MHER MUHAMMAD ARIF SARGANA, MEMBER (JUDICIAL). - This appeal has been filed against Order-in- Appeal No. 8 of 2001, dated 25 1.2010 through which th^e learned Collector of Customs (Appeals), Multan hadrejected7 the appeal and upheld Order-in-Original No.' 79 of 2009, dated 30.7.2009 passed by the learned Additional Collector (Adjudication), Multan.
2. Briefly stated the facts of the case are that an information was received that huge quantity of foreign origin smuggled petroleum liquid was dumped in a plot adjacent to Messrs Sun Lubricant, Sher Shah Muzaffargarh Road, Multan, which was statedly got cleared by the appellant under the garb of residue of petroleum instead of actual description of used lubricating oil from Multan Dry Port Trust (MDPT), Multan and as such the staff of respondent No. 1 visited the said premises on 4.4 2009 and found 512 drums duly filled with foreign origin lubricating oil lying there. On query, one person introduced himself as Shafique Ahmed son of Muhammad Sharif Proprietor of Messrs Sun Lubricants Multan stated that the said consignment was belonging to the appellant and the same reached and unloaded on 28.3.2009 and.30.3.2009 in his open plot adjacent to Messrs Sun Lubricants, Sher Shah Muzaffargarh Road Multan, which was given to Kh. Muhammad Siddique Proprietor of the appellant. He further stated that Kh. Muhammad Siddique was residing at Holland.
He however, shown his inability to disclose the business matter of the appellant. Consequently, the said consignment was detained and a notice under Section 26 of the Customs Act, 1969 was served upon Kh. Muhammad Siddique, Proprietor of Messrs Global Traders (Appellant) through Sh.
Shafique Ahmed Proprietor of Messrs Sun Lubricants Multan, lt was further reported that an identical consignment of petroleum liquid imported by the appellant declaring as residue of petroleum was jointly examined at MDPT Multan on 3.4.2009 by the staff of the Directorate and the Collectorate. Representative samples were drawn and sent to lab for chemical analysis and according to report dated 14.4.2009 received from Messrs Hydrocarbon Development Institute of Pakistan Lahore, the description was found as under:- "to the extent of test carried out in this laboratory for this specific sample. Analysis result of the sample does not meet with any standard petroleum product. therefore, it can be regarded as residue of petroleum."
3. The Directorate was of the view that the test report of Messrs Hydrocarbon Development Institute of Pakistan Lahore was managed by the party, thus, respondent No. 1 also sent samples to Messrs H.E.I. Research Institute of Chemistry, University of Karachi for chemical analysis and according to its report dated 25.4.20G9 the description was found as under:- "in the light of test carried out the given sample seem to be mixture of used/waste lubricating oil."
4. Lt has further been reported that the above position shows that appellant imported used lubricating oil under the garb of residue of petroleum, thus, the matter was referred to Special Secretary, Ministry of Petroleum and Natural Resources Islamabad, which authorized Messrs H.E.J.
Research Institute of Chemistry University, Karachi to conduct the testing of petroleum product in future wide letter dated 11.5.2009. Lt was further reported that Kh. Muhammad Siddique was permanently residing at Netherlands, but on the other hand he opened his import licence/business in the name of appellant, but basically another person was running the same business of smuggling on his licence, it was further reported that evidence in this regard was collected, which shall be submitted in the Court after confirming the same, it has further been reported that the licence of Kh. Muhammad Siddique was being used by some one else who was running business of smuggling and the said act also indicated that Kh. Muhammad Siddique was whitening his black money under the coverage of this business. Since no one appeared before the Investigating Officer to produce documentary evidence showing legal import or lawful possession of the detained consignment, thus, on 14.5.2009 the recovered goods of Foreign origin i.e. Used lubricating oil quantity 512 drums having average weight of each drum 180 kgs/itrs (App) (with damaged/leaked) 92160 kgs/ltrs (App) having GIF value of Rs. 36,86,400 (App) attracting duty and other taxes amounting to Rs. 15,37,382 (App) was seized in the presence of witnesses. Two representative samples were also drawn and sent to H.E.J. Research Institute of Chemistry University of Karachi for chemical analysis. However, the report was awaited. A notice under Section 171 of the Customs Act, 1969 was also sent to all concerned, at available postal addresses.
On the aforesaid allegations the recovered 512 drums each weighing 180 kgs of used lubricating oil were found mis declared/smuggled one and, thus, seized under Section 168(1) for violation of Sections 16, 32, 32-A and 178 of the Customs Act, 1969 and Section 3(1 )(3) of Imports and Exports (Control) Act, 1950 punishable under Clauses 9, 14, 14A, 77, 89 and 90 of Section 156(1) of the Customs Act, 1969 and Section 3(3) of the Imports and Exports (Control) Act, 1950. On receipt of seizure report dated 14.5.2009, show-cause notice dated 20.5.2009 was issued by respondent No. 2, who after providing hearing to both the parties confiscated the goods consisted of 512 drums of used lubricating oil on the charge of misdeclaration under Section 32 punishable under Clause 14 of Section 156(1) of the Customs Act, 1969 with an option to the appellant to redeem the goods against payment of redemption fine equivalent to 35% of the customs value of the goods in terms of Section 181 of the Customs Act, 1969, in addition to payment of differential amount of duty and taxes and penalty equal to three times of the value of goods vide order dated 30.7.2009.
Adjudicating Officer (respondent No. 2), however, has dropped all other charges except the charge under Section 32 of the Customs Act, 1969. Being aggrieved of the said order, the appellant went in appeal before the learned Collector of Customs (Appeals), Multan (respondent No. 3), which was dismissed vide impugned order, dated 25.1.2010. Hence, this appeal.
5. The main grounds as urged in the memo, of appeal by the appellant are:-
(a) That it has been admitted by the department as well as both the forums below that the goods were imported on payment of duty and taxes as assessed by the customs authorities and as such imposition of huge redemption fine and penalty is not justified at all because, it is the department itself which examined, assessed and out of charged the goods in question.
(b) That according to the report received from Hydrocarbon Development Institute of Pakistan (Petroleum Testing Centre) Lahore vide letter dated 14.4.2009 - in respect of identical consignment imported by the appellant mentioned in para. 4 of the impugned order by, the respondents the analysis result was not meeting with any standard of . Petroleum product and as such it was regarded as residue of petroleum.
(c) That according to the department itself another report obtained by it from H.E.J. Research Institute of Chemistry University of Karachi the stuff was reported "seem to be mixture of used/waste lube oil" which also means that it was a residue of petroleum. If the aforesaid reports are taking into consideration, , the appellant had not made any misdeclaration and the goods were rightly declared as residue of petroleum.
(d) That respondent No. 3 totally failed to address the factual and legal issues raised by the appellant and also not considered the documents enclosed with the memo, of appeal. Thus, the impugned order cannot. Be termed as speaking quasi-judicial order. The memo, of appeal filed before respondent No. 3 and document annexed with it may kindly be read as an integral part of this appeal.
(e) That it is strange that no one from the prosecution appeared before respondent No. 3 nor any one rebutted the grounds taken by the appellant as incorporated at para. 10(i) to (iv) and (a) to (f) of the impugned order, but even then respondent No. 3 without considering the said ground has rejected the appeal of the appellant, which speaks much but the appellant do not want to disclose the actual facts which led respondent No. 3 to reject the appeal.
(f) That the perusal of the operative part of the impugned order revealed that according to respondent No. 3 the appellant imported used lubricating oil quantity 512 drums and got the same cleared by declaring residue of petroleum after payment of less amount of duty and taxes but he had not taken into consideration that the assessment was made under 2nd appraisement subject to drawl of samples and the consignment was finally released, in the light of report received from Hydrocarbon Development Institute of Pakistan (Petroleum Testing Centre) Lahore which regarded the goods imported by the appellant as residue of petroleum and as such there was no fault, whatsoever, on the part of the appellant and his declaration was confirmed by the laboratory which is the only notified institution for testing samples of the petroleum.
(g) That both the forums below have lost sight that the consignment was lawfully imported and there was no restriction or prohibition on the import of the goods and that the assessment was made under 2nd appraisement subject to drawl of representative samples and that the declaration was confirmed by the notified institution for testing of petroleum products and as such there was no justification for imposition of huge redemption fine and penalty. At the best both the forums below would have directed for payment of differential amount of duty/taxes, if any, allegedly short paid in term of Section 32(3) of the Customs Act, 1969. Imposition of penalty equal to 3 times of the value of the goods besides redemption fine equal to 35%, of the customs value, is not only harsh, but totally unjustified, illegal, arbitrary and un-precedented.
(h) That besides above, the raid, search and seizure and all subsequent proceedings were illegal because neither warrant for search under Section 162 was obtained from the Judicial Magistrate nor the statement containing the grounds of belief as required under Section 163 of the Customs Act, 1969 was prepared and delivered to the occupant of the premises and the aforesaid violation of law rendered the search, seizure issuance of show-cause notice adjudication of the matter rejection of appeal and other subsequent acts and actions on the part of the respondents void, ab initio, unjust, without lawful authority and of no legal effect.
6. The respondent filed parawise comments.
They submitted that:-
(i) Admitted to the extent that the detecting agency as well as both the forums were of the view that the goods in question were imported however, the appellant got cleared the same by mis- declaring the classification as residue of petroleum instead of used lubricating oil attracting higher rate of duty and taxes thereon. This position clearly shows that the appellant just to escape the payment of actual duty and taxes mis declared his imported consignment hence the imposition of redemption fine and penalty is in accordance with the provisions of law.
(ii) Denied. The samples of seized consignment were sent to Messrs HEJ, Karachi who reported that the goods under reference were used lubricating oil whereas the appellant got cleared the same by misdeclaring its classification as residue of petroleum, lt is on record that various reports of HDIP in this regard are. Contradictory and are not reliable. The matter was taken up with the Ministry of Petroleum and Natural Resources who vide its letter dated 11.5.2009 authorized Messrs HEJ, Karachi for chemical testing of the disputed samples.
(iii) Denied, in the subject-matter no such report was referred in the instant case while the contents of the said report were reported in another matter and that too Messrs HEJ, Karachi vide its letter dated 16.5.2009 reconfirmed that the goods in question were used lubricating oil/high speed diesel.
Hence the plea of the appellant in this regard is not tenable.
(iv) Denied. Para 12 of the order in appeal passed by the learned respondent No. 3 clearly shows that the factual as well as legal issues were discussed therein. Hence, the plea of the appellant in this regard is absolutely incorrect/baseless.
(v) Denied. The seizing officer of the subject case intimated that he attended all the hearings before the learned respondent No. 3 except the last hearing held on 7.1.2010 and that too was not attended due to occupy in another assignment. The reasons for non-incorporating the attendance of the representative of the Directorate are best known to the respondent No. 3. However, the appeal of the appellant has rightly been rejected on the basis of material evidence available on record.
(vi) Admitted to the extent that in the impugned Order-in-Original it has been mentioned that the appellant imported 512 drums of used lubricating oil under the garb of residue of petroleum by misdeclaring its classification. The referred report of HDIP was manipulated/managed and do not correspond with the seized/Confiscated goods, it is submitted that samples of seized consignment were sent to Messrs HEJ, Karachi who reported that the goods under reference were used lubricating oil whereas the appellant got cleared the same by misdeclaring its classification as residue of petroleum, it is on record that various reports of HDIP in this regard are contradictory and are not reliable. The matter was taken up with the Ministry of Petroleum and Natural Resources who vide its letter dated 11.5.2009 authorized Messrs HEJ, Karachi for chemical testing of the disputed samples. This position shows that the earlier test reports obtained by the appellant were not reliable.
(vii) Denied. As already explained in paras, I and vi above the imposition of penalty by the respondents is in accordance with the provisions of law.
(viii) Denied, it is submitted that the goods in question were seized from an open plot adjacent to the manufacturing premises of Messrs Sub-Lubricants, Sher Shah, Multan hence there was no need for application of Sections 162 and 163 of the Customs Act, 1969. Therefore, the question of seizure of goods in violation of Sections 162 and 163 of the Customs Act, 1969 does not arise.
7. Arguments were heard. The learned counsel for the appellant besides re-iterating the grounds mentioned in the memo, of appeal has contended that the learned Additional Collector Customs Multan while adjudicating and deciding this case has dropped all the charges except the charge under Section 32 of the Customs Act, 1969. According to him the staff of the Directorate has no authority to take any action under Section 32 of the Customs Act, 1969 as no powers under the said provision of law were entrusted to them by the Federal Board of Revenue while delegating powers under certain provisions of the Customs Act, 1969 vide S.R.O. 486 (1)2007, dated 9.6.2007. As regard the powers under Section 168(1) of the Customs Act, 1969, the learned counsel submits that since no powers under charging Section 32 have been delegated and as such the staff of the Directorate' could not make seizure of the goods under the said provision of law. Ln this behalf he relied upon the judgment of this Tribunal dated 24.3.2010 passed in C.A. No. 603/LB of 2009 in which it was held that the powers under Section 32 of the Customs Act, 1969 have not been vested with the Intelligence Department and Section 168(1) only authorizes seizure of the goods which are liable to confiscation and for this some charging clause which is Section 32 of the Act has to be invoked but unfortunately they do not enjoy the powers of this Section. According to learned counsel for the appellant the consignment once examined, assessed and out of charged, would become past and closed transaction and such cases cannot be re- opened subsequently. According to learned counsel the search, seizure and subsequent proceedings were also void and illegal as neither any search warrant was obtained as required under Section 162 of the Customs Act, 1969 nor any statement containing the grounds of belief was prepared and delivered to the occupant of the premises under Section 163 of the Customs Act, 1969 as held by the superior Courts of the country in number of cases. The learned counsel for the appellant further stated that after clearance of the goods and removal of consignment from the customs area, the customs authorities are functus officio to re-open such cases again as held in Messrs Haji Ismael and Company v. Customs Excise Tribunal, Karachi Bench and another (SBLR 2008 Sindh 1699) and Messrs Sunny Traders through Proprietor v. Federation of Pakistan Revenue Division (Through Secretary) and 4 others (2006 PTD 281). According to him even the samples drawn from the goods which are not under the control of the customs would not make basis for alleging mis-declaration. According to learned counsel the assessment was finalized on the basis of lab report and as such the said assessment cannot be questioned on the basis of report obtained in respect of samples drawn from some other consignment. According to him the order passed by the lower forums are otherwise liable to be set aside because at the one hand they dropped all the charges except the charge under Section 32 for recovery of alleged differential amount while at the same time they imposed huge penalty and redemption fine in a case where the entire action on the part of the seizing agency was without jurisdiction and illegal.
8. The learned representative of the department supported the impugned orders. According to him the appellant got the goods in question cleared by misdeclaring description in order to avoid higher rate of duty. According to him no raid was conducted and the goods were firstly, detained and thereafter, seized by visiting the premises of the appellant. However, he was unable to show any provision in the Customs Act, 1969 authorizing the seizing officer to visit any premises without complying with mandatory requirement prescribed under Sections 162 and 163 of the Customs Act, 1969. As regards the powers under Section 32, he staled that since the staff of the Directorate is vested with the powers under Section 168(1) of the Customs Act, 1969 and as such they can seize the goods. He, however, admitted that the goods in question were imported by the appellant and cleared by MDPT Multan. On query, he stated that the seizure was made on the basis of report received from Messrs HEJ, Karachi in respect of samples drawn from some other identical consignment lying at MDPT Multan. He, however, admitted that no lab report of the samples drawn from the consignment in question was received and placed on record of the lower forums.
9. I have heard the learned counsel appearing on behalf of the appellant as well as the representative of the department and perused the record carefully. So far as the argument of the learned counsel for the appellant that the staff of the Directorate had no authority to take any action under Section 32 of the Customs Act, 1969, this Tribunal has already held in case Messrs Kh.
Muhammad Waseem son of Muhammad Zakirya v. Superintendent Intelligence and Investigation F.B.R, and 2 others (C.A. No. 603/LB/2009) that "the staff of the Directorate was not vested with the powers under Section 32 of the Customs Act, 1969". As regards the powers under Section 168(1) of the Customs Act, 1969, the goods not liable to confiscation cannot be seized if no powers under the charging Section have been entrusted, lt was held in the said case "the goods as discussed above, have been found mostly importable except in 3 items i.e. 2(b), 3(b) and 4(a) of the test report and the fact that the powers under Section 32 of the Act have not been vested with the Intelligence Department and Section 168 of the Act only authorizes seizure of the goods, which are liable to confiscation and for this some charging clause, which is Section 32 of the Act is to be invoked but unfortunately they do not enjoy the powers of this Section, therefore, the seizure etc. Is found to be illegal and without jurisdiction. There is also no denial that the goods in question were importable at the relevant time. There is a procedure prescribed under Sections 162 and 163 of the Customs Act, 1969 for conducting raid, carrying out search and making seizure of the goods. There is no enabling provision authorizing any official of the Directorate to visit any private premises and detain or seize goods lying there. He should either obtain search warrant from the Judicial Magistrate under Section 162 of the Customs Act, 1969 and if there was any urgency as well as the danger of removal of goods if - the warrant under Section 162 was obtained, he should prepare a statement containing grounds of his belief and delivered its copy to the occupant of the place to be searched. Admitted position in this case is that neither any search warrant was obtained under Section 162 nor the mandatory requirement laid down under Section 163 of the Customs Act, 1969 was fulfilled and as such the raid/visit, search, seizure of the goods and all subsequent proceedings are illegal and of no legal effect. Since the initial action of conducting raid, carrying out search and seizure of 2700 drums of used oil (black oil) were illegal, thus, entire subsequent action including issuance of seizure report, show-cause notice, subsequent proceedings would be void and illegal as held in "Collector of Customs (Preventive) and 2 others v. Muhammad Mahfooz (PLD 1991 SC 630), Shaukat Hussain v. Zulfiqar Ahmed and 2 others (PLD 1971 Lahore 13), Shuja-ud- Din and 15 others v. Assistant Collector of Customs, Karachi and 3 others (1984 CLC 2615), Collector of Customs v. Muhammad Akram (PLD 1999 Pesh . 33), Haji Muhammad Jalal v. Ejaz Ahmed Bajwa, Assistant Director FIA State Bank Circle Lahore and 3 others (2000 M LD 837), Collector of Sales Tax and others v. Messrs Food Consultant (Pvt.) Ltd. And another (2007 PTD (SC) 2356), Chairman Central Board of Revenue and others v. Messrs Had Cotton Mills Ltd., Burewala (2007 SCM R 1039).
The contention of the learned counsel that if the goods are not seized in lawful manner, the burden of proof would not shift to the owner of such goods also carries weight as held in Aziz Ullah v. The State (PLD 1981 Karachi 250). The argument of the learned counsel that once the consignment is examined, assessed, out of charged, removed from the customs area and no more under the control of the customs it becomes past and closed transaction and the department would become functus officio is also forceful and the judgment cited as SBLR 2008 Sindh 1699 is applicable with full force. The learned departmental representative when confronted with the above position that how the charge of misdeclaration under Section 32 was established against the appellant on the basis of lab report of samples drawn from some other consignment lying at the port, he was unable to meet the same. The learned DR also admitted that the consignment was firstly assessed under 2nd appraisement and released on receipt of report from Messrs Hydrocarbon Development Institute of Pakistan, Lahore on payment of leviable duty and tax.
10. The up-shot of the above discussion is that the raid/visit, search, seizure and subsequent proceedings were illegal being violative of the mandatory provisions contained in Sections 162 and 163 of the Customs Act, 1969 and that the seizing officer was not vested with the power of Section 32 of the Customs Act, 1969 and that there is no evidence to establish that the consignment was got cleared by misdeclaring the description by the appellant. Resultantly, the appeal is accepted, the impugned Order-in-Original as well as order in appeal are set aside.