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Petitioner: Messrs YASIR ENTERPRISES, MULTAN and 2 others VS Respondent: DEPUTY/ADDITIONAL
Court Name: Customs, Excise and Sales Tax Appellate Tribunal Judge(s): Ch. Imran Masood, Shahid Mehmood Bhatti Title:Messrs YASIR ENTERPRISES, MULTAN and 2 others vs DEPUTY/ADDITIONAL
JUDGMENT
Reported As: 2012 PTD (Trib.) 1788 Result: Appeal allowed Judgment JUDGMENT SHAHID MAHMOOD BHATTI, MEMBER (JUDICIAL).---This judgment shall dispose of two (02) Customs Appeal No.312/LB of 2011 (filed by the appellant) and No.12/LB/2012 (filed by clearing agent ) filed against an Order-in-Appeals Nos.525 and 526 of 2011 dated 10-11-2011 passed by the learned Collector of Customs (Appeals), Lahore. 2. The, brief facts giving rise to this appeal are that Messrs Yasir Enterprises, Multan imported a consignment declaring goods as residue of petroleum. The said consignment was consisting of 25 containers containing 3400 drums weighing 527 M-Tons imported from Jeddah (KSA) vide Bill of Lading No. 502852 dated 10-3-2009 and Commercial Invoice. No. BCE-YE008-09 dated 10-3-2009. The Goods Declaration No.MDRY-11C-1151 dated 30-3-2009 was filed by Mr. Shahid Mehmood, Work Permit Holder on behalf of Messrs Pioneer Customs Clearing and Forwarding Agent, Multan seeking clearance of the goods. The assessment was claimed under PCT heading 2713.9090 and the value was declared at USD 0.120/kg and duties/taxes amounting to Rs.17,29,865, were deposited with National Bank of Pakistan, Dry Port Trust Branch, Shershah Multan. The GD was filed under 2nd appraisement system. The aforesaid amount was deposited through pay Order No. 0964196 on 30- 3-2009 issued by MCB, Vehari Chowk, Multan from Account No.3000-2 pertaining to Bashir Ahmad son of Muhammad Sardar. As per Cargo summary of MDPT bearing No.1305 dated 30-3-2009, the first batch of part consignment of 14 containers, only 08 containers arrived at MDPT while 06 containers reached on 31-3-2009. A perusal of the Import Folio. No. MDP/Imp/359/09 of the said GD showed that Mr. Abdul Rauf, Examining Officer, examined the said consignment on 30-3-2009 and therein endorsed the examination of all the 14 containers instead of 08 containers and drew
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representative samples for Lab Test, but he failed to point out actual description, apparent difference of colour, viscosity and colour of the said goods for the reasons best known to him and recorded examination report without making any reference to his senior Officers. Rana Ali Hassan, Deputy Superintendent without confirming the facts and evidential circumstances of the examination report, countersigned the same. It is further reported that perusal of the aforesaid record revealed that Rana Nisar Ahmad, AO appraised the said consignment consisting of 25 containers on the basis of 2nd appraisement system under section 80 of the Customs Act, 1969 on 30-3-2009. The said appraisement was duly approved by Mr. Azdar Durrani, Principal Appraiser. However neither the Appraising Officer obtained prior permission from the higher Officers nor any request of the importer or his authorized Clearing Agent was available on file which confirmed that the Appraiser failed to discharge his duty appropriately as required under Para-3 of Chapter-II (Scrutiny and Assessm ent) of the Appraiser Manual. The part consignment of 14 containers comprising of 1904 drums weighing 295.120 M-Tons was out of charged by Mr. Altaf Khan, Superintendent on the same day i.e, 30-3-2009 after payment of duty and taxes. Out of short landed consignment consisting of 11 containers, 03 containers reached on 1-4-2009, which were examined again by the same Examining Officer. As per examination report, samples were drawn for Lab Test. The remaining 08 containers arrived on 2-4-2009 and said short landed consignment was jointly examined by the Customs Staff of Multan Dry Port and Intelligence & Investigation-FBR, Range Office, Multan on 1-4-2009 and 3-4-2009. During the joint examination, it was observed that there were 1531 drums in 11 containers as against the declaration by the importer of 1496 drums (136 drums per container). In this way, the importer has also mis-declared the quantity of the drums as 1496 instead of 1531 and tried to get clear restricted item. Principal Appraiser, Dry Port Multan after joint examination and drawal of the representative samples, again sealed the containers. Meanwhile, a sample drawn from the consignment already cleared sent to Hydrocarbon Development Institute of Pakistan (Petroleum Test Center) Lahore (HDIP) for chemical analysis as HDIP Multan shown its inability to carry out test of POL samples. HDIP Lahore vide test Report No.15344 dated 3-4-2009 reported that test result of the sample is comparable to HSD, but contains water and sediment not suitable for use in diesel engine. On receipt of said report, Principal Appraiser seized the short landed consignment comprising of 11 containers consisting of 1531 drums containing 251084 Kgs of HSD falling under PCT heading 2710.1931 under Section 168 (1) of the Customs Act, 1969. Apart from this, the part consignment of 14 containers consisting of 1904 drums containing 295.120 M-Tons HSD cleared on 30-3-2009 was also seized under section 168 of the Customs Act, 1969 with the charge of misdeclaration of description of goods by serving a notice under section 171 of the Customs Act, 1969 and the importer was directed not to remove, part with or otherwise deal with already cleared consignment except with the prior permission of the authorized Customs Officer of MCC Multan. Principal Appraiser also formulated AIR No.09/2009 dated 3-4-2009 with the request for initiating criminal proceedings against the culprits involved in the said fraudulent import and accordingly an F.I.R. No.1 of 2009 dated 3-4-2009 was registered with Investigation and Prosecution Branch, Customs House, Multan. Samples drawn during joint examination were also sent to HEJ (Research Institute of Chemistry) Karachi for chemical analysis. .HEJ vide Report No. IAC/09/04/2958 dated 25-4-2009 also confirmed that "in the light of test carried out, the given samples seem to be High Speed Diesel Oil". In response to request for re- confirmation of exact description of the aforesaid goods, the co-Principal Investigator of HEJ vide letter dated 16-5-2009 confirmed that "on re-analyze the provided samples for the exact specification; result shows both samples of petroleum liquid fulfillment of High Speed Diesel as per Pakistan Standard Specification of HSD. Thus, in the light of aforesaid test report, the seized consignment along with partly cleared consignment of 14 containers appropriately attracted PCT
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Heading 2710.1931 meant for HSD the import of which was restricted into Pakistan under Section 16 of the Customs Act, 1969 read with Serial-2 of Para-II, Appendix-B of Import Policy Order 2008-2009 liable to confiscation under section 168 of the Customs Act, 1969 as HSD was only importable by approved Oil Marketing Companies. Hence, a show cause notice dated 27-5-2009 was issued On the allegation that Messrs Yasir Enterprises Multan had imported HSD falling under PCT Heading 2710.1930 in the garb of residue petroleum with active connivance of Messrs Pioneer Customs Clearing and Forwarding Agent, Multan, Customs Officers/Officials and others and tried to clear the goods in question by depriving the Government Exchequer from its legitimate revenue amounting to Rs.1,38,83,740 on account of Customs Duties, Sales Tax, Petroleum Development Levy and Additional Sales Tax by violating the provisions of sections 2(s), 16, 18, 32(1) & (2), 32-A (1), 79, 80, 202-A of the Customs Act, 1969, sections 3, 34 and 36 of the Sales Tax Act, 1990 read with section 3(1) of Import and Export (Control) Act, 1950 punishable under clauses 8(1), 14, 14-A, 43 and 89 of Section 156(1) read with sections 157(1) and 178 of the Customs Act, 1969 further read with Section 3(3) of the Import and Export (Control) Act, 1950 and Serial-2 of Part - II, Appendix-B of the Import Policy Order, 2008-2009. 3. The show cause notice was replied by the appellants and as a consequence of adjudication proceedings, the learned adjudicating officer passed an Order-in-Original No.150 of 2010 dated 24- 1-2010 issued on 9-12-2010. Being aggrieved of the said order, the appellants filed an appeal before the learned Collector of Customs (Appeals), MCC, Lahore, but during the pendency of appeal before respondent No.3, the learned Collector of Customs, MCC, Lahore re-opened Order-inOriginal No. 150 of 2010 dated 24-1-2010 issued on 9-12-2010 in terms of section 195 of the Customs Act, 1969 on the grounds that it was passed by respondent No.2 beyond time limit as specified in section 179(3) of the Customs Act, 1969 with the directions to re-adjudicate the case within six weeks vide order dated 27-1-2011. On reopening the aforesaid order, the appeal filed by appellants was also disposed of by respondent No.3 as having become redundant vide Order in-Appeal No.91 of 2011 dated 28-3-2011. The learned adjudicating officer in pursuance of order dated 27-1-2011 passed by the learned Collector of Customs, Lahore re-adjudicated the matter, which culminated into passing of an impugned Order-in-Original No.43 of 2010 dated 4-4-2011 issued on 19-4-2011. Being aggrieved of the said order the appellants filed appeal before the learned Collector of Customs (Appeals), Lahore which was partly accepted so far as it relates to 14 containers, examined, assessed and cleared by the Customs authorities while the order-in-original in respect of rest of the consignment consisting of 11 containers was maintained vide impugned order-inappeal dated 10-11-2011. 4. The appellants have filed the instant appeal before this Tribunal on the following grounds:--- (a) That respondent No. 3 in Para-21 of the impugned order has admitted that re-opening of the earlier order by the Collector of Customs Lahore was bad in law but lost sight that if the original order was illegal how the subsequent order passed by respondent No.2 on the basis thereof would sustain. Para-21 of the impugned order reads as under:- (21) I have examined the case and gone through the voluminous record of the case presented during hearing. The evidence available on record indicates that he appellants did get clearance of part of the goods on documents even before the goods had arrived and some of the examination report were also signed by the customs officials well before the arrival of the goods. This lone fact is an indicator .Of the fraud on the government exchequer. Some of the technicalities pointed out by the learned Advocate for appellant appear to have a lot of legal force. Of particular interest is the so called reopening of the Order-inOriginal No.150 of 2010 dated 9-12-2010 by the Collector MCC, Lahore on the ground that the same has been passed after the expiry of the statutory period. Such re-opening raises more questions than it answers in as much as it is highly questionable as to whether passing of an order after the limitation period is an illegally and improperly capable of
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being corrected through another orders. As this question is sub-judice before higher judicial fora, no findings on the issue can be given." (b) That perusal of aforesaid version of respondent No.3 makes it crystal clear that entire case was based on mala fide. The earlier order re-opened just to over come the issue of limitation but the Collector of Customs Lahore also lost sight that by re-opening, the limitation would not be extended. It was an exercise in futility on his part. Rather he admitted that the earlier order passed by respondent No. 2 was a void order having been passed and issued after expiry of limitation prescribed under section 179(3) of the Customs Act, 1969. (c) That respondent No.3 in Para-22 of the impugned order has stated that there were three laboratory reports in this case. He relied upon the report of HEJ Lab on the ground that it performed requisite tests. It is settled proposition of law that if there are more than one reports and majority of them containing identical opinion, such reports shall be accepted on the basis of majority views and not the single report. Para-22 of the impugned order reads as under:- (22) There were three laboratory reports in this case. The departmental reliance on the report from HEJ laboratory that the impugned goods were HSD Oil is justified because other laboratories did not perform certain tests which the HEJ laboratory did, particularly with reference to the ratio of water etc. In the impugned goods. The report from the Lahore laboratory had lost its relevance in view of the later proven mala fide intentions of the relevant officials." (d) That even otherwise the appropriate and notified Lab for testing of petroleum product was Hydrocarbon Development Institute of Pakistan (Petroleum Testing Center) and not HEJ. It is pointed out that hundreds of reports were obtained by the Multan Dry Port from the said institute. The samples of petroleum products always sent and tested by the said Institute pertaining to all Ports in Pakistan. Thus, the view of respondent No.3 that the report of HEJ Lab was rightly relied upon is patently erroneous as is evident from the perusal of Para-20 of the impugned order which reads as under:- (20) On behalf of the department Mr. Muhammad Ali Rizvi reiterated the stance as reflected in the impugned order and in the parawere comments of the department. He stressed that samples were drawn in the presence of the C/A of the appellants or subsequently in the presence of a representative of the appellants. He stated that the said representative had signed a document testifying his presence at least in one case. He did not controvert the appellant's position that as per normal practice, the department was continuing to accept the HDIP reports even after the instant case." (e) That according to the report of Hydrocarbon Development Institute, the goods were reported to be HSD containing water and sediment not suitable for use in diesel engines, appropriately classifiable under HS Code under PCT heading 2710.9100 freely importable even by commercial importers as was mentioned in F.I.R. Lodged in this case. (1) That respondent No.3 has also fallen in error of law and facts that the goods were sold at par with the prices obtained as a result of disposal of similar goods throughout the country. It is, pointed out that goods in this case were sold at Rs.26 per liter whereas identical goods were sold to government departments at the prices exceeding Rs.50 per liter by the same Collectorate. It is further submitted that at the relevant time, the value of HSD was more than Rs.60 per liter. Had the goods in question been HSD, the same would have not been sold at Rs.26 per liter. Since it was residue of petroleum, thus, the same was sold at Rs.26 per liter. This alone established that the goods in question were residue of petroleum and not HSD. (g) That respondent No.3 also erred in law and facts by holding in Para 24 of the impugned order that even if the original order was barred by time, the recovery of duties and taxes could be affected but he lost sight that it was not the case of evasion of duties and taxes. It was,a case about dispute over the description of the goods and registration of criminal case against the
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appellants and as such the reliance on certain judgments by respondent No.3 is totally irrelevant. Since the basic order was illegal and as such neither any recovery can be effected nor any case can be made against the appellants as held by the Hon'ble Supreme Court of Pakistan in case of Messrs Ibrahim Spinning Mills (1992 SCMR 1898). (h) That respondent No.3 also misread the record and evidence so far as 1 lx containers were concerned. He has mentioned in Para-26 that these containers were rightly seized and confiscated as the same were available. It is pointed that the confiscation of these containers took place on 9- 12-2010 whereas the same were auctioned and disposed of during 2009. Hence the confiscation of these containers was also illegal as the goods which were not available cannot be confiscated. It is a condition precedent for confiscation of the goods that the same must be available and under the control of the Customs department. (i) That respondent No.3 has also wrongly stated that the goods were mis-declared and got cleared fraudulently in violation of the relevant laws. It is submitted that no mis-declaration was made. The GD was filed under 2nd appraisemcnt and the goods were cleared after drawing representative samples subject to Lab test and as such the question of mis-declaration in such a situation does not arise. Respondent No.3 also failed to substantiate as to how the shipping company was at fault which provided containers. Thus there was no justification for imposition of penalty of Rs.25,000 on each container. (j) (j) That respondent No.3 has wrongly mentioned in Para-8 that llx containers were containing HSD. It is an admitted fact that according to two consecutive reports received from Hydrocarbon Development Institute of Pakistan, 1 1 x containers were containing HSD containing water and sediment not usable in diesel engines and as such the same was rightly declared as residue of petroleum and no mis-declaration by the appellants. (k) That respondent No.3 did not utter a single word in the impugned order so far as imposition of huge penalties upon the appellants and their clearing agents. He has neither maintained these penalties nor remitted the same nor mentioned anything in this behalf. This alone makes the impugned order illegal so far as it relates to imposition of penalties upon the appellants and their clearing agents. (1) That appellants as earlier stated filed GD under 2nd appraisement. The goods examined by the Customs authorities. Representative samples were drawn and the clearance was made subject to Lab test and the appropriate procedure was that on receipt of report, the department should have charged duty and other taxes in accordance with the said report. There .Was no justification of imposition of huge penalty upon the appellants and their Customs House Agents which merit remittance keeping in view the facts and circumstances of the case. (m) That under the directions of the Hon'ble Lahore High Court Multan Bench Multan contained in order dated 29-1-2010, the points mentioned in the Constitutional Petition were raised before respondent No.2 and she also reproduced the same in the earlier order-in-original at-page - 18 to 20 thereof but did not utter a single word to address the same in her order. The said points as reproduced in the earlier order-in-original at page-18 to 20 thereof by respondent No.2 were also raised before respondent No.3 but the same remained un-addressed. The points were:-- (a) An inquiry may be ordered to be conducted as to how the seized goods, if the same were diesel oil according to the version of the prosecution, were sold 0 Rs.26 per litter during the period when the rate of HSD was prevailing in the market exceeding Rs.60 per litter. (b) As per order of the learned Special Judge (Customs, Anti-Smuggling and ,Taxation) Lahore dated 18-5-2009, respondents Nos.1 to 3 were allowed to join the auction if allowed under the Customs Act, 1969. Similarly as per judgment dated 315-2009 announced on 8-6-2009 by the Hon'ble Lahore High Court Lahore in Customs Appeal No.1 of 2009 it was directed that "learned court accepted the plea of respondent No. 3, qua the auction of the
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imported consignment and at its request allowed the applicant to participate in the auction. (c) The seized goods were neither confiscated nor vested in the Federal Government and as. Such the same were required to be dealt with under section 201 of the Customs Act, 1969 according to which where any goods, other than confiscated goods, are to be sold under any provision of the Customs Act, 1969, they shall be sold after due notice to the owner but in this case no such notice was ever issued or served personally or through post upon respondents Nos.1 to 3. (d) It is to be inquired as to why respondents Nos. 1 to 3 (now appellants) were not allowed to join the proceedings of the auction as per order of the learned trial court dated 18-5-2009 when it is specifically allowed by law and why the order of the Hon'ble Lahore High Court Lahore were violated. (e) As per Report No. 15344 dated 3-4-2009 received from Hydrocarbon Development Institute of Pakistan (Petroleum Testing Centre) Multan/Lahore, the goods were found to be "test result of the sample is comparable to the HSD but contains water sediment and not suitable for use in diesel engine. (f) The aforesaid report was ignored for the reason best known to the concerned authorities and a fresh Report No. IAC/09/04/ 2958 dated 25-4-2009 was obtained on the back of respondents Nos. 1 to 3 (now appellants) from H.E.J. Research Institute of Chemistry, University of Karachi and according to said report the goods were found as "in the light of the test carried out the given samples seem to be high speed diesel oil. (g) Since the 2nd report also supported the opinion of Hydrocarbon Development Institute of Pakistan, the 2nd lab was forced and compelled by the prosecution and a clarification dated 16-5- 2009 (not report) was obtained according to which it was reported as "we re-analyzed your provided samples for the exact specification, results shows both samples of petroleum liquid fulfill the requirement of high speed diesel as per Pakistan standard specification of HSD. The present case was built-up on the basis of clarification dated 16-5-2009 obtained under duress on the back of respondents Nos. 1 to 3 (now appellants). The samples stated to have been drawn and sent to HEJ Karachi were never obtained from the seized goods. There is nothing on record to establish that these samples were the representative samples of the consignment in question. According to the information of respondents Nos.1 to 3 these samples were never drawn from the consignment Ili question and managed otherwise in order to get result of on choice by the prosecution due to mala fide on their part. Besides above admittedly there are three reports. Two supported respondents Nos. 1 to 3 (now appellants) that the goods were freely importable being classifiable under HS-Code-2710.9100 while according to report of the other lab the goods were not importable, being classifiable under HS-Code-2710.1931. Justice demands that if there is difference in two reports submitted by two different institutions, the samples should have been sent to the third reputed lab for obtaining independent and impartial expert opinion but in this case report of the institution specifically notified by the Federal Government for testing of samples of the petroleum products was ignored being not liked by the prosecution and the case was built-up on the report obtained from non- notified lab and that too obtained under duress as is evident from the perusal of reports dated 25- 4-2009 and 16-5-2009. It is further pointed out that on receipt of report dated 25-4-2009 supporting the opinion of first report, the clarification was sought instead of sending the samples to some third independent and partial reputed lab. This speaks much about conduct of the prosecution in this case. (n) That although respondents Nos. 2 and 3 had reproduced the application dated 8-2-2010 and order dated 29-1-2010 passed by the Lahore High Court Multan Bench Multan in their orders yet the issues were neither addressed nor disposed of which action on their part is patently void and illegal.
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(o) That the aforesaid issues were crucial because if the goods were HSD, the same would have not been sold at Rs.26/litre during the period when the rate of HSD in the market was exceeding Rs.165/litre. This alone goes to the root of the case. (P) That non application of judicial mind on the part of respondent No.3 he has maintained confiscation of 11 x containers without ascertaining as to whether the same were available or otherwise at the time of their confiscation by respondent No.2. It is humbly pointed out that the goods which are neither available nor existed cannot be confiscated out rightly under the law. Respondent No.3 at the best would have raised the demand of short levy, if any, or as the case may be imposed penalty etc. But cannot maintain outright confiscation of 11 x containers which were not existed being auctioned long before. (q) That the entire case was based on clarification sought by the department from HEJ Lab. It is pointed out that the first report from HDIP was in favour of the appellants while the 2nd clarification from HEJ was ambiguous as the said Lab stated the goods "seem HSD". Thus, the proprietary demands that the department should have sent the representative samples to some third Lab instead of seeking…
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