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Petitioner: ZAHID MAJEED CORPORATION, KARACHI VS Respondent: The DEPUTY COLLECTOR, GROUP-VIII, MCC APPRAISEMENT-EAST, KARACHIHonorable Justice Jahanzaib WahlahNadeem Ahmed Mirza,Zeeshan Wazir
2021 P T D (Trib.) 1879 [Customs Appellate Tribunal] Before Jahanzaib Wahlah, Member Judicial-III Messrs ZAHID MAJEED CORPORATION, KARACHI Versus The DEPUTY COLLECTOR, GROUP-VIII, MCC APPRAISEMENT-EAST, KARACHI and another Custom Appeal No.K-1251 of 2017, decided on 7th July, 2019. (a) Customs Act (IV of 1969)--- ----S.32---Mis-declaration---Weight of essential/non-essential packing---Country of origin---No loss of revenue---Scope---Appellant imported spare parts of auto rickshaw and motorcycle from Vietnam but declared the country of origin to be China---Department levelled allegations of mis-declaration and also found the weight of consignment to be in excess of the declared weight---Contention of appellant was that although country of origin was mis-declared but it did not make any difference as valuation criterion for both Vietnam and China was the same and that no variation existed in the declared weight and weight of the goods after deduction of essential/non-essential packing---Validity---No duty and taxes could be levied on the weight of the essential/non-essential packing, unless same were imported as separate goods---Department had leveled the charge of mis-declaration of origin on the basis of port of shipment available on the Bill of Lading which alone could not be construed as the criteria for determination of origin of imported goods---Department termed China, Laos, Cambodia, Vietnam and Taiwan as one and the same region for the purpose of assessment of goods---Department had assessed the goods with the application of Valuation Ruling of motorcycle parts issued by Director, Directorate General of Valuation, for China origin goods despite of the fact that the goods were alleged to be of Taiwan origin, meaning thereby that determination of origin declared by the appellant was immaterial as in any case the leviable duty and taxes were the same---Leveling charges of mis-declaration of origin was not warranted under law within the meaning of S.32 of Customs Act, 1969, which could only be invoked on an importer in case of loss of revenue, which was non-existent in the case---Impugned order was set aside and the appeal was allowed, in circumstances.
Messrs Al-Hamd Edible Oil Ltd. and others v. Collector of Customs and others 2003 PTD 552; Messrs Kamran Industry v. The Collector of Customs (Export) and 4 others PLD 1996 Kar. 68; Collector of Customs Exports and another v. R.A Hosiery Works 2007 PTD 2215; Messrs Shoaib Tayyab International v. Additional Collector of Customs of Customs, Karachi 2014 PTD (Trib.) 190; Customs Appeal No.K-249/2000/13372; Customs Appeal No. K-35/2002; Customs Appeal No. K-1670/2001; 2005 PTD (Trib.) 617; 1668/LB, 1669/LB of 2002; Customs Appeal No. K-1281/05; 1986 MLD 790; PLD 1996 Kar. 68; 2006 PTD 909; 2002 PTD 2957; 2007 SCMR 1357 = 2007 PTD 1858; 2008 SCMR 438; 1992 SCMR 1083; 2008 PTD 1250 and 2008 SCMR 438 ref. (b) Customs Act (IV of 1969)--- ----S.180---Sales Tax Act (VII of 1990), S.33---Income Tax Ordinance (XLIX of 2001), S. 148---Show-cause notice---Offences and penalties---Scope---Section 33 of Sales Tax Act, 1990, contains penal clauses synonymous to S.156(1) of Customs Act, 1969 and can only be invoked for the contravention of the respective provisions of Sales Tax Act, 1990 and not the Customs Act, 1969---Section 148 of Income Tax Ordinance, 2001, prescribes the procedure for collection of income tax at import stage by the authorities referred therein, meaning thereby that the said sections are independent under which no charge can be invoked---Provisions of Sales Tax Act, 1990 and Income Tax Ordinance, 2001, can only be invoked for the contravention of the respective provisions of Sales Tax Act, 1990 and Income Tax Ordinance, 2001 and not for the Customs Act, 1969---Referred sections of Sales Tax Act, 1990 and Income Tax Ordinance, 2001, are independent and have no nexus whatsoever with any provision of the Customs Act, 1969---Issuance of show-cause notice by invoking irrelevant/erroneous sections of independent statute by unauthorized authority rendered the same void and of no legal effect. Assistant Collector v. Khyber Elec. Lamps 2003 PTD 1275; D.G. Khan Cement v. Collector of Customs 2005 PTD 480; Caltex v. Collector 2003 PTD 1593; Union Playing Card Company v. Collector of Customs 2002 MLD 130; Atlas Tyres v. Additional Collector 2002 MLD 180; State Cement v. Collector PTCL 2001 CL 558; Kashmir Sugar v. Collector 1992 SCMR 1898 and Sarwar International v. Additional Collector of Customs 2013 PTD 813 ref. (c) Customs Act (IV of 1969)--- ----Ss. 32 & 179---Sales Tax Act (VII of 1990), Ss. 11, 30 & 48---Income Tax Ordinance (XLIX of 2001), Ss. 162, 228 & 140---Mis-declaration---Assessment of sales tax---Recovery of sales tax and income tax---Procedure---Scope---Availability of word "tax" in S.32, Customs Act, 1969, does not empower customs authorities to assume powers under the provisions of Ss.11(2) & (3) of Sales Tax Act, 1990 and S.162(1) of Income Tax Ordinance, 2001, unless Legislature appoints them as "Officer of Inland Revenue/Commissioner of Income Tax", who have powers under the provisions to take cognizance in the matter relating to Sales Tax and Income Tax---Word "tax" inserted in S.179 of the Customs Act, 1969 is only for assuming of powers on the basis of involved duty and taxes by the appropriate adjudicating authority, likewise insertion of word "tax" in S.32, empowers the adjudicating authority to issue show cause notice for penalizing the importer under the provisions of S.156(1) of Customs Act, 1969---Mention of word tax in both sections does not automatically empower an officer of Customs appointed under S.3 to wield powers under the charging/respective provisions of Sales Tax Act, 1990 and Income Tax Ordinance, 2001, unless, they are appointed as officer of Inland Revenue by the Legislature under the existing provision of S.30 of Sales Tax Act, 1990 and S.228 of Income Tax Ordinance, 2001, or by carving a new subsection of S.30 of Sales Tax Act, 1990 and S.228 of the Income Tax Ordinance, 2001, or all together by inserting new sections through money bill, therefore, despite insertion of the word "tax" in Ss. 179 & 32 of the Customs Act, 1969, the adjudicating authority can only issue show-cause notice within the respective provisions of the Customs Act, 1969 and not under any charging sections or S.11 of the Sales Tax Act, 1990 and S.162 of the Income Tax Ordinance, 2001. (d) Customs Act (IV of 1969)--- ----S.202---Sales Tax Act (VII of 1990), Ss. 11 & 48---Income Tax Ordinance (XLIX of 2001), Ss. 162 & 140---Recovery of Government dues---Recovery of arrears of sales tax---Recovery of tax from persons holding money on behalf of a taxpayer---Scope---Customs Collectorates have powers to collect sales tax and income tax as duty at import stage---Argument that Customs is empowered to recover the short paid amount of sales tax and income tax at import stage under S. 202 of the Customs Act, 1969, is based on mistaken belief---Customs Collectorates can only recover the amounts of sales tax and income tax upon receipt of notice from the Officer of Inland Revenue and Commissioner of Income Tax in terms of S.48 of Sales Tax Act, 1990 and S.140 of Income Tax Ordinance, 2001, for recovery of adjudged amount of sales tax and income tax after due process of law---Clearance Collectorates have the authority to collect sales tax and income tax at import stage in the capacity of collecting agents and can recover escaped/short paid customs duty and regulatory duty, after due process of law, but have no powers to adjudicate the cases of recovery of sales/income tax falling within the ambit of S.11 of Sales Tax Act, 1990 and S.162(1) of Income Tax Ordinance, 2001. 2011 PTD (Trib.) 110; 2010 PTD (Trib.) 2086; SCRA No. 01/2010 2004 PTD 801; C.P. No. D-216/2013; 2014 PTD 1963; 2015 PTD 702; 2016 PTD (Trib.) 969; 2016 PTD (Trib.) 1008; 2016 PTD (Trib.) 2125; Appeal No. K-1635/2014; Appeal No.K-1029/2016; Appeal No.K-1030/2016; 2016 PTD (Trib.) 2463 and 2017 PTD (Trib.) 481 ref. (e) Customs Act (IV of 1969)--- ----Ss.25 & 25A---Value of imported and exported goods---Power to determine the customs value---Scope---When any order is challenged through an appeal/revision, it stands merged in that and the case stands wide open by virtue of the fact that the order/valuation ruling stand abated---No action whatsoever can be initiated on the strength of such an order, likewise, no assessment of goods of the person who has challenged the vires can be made with the application of the value available in valuation ruling, unless same has attained finality after crossing all the forum earmarked in the Customs Act, 1969. (f) Customs Act (IV of 1969)--- ----Ss. 25 & 25A---Customs Rules, 2001, R.107(a)---Value of imported and exported goods---Power to determine the customs value---Scope---Validity of ruling is only 90 days, no assessment under the stale ruling is permitted under the law. Sadia Jabbar v. FOP 2018 PTD 1746 and Danish Jehangir v. FOP and 2 others 2016 PTD 702 rel. Nadeem Ahmed Mirza, Consultant for Appellant. Zeeshan Wazir, A.O. for Respondent. Date of hearing: 27th June, 2019. JUDGMENT JEHANZAIB WAHLAH, MEMBER JUDICIAL-III.----Through this order, I dispose off appeal bearing No.K-1251/2017 directed against the Order-in-Original No. 75498 dated 03.10.2017 passed by The Additional Collector of Customs, Adjudication-II, Customs House, Karachi. 2. Briefly fact of the case are that the appellant imported a consignment of 6274 kgs of spare parts of auto rikshaw and motorcycle from Vietnam, valuing to US $ 7528.80 C&F, Karachi against invoice No.YTP-009-14 dated 15.07.2017 and B/L No.EHPH17-037 dated 19.07.2017. Upon receipt of import documents delivered those to his clearing agent M/s. Khurram Brothers, Karachi for transmitting Goods Declaration (GD) with the MCC of Appraisement-East under the provision of Section 79(1) of the Customs Act, 1969 (Act) and Rule 433 of Sub-Chapter III of Chapter XXI of Customs Rules, 2001 (Rules), which he did and as per pre-requisite deposited upfront duty and taxes of Rs.587,107.00 on 26.08.2017, consequent to which GD was numbered as KAPE-HC-39462-26082017. The Assessing Officer on receipt of GD on his workstation opted to get the goods examined first under the provision of section 198 and Rule 435 of the Act/Rules, to proceed with after adducing his opinion/reasoning for conduction of examination, transmitted the GD to the respondent No.1, who gave his assent and routed the GD to the Deputy Collector, Examination, PICT, who marked that to the officials of his choice/selection. The examiner conducted the desired physical verification of the imported goods and opined that the appellant has misdeclared the origin of the goods and report so prepared was uploaded by him in the reservoir of GD reading as "Assessment Alert: The trader has declared country of origin China while origin found Vietnam. Examined Container No.TEMU5644439, vide G.D No.KAPE-HC-39462-26-08-2017. (Partial Shipment). Invoice and Packing list found inside the container. Found invoice value in US$ 7528.80. Description: Motorcycle/Rickshaw spare parts including: (1) Engine Valve = 687 KG (Net) Approx, (2) Ring Set = 227 KG (Net) Approx, (3) Piston kit = 4176 KG (Net) Approx, Excess weight 7.46% (4) Piston Kit (Rickshaw) = 2828 KG (Net) Approx, Excess weight 6.63% (5) Ring Set (Rickshaw) = 52 KG (net) Approx, Brand: STR, Origin: Vietnam And weight found 8820 KG (Gross). Group is requested to check all aspects including Importability as per IPO and IPR. condition in vogue." The Assessing Officer despite of the fact that the goods were found to be of Vietnamese Origin completed the assessment by passing assessment order under section 80 and Rule 438 of the Act/Rules with the application of value of China origin in terms of Vthuation Ruling (VR) 967/2016 dated 16.11.2016 and forwarded that to Principal Appraiser for approval, who despite noticing the illegality in the Assessment Order, went one step ahead and construed the non-instant mis-declaration in material particular, framed contravention report and forwarded to Additional Collector Law who approved that and transmitted to respondent No. 2, who issued show-cause notice dated 13.09.2017 with the allegation that the appellant is guilty of mis-declaration of origin found as Vietnam as against declared China and weight declared was found in excess by 1544 kgs equivalent to 24.03% as evident from the examination report, causing anticipated loss to the exchequer in the shape of duty and taxes to the tune of Rs.1,334,582.00. Hence, contravened the provision of Sections 32(1) and 32(2), 79(1) of the Act, Section 33 of the Sales Tax Act, 1990 (STA) and Section 148 of the Income Tax Ordinance, 2001 (ITO), punishable under clauses 1, 14, of Section 156(1) of the Act read with SRO 499/2009 dated 13.06.2009. The appellant consultant replied to the show-cause notice vide dated 13.09.2017, through which he challenged his jurisdiction in the matter of Sales Tax and Income Tax and in regards to charge of mis-declaration. He also placed on record reported Judgments of the Hon'ble Tribunal where similar issues were decided upon. The respondent No 2, ignored those and passed Order-in-Original imposing 20% fine of Rs. 483,861/- and penalty of 100,000/- on the pretext that the appellant has mis-declared the origin and weight of the goods imported. Paras 7 and 8 of the order is relevant, which is reproduced for easement/perusal. "I have gone through the case record and have considered written/verbal arguments put forth by the respondents. The case of the departments is that the examination report confirms that the goods found are of the Vietnam origin as against declared origin of China. Excess weight to the extent of 1544 Kgs is also reported which is 24.03% of the total consignment. The duty/taxes of excess weight comes to Rs.386,402/-. Therefore, the importer have deliberately concealed/declared the origin and weight of the goods to take and attempt for getting the goods assessed on suppressed value and weight for evading legitimate amount of taxes to the tune of Rs.1334582/- willfully and with mala fide intention. The offending value of the goods is worked out to be Rs.2419,305/-. The contention of the importer through their reply as well as verbal arguments in respect of the origin of the goods is that although mis-declaration of origin is there but it does not make any difference as valuation criterian for both Vietnam and China is same. Regarding weight the exclusion of weight of essential/non essential packing added in the weight of the goods, there exist no variation in the declared weight of the goods. The contention of both sides has been examined in detail and it is fact that origin and weight of the goods have been mis-declared by the respondents. Therefore, charges mentioned in the Show-Cause Notice stands established as the importer has deliberately mis-declared origin and weight of the goods to get the goods assessed on suppressed value for evading legitimate amount of duty and taxes , thus the importer has violated the provisions of Sections 32(1) , 32(2) and 79(1) of the Customs Act, 1969, Section 33 of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2001. Accordingly, offending goods are confiscated under clause (14) of Section 156(1) of the Customs Act, 1969. However, an option is given to the importer to redeem goods under Section 181 of the Customs Act, 1969 read with SRO 499(I)/2009 dated 30.06.2009 on payment of duty and taxes leviable thereon along with fine equal to 20% of the offending value of the goods amounting to Rs.483861/- (20% of value of the imported goods Rs. 2419305/-) subject to condition that these goods are otherwise importable as per Import Policy Order in vogue. A penalty of Rs.100,000/- (Rs.One hundred thousand only) is imposed on importer for deliberate mis-declaration of origin and weight of goods in terms of clause (14) of Section 156(1) of Customs Act, 1969." 3. The appellant filed application for urgent hearing and interim relief supported by affidavit with the main appeal on 11.10.2017, praying that his goods be ordered to be released upon submission of pay order equivalent to the alleged short paid/evaded amount of duty and taxes of Rs. 1334582.00 and post dated cheque of Rs.583,861.00 against the imposed fine and penalty as security deposit with the Collector of Customs, MCC of Appraisement-East subject to their encashment/return upon decision on the main appeal. The Tribunal after allowing urgent hearing took up the application for interim relief and disposed off the same on 6-11-2017 in the following manner. "The basic ingredients for grant of interim relief flow in favor of the appellant therefore, while considering the hardships of the appellant to run the business as its capital has also been blocked due to non release of his consignment, interim relief for release of subject consignment is accorded subject to payment of duty and taxes in accordance with description of the goods, pay order in respect of differential amount of duty and taxes as per assessed value and weight of the goods by the department, redemption fine and penalty. After payment of duty and taxes and deposit of pay order, the clearance Collectorate is required to release the subject consignment at once. The Collectorate is further directed not to encash the pay order till final decision of main appeal. Before parting with this order we feel it better to add that there is dispute in respect of weight declared by the importer and determined by the department. Same is vital issue before this forum for determination, therefore, if the appellant (importer) is not accepting the said determination of weight of the consignment than it would be in the interest of justice that before releasing of the consignment its weighment may be carried out jointly by the department and the representative of the appellant. Besides gross weight sample weight of packing may also be determined for each category of goods during examination. No technical defects notice in the appeal same is also filed within time, therefore, appeal is admitted subject to all legal exception for regular hearing. The respondent are directed to file memorandum of cross objection." 4. On the date of hearing the consultant of the appellant argued the case strictly in line with the grounds incorporated in the memo. of appeal and place on record of the Tribunal host of citation in support thereof. No cross objection under subsection (4) of Section 194A of the Act has been filed within the stipulated period of 30 days by the respondent No.1, resultant, lost the right of cross appeal within the contemplation of subsection (3) of aforesaid section. However, comments have been submitted, which least qualify as the definition of cross objection. Hence, will be taken as opinion having no legal sanction. 5. None appeared on behalf of respondent on multiple dates of hearing fixed between 13.12.2018 to 27.06.2019, despite categorical direction to the representative of the respondents Mr. Rashid Ali AO on the date he registered appearance, in addition to notice for hearing for 29.05.2019 delivered by hand in the office of the Collector of Customs, and telephone calls by the court clerk of this Bench to the Collectorate in regards to fixation of hearings. This shows non-seriousness/lackluster approach of the department. In addition to the aforesaid date of hearing in this case, 25 hearings have been conducted and not on one occasion consultant of the appellant sought adjournment, instead was found without any exception ready for arguing the case of the appellant as against the representative of the respondent who sought adjournments now and then. Therefore, I have no other option except to close their side and decide the case on available record and comments on memo. of appeal submitted by the respondents. 6. Heard and case record perused and so the relied upon judgments. Consequently framed the following issues for decision: (i) Whether invoking of the provisions of Section 33 of the STA and Section 148 of the ITO by the respondent No.2 in the show-cause notice are valid and whether he has been empowered to invoke those in the matter of customs? (ii) Whether respondent No. 2 has been appointed as officer of Inland Revenue under the provision of Section 30 of the STA and respective Section of the ITO and as to whether he has been delegated power through a notification by the Board to proceed under Section 32 of the Act for the offences of STA of ITO falling under the provision of Section 11 and Section 162(1) of the STA/1TO and the law laid down by the Superior Judicial Fora on the said issue? (iii) Whether determination/ascertainment of weight of imported goods with the addition of weight of essential/non essential packing for levy of duty and tares under the respective applicable PCT Heading of the First Schedule to the Act was correctly made by the respondent No.1 and his subordinates at the time of physical verification of the imported goods as per the contemplation of Section 198 and Rule 435 of the Act/Rules , para 5 of CGO 12/2002 dated 15.06.2002 and Examination Manual, 1996? (iv) Whether port of shipment is the only criteria for determination of origin of the goods in the absence of availability of engraving of "made in" on the goods and tangible unrefutable incriminating evidence validating the determined origin? (v) Whether Vietnam and China are being termed as one and the same region by the respondents and by the Director, Directorate General of Valuation through Valuation Ruling (VR) issued under the provision of Section 25A of the Act containing determination of value for application on the imported goods or class of goods for levy of duty and taxes under the respective PCT heading of the First Schedule to the Act? (vi) Whether loss of revenue could be worked out/determined on the basis of values of VR and as to whether charge of misdeclaration or suppressed value could be levelled on an importer on the basis of those values? (vii) Whether assessment order of the imported goods of the appellant can be made by the competent authority defined in section 2(a) under Section 80 and Rule 438 of the Act/Rules in exercise of the vested powers delegated through SRO 371(I)/2002 dated 15.06.2002 on the basis of VR No. 967/2016 dated 16.11.2016, vires of which has been assailed under the provision of Section 25D before the Director, Directorate General of Valuation (DGV)? 7. As regard to Issue No. (i). The respondent No.2 have invoked Sections 33 and 148 of the STA/ITO without going through their expression, and in derogation of the ratio settled by the Supreme Court of Pakistan in reported judgment 2010 SCMR 1425 Section Officer Government of Punjab Finance Department and others v. Ghulam Shabbir containing Principle of Administration of Justice and Interpretation of Statute that "the person who is performing the role of a judge, no matter even in quasi-judicial proceeding must wear all laws of the country on the sleeves of his robes and failure to do so by any reason is not an excuse" Section 33 contain penal clauses synonymous to Section 156(1) of the Act and could only be invoked for the contravention of the respective provision of STA not the Act, whereas, Section 148 prescribes the procedure for collection of Income Tax at import stage by the authorities referred therein. Meaning thereby that the said sections are independent under which no charge can be invoked. To the contrary, respondent No. 2 invoked these for which I am unable either to visualize/comprehend his wisdom that he being an officer of customs appointed under Section 3 of the Act invoked these sections for the offence allegedly committed by the appellant under the provision of Section 32 of the Act. The sections of STA and ITO could only be invoked for the contravention of the respective provision of the STA and ITO not for the Act. These are independent Sections of STA/ITO and have no nexus whatsoever with any provision of the Act. Issuance of show-cause notice by invoking irrelevant/erroneous sections of independent statute by un authorized authority render it void and ab-Initio and of no legal effect as held by the superior judicial fora in their judgments reported at Assistant Collector v. Khyber Elec. Lamps 2003 PTD 1275, D.G. Khan Cement v Collector of Customs 2005 PTD 480, Caltex v. Collector 2003 PTD 1593, Union Playing Card Company v. Collector of Customs 2002 MLD 130 Atlas Tyres v. Additional Collector 2002 MLD 180, State Cement v. Collector PTCL 2001 CL 558, Kashmir Sugar v. Collector 1992 SCMR 1898, Rose Color v. Chairman, CBR (sic) and 2013 PTD 813 Sarwar International v. Addl. Collector of Customs. The issue No. (i) is answered in negative. 8. As regard to issue No. (ii). As…
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