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Petitioner: Messrs SHAHID INDUSTRY, D.H.A., LAHORE VS Respondent: COLLECTOR (APPEALS), COLLECTORATE OF CUSTOMS (APPEALS), KARACHI and another
Court Name: Customs, Excise and Sales Tax Appellate Tribunal Judge(s): Ch. Imran Masood, Muhammad Arif Moton Title:Messrs SHAHID INDUSTRY, D.H.A., LAHORE vs COLLECTOR (APPEALS),
COLLECTORATE OF CUSTOMS (APPEALS), KARACHI and another Case No.: Customs Appeal No 4C-914 of 2010 Date of Judgment:2011-04-23 Reported As: 2011 PTD (Trib.) 2404 Result: Appeal allowed Judgment ORDER MUHAMMAD ARIF MOTON, MEMBER (JUDICIAL-II).--This order will dispose of Customs Appeal No,K- 914 of 2010 filed by the appellant against the Order-in-Appeal No,4107 of 2010 dated 21-7-2010, passed by the Collector of Customs, (Appeals), Karachi. 2. Brief facts of the case are that the appellant imported a consignment of re-rollable Thick Plate over size comprising of two items weighing 1420 MT vide GD IGM No,6955 dated 25.02-2010, Index No,108 both USS 352/MT at the total value of US No,499966.016 classifiable under PCT headings 7204.4910 attracting 0% customs duty and PCT heading 7207.2090 attracting 5% customs duty respectively. The importers filed a GD for Home Consumption bearing Machine No,HC68402 dated 15-3-2010 through their authorized clearing agent M/s. V.N. Lakhani, Chal No, 441 for the clearance thereof. And whereas the GD processed under 1st Appraisement System for examination, of the goods. Upon examination the Shed Staff vide Examination report endorsed on reverse of the, GD reported that the imported goods were found to be Hot Rolled Plates of secondary quality of various sizes and thickness assessable US$ 505/MT, total value comes to US$ 717281 (Rs,61Q54210) Classifiable under PCT heading 7211.1410 attracting 20% customs duty contrary to Re-Rollable Thick plate oversize classifiable under PCT heading 7204-4910 and 7207-2090 attracting 0% and 5% customs duty respectively. The importers in connivance of their clearing agent by manipulating the description and classification of the goods attempted to defraud the national exchequer and found guilty of an offence of miss-declaration in terms of sections 32(1) and (2) of the Customs Act,, 1969 punishable under Clause 14 of section 156(1) ibid. Had this offence gone undetected the government would have lost its legitimate revenue to the tune of Rs,1,98,50,525
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3. Adjudication proceedings were initiated by the Additional Collector who after hearing the parties passed the Order-in-Original No,97 of 2010 dated 25-5-2010. The relevant- extract is as follows:-- "I have gone the record of the case and given due consideration to the arguments of the representative of the importers as well as of the department. Briefly, the following main points arose during the course of hearing, viz. (i) Determination of appropriate classification of the portion of the imported goods which was cut. (ii) Determination of classification of the portion of the imported goods which was not cut. (iii) Whether there was an element of mens rea on part of the importers. Firstly, in the light of Steel Committee's findings, it has been established that the Cut portion of the consignment i,e, 763.25 MT has been rendered as 'Scrap and thus, is classifiable under PCT heading 7204.4990, attracting customs duty @ 0%, sales tax @ 16% and income Tax 3%. Secondly, the rest of the consignment is hot rolled plates of secondary quality, having width of various thicknesses and sizes as has been mentioned in the examination report at the back of the GD. The same is ordered to be assessed, under PCT heading 7211,1410 attracting customs duty 20%, sales tax @ 18.50%, income Tax 3% and FED 6 1%. Lastly, the facts of the case like the request of the importer, wherein he had sought permission for preparation of inventory, prior to filing of GD for want of complete information regarding description, weight, quantity and sizes adequately portrays that the importer himself did not have, in his possession, the complete information relating to his consignment and he sought permission, in this regard, from the customs authorities prior to filing of the GD. Hence, in the absence of mens rea, the charge of miss-declaration under section 32 of the Customs Act, 1969 is not established." 4. The order was challenged before the Collector (Appeals) who rejected the appeal and passed order-in-appeal dated 21-7-2010. Hence the instant appeal on the following grounds incorporated in the memo. Of appeal:-- (i) That the goods of the appellant were assessed under the First Appraisement System, and the charge of miss-declaration can't be alleged when the assessment of goods was made under the first appraisement system as held by the Hon'ble High Court of Sindh reported in 2003 PTD 2090. It was held that "In the case of option given for first appraisement for the determination of correct description of PCT heading, quantity of goods, no miss-declaration shall be charged for miss- declaration under section 32 of the Customs Act, 1969" (ii) That the Hon'ble High Court of Sindh has re-enforced the similar position of law in the case of Messrs Muhammad Razi v. Collector Customs(Appraisement) reported as 2003 PTD 2821 and Messrs Shaheen Enterprises v. Additional Collector, 2005 PTD (Trib.) 1321 and 2005 PTD (Trib.) 1826. (iii) That the impugned order-in-original is void of all legality as it is based on show cause notice which is issued under section 32(2) of the Customs Act, 1969, which speaks about the "collusion" between the importer and Customs officer but is this case there is no collusion was found between the importer and the Customs Officer. Therefore the charged for violation of section 32(2) is not established. The Hon'ble High Court of Sindh at Karachi. Has ruled on similar position of law reported as 1984 MLD 562. The relevant extract as "The respondents have not alleged any collusion on the part of petitioners and the above customs official in order to press into service subsection (2) of section 32. It may again be observed that the above endorsement is mentioned in the column which was intended to be filled in by the Customs Department. In our view, it was a case of misconstruction or inadvertence and, therefore, the case is covered by subsection (3) of section 32." (iv) That the similar position of law has been reinforced by the Hon'ble Lahore High Court vide its Judgment reported as PLD 1989 Lahore 47. It was categorically held that. "Allegation that short levy was the result of any collusion between the assessed and Customs Staff, must be clearly leveled, with proper particulars, if that was the ground on which the short levy was
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to be claimed--Where no such allegation was made in the show-cause notice and such a matter, was not taken into consideration during the adjudication of case" issue of collusion, would not arise in the case. (v) That the documents provided by the respondent were true to the material facts of the case. No offence under section 32 was ever committed by the appellant. The intention of the appellant is not willful or not a deliberate act and the mens rea about willful miss-declaration is not available. Hence, the impugned order is unlawful as held by the Hon'ble Superior Courts in the Judgments reported as Collector of Customs (Exports and another v. Messrs R.A. Hosiery Works 2007 SCMR 1881 Kamran Industries v. The Collector of Customs (Exports), Karachi and 4 others PLD 1996 Kar. 68, Messrs Al-Hamd Edible Oil Limited and others v. Collector of Customs and others 2003 PTD 552, State v. Hard castle PLD 1967 SC 101, Sikandar and Brothers v. Government of Pakistan PLD 1986 Kar. 3783 and Finest Corporation v. Collector of Customs PLD 1990 Kar. 338 rel. (vi) That without prejudice to our above stated stance it is humbly submitted that even otherwise the Show-Cause Notice is on merits and needs to be vacated. In this regard it was respectfully submitted that the impugned goods are scrap aril were inworted as scrap. The \definition of re- rollable scrap is given in the explanatory Notes as follows. (vii) That the goods which cannot be used for the original purpose are generally treated and considered scrap. The impugned scrap has specifications according to IPO 2009-2010, but has certain oversized lengths. (viii)That the respondent No,2 has changed PCT without any legal ground by considering the impugned scrap as goods of PCT 7211.1410 and assessed the same accordingly @ 20% as against findings on the basis of sections 79(2) and 27(A) which revealed it as thick plate end cuts/off cuts scrap for re-rolling purpose. (ix) That the Assistant Collector MCCA-AICT on 19-4-2010 issued a letter for expert opinion to confirm description of the appellant's consignment from Mr. Javed Razi, Quality Control Department, Messrs Pakistan Steel Mills, Port Muhammad Bin Qasim, Karachi, Mr. Zahid Husain (Dy. General Manger); Messrs Karachi Shipyard and Engineering Works Ltd., West Wharf Road, Karachi. The General Manager, Peoples Steel Mills, Manghopir Road, Karachi and The President, Messrs Pakistan Iron and Steel Merchants Association, 1. Rafiq Manzil, Off. Nishter Road, Near C.M.A. School, Karachi. (x) That the experts have given the following opinion on the physical traits, description and possible use as follows:-- Karachi Shipyard and Engineering WorkdsPakistan Steel Mills Pakistan Iron and Steel Merchant's Association From the conclusion at para 3 above derived from observations at para 2, it is my considered opinion that the captioned consignment may be considered as off- cust I scrap of thick steel plates for re-rolling purposes under the PCT heading 7207- 2090 and 7204-4910".Considering the facts as mentioned in Paras. 2, 3 and 4/N, based on physical inspection, it is concluded that the subject that the subject consignment vide IGM No. 6955, dated 25-2-2010 Index No.108, of weighting 1420 tons is found to be thick plate end cut scrap, which can be use for re- rolling purpose."Keeping in view of the above facts the material imported as Re-Rollable (Scrap) not as finish products of the Steel Plate Bars. Furthermore material does not fall under the category of the finish product, and we confirm that the said material will be used/consumed as for Re- rollable." (xi) That the above "expert reports" also match with the detailed (examination) report of EO, AO and PA all dated 5-4-2010 which read as follows:--
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"Hot Rolled plate of secondary Quality of various thicknesses of sizes like 220 cm x 39 cm x 2.5 cm, 170'm x 38 cm.x 1.7 cm, 373 cm x 38 cm x 3.3 cm etc. I/O not shown, PCT 7211.1410. Check weight 100% at the time of delivery. Confirmed that the goods are of Secondary Quality Group may check all aspects including value and classification in the light of examination report and import documents". That the "expert opinion" and the examination reports clearly depict end cuts of "various thickness", of hot rolled plates, not capable of any other use except for re-rolling was imported vide impugned consignment (xii) That in spite of clear, unanimous expert report which was synchronous with examination report the learned respondent No,2 failed to reach the conclusion that impugned goods were re-melt able scrap, and he ordered to charge the uncut portion of consignment @ 20% Customs Duty under PCT 7211.1410 (xiii) That the respondents Nos.1 and 2 have failed to take the notice of the provisions of section 27A of Customs Act, 1969, and the intention of the legislators. The language of section 27-A of the Act clearly provides that an importer may apply for cutting/mutilating of the goods imported by him prior to filing of the GD as follows:-- (xiv) That the above provisions clearly depict that any imported goods which can be put to more than one use can be mutilated/denatured/scrapped under the above-quoted provision of law and the purpose of such mutilation/denaturing/ scrapping is to render the goods unfit for more than one use and it is necessary to the importer to apply this benefit before filling the GD. Reliance in this regard may kindly be placed upon the following Judgment. Of the Hon'ble High Court of Sindh at Karachi reported as 2010 PTD 826. (xv) That in this case, the appellant has made the request under section 27A of the Customs Act, 1969 before filling GD under section 79(1). This fact cane be confirmed from the letter dated 4-2- 2010. (xvi) That the Indian Customs Act, 1962, has identical provisions vide section 24 ibid which read as follows:-- "The Central Government may make rules for permitting at the request of the owner the denaturing or mutilation of imported goods which are ordinarily used for more than one purpose so as to render them unfit for one or more of such purposes; and where any goods are so denatured or mutilated they shall be chargeable to duty at such rate as would be applicable if the goods had been imported in the denatured or mutilated form." (section 24 (Indian Customs Act, 1962) (xvii) That the Indian Courts and Tribunals have given very clear Judgments interpreting the provisions of section 24 of Indian Customs Act, 1962. In case of (Antarctic Industries v. Collector of Customs) 1999 (108) ELT 496 Tri Del. (xviii) That in another judgment in case [Commissioner of Customs v. Garg Steel] 2006 (113 ECC 165 2006 ECR 165 Tri Chennai. (xix) That there is no doubt that denaturing/mutilating is meant to render the imported goods unfit for more than one use and the limited and myopic view that only denaturing/mutilating of scrap is admissible under the law is not in conformity with the provisions of law reproduced above. Moreover, it is now a settled law that if any provisions of law are considered susceptible to two interpretations, the interpretation that favors the citizens would need to be adopted and in the context of the instant case it means that appellant was entitled to apply for cutting/mutilating of any imported goods under section 27-A of the Act. (xx) That the goods imported in this case are end cuts of hot rolled steel plates of varying thickness and length which are quite close to the definition of re-rollable scrap provided in Serial No,7(3) of Appendix-A of IPO, 2009-2010 inasmuch as width and thickness of the same are within the prescribed limits and only the lengths are longer than prescribed. Therefore, if the lengths of the impugned sheets are cut to bring them within the permissible limit the same would squarely be
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covered under the definition of re-rollable scrap provided in the IPO, 2009-2010. Therefore under the circumstances, the appellant's application, filed strictly in accordance with the provisions of section 27-A read with section 179(1) of the Act, carried a lot of merit and the competent authority allowed cutting of the impugned plates so as to bring the same in conformity with the definition of re-rollable scrap as contained in Serial No, 7(3) of Appendix-A of the IPO read with Federal Board of Revenue's letter C.No,2 (4) T.II/2000 dated 24-5-2007 the Hon'ble Supreme Court of Pakistan findings where it was held, that "A thing required by law, is to be done in the manner prescribed by the law, must be done in the same manner as prescribed by the law". 2001 SCMR 838 at page 842 note B. (xxi)That the appellant had acted perfectly in accordance with the provisions of law by applying for denaturing/mutilating of the sheets imported in this case, Moreover the appellant is an industrial consumer and that the impugned goods, after cutting of the lengths thereof, would be consumed by him as re-rollable scrap meaning thereby that the appellant was well within his legal right to import the goods in their present shape and apply denaturing/mutilating of the same under section 27-A of the Act. The respondent No,2 view that further cutting/mutilating of the impugned goods may not be done and rest of the consignment may be assessed under PCT7211.1410 does not find any support from the provisions of law: Government can charge taxes on the goods only in the condition/shape in which the same are released/cleared and if the law provides for denaturing/ mutilating of the goods, the applicable customs value and rate of duty/taxes would be the ones which would have been applicable to denatured/mutilated goods. This has been held by the Indian Tribunals and also by Collector Appeals in Case No,3788 of 2010 dated 10-5-2010. (xxii) That the section 27-A of the Act does not specify the officer of customs who is empowered to allow or refuse permission to cut/ mutilate imported goods. However, under Public Notice No, 19 of 2006-111(A) dated 19-8-2006, as amended through Public Notice No, 2 of 2007-III (A) dated 6-2- 2007, issued by the Collector of Customs (Appraisement), Custom House, Karachi. Deputy/Assistant Collector concerned has been authorized to exercise such powers. Neither under section 27-A of the Act nor under the above-mentioned public notices the Deputy/Assistant Collector or Additional Collector has been empowered to withdraw the permission of denaturing/mutilating of goods once he has granted such permission. Therefore if any such permission is required to be withdrawn the same can be done by the Collector of Customs concerned within the meaning of section 195 of the Act. (xxiii) That in the wake of above legal provisions of section 195 of Customs Act, 1969, the order passed by the Deputy Collector by way of allowing cutting/mutilating of the goods could have been reversed only by the Collector and that too by providing an opportunity of defense to the appellant because in the cut/mutilated shape the goods would have been treated as rerollable scrap of PCT heading 7204.4910 chargeable to customs duty 0% whereas the reversal of Deputy Collector's order meant that customs duty 20% under PCT 7211.1410 would be charged on the impugned goods. (xxiv)That the reversal of order was neither done by the Collector nor provisions of section 195 were invoked. Thus, the order of withdrawing the permission of cutting/mutilating the impugned goods was unlawful and void ab initio. Therefore, the original permission of cutting/mutilating the impugned goods still holds the field. Moreover, the aforesaid withdrawal order was improper as well, besides being unlawful: a reasonable part of the goods had already been cut/mutilated and the cutting work was well in progress when the same was stopped. In a similar case the Collector Appeal vide Case No,3788 of 2010 dated 10-5-2010. (xxv) That the respondent failed to consider the dictums of Hon'ble High Court as held in 2008 PTD 1482 and the Customs Tribunal vide Customs Appeals Nos. K-2217/99, K-32/2010, K-435/2008 . To K-455/2008 K-274 to.277 of 2009.
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5. The respondent Deputy Collector (Law) MCC, (Appraisement) filed parawise comments which are as under:-- (i) That the respondent No's vide Order-in-Original held that charge of `miss-declarationis not established, therefore, submissions made under this Para are deemed irrelevant, however, element of incorporating inappropriate PCT Heading even after availing the facility as available under section 79(1) of the Customs Act, 1969 require no further corroboration to establish the intent of the appellant to deprive the public exchequer chargeable in shape of customs duty and allied taxes which could only be possible after application of correct PCT hearing which has been done by the assessing officer, therefore, this aspect of the case not overruled by the learned respondent No's and that it reflect application of judicial wisdom in its true perspective. (ii) That as a first measure towards initiation of adjudication proceedings show-cause notice is always served upon the concerned persons and after seeking their reply thereof, the adjudicating authority passes and order-in-original whereby the authority might have accepted the contentions of the respondent or part thereof or may be in disagreement with the submissions made in reply to show cause notice. In the instant case the learned respondent No's being the adjudicating authority meted out the end of natural justice and declared that charge of miss- declaration is not established. However, the, learned respondent No's did not overruled the attempted evasion of duty and taxes under the umbrella of PCT Classification. (iii) That for the reasons detailed herein above, the order-in-original is maintainable in the eyes of law a same is based on ground realities as the charge of 'miss-declarationis held un-established. However, deliberate attempt of evading the umbrella and manipulating the PCT Classification was not ruled out by both the above named learned respondents. Hence provisions of section 32(2) are very mush applicable in this case. (iv) That the circumstances detailed herein above, deliberate attempt of depriving the public exchequer from its legitimate revenue was committed by the appellant with the collusion of their clearing agent by way of mentioning correct PCT even after availing the remedy available under section 79(1) of the Customs Act, 1969, which act of them require no further corroboration or authentication in the backdrop of facts and circumstances of the case. (v) That the aspect of miss-declarationhas already been eliminated by the learned respondent .No's through the order-in-original referred herein above, however, the learned respondent kept established the deliberite attempt of evading duty and taxes by way of incorporating PCT Heading by the appellant. However, the Assessing Office applied his professional wisdom and applied correct PCT Heading which factor most provably has been considered by the learned respondent No's to be the difference of opinion but application of correct PCT Heading is the responsibility of Assessing Officer which he did accordingly within the confinement of the provisions of Customs Act, 1969. In the circumstances detailed hereinabove, the cited quotations have no relevancy in the instant case. (vi) That the goods found during the course of physical examination were not falling under the definition of 'scrapas such same was denatured on the behest of the appellant without seeking any prior permission to do so. If the imported goods were falling within the meaning of `scrap;as to why it was felt necessary to denature the same? Answer to this question is available under Para 1 of the Memo. Of Appeal. The definition of re-rollable scrap relied upon by the appellant is not deemed appropriate in the instant matter. (vii) That under the submissions made in this para the appellant himself admitted that 'impugned scrap has specifications according to IPO 2009-2010, but has certain oversized lengths'. The contention of the appellant as quoted herein above speaks itself that the appellant willfully imported the goods of oversized lengths with the intention to get it cleared under the garb of 'scrapbut physical examination of the goods thwarted their preconceived plan and the staff of the
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learned respondent No's acted within the parameters of the provisions of Customs Act, 1969 and applied their professional wisdom for the determination of true nature of imported goods and application of correct and appropriate PCT Heading to safeguard the revenue of national exchequer. If the goods imported by the appellant were in accordance with the requirements as laid down under the Import Policy Order 2009-2010 as to why the appellant was anxious to get denatured the imported goods, this question has already been answered herein above. (viii) That the Assessing Officer is always responsible to check and apply correct and most appropriate PCT Heading for the purpose of determining the accurate customs duty and taxes chargeable in consideration of actual description and specification of imported goods as reported by the examining officer through the examination report endorsed on the reverse of Goods Declaration. The learned respondent No's has nothing to do with the application of PCT Heading but his role to nullify the charge of `miss-declarationagainst the appellant and on the other end to keep strict watch on the interest of the State is appreciable. (x) That the contents of this para are not to be commented being based on factual position. (x) That portions of expert's reports as available under this para at nowhere inscribe the length of imported goods and also does not reflect about its importability under the provisions of PO-2009- 1010 as per contention of the appellant based on expert's repots, was correct, then as to why he was predetermined to get the things denatured, this simple aspect of the case established deliberate intention of depriving the public exchequer from its legitimate revenue to get the clearance of goods imported in violation of aforementioned IPO in the garb of scrap which otherwise not to be used as scrap as denatured under the provisions of the Customs Act, 1969. (xi) That the contention of the appellant as expressed under this para has no relevancy between the examination report and the expert's reports. Here,…
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