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Petitioner: AJMAIR TRADERS VS Respondent: COLLECTOR OF CUSTOMS (EXPORTS)
Court Name: Customs Appellate Tribunal Judge(s): Muhammad Nadeem Qureshi, Zulfiqar A. Kazmi Title: AJMAIR TRADERS vs COLLECTOR OF CUSTOMS (EXPORTS) Case No.: Customs Appeal No,K-958 of 2016 Date of Judgment:2017-01-13 Reported As: 2017 PTD (Trib.) 1450 Result: Appeal allowed
JUDGMENT
JUDGMENT MUHAMMAD NADEEM QURESHI, MEMBER (JUDICIAL-I).-- Through this order, we intend to dispose off Appeal bearing No,K-958/ 2016 filed against Order-in-Original No, 578517 dated 26.09.2016 passed by Collector of Customs, Adjudication-II, Custom House, Karachi. 2. Brief facts of the case are that the appellant is a manufacturer of iron and steel pipes and operates a manufacturing warehouse No,25/LHR/MFG/2003 at Lahore, under which he imports (i) HR Coils (ii) C.R. Coil (iii) Galvanized Coil for manufacture of MS Pipes, Strips and same state goods for export. In the month of June 2016 he got an order from Messrs Mian Muhammad and Company, Madina Munawara, Saudi Arabia for export of 137585 kgs of hot rolled strips/coils, for which his officials prepared invoice/packing list No,AT/786/MB/366 dated 15.07.2016 and dispatched those to his clearing agent M/s. Trade Link International, Karachi for transmitting Goods Declaration for A export in terms of Section 131 of the Customs Act, 1969 (here-in-after to be referred as Act) and Rule 444 of Chapter IV of Chapter XXI of Customs Rules, 2001 (here-in-after to be referred as Rules), with the MCC of Export- Karachi. The clearing agent on the strength of documents, transmitted GD which was numbered as KPEX-SB-3741- 18072016 and message under Rule 447 of the Rules was received on his desktop for passing of the containers which was complied. Immediately, after passing in off the container, the official Incharge of Export of the appellant realized his mistake committed inadvertently in regards to the actual description of the goods stuffed in containers. Resultant, he prepared fresh invoice and packing list and forwarded to the clearing agent with the direction to upload these in the reservoir of the Goods Declaration for making part and parcel of the declaration. The Goods Declaration was selected for examination in terms of Section 198 and Rule 452(1) of the Act/Rule, the concerned official instead of conducting the examination on the
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basis of correct invoice and packing list opted to consider the invoice/packing list, which have no nexus with the goods. This led him to form the opinion that the goods stuffed in the containers are contrary to the declaration and has committed an act of misdeclaration and reported the said opinion to the Collector of Customs Exports (here-in-after referred as respondent No, 1), who directed to frame contravention report, which he did and the respondent No, 1 transmitted that to respondent No, 2, who forwarded to concerned adjudicating officer, who transmitted a communication dated 17.08.2016 in the capacity of Principal Appraiser, alleging that the appellant with mala fide intention attempted to export 114000 kgs of hot rolled coils in same state and 51020 kgs of hot rolled strips and as such is instrumental in causing loss to the exchequer to the tune of Rs,3,400,915.00 attracting the provision of Sections 16, 19, 32(1), 32(2), 32A and 131 of the Act and Rule 343 of Rules. The advocate of the appellant replied to the communication vide reply dated 24.08.2016, which failed to impress respondent No, 2 and he passed order dated 26.09.2016, through which he held the charges leveled in the communication as established and ordered outright confiscation of the goods, subject to redemption of those on payment of 20% fine of Rs, 1223887.00 in terms of clause (f) of S.R.O. 499(1)/2009 dated 13.06.2009 and penalty of Rs, 500,000.00 in addition of worked out loss of revenue. Paras. 22 to 24 are relevant and are reproduced:-- 1 have gone through the case record and written as well as verbal submission of the respondent and the department as well. The main allegation on the respondent is that he attempted to export the goods from his manufacturing bond which were no specified in his analysis certificate issued under Rule 351 of the Customs Rules, 2001 issued vide S.R.O. 450(1)/2001 dated 18.06.2001. The description of the goods being exported was also found misdeclared as exporter declared only "Hot Rolled Coils in Strips" whereas the goods being exported also contain 95 tons i,e, major portion of consignment as "Hot Rolled Steel Coils". The respondent in the written reply has attributed this misdeclaration of description to the ignorance of labour who could not recognize the difference between the two and loaded almost 2/3rd of the consignment with wrong goods this contention does not seems to hold grounds as in his written reply, the respondent had stated that when they failed to export finished goods to Afghanistan they obtained a purchase order of "HR Strips" from Sauid Arabia and goods were being exported to fulfill that order. It is quite un- acceptable that goods other than agreed were being exported and exporter relied on his ignorant labour to fulfill such large order and did not even try to counter check as to whether or not the right goods were being supplied to the buyer abroad. This is an afterthought and willful attempt with mala fide intention to cover up the misdeclaration of description. The other allegation on the exporter is that of attempting to export the goods not specified in his Analysis Certificate. As per the prosecution, the manufacturing bond issued to the respondent vide license No, 25/LHR/MFG/2003 dated 28.10.2004 granted by the MCC Lahore allows the manufacturer to export "M. S. Pipe & G.I. Pipe" only whereas he tried to export "Hot Rolled Strips in Coils and Hot rolled Steel Coils in terms of provisions of Chapter XV of Customs Rules ibid, the input goods for production of finished goods of the specification approved by the Collector are procured by the licensee without payment of duty and taxes. This exemption from duty and taxes is granted on the ground that the exempt goods so procured shall be used in the production of goods specked in the license, which were to be exported subsequently. The Customs Rules, 2001 do allow export of same state goods but not without permission by the regulatory Collectorate. The exporters plea that this misdeclaration and export of same state goods is just a procedural/technical violation is not tenable. Had there been any bona fide, the licensee must have get the permission of the concerned authority before export of goods. It was only after the 'attempt to export the same state goods under Customs Rules ibid. "Moreover, no permission from the regulatory Collectorate has been submitted to the adjudicating authority in respect of the subject goods. In the light of aforesaid facts, it stands proved beyond any doubt that the exporter not only mis-declares the
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description of goods but also attempted to export goods under his manufacturing non license which were not specified in the Analysis Certificate and could only be exported after proper approval from the Regulatory Collectorate which approval was not available at the time of Goods Declaration (GD) for export was filed. This approval is required under law for the export of same state goods under SRO 450(1)/2001 and its absence can not be treated as procedural or technical error. Therefore keeping in view the above discussion the charges mentioned in the show cause notice stand established, therefore the subject goods are confiscated in exercise of the powers rover conferred under sections 16, 19, 32(1), 32(2), 32A, 131 and 209 of the Customs Act, 1969, read with clause of SRO 499(1)/2009 dated 13.06.2009. However, the exporter is given an option to redeem the subject goods on payment of fine equal to 20% of the value of Rs, I223887./- (20% of the ascertained value of impugned goods Rs, 6119434/-) in terms of clause (f) of SRO 499(1)/2009 dated 13.06.2009 along with payment of duty and taxes which were exempted at the time of import of subject goods in terms of Rules 343 and 358 of SRO 450(1)/2001 dated 18.06.2001. A penalty of Rs, 5 lac (Rs, Five hundred thousand only) is also imposed on the exporter in terms of clauses 1, 9, 10A, 14, 14A, 58, of Section 156(1) of the Customs Act, 1969. 3. The appellant has challenged the order of the respondent No, 2 by way of the instant appeal the consultants/advocates argued on the strength of the grounds incorporated in the memo of appeal and which are inter alia taken on record:--- (i) That the show cause notice is in unique in nature, and this stood validated from the fact that it has been transmitted to M/s. Mian Muhammad & Company (who is an importer and to whom no show-cause notice can be issued under the provision of Customs Act, 1969). Whereas, no show cause notice has been issued in principle to the appellant as evident from the contents of the communication which although contains different events and opinion based on whims and wishes of the subordinate of respondent No, 1 and the provision of the Act/Rules for increasing the gravity. This at no where direct the appellant to submit reply to the formed opinion based on inapt interpretation of law. Resultant, it is infact not served for submission of reply, instead it is a document prepared by the officials of respondent No, 1 for themselves for record. (ii) The transmitted communication in no manner can be considered as a show-cause notice, basic requirement of that is that it should comprehensively describe the case made out against the tax payer by making reference to the evidence collected in. Support of the same and with a narration of facts in the show-cause notice along with supportive evidence which determined the offence attracted. Show-cause notice is not a casual correspondence or a tool or a license to commence a rowing inquiry into the affair based on assumption and speculation but is a fundamental document that carries definitive legal and factual position of the department against the tax payer, legal enforceability and jurisdictional validity of a show-cause notice vested from its context, that was, the facts supposed to be tangible evidence referred to in the show-cause notice and not from the cosmetic show causing of statutory provision or from the use of statutory keywords in the show-cause notice. No valid show-cause notice in the instant case of the appellant has been served transmitted. Rendering the order so passed by the respondent No, 2, as void and ab-initio, hence, Coram non juice and of no legal effect and jurisdiction as held in reported judgment PTCL 2004 CL 2005, PLD 1961 SC 237, PLD 1964 SC 410, PLD 1964 SC 536, PLD 1965 Supreme Court 90, 1983 SCMR 1208, PLD 1987 Supreme Court 304, 1994 SCMR 2232, 2003 SCMR 1505, 2006 SCMR 129, 2006 SCMR 1023, 2013 PTD (Trib.) 353 and [(2015) 111 Tax 231(Trib.)] (iii) The Government of Pakistan has not withdrawn the powers vested to Custom Officers of Executive Collectorate under section 179 of the Custom Act, 1969 through S.R.O. No, 886(1)/ 2012 dated 18.07.2012, (Exhibit "L") in the cases involving technical violation of import or export restrictions without any involvement of any evasion of duty and taxes as evident from Sub-Para (d) of Para 3. In the instant case there is no revenue loss stood proved from the charter of the communication
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that the goods were imported in manufacturing bond without payment of duty and taxes and were exported from there on export no duty or taxes are leviable. The entire case is based on error and omission or technical violation i,e, instead of exporting strips, it has been alleged that the appellant tried to export coil. Meaning thereby, that the case in question is based on technical violation of Chapter XV of Customs Rules, 2001, such case has to be adjudicated by the Executive Collectorate. While laying hand on the instant case the respondent No, 2 has transgressed the authority vested with the Officer of the Executive Collectorate, rendering the issuance of show-cause notice and Order-in-Original being in-flagrant violation of law and as such coram non judice, hence void and ab-initio as held in reported judgments 2002 PTD 2457, PLD 1971 Supreme Court 61, PLD 1973 Supreme Court 236, PLD 1964 SC 536, 2001 SCMR 838 and 2003 SCMR 1505, In PLD 1996 Karachi 68, 2006 PTD 978 and PLD 1971 Supreme Court 184. (iv) That the power to adjudicate the subject case rest with the Principal Appraiser, who while exercising his powers vested under S.R.O. 371(1)/2002 dated 15.06.2002 at the time of shipment in terms of clause (a) of Sub-Clause (iii) of section 131 of the Customs Act, 1969 has to take into consideration the conducted examination and where there is no loss of duty drawback, but an element of mis-declaration is apparent took the cognizance of the case himself and issue show- cause notice to the exporter, for the contravention for adjudication and this stood validated from the communication which state with clarity that it has been transmitted to the appellant by the Principal Appraiser. The fact of matter is that the show-cause notice has to be issued by the Principal Appraiser of the Executive Collectorate, not by the Collectorate of Adjudication-II. By issuing show-cause notice by the Principal Appraiser of Adjudication Collectorate (for the purpose of record the appellant state that no principal Appraiser, is being posted to this date in the Adjudication Collectorate), render the communication said to be impugned show-cause notice without power/ jurisdiction and as such void and ab-initio and as such coram non judice arid this has been held by the Superior Judicial For a in the judgment referred in paras supra. (v) That the impugned communication said to be show-cause notice in the case of the appellant has been issued by Mr. Basit Hussain, who is Deputy Collector of the Collectorate of Customs, Adjudication and this stood validated from the. Serial No, 16 of Notification No, 2426-C-II/2015 dated 14.10.2015. The powers of adjudication are specific and has to be used by the authority being empowered and by none else. By issuing show cause notice by the Deputy Collector, he on one hand transgressed the powers of the Principal Appraiser of the Executive Collectorate and on the other hand of Collectorate of Adjudication. While exercising the powers of adjudication has to be used by the person to whom powers are vested i,e, Principal Appraiser, no superior authority is empowered to exercise the powers of his subordinate in the course of, adjudication, as it is settled elementary principle of law that action of the authority is to be restricted to the specific sphere permitted by the statute. Rendering the show cause notice as well as the structure built thereupon in the shape of order-in-original without power/jurisdiction, hence null void and ab-initio and this have been held in countless reported judgments by the Superior Judicial Fora, refer to Lt. General (Retd) Shah Rafi Alam v. Lahore Race Club, 2004 CLD 373), Khalid Qureshi v. UBL 2001 SCMR 103), East West Steamship v. Queen Land Insurance PLD 1963 SC 663, Sahibzada Sharfuddin v. Town Committee, 1984 CLC 1517, Abida Rashid v. Secretary, Government of Sindh PLD 1995 Kar. 587, Assistant Director v. B.R. Herman Mohata Ltd. PLD 1992 SC 485, Central Insurance v. CBR 1993 SCMR 1232, S.T. Appeal No, 176/2007 Messrs Muller and Phipps Pakistan (Pvt.) Ltd. v. The Collector of Sates Tax Enforcement LTU, Karachi and 2011 PTD (Trib.) 2114 Collector of Customs, Peshawar v. Collector of Customs (Appeals) Peshawar and 2011 PTD (Trio.) 2557, Messrs Wawa Garments Industries (Pvt) Ltd v. The Additional. Collector of Customs, Export, Karachi and Order-in-Custom Appeal NoH-510/ 2008 Dewan Farooque Motors Ltd. v. Collector of Customs (Appeal) and 2014 PTD 199 Collector of Customs, Lahore v. South East Trading.
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(vi)That the order-in-original in the instant case has been passed by respondent No, 2, while exercising the powers of Deputy Collector in terms of section 5(2) of the Customs Act, 1969 as observed by him in para 19 of the order. The said observation/interpretation by the respondent No, 2 is absurd/inapt. Under the said subsection powers are vested with the Board, which can through an order can direct the Director General and Collector and any other officer of Customs to exercise within any specified area any of the powers of the Director General, Director or Collector or any other officer of the Customs under this Act. Meaning thereby the Board through an order can direct the respondent No, 2 to exercise the powers of any of the Collector or Director in addition to his present designation not of any subordinates. In the absence of any order of the Board the respondent No, 2 was not empowered to assume the powers of Deputy Collector himself. Notwithstanding, this section relates to administrative job not adjudication. He could had laid hands in the case for decision, if the Board would had authorized him through a notification as expressed in subsection (2) of Section 179 of the Customs Act, 1969. In the absence of any notification passing of order by the respondent No, 2 is without lawful authority and jurisdiction, void and ab- initio and coram non judice as held in host of judgments by the Superior Judicial Fora. (vii) That the provision of Sections 32(1) and (2) of the Customs Act, 1969 could only be invoked by the respondents, where there exist any revenue loss. In the instant case although the loss of duty and taxes has been calculated but those were leviable at import stage and to be paid in case of filing of Goods Declaration for home consumption as against the Goods Declaration filed by the appellant for clearance for production in manufacturing bond, without payment of duty and taxes. On export no duty and taxes are leviable. Therefore, there exist no revenue loss, when there is no revenue loss the provision of Section 32 cannot be invoked as held in reported judgment 2003 PTD 552 Messrs Al-Hamd Edible Oil Ltd and others v. Collector of Customs and others wherein, their lordship held: "A bare reading of Section clearly indicate that it relates to a situation where a person makes any statement or files any documents which is false in any material particular by reason of which any duty or charge is not levied or is short levied or refunded. In such event Customs authorities is empowered to issue to the person concerned a notice to show cause that why he should not pay the loss of revenue suffered by the department and after giving him a hearing, beside any other action under law order payment of the same, if a case is made out. The entire provision revolves around the central point of loss of revenue suffered by the Customs Department on account of the conduct of any person. Mr. Iqbal has not urged that the Department has suffered any loss on account of the conduct of the Appellant. The question of applicability of Section 32 in the present circumstances apparently does not arise." The Honble High Court of Sindh in another Landmark judgment reported at PLD 1996 Karachi 68 Messrs Kamran Industry v. The Collector of Customs (Export) and 4 others held in un-equivocal terms:-- "In the present case the accused has categorically taken the stand that any mis-declaration or under valuation was of no fiscal consequence. Such is also the admitted position which is not disputed where a person submit a declaration in the context of customs clearance and there can possibility be no fiscal consequence contingent upon his declaration and that contingency of no fiscal consequence is either undeniable or regarding which the accused has demonstrated his knowledge or reason to belief that he thought no tax was leviable, by no figment of imagination could it be said that the said person had any knowledge or reason to believe that his declaration/ statement was false or untrue in any material particular. In this context the contention that no penalty under section 32(1) is leviable for any alleged under-valuation and misdescription where there can be no motive to evade tax and where such declaration would carry no fiscal
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consequences is correct. Any other interpretation would also give rise to an absurd situation, where although no tax would be leviable on the main/basic assessment but there could be no possibility of imposition of penalty. Mere allegation without any concrete or positive evidence produced by the customs authority cannot warrant a finding of falasity to the declaration in material particular in context of section 32(1) of the Customs Act, 1969 and its comparable provisions. The Customs authorities were not justified to levy penalty under section 32(1) when admittedly there was no motive on the part of the accused to evade tax." The said opinion was endorsed by the Honble Supreme Court of Pakistan in reported judgment 2007 PTD 2215 Collector of Customs Exports and another v. R.A Hosiery Works wherein the bench presided by their lordship Justice Rana Bhagwandas held that:-- "Provision of Section S.32 (1) of the Customs Act, 1969 would be attracted only when the misdeclaration or misstatement was made with a view to obtain illegal gain by evasion of payment of custom duties and other taxes or by causing loss to the government revenue. Misdeclaration alleged to have been made in the case, was neither for evasion of payment of Customs duty or other taxes /charges nor the same had caused any financial loss to the Government. Petition for leave to Appeal by the authority being without merit, was dismissed." (viii) Notwithstanding to the submission made here-in-above, it is imperative for the appellant to state that the respondents have made out the mountain out of mole hill and this stood validated from the fact that the relevant invoices and packing list answering the description and quantity of the exported goods were also scanned and are available in reservoir of the GD and those are deems to be declaration of the appellant in terms of Section 2(kka) of the Customs Act, 1969 and form integral part of the Goods Declaration of export transmitted under Section 131 ibid and Rule 444 of the Rules. [{kka} "documents means a goods declaration, application for claim of refund, duty drawback or repayment of duty, import or export general manifest passenger manifest, bill of lading, airway bill, commercial invoice and packing list or similar other forms or documents used for customs clearance or making a declaration to customs, whether or not signed or initiated or otherwise authenticated, and also includes:-- (i) any form of writing on material, data or information recorded, transmitted, or stored by means of a tape recorder, computer or any other device, and material subsequently derived from information so recorded, transmitted or stored; ii) a label, marking or other form of writing that identifies anything of which it forms part for to which it is attached by any means; iii) a book, map, plan, graph or drawing, and iv) a photograph, film, negative, tape or other device in which one or more visual images are embodied so as to be capable (with or without the aid of some other equipment of being reproduced; and)] That upon availability of 02 sets of invoices and packing lists, it was mandated upon the subordinates of respondent No, 1 to transmit a view message to the appellant for justification of scanning invoices and packing lists pole apart from each other, upon receipt of the justification, instead of construing the human error as an act of misdeclaration, falling under the provision of Section 32 ibid, which is not applicable in the case of the appellant as evident from the deliberation made in paras supra, it would had been just and proper, if the subordinate of respondent No, 1 would had amended the Goods Declaration as per the expression of Section 205 ibid. Wherein a custom officer can allow amendment of any discrepancy upon either pointation of the importer/exporter or observed by the customs officer prior to allow of shipment. This Section express that "except in the cases provided for by Sections 29, 45, 53 and 88, an officer of customs not below the rank of an Assistant Collector of Customs may, in his discretion upon payment of a
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fee of Rs, 100/-authorize any document after it has been presented at the Custom House to be amended". Rule 445, which prohibit amendment after filing of the Goods Declaration is in conflict with section 205 ibid. it is settled proposition of law that Rules are made for the promotion of the Act and to be used as "stepping stones" and not to be applied and operated as "stumbling blocks". They should also be not used to trap people by technicalities of these rules instead of advancing the purpose for which they are framed as held by Supreme Court of Pakistan in its reported judgment PLD 1989…
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