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Petitioner: RIGHTWAY TRADING COMPANY, KARACHI VS Respondent: The DEPUTY COLLECTOR OF CUSTOMSHonorable Justice Muhammad Nadeem QureshiMuhammad Anan Moton,Faraz Qazi and Masood Ahmed
2018 P T D (Trib.) 1318 [Customs Appellate Tribunal] Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Muhammad Nazim Saleem, Member (Technical-II) Messrs RIGHTWAY TRADING COMPANY, KARACHI Versus The DEPUTY COLLECTOR OF CUSTOMS and 3 others Customs Appeal No.K-1343 of 2015, decided on 23rd July, 2016. (a) Customs Act (IV of 1969)--- ----Ss. 18, 19, 20, 25, 32 & 80----Exemption from payment of customs duty and taxes---Renewable energy equipment---Question before the Tribunal was whether exemption of customs duty, sales tax and income tax was admissible on import of renewable energy equipment for installation of solar system in conformity with provisions of serial No.24 of the Second Schedule to the Customs Act, 1969"---Held, Collectorate had no reason to deny the exemption with no conditions attached for allowing exemption except certificate from Chief Executive Officer, Alternate Energy Development Board regarding the commensuration of the quantities imported---Question was answered in the affirmative. [Case-law referred]. (b) Customs Act (IV of 1969)--- ----Ss. 18, 19, 20, 25, 32 & 80----Exemption from payment of customs duty and taxes---Commensuration letter against importer by Alternate Energy Development Board---Scope---Question before the Tribunal was "whether the commensuration letter against the importers' application confirming that goods imported against the bill of lading were exempted from payment of customs duty and sales tax in its entirety was factually issued by the office of the Chief Executive Officer Alternate Energy Development Board"---Held, scrutiny of the letter issued by the office of Chief Executive Officer, along with the connected record of the case indicated that said letter could not have been prepared and scanned by the importer/Clearing Agent since they did not have access to the office of the Chief Executive Officer---Said fact could not be proved either by Chief Executive Officer as well as the two inquiry reports---Various documentary evidence on record indicated that said letter was factually issued from the office of Chief Executive Officer and the importer/Clearing Agent had no role, either in its preparation, posting or scanning---Question was answered in the affirmative. (c) Customs Act (IV of 1969)--- ----Ss. 18, 19, 20, 25, 32 & 80----Exemption from payment of customs duty and taxes---Issuance of Second Commensuration letter against importer by Alternate Energy Development Board---Scope---Question before the Tribunal was "whether second commensuration letter against the importer's application issued by the same Assistant Director of Chief Executive Officer's office with lesser quantities of renewable energy equipment already earlier notified by the first letter, could be termed a legally admissible document"---Held, second commensuration letter against Importer's application was issued by the said office---Letter was also issued by the Office of Chief Executive Officer without withdrawing the first letter, which was already issued by the Office of Chief Executive Officer and was in field for all legal practical purposes---Said letter was branded fake and forged and the importer was blacklisted for all their incoming and future consignments to cover the irregularities committed by personnel working at the office of Chief Executive Officer---Vested rights so created and acquired by the importer could not be disturbed or taken away by issuance of letter withdrawing the first letter---Question was answered in the negative. (d) Customs Act (IV of 1969)--- ----Ss. 18, 19, 20, 25, 32 & 80----Exemption from payment of customs duty and taxes---Appointment of Adjudication officer as an officer of Inland Revenue---Requirement---Scope---Question before the Tribunal was "whether, Adjudicating Officer had been appointed as an Officer of Inland Revenue under S.30 of the Sales Tax Act, 1990 and S.207 of the Income Tax Ordinance, 2001, and could exercise powers under the provisions of Ss.11 & 162(1) of the Income Tax Ordinance, 2001"---Held, adjudicating authority had invoked Ss.3, 6, 11(c) & 37 of Sales Tax Act, 1990 and S.148 of the Income Tax Ordinance, 2001---Counsel for the importer, had contended that Adjudicating Officer had not been appointed as Officer of Inland Revenue under S.30 of the Sales Tax Act, 1990 and S.207 of the Income Tax Ordinance, 2001, therefore had no powers to proceed in the matter of sales tax and income tax under the sections invoked in the show-cause notice for short paid taxes---Clearance Collectorate, did have the authority to collect sales tax and income tax at import stage in the capacity of collecting agent and could recover escaped/short payment of customs duty and regulatory duty levied on the imported goods under S.18 of the Customs Act, 1969, however, under S.202 of the Customs Act, 1969 after due process of law, collectorate had no power to adjudicate the case of short recovery of sales tax and income tax under S.11 of the Sales Tax Act, 1990 & S.148 of Income Tax Ordinance, 2001---None of the said authorities had the powers to recover the arrears of said taxes on their own, unless they were in receipt of notice from the Officer of Inland Revenue and Commissioner of Income Tax under S. 48 of Sales Tax Act, 1990, S.148, Income Tax Ordinance, 2001--Resultant adjudication proceedings under S.11 of the Sales Tax Act, 1990 and S.148 of the Income Tax Ordinance, 2001, were not legal, justifiable and tenable in the eyes of law---Exercise of jurisdiction by adjudicating authorities, were without lawful authority and jurisdiction---Issuance of show-cause notice and passing of order-in-original was ab initio void and coram non judice---Question was answered in the negative. [Case-law referred]. (e) Customs Act (IV of 1969)--- ----Ss. 18, 19, 20, 25, 32 & 80----Exemption from payment of customs duty and taxes---Issuance of fabricated/forged commensuration letter by officer of Alternate Energy Development Board---Inquiry conducted by officers of the Board---Scope---Question before the Tribunal was "whether both the inquiries conducted by Officers regarding issuance of fabricated/forged commensuration letter, were fair and impartial and within the parameters generally observed by Inquiry Officers---Held, two inquiry reports on record had shown that inspite of irregularities committed in the office of Chief Executive Officer by various personnel, no responsibility had been fixed on any particular officer or official regarding issuance of first commensuration letter---All the officers and involved lower staff, inspite their participation in preparation of the said letter, had not been held responsible and recommended for any penal action---Responsibility of forgery was cast upon the importer/Clearing Agent solely because it appeared to be the sole beneficiaries---Inquiry report recommended blacklisting of the importer---Said recommendation itself was indicative of the fact that something went wrong in the office of Chief Executive Officer in preparation of the earlier commensuration letter, its scanning and dispatch to the representative of importer---Inquiries did not seem to be impartial and conclusive and put out the complete responsibility on the shoulders of the Clearing Agent and the importer, who had been unnecessarily victimized---Question was answered in the negative. (f) Customs Act (IV of 1969)--- ----Ss. 18, 19, 20, 25, 32 & 80----Exemption from payment of customs duty and taxes---Issuance of commensuration letter to importer and Clear Agent---Effect---Question before the Tribunal was "whether the issuance of commensuration letter made the importer and his Clearing Agent liable for any penal action within the ambit of mischief of S.32 of the Customs Act, 1969, and tantamount to misdeclaration---Held, commensuration letter, was issued by the office of Chief Executive Officer and the importer and his Clearing Agent had no part whatsoever in its preparation and scanning from the office of Chief Executive Officer---Clearing agent, uploaded the letter into WBOC System for claming exemptions of customs duty and taxes while filing Goods Declaration on receipt of the same from the importer's representative---No act of misdeclaration was committed by the importer or his Clearing Agent---Question was answered in the negative---Appellate Tribunal, however, observed that courts, being custodians of law, were required to maintain the norms of justice and equity---Litigants were to be respected not on account of court's power to legalize injustice on technical grounds, but to remove injustice---Orders passed during the hierarchy of customs, based on apparent breach of natural justice and law suffered from grave legal infirmities; were declared illegal, ab initio void and of no legal effect on various---Appeal was allowed---Authorities were directed to issue delay detention certificate in duplicate for shipping terminal, order accordingly counts. [Case-law referred]. Muhammad Anan Moton for Appellant. Faraz Qazi and Masood Ahmed A.O. for Respondents. Date of hearing: 15th July, 2016. JUDGMENT MUHAMMAD NADEEM QURESHI, MEMBER (JUDICIAL-I).--By this order, we intend to dispose of the Customs Appeal No.K-1343/15 filed by Messrs Right Way Trading Company, Karachi, (NTN 2315531) under Section 194-A of the Customs Act, 1969 against Order-in-Original No. ONO-392026 dated 09.07.2015 passed by the Collector of Customs, Collectorate of Customs (Adjudication-I) Custom House, Karachi. 2. Brief facts of the case are that the Appellant M/s Right Way Trading Company filed Goods Declaration No KAPW-HC-14682 dated 24.7.2014 through his authorized clearing agent Messrs (Rempex Trading) electronically through WeBoc system of a consignment of Solar Panel (157watt and 165watt),Dry Battery 12 V-7AH, Dry Battery 12 V-50AH, Dry Battery 12 V-92AH, Dry Battery 12 V-100AH, Dry Battery 12 V-160AH,Dry Battery ,Solar LED lights , LED Fitting Fixtures. The details of consignment vide goods declaration Invoice No. AMGH/PAK486 and Bill of Lading No. HMDUKKKNO890454 are as under:--
S.No.
Item Description
Quantity
Unit Price US$
Amount US$
1
SOLAR PANEL 157 WATT
8PCS
25.00
200.00
2
SOLAR PANEL 165 WATT
311PCS
30.00
9330.00
3
DRY BATTERY 12V-7AH
450PCS
2.50
1125.00
4
DRY BATTERY 12V-50AH
40PCS
15.,00
600.00
5
DRY BATTERY 2V-92AH
8PCS
25.00
200.00
6
DRY BATTERY 12V-100AH
34PCS
32.00
1088.00
7
DRY BATTERY 12V-160AH
84PCS
40.00
3360.00
8
DRY BATTERY
168PCS
20.00
3360.00
9
SOLAR LED LIGHTS
390PCS
0.50
195.00
10
LED FITTINGS FIXTURES
7483 PCS
0.15
1122.45
USA Dollars:-- TWENTY THOUSAND FIVE HUNDRED FORTY FIVE CENTS ONLY $20580.45 3. The Appellant declared the solar panel under PCT Heading 8541.4000 and also claimed Custom duty@ 0% Sales tax @0% and Income tax @ 0% in terms of 5th Schedule (Part 24.6 of Table 1) 6th Schedule Sales Tax Act 1990.(15.6 of Table iii) Income Tax Ordinance, 2001 CL 77PT/4 2nd Schedule (Serial No 10). Item Nos. 3 to 8 as Dry Battery 12 Volt-7AH, 12Volt-50AH, 2Volt-92AH, 12Volt-100AH, 12Volt- 160AH. Custom duty @ 0% Sales Tax @0% and Income Tax @ 0% in terms of 5th Schedule (Part 24.6 of Table 1) 6th Schedule Sales Tax Act 1990. (15.6 of Table iii) Income Tax Ordinance, 2001 CL 77PT/4 2nd Schedule (Serial No. 10). Item Nos.9 and 10 declared as LED Tube Lights and LED fitting fixture declared under PCT Heading 9405.1090 carrying Custom duty @ 0% Sales Tax @0% and Income Tax @ 0% in terms of 5th Schedule (Part 24.2 of Table 1) 6th Schedule Sales Tax Act 1990. (15.2 of Table iii) Income Tax Ordinance, 2001 CL 77 PT/4 2nd Schedule (Serial No.10). The said GD was referred to physical examination staff for examination in order to check the tax liability in terms of Section 80 of the Customs Act 1969. The container No. DFSU6801823 got examined by the examination staff which reveals the detailed of found item the quantity, description, specification as per declaration. No controversial aspect was reported. That the Customs processing staff processed the said GD item Nos. 1 and 2 Solar Panel got classified under PCT Heading 8541.4000 carrying Customs duty @ 0%, Sales Tax @ 0% and Income Tax @ 0% % in terms of 5th Schedule (Part 24.6 of Table 1) 6th Schedule Sales Tax Act, 1990.(15.6 of Table iii) Income Tax Ordinance, 2001 CL 77PT/4 2nd Schedule (Serial No. 10) in accordance with the FBR letter No. 1(56) Mach/95 dated 7.8.2014 against undertaking and the rest of the items i.e. dry Battery re-chargeable sealed lead Acid and Solar LED Lights and LED fittings under PCT Heading 9405.1090 were assessed against statutory rate of duty Sales Tax and Income tax despite of the fact that the importer was entitled to get the benefit of Custom duty, Sales Tax and Income Tax in terms of 5th Schedule to the Customs Act, 1969 6th Schedule to the Sales Tax Act, 1990 on the strength of AEDB letter. That the Appellant uploaded the same AEDB letter in" WeBoC" system, which were provided by the importer. Subsequently, the Respondent Collectorate forwarded the same letter to the M/S Alternate Energy Development Board Islamabad for the verification of its authenticity/genuineness. The AEDB reported that the above mentioned ummensuration letter had not issued by them. 4. A show-cause notice was issued by the Adjudication Authority dated 30.4.2015 alleging that importer and clearing agent have attempted to defraud the Government exchequer, thereby alleging that Appellant and clearing agent had committed an offence under sections 32(1), 32(A) 32A(2), 79(1) and 192 of the Customs Act, 1969 read with Sections 3, 6, 11(c), and 37 of the Sales Tax, 1990 read with Section 148 of the Income Tax Ordinance, 2001 punishable under clauses (14), (14-A), (43) (77) and (86) of section 156(1) of the Customs Act, 1969, show-cause notice was issued to importer, Messrs Right Way Trading Corporation and a copy of the show-cause notice was forwarded to clearing agent. That the Appellant furnished reply in response to the allegation levelled vide aforesaid show-cause notice, rebutting the charges. That the Respondent adjudicated the case vide Order-in-Original No. 392026 dated 9.7.2015 by imposing penalty of Rs. 100,000/. upon Appellant (Clearing Agent) under clause 14 of section 156(1) of the Customs Act, 1969. Accordingly, the Collector of Customs (Adjudication-I) Custom House, Karachi adjudicated the case vide Order-in-Original No. 392026 dated 09.07.2015. The operative part of the order is reproduced as under:-- "On the issue of submitting fake/ fabricated document of AEDB dated 1.10.2014, it is a fact that the respondents scanned and uploaded the same using their unique user-ID; hence any claim to the contrary is without basis and an attempt to deflect the attention of these proceedings from their own misdemeanors. The Collectorate placed on record copy of the verification report from the Director (Solar) of AEDB confirming the fabricated/forged nature of AEDB letter No. 6/5/9/2013/exemp-RWT/ 002 dated 1.10.2014. Hence their attempt to obtain release on the basis of such an illegal document leaves no doubt as to their attempt to circumvent/escape the legal framework governing the instant imports. In view of above deliberation, it is evident that despondent importer has made mis-statement and made an attempt to evade legitimate government revenue by making in-admissible claim of Fifth Schedule of the Customs Act, 1969 and Sixth Schedule in the Sales Tax Act, 1990 on the basis of fake / fabricated AEDB certificate. The charges levelled in the Show-Cause Notice, thus, stand established. I, therefore, order for confiscation of the offending goods under clause (14) of Section 156(1) read with sections 32(1)(2) and 79(1) of the Customs Act, 1969. However, an option under section 181 of the Customs Act, 1969 is given to the respondent to redeem the confiscated goods on payment of Redemption Fine equal to 20% Rs.2,214,257/- (Rupees two million two hundred fourteen thousand two hundred and fifty seven) of the value of offending goods as assessed by the department in addition to payment of duty and taxes leviable thereon at statutory rate as specified in the first schedule to the Customs Act, 1969. I, impose a penalty of Rs.300,000/- (Rupees three hundred thousand) on the importer in terms of Section 156(1) clause (14) of the Customs Act, 1969. I, also impose a penalty of Rs. 100,000/- (Rupees one hundred thousand) on the Clearing Agent, whose role cannot be ignored as he acted in connivance with the importer, for violation of the aforementioned provisions of law. Total amount of penalty Rs.400,000/- (Rupees four hundred thousand). 5. Being aggrieved and dissatisfied with the Order-in-Original, the appellants filed the instant appeal before this Tribunal on the grounds mentioned in the Memo of Appeal. 6. On the final date of hearing dated 15.07.2016 Mr. Muhammad Adnan Moton, Advocate appeared on behalf of the appellant and reiterated the contents of the appeal and contended that, the Appellant is a commercial importer and deals in alternate energy products. During the course of his business activities he imported a consignment of solar system for installation at Dhadember Village located near Karor in Tehsil and District Rawalpindi as desired by his client Messrs Fazal Muhammad and Sons. Upon receipt of import documents the Appellant delivered those to his clearing agent Messrs Rempex Trading Karachi, who on the strength of those transmitted goods declaration under the provision of Section 79(1) of the Customs Act, 1969 and Rule 433 of Sub-Chapter-III of Chapter XXI to Customs Rules, 2001. He particularly emphasized on the exemption of Customs Duty on the subject goods under Serial No. 24 of the Second Schedule of the Customs Act, 1969, Serial No.15 of the Sixth Schedule of the Sales Tax Act, 1990 and clause 77 Part-(IV), Second Schedule of Income Tax Ordinance, 2001 since the exemption of duty and taxes claimed were as per statute solely for promotion of renewable energy purpose. There was no apparent requirement for fulfillment of any other formalities. Since the claim exemption was correct the Appellants Goods Declaration was numbered vide GD No. KAPW-HC-14682 dated 28.7.2014. That instead of completing assessment outright, the Appraiser officer of Respondent Collectorate opted to get the goods examined, which resulted in confirmation of the declaration of the appellant. The assessing Officer on 5.8.2014, passed assessment order under the provision of Section 80 and Rule 438 and while doing so he applied Valuation Ruling No. 620/2013 dated 12.12.2013 which was stale besides no nexus with the appellant's imported goods. Similarly, he disallowed the exemption on the pretext that the panels are manufactured in Pakistan as evident from incorporation in Serial No.25 of CGO. Like wise, the batteries were also denied exemption consequent to which appellant filed 1st Review under Rule 441, who rejected that, resultant, 2nd review was filed before Respondent Collectorate, who also rejected those while ignoring the serial No. of CGO. 7. He further argued that subsequently, the Respondent No.2, AEDB issued letter dated 1.10.2014, confirming that the goods imported by the Appellant are interconnected and for dedicatedly use for solar energy and as such is entitled for exemption of duty and taxes. However, Respondent No.2, AEDB forwarded yet another letter dated 2.10.2014 with modification to the Collector of Customs, MCC Appraisement West, without cancelling or withdrawing the letter dated 1.10.2014 after receipt of letter dated 1.10.2014. The Respondent Collectorate again passed assessment order once again against each item. Inspite of the said fact the Respondent Collectorate forwarded letter dated 1.10.2014 to Respondent No.2 vide their letter dated 15.11.2014 for verification, the Director of Respondent No.2 office disowned the said letter and term the same fabricated and forged vide letter dated 25.11.2014. This created enormous hardship for the appellant as the Respondent Collectorate established an FIR against the appellant, against which he had to obtain bail inspite of the matter under investigation in the office of Respondent No.2. The Respondent Collectorate framed contravention report and forwarded to adjudication Collectorate who issued show-cause notice dated 30.4.2015, reply of which was submitted by the Appellant vide their letter dated 14.5.2015 but of no avail and the adjudicating authority passed Order-in-Original dated 9.7.2015 against the appellant holding that the charged levelled in the show-cause notice stood established, result of which was that the goods so imported by the Appellant were ordered to be confiscated subject to redemption of those on payment of fine equivalent to 20% and imposed a personal penalty of Rs, 3,00,00/- on the Appellant. He also produced a copy of the letter dated 16.(sic).2015 addressed to CEO Respondent No.2 and eventually met the CEO who on the face of the letter issued autographic orders, which is self-explanatory and which is " what is the issue? Please, ensure, justice/ transparency and fair play none should be victimized. The CEO Respondent No.2 upon receipt of the direction informed the Appellant that an inquiry has already been ordered in the incidence, outcome of which shall be communicated to the appellant and the customs. 8. He also contended that Respondent Collectorate put and hold on the clearance of the Appellants goods on 26.11.2014, upon receipt of AEDB letter dated 25.11.2014. Such hold amount to notional seizure as held by High Court of Sindh in reported judgment PTCL 2005 CL 480 Syed Muhammad Razi v. Collector of Customs ( Appraisement), Karachi and 2 others. That by virtue of notional seizure the provision contained in Sections 171 and 168 of the Customs Act, 1969 comes into operation. Meaning thereby in the case of seizure of goods under Section 168 the reason are to be recorded and notice under Section 171 of the Customs Act, 1969 has to be served on the person from whose possession the goods are seized. In the instant case, inspite of notional seizure as far as 26.11.2014, the Respondent Collectorate once again seized the goods on 22.1.2015 under Section 168(1) which was not warranted as there exists no provision to pile upon another notice on the already existing virtual notice infield since 26.11.2014. Inspite of the said fact the said notice including the notice under Section 171 has been served on the Appellant to this date. Non serving the notice render the whole proceeding infested from legal infirmity and as such of no legal effect as held by Superior Judicial Fora in umpteenth reported judgment. In case of seizure under section 168(1) of the Customs Act, 1969, a show-cause notice under Section 180 of the Customs Act, 1969 by the authorities vested with powers under Section 179 ibid is also required to be issued within 2 months of the seizure of the goods subject to extension for further two months based on exceptional circumstances by the Collector of Customs after giving notice to the respective person as per law laid down by the Supreme Court of Pakistan in reported judgment 1999 SCMR 1881 Khalid Mehmood v. Collector of Customs, Custom House, Lahore and recording of those exceptional circumstances. That the entire period of 4 months stood lapsed on 26.3.2015 from notional seizure dated 26.11.2014. To, the contrary, the show-cause notice by adjudicating authority has been issued on 29.4.2015 i.e. expiry of entire period of 120 days, rendering it time barred by 93 days from the date of expiry of initial period and as such without powers/ jurisdiction, hence void and ab-initio as held by Superior Courts in umpteenth number of judgments reported as PTCL 1998 CL 435, 2005 PTD 23, PTCL 2005 CL 480 and 2007 PTD 2092. The Adjudicating Authority is not appointed as Officer of Inland Revenue under Section 30 of the Sales Tax Act, 1990 and Section 207 of the Income Tax Ordinance, 2001 and as such is not empowered to issue show-cause notice and pass order in original relating to matters of Sales Tax and Income Tax under Section 11 of the Sales Tax Act, 1990 and Section 162(1) of the Income Tax Ordinance, 2001. Hence, by issuing show-cause notice with the inclusion of amount of Sales Tax and Income Tax, the adjudicating authority usurped the powers of Officer of Inland Revenue to which he is not vested, rendering the show-cause notice and order-in-original being in flagrant violation of law and as such coram non judice as held by the judgments of Superior Judicial Fora and Apex Court reported as PLD 1971 SC 184, PLD 1976 SC 514, 2004 PTD 624, PLD 2004 SC 600, PLD 2005 SC 842, 2010 PTD 465 and 2010 PTD (Trib.) 1636. That invoking of Section 79(1) of the Customs Act, 1969 in the show-cause notice by the adjudicating authority is out of context due to the fact that the said section contains procedure for filing Goods…
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