vastly discussed and elaborated in the Order-inoriginal and the impugned order. Therefore, incompatible cranes and old/used Trucks have been separately classified. Old/used Trucks (more than 8 years old) are classifiable under HS Code 87.04 and liable to confiscation under S. No. 10 of Appendix "C" of the Import Policy Order, 2007-2008 being restricted for import. However, the cranes imported besides the old/used trucks were allowed release on payment of leviable duty/taxes. Whereas on the face of it the truck mounted crane imported by Shaheen Builders International (GD No.KCSI-HC11203 dated: 25.01.2012 as quoted by the appellant) were released by Customs Karachi, in view of Ministry of Commerce letter dated: 12.03.2012. Whereas in the subject case of the appellant importer, the vehicles in question have not been established as Truck mounted cranes/crane lorries due to lack of essential characteristics of Truck mounted crane/lorry crane, elaborated as under:- The issue has been examined in the light of the respective stance maintained by the department as well as by the respondent. In order to fully appreciate the dimensions of the instant case it would be essential to have recourse to the explanatory notes to HS Code 87.05 as reproduced below:- "This heading covers a range of motor-vehicles, specially constructed or adapted, equipped with various devices that enable them to perform certain non-transport functions, i.e. The primary purpose of a vehicle of this heading is not the transport of persons or goods." A perusal of the parameters laid down for the classification of vehicles in HS Code 87.05 reveals a series of inter connected criterion, which must be satisfied concurrently before a vehicle could be classified under it. This inter alia includes that a vehicle must in the first place be other than the one principally designed for the transport of goods or persons. This conditionally represents the core characteristic of the vehicles classifiable under HS Code 87.05, which sets them apart from those designed and built for the transportation of goods and passengers. As per the Explanatory Notes to HS Code 87.05 the two types of vehicles are mutually exclusive in so far as their classification under the nomenclature is concerned. The second pre-requisite for the vehicles classifiable under HS Code 87.05 is that such vehicle must be specially adapted or constructed to perform non- transport functions, such as haulage of broken down vehicles, sweeping or cleaning or road drilling of hard surfaces etc which is visible from their configuration and the matching equipment fitted on them. Going by the comprehensive list of special purpose vehicles enumerated in the Explanatory Notes to HS Code 87.05, one reaches the conclusion that the term "adaptation" used therein is meant to convey the overall modeling of the vehicle for the special purpose for which it is to be ultimately used, apparent from its structure and the paraphernalia attached to it, rather than a make-shift addition, alteration, or a superimposition to accomplish a function, which going by the original structure of the vehicle was not meant to be performed through it. Applying the two-fold mandatory criteria underlying the Explanatory Notes for the classification of vehicles under HS Code 87.05, the vehicles imported by the appellant are hit by the primary eligibility clause of non
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being "principally designed for the transport of persons or goods." This aspect has not been denied by the appellant either, whose main contention is that the vehicles imported by it must be treated as special purpose ones on account of the post manufacturing alteration in them, whereby they have become capable of operating a detachable crane fixed to it, though in the limited aspect of supplying power to it through the engine of the vehicle. The criterion for classifying vehicle under HS Code 87.05 is not the use for which they could be employed but the use for which they were essentially designed. A perusal of the examination report submitted in relation to the subject vehicles indicates the non existence of a cab and a permanently attached crane. In fact the cranes found accompanying the vehicle could only be described as non-integral adjuncts, rather integral part of structure of the vehicle which are essentially those designed for transport of goods for person. (c) Admittedly as explained by Ministry of Commerce vide letter dated: 03.05.2012, the earlier clarification dated: 12.03.012 was not importer specific however, both clarifications are description specific and being so the clarifications are unrelated to the Vehicles in question falling outside the ambit of specialized machinery with reference to Import Policy Order, 2007-2008. (d) Not admitted. The appellant has misconstrued and mis-presented the Board's directions, out of the context of the impugned order. The respondent No.4 has not passed Order in any violation of the clarifications by the Ministry of Commerce and accordingly there is no deviation from the Board's directions. Facts of the matter is that the Ministry's clarification is in relation to the truck mounted crane/crane lorry, which cannot be overstretched to cover the vehicles in question being not truck mounted crane/crane lorries. (e) Not admitted. Contents of Para (d) above are reiterated. (f) Not admitted. It will be pertinent to reproduce the examination findings as under:- As per the examination carried out by the Customs staff it was observed that :- The said six Hino Trucks, bearing chassis No. FD2JJB-11811, Engine No.H08C-11483 Engine No. JO8C- B34944, Chassis No. FD2JLB-14347, Engine No.J08-B27622, Chassis No.FDIJJB1386, Engine No JO8C- 21757 & Chassis No. FDIJLC-1341 Engine No. JO8C-B27930 alongwith six cranes were found loaded in container No. HDMU-641764-7 and HDMU-644956-2 (2x40). The six vehicles and six cranes have been taken out of the two containers being in separate condition in the presence of the Clearing Agent and the Customs Examining staff. It has been found by the examination staff that the vehicle has only one cabin for driver whereas the operating levers have been attached with the crane for manual operation by an operator standing on the ground or on the Bed of the Hino Truck. No separate cabin for operation of the crane by the operator exists. The crane itself is of crude type having brand names 'UNIC' and 'Quick Hook'. The said cranes can be mounted/fixed and dismounted from vehicles as and when required." Moreover, H.S Code 8705.1000 crane lorries "covers Special purpose motor vehicles, other than those principally designed for the transport of persons or goods. Whereas physical condition of the vehicles in question is not compatible with special purpose motor vehicles principally designed for cranes. This is further strengthened by the explanatory notes to Harmonized Commodity. Description and Coding System (4th Edition 20070 which gives the characteristics of the crane lorries as under :- "Crane lorries (trucks) not for the transport of goods, consisting of a motor vehicle chassis on which a cab and a rotating crane are permanently mounted." In view of the above criteria neither crane is permanently mounted nor a cab exists on the vehicle chassis for rotating crane. The distinctive feature of crane lorries falling under H.S. Code 8705 is the availability of dual cabin i.e one each for operating the vehicle and the crane mechanism. Whereas in the impugned units manually operated mobile/small cranes are placed alongside the used trucks which are otherwise essentially designed for the transport of goods. The examination
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report of the subject vehicles revealed nonexistence of the cab and a permanently attached crane. The vehicles in question are essentially designed for transport of goods falling under PCT heading 8704 which are not importable in second hand condition as mentioned at S. No. 10 of Appendix-C of Import Policy Order, 2007-2008. (g) Although trucks mounted cranes is described in Appendix-I nonetheless the vehicles in question cannot be treated as truck mounted cranes given their physical characteristics. In the first place, the special purpose vehicles under HS Code 87.05 be "other than those principally designed for the transport of goods or persons: This conditionality represents the core characteristics of the vehicles classifiable under H.S. Code 87.05 which sets them apart from those design and built for the transportation of goods and persons. These two types of vehicles are mutually exclusive insofar as their classification is concerned. As regards adaptation of the vehicles to perform non-transport functions in falling under H.S. Code 87.05 such as haulage of broken down vehicles, sweeping or cleaning of roads, drilling of hard surface etc which is visible…
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