MUHAMMAD ARIF MOTON, MEMBER (JUDICIAL-II).--This order will dispose of Customs Appeal No,K- 914 of 2010 filed by the appellant against the Order-in-Appeal No,4107 of 2010 dated 21-7-2010, passed by the Collector of Customs, (Appeals), Karachi.
2. Brief facts of the case are that the appellant imported a consignment of re-rollable Thick Plate over size comprising of two items weighing 1420 MT vide GD IGM No,6955 dated 25.02-2010, Index No,108 both USS 352/MT at the total value of US No,499966.016 classifiable under PCT headings 7204.4910 attracting 0% customs duty and PCT heading 7207.2090 attracting 5% customs duty respectively. The importers filed a GD for Home Consumption bearing Machine No,HC68402 dated 15-3-2010 through their authorized clearing agent M/s. V.N. Lakhani, Chal No, 441 for the clearance thereof. And whereas the GD processed under 1st Appraisement System for examination, of the goods. Upon examination the Shed Staff vide Examination report endorsed on reverse of the, GD reported that the imported goods were found to be Hot Rolled Plates of secondary quality of various sizes and thickness assessable US$ 505/MT, total value comes to US$ 717281 (Rs,61Q54210)
Classifiable under PCT heading 7211.1410 attracting 20% customs duty contrary to Re-Rollable Thick plate oversize classifiable under PCT heading 7204-4910 and 7207-2090 attracting 0% and 5% customs duty respectively. The importers in connivance of their clearing agent by manipulating the description and classification of the goods attempted to defraud the national exchequer and found guilty of an offence of miss-declaration in terms of sections 32(1) and (2) of the Customs Act,, 1969 punishable under Clause 14 of section 156(1) ibid. Had this offence gone undetected the government would have lost its legitimate revenue to the tune of Rs,1,98,50,525
3. Adjudication proceedings were initiated by the Additional Collector who after hearing the parties passed the Order-in-Original No,97 of 2010 dated 25-5-2010. The relevant- extract is as follows:-- "I have gone the record of the case and given due consideration to the arguments of the representative of the importers as well as of the department. Briefly, the following main points arose during the course of hearing, viz.
(i) Determination of appropriate classification of the portion of the imported goods which was cut.
(ii) Determination of classification of the portion of the imported goods which was not cut.
(iii) Whether there was an element of mens rea on part of the importers.
Firstly, in the light of Steel Committee's findings, it has been established that the Cut portion of the consignment i,e, 763.25 MT has been rendered as 'Scrap and thus, is classifiable under PCT heading 7204.4990, attracting customs duty @ 0%, sales tax @ 16% and income Tax 3%. Secondly, the rest of the consignment is hot rolled plates of secondary quality, having width of various thicknesses and sizes as has been mentioned in the examination report at the back of the GD. The same is ordered to be assessed, under PCT heading 7211,1410 attracting customs duty 20%, sales tax @ 18.50%, income Tax 3% and FED 6 1%. Lastly, the facts of the case like the request of the importer, wherein he had sought permission for preparation of inventory, prior to filing of GD for want of complete information regarding description, weight, quantity and sizes adequately portrays that the importer himself did not have, in his possession, the complete information relating to his consignment and he sought permission, in this regard, from the customs authorities prior to filing of the GD. Hence, in the absence of mens rea, the charge of miss-declaration under section 32 of the Customs Act, 1969 is not established."
4. The order was challenged before the Collector (Appeals) who rejected the appeal and passed order-in-appeal dated 21-7-2010. Hence the instant appeal on the following grounds incorporated in the memo. Of appeal:--
(i) That the goods of the appellant were assessed under the First Appraisement System, and the charge of miss-declaration can't be alleged when the assessment of goods was made under the first appraisement system as held by the Hon'ble High Court of Sindh reported in 2003 PTD 2090. It was held that "In the case of option given for first appraisement for the determination of correct description of PCT heading, quantity of goods, no miss-declaration shall be charged for miss- declaration under section 32 of the Customs Act, 1969"
(ii) That the Hon'ble High Court of Sindh has re-enforced the similar position of law in the case of Messrs Muhammad Razi v. Collector Customs(Appraisement) reported as 2003 PTD 2821 and Messrs Shaheen Enterprises v. Additional Collector, 2005 PTD (Trib.) 1321 and 2005 PTD (Trib.) 1826.
(iii) That the impugned order-in-original is void of all legality as it is based on show cause notice which is issued under section 32(2) of the Customs Act, 1969, which speaks about the "collusion" between the importer and Customs officer but is this case there is no collusion was found between the importer and the Customs Officer. Therefore the charged for violation of section 32(2) is not established. The Hon'ble High Court of Sindh at Karachi. Has ruled on similar position of law reported as 1984 MLD 562. The relevant extract as "The respondents have not alleged any collusion on the part of petitioners and the above customs official in order to press into service subsection
(2) of section 32. It may again be observed that the above endorsement is mentioned in the column which was intended to be filled in by the Customs Department. In our view, it was a case of misconstruction or inadvertence and, therefore, the case is covered by subsection (3) of section 32."
(iv) That the similar position of law has been reinforced by the Hon'ble Lahore High Court vide its Judgment reported as PLD 1989 Lahore 47. It was categorically held that.
"Allegation that short levy was the result of any collusion between the assessed and Customs Staff, must be clearly leveled, with proper particulars, if that was the ground on which the short levy was to be claimed--Where no such allegation was made in the show-cause notice and such a matter, was not taken into consideration during the adjudication of case" issue of collusion, would not arise in the case.
(v) That the documents provided by the respondent were true to the material facts of the case. No offence under section 32 was ever committed by the appellant. The intention of the appellant is not willful or not a deliberate act and the mens rea about willful miss-declaration is not available.
Hence, the impugned order is unlawful as held by the Hon'ble Superior Courts in the Judgments reported as Collector of Customs (Exports and another v. Messrs R.A. Hosiery Works 2007 SCMR 1881 Kamran Industries v. The Collector of Customs (Exports), Karachi and 4 others PLD 1996 Kar. 68, Messrs Al-Hamd Edible Oil Limited and others v. Collector of Customs and others 2003 PTD 552, State v. Hard castle PLD 1967 SC 101, Sikandar and Brothers v. Government of Pakistan PLD 1986 Kar.
3783 and Finest Corporation v. Collector of Customs PLD 1990 Kar. 338 rel.
(vi) That without prejudice to our above stated stance it is humbly submitted that even otherwise the Show-Cause Notice is on merits and needs to be vacated. In this regard it was respectfully submitted that the impugned goods are scrap aril were inworted as scrap. The \definition of re- rollable scrap is given in the explanatory Notes as follows.
(vii) That the goods which cannot be used for the original purpose are generally treated and considered scrap. The impugned scrap has specifications according to IPO 2009-2010, but has certain oversized lengths.
(viii)That the respondent No,2 has changed PCT without any legal ground by considering the impugned scrap as goods of PCT 7211.1410 and assessed the same accordingly @ 20% as against findings on the basis of sections 79(2) and 27(A) which revealed it as thick plate end cuts/off cuts scrap for re-rolling purpose.
(ix) That the Assistant Collector MCCA-AICT on 19-4-2010 issued a letter for expert opinion to confirm description of the appellant's consignment from Mr. Javed Razi, Quality Control Department, Messrs Pakistan Steel Mills, Port Muhammad Bin Qasim, Karachi, Mr. Zahid Husain (Dy.
General Manger); Messrs Karachi Shipyard and Engineering Works Ltd., West Wharf Road, Karachi.
The General Manager, Peoples Steel Mills, Manghopir Road, Karachi and The President, Messrs Pakistan Iron and Steel Merchants Association,
1. Rafiq Manzil, Off. Nishter Road, Near C.M.A. School, Karachi.
(x) That the experts have given the following opinion on the physical traits, description and possible use as follows:-- Karachi Shipyard and Engineering WorkdsPakistan Steel Mills Pakistan Iron and Steel Merchant's Association From the conclusion at para 3 above derived from observations at para 2, it is my considered opinion that the captioned consignment may be considered as off- cust I scrap of thick steel plates for re-rolling purposes under the PCT heading 7207- 2090 and 7204-4910".Considering the facts as mentioned in Paras. 2, 3 and 4/N, based on physical inspection, it is concluded that the subject that the subject consignment vide IGM No. 6955, dated 25-2-2010 Index No.108, of weighting 1420 tons is found to be thick plate end cut scrap, which can be use for re- rolling purpose."Keeping in view of the above facts the material imported as Re-Rollable (Scrap) not as finish products of the Steel Plate Bars. Furthermore material does not fall under the category of the finish product, and we confirm that the said material will be used/consumed as for Re- rollable."
(xi) That the above "expert reports" also match with the detailed (examination) report of EO, AO and PA all dated 5-4-2010 which read as follows:-- "Hot Rolled plate of secondary Quality of various thicknesses of sizes like 220 cm x 39 cm x 2.5 cm, 170'm x 38 cm.x 1.7 cm, 373 cm x 38 cm x 3.3 cm etc. I/O not shown, PCT 7211.1410. Check weight 100% at the time of delivery. Confirmed that the goods are of Secondary Quality Group may check all aspects including value and classification in the light of examination report and import documents". That the "expert opinion" and the examination reports clearly depict end cuts of "various thickness", of hot rolled plates, not capable of any other use except for re-rolling was imported vide impugned consignment
(xii) That in spite of clear, unanimous expert report which was synchronous with examination report the learned respondent No,2 failed to reach the conclusion that impugned goods were re-melt able scrap, and he ordered to charge the uncut portion of consignment @ 20% Customs Duty under PCT 7211.1410
(xiii) That the respondents Nos.1 and 2 have failed to take the notice of the provisions of section 27A of Customs Act, 1969, and the intention of the legislators. The language of section 27-A of the Act clearly provides that an importer may apply for cutting/mutilating of the goods imported by him prior to filing of the GD as follows:--
(xiv) That the above provisions clearly depict that any imported goods which can be put to more than one use can be mutilated/denatured/scrapped under the above-quoted provision of law and the purpose of such mutilation/denaturing/ scrapping is to render the goods unfit for more than one use and it is necessary to the importer to apply this benefit before filling the GD. Reliance in this regard may kindly be placed upon the following Judgment. Of the Hon'ble High Court of Sindh at Karachi reported as 2010 PTD 826.
(xv) That in this case, the appellant has made the request under section 27A of the Customs Act, 1969 before filling GD under section 79(1). This fact cane be confirmed from the letter dated 4-2- 2010.
(xvi) That the Indian Customs Act, 1962, has identical provisions vide section 24 ibid which read as follows:-- "The Central Government may make rules for permitting at the request of the owner the denaturing or mutilation of imported goods which are ordinarily used for more than one purpose so as to render them unfit for one or more of such purposes; and where any goods are so denatured or mutilated they shall be chargeable to duty at such rate as would be applicable if the goods had been imported in the denatured or mutilated form." (section 24 (Indian Customs Act, 1962)
(xvii) That the Indian Courts and Tribunals have given very clear Judgments interpreting the provisions of section 24 of Indian Customs Act, 1962. In case of (Antarctic Industries v. Collector of Customs) 1999 (108) ELT 496 Tri Del.
(xviii) That in another judgment in case [Commissioner of Customs v. Garg Steel] 2006 (113 ECC 165 2006 ECR 165 Tri Chennai.
(xix) That there is no doubt that denaturing/mutilating is meant to render the imported goods unfit for more than one use and the limited and myopic view that only denaturing/mutilating of scrap is admissible under the law is not in conformity with the provisions of law reproduced above.
Moreover, it is now a settled law that if any provisions of law are considered susceptible to two interpretations, the interpretation that favors the citizens would need to be adopted and in the context of the instant case it means that appellant was entitled to apply for cutting/mutilating of any imported goods under section 27-A of the Act.
(xx) That the goods imported in this case are end cuts of hot rolled steel plates of varying thickness and length which are quite close to the definition of re-rollable scrap provided in Serial No,7(3) of Appendix-A of IPO, 2009-2010 inasmuch as width and thickness of the same are within the prescribed limits and only the lengths are longer than prescribed. Therefore, if the lengths of the impugned sheets are cut to bring them within the permissible limit the same would squarely be covered under the definition of re-rollable scrap provided in the IPO, 2009-2010. Therefore under the circumstances, the appellant's application, filed strictly in accordance with the provisions of section 27-A read with section 179(1) of the Act, carried a lot of merit and the competent authority allowed cutting of the impugned plates so as to bring the same in conformity with the definition of re-rollable scrap as contained in Serial No, 7(3) of Appendix-A of the IPO read with Federal Board of Revenue's letter C.No,2 (4) T.II/2000 dated 24-5-2007 the Hon'ble Supreme Court of Pakistan findings where it was held, that "A thing required by law, is to be done in the manner prescribed by the law, must be done in the same manner as prescribed by the law". 2001 SCMR 838 at page 842 note B.
(xxi)That the appellant had acted perfectly in accordance with the provisions of law by applying for denaturing/mutilating of the sheets imported in this case, Moreover the appellant is an industrial consumer and that the impugned goods, after cutting of the lengths thereof, would be consumed by him as re-rollable scrap meaning thereby that the appellant was well within his legal right to import the goods in their present shape and apply denaturing/mutilating of the same under section 27-A of the Act. The respondent No,2 view that further cutting/mutilating of the impugned goods may not be done and rest of the consignment may be assessed under PCT7211.1410 does not find any support from the provisions of law: Government can charge taxes on the goods only in the condition/shape in which the same are released/cleared and if the law provides for denaturing/ mutilating of the goods, the applicable customs value and rate of duty/taxes would be the ones which would have been applicable to denatured/mutilated goods. This has been held by the Indian Tribunals and also by Collector Appeals in Case No,3788 of 2010 dated 10-5-2010.
(xxii) That the section 27-A of the Act does not specify the officer of customs who is empowered to allow or refuse permission to cut/ mutilate imported goods. However, under Public Notice No, 19 of 2006-111(A) dated 19-8-2006, as amended through Public Notice No, 2 of 2007-III (A) dated 6-2- 2007, issued by the Collector of Customs (Appraisement), Custom House, Karachi.
Deputy/Assistant Collector concerned has been authorized to exercise such powers. Neither under section 27-A of the Act nor under the above-mentioned public notices the Deputy/Assistant Collector or Additional Collector has been empowered to withdraw the permission of denaturing/mutilating of goods once he has granted such permission. Therefore if any such permission is required to be withdrawn the same can be done by the Collector of Customs concerned within the meaning of section 195 of the Act.
(xxiii) That in the wake of above legal provisions of section 195 of Customs Act, 1969, the order passed by the Deputy Collector by way of allowing cutting/mutilating of the goods could have been reversed only by the Collector and that too by providing an opportunity of defense to the appellant because in the cut/mutilated shape the goods would have been treated as rerollable scrap of PCT heading 7204.4910 chargeable to customs duty 0% whereas the reversal of Deputy Collector's order meant that customs duty 20% under PCT 7211.1410 would be charged on the impugned goods.
(xxiv)That the reversal of order was neither done by the Collector nor provisions of section 195 were invoked. Thus, the order of withdrawing the permission of cutting/mutilating the impugned goods was unlawful and void ab initio. Therefore, the original permission of cutting/mutilating the impugned goods still holds the field. Moreover, the aforesaid withdrawal order was improper as well, besides being unlawful: a reasonable part of the goods had already been cut/mutilated and the cutting work was well in progress when the same was stopped. In a similar case the Collector Appeal vide Case No,3788 of 2010 dated 10-5-2010.
(xxv) That the respondent failed to consider the dictums of Hon'ble High Court as held in 2008 PTD 1482 and the Customs Tribunal vide Customs Appeals Nos. K-2217/99, K-32/2010, K-435/2008 . To K-455/2008 K-274 to.277 of 2009.
5. The respondent Deputy Collector (Law) MCC, (Appraisement) filed parawise comments which are as under:--
(i) That the respondent No's vide Order-in-Original held that charge of `miss-declarationis not established, therefore, submissions made under this Para are deemed irrelevant, however, element of incorporating inappropriate PCT Heading even after availing the facility as available under section 79(1) of the Customs Act, 1969 require no further corroboration to establish the intent of the appellant to deprive the public exchequer chargeable in shape of customs duty and allied taxes which could only be possible after application of correct PCT hearing which has been done by the assessing officer, therefore, this aspect of the case not overruled by the learned respondent No's and that it reflect application of judicial wisdom in its true perspective.
(ii) That as a first measure towards initiation of adjudication proceedings show-cause notice is always served upon the concerned persons and after seeking their reply thereof, the adjudicating authority passes and order-in-original whereby the authority might have accepted the contentions of the respondent or part thereof or may be in disagreement with the submissions made in reply to show cause notice. In the instant case the learned respondent No's being the adjudicating authority meted out the end of natural justice and declared that charge of miss- declaration is not established. However, the, learned respondent No's did not overruled the attempted evasion of duty and taxes under the umbrella of PCT Classification.
(iii) That for the reasons detailed herein above, the order-in-original is maintainable in the eyes of law a same is based on ground realities as the charge of 'miss-declarationis held un-established.
However, deliberate attempt of evading the umbrella and manipulating the PCT Classification was not ruled out by both the above named learned respondents. Hence provisions of section 32(2) are very mush applicable in this case.
(iv) That the circumstances detailed herein above, deliberate attempt of depriving the public exchequer from its legitimate revenue was committed by the appellant with the collusion of their clearing agent by way of mentioning correct PCT even after availing the remedy available under section 79(1) of the Customs Act, 1969, which act of them require no further corroboration or authentication in the backdrop of facts and circumstances of the case.
(v) That the aspect of miss-declarationhas already been eliminated by the learned respondent .No's through the order-in-original referred herein above, however, the learned respondent kept established the deliberite attempt of evading duty and taxes by way of incorporating PCT Heading by the appellant. However, the Assessing Office applied his professional wisdom and applied correct PCT Heading which factor most provably has been considered by the learned respondent No's to be the difference of opinion but application of correct PCT Heading is the responsibility of Assessing Officer which he did accordingly within the confinement of the provisions of Customs Act, 1969. In the circumstances detailed hereinabove, the cited quotations have no relevancy in the instant case.
(vi) That the goods found during the course of physical examination were not falling under the definition of 'scrapas such same was denatured on the behest of the appellant without seeking any prior permission to do so. If the imported goods were falling within the meaning of `scrap;as to why it was felt necessary to denature the same? Answer to this question is available under Para 1 of the Memo. Of Appeal. The definition of re-rollable scrap relied upon by the appellant is not deemed appropriate in the instant matter.
(vii) That under the submissions made in this para the appellant himself admitted that 'impugned scrap has specifications according to IPO 2009-2010, but has certain oversized lengths'. The contention of the appellant as quoted herein above speaks itself that the appellant willfully imported the goods of oversized lengths with the intention to get it cleared under the garb of 'scrapbut physical examination of the goods thwarted their preconceived plan and the staff of the learned respondent No's acted within the parameters of the provisions of Customs Act, 1969 and applied their professional wisdom for the determination of true nature of imported goods and application of correct and appropriate PCT Heading to safeguard the revenue of national exchequer. If the goods imported by the appellant were in accordance with the requirements as laid down under the Import Policy Order 2009-2010 as to why the appellant was anxious to get denatured the imported goods, this question has already been answered herein above.
(viii) That the Assessing Officer is always responsible to check and apply correct and most appropriate PCT Heading for the purpose of determining the accurate customs duty and taxes chargeable in consideration of actual description and specification of imported goods as reported by the examining officer through the examination report endorsed on the reverse of Goods Declaration. The learned respondent No's has nothing to do with the application of PCT Heading but his role to nullify the charge of `miss-declarationagainst the appellant and on the other end to keep strict watch on the interest of the State is appreciable.
(x) That the contents of this para are not to be commented being based on factual position.
(x) That portions of expert's reports as available under this para at nowhere inscribe the length of imported goods and also does not reflect about its importability under the provisions of PO-2009- 1010 as per contention of the appellant based on expert's repots, was correct, then as to why he was predetermined to get the things denatured, this simple aspect of the case established deliberate intention of depriving the public exchequer from its legitimate revenue to get the clearance of goods imported in violation of aforementioned IPO in the garb of scrap which otherwise not to be used as scrap as denatured under the provisions of the Customs Act, 1969.
(xi) That the contention of the appellant as expressed under this para has no relevancy between the examination report and the expert's reports. Here, question again arises that if the goods were in accordance with the provisions of IPO as to why it was felt impetrative by the appellant to get the same denatured which process was started without seeking any prior approval to do so.
(xii) That the contention of the appellant appearing in this para is replica of facts given in the preceding paras of the memo of appeal which have comprehensively been commented herein above. Xiii) That the learned respondent No's has very rightly any justifiably ordered to charge the uncut portion of consignment 20% in terms of customs duty and allied taxes, whereas, in fact this rate of duty should have been applied under the entire consignment of the reasons that the a process of denaturing was started without any approval of the competent authority.
(xiv) That perusal of record available on file does not reflect that the appellant was granted any permission of denaturing the imported goods, therefore, provision of section 27A are not attracted in this case.
(xv) That the submissions made under the para is very much clear about the intention of the appellant in relation to have imported goods in gross violation of IPO 2009-2010. If the goods were in accordance with the mandatory provisions of afore mentioned IPO, there were no reasons to apply for denaturing the goods in terms of section 27A of the Customs Act, 1969 needless to emphasis that such benefit is extended to the importer but same is subject to prior approval by the competent authority which has not been done in the instant matter.
(xvi)That perusal of referred letter confirms that the competent authority accepted the request of the appellant with regard examination of imported goods by the appellant but it does not reflect the permission of denaturing. In the circumstances, the process of denaturing of the consignments was illegal and is to be discarded without any consideration.
(xvii) That the contents of this para are based on facts but same are only for reference purpose and has not relevancy in the instant matter as no any permission was granted by the competent authority in exercise of powers vested under section 27A of the Customs Act, 1969.
(xviii) That in the light of justification given herein above, the citations made under this para by the appellant are irrelevant in this matter.
(xix) That the imported goods which remained beyond the process of denaturing have very rightly been classified under appropriate PCT Heading, Whereas, the referred judgment in this para relates to the findings 'pertaining to the charge, of miss-declarationwhich charge has already been absolved in this case by the learned respondent No's while the act of Assessing Officer towards application of correct PCT. Heading and determination of customs duty and allied taxes has been upheld by both-the learned respondents. In the circumstances, the judgment relied upon in this para, is not applicable in this case.
(xx) That since the issue raised in this para has more comprehensively been commented herein above at preceding paragraphs, therefore, submission made under this para require are not commented upon.
(xxi)That in the instant case all the concerned Examination/Assessing Officers and the learned respondents have acted well within the manner as prescribed by the law and that no one has violated and provisions of the Customs Act, 1969, which could be attributed in violation of prescribed manners as defined under the relevant law.
(xxii) That the submissions made under the para are replica of facts and circumstances in relation to importation of goods imported by the appellant and its denaturing/mutilation which aspects have comprehensively been dilated upon in the foregoing paragraphs, therefore, require no further comments.
(xxiii) That for the accomplishment of entire process of customs formalities inclusive allowing various requests of the concerns, appropriate competent authorities always grant permission to undertake such works or to entertain such requests made by the applicant importers. In the instant matter the Deputy Collector of Customs (Examination) is impliedly considered as appropriate authority to grant permission of denaturing/mutilating the imported goods. In absence of such implied powers the entire mechanism to run the affairs of allowing such requests, applying correct classifications, determining applicable rate of customs duty would ultimately collapse the process of revenue generation which would eventually cause numerous losses to the national exchequer. If the contention of the appellant is entertained, the importers would be- are liberty to do the things at their own accord without seeking any permission from the supervisory officers which includes Assistant/Deputy Collectors of Customs posted at various places of examination etc.
(xxiv) That contention of the appellant as appearing in this para is contradictory to his submission made at para 23 of the memo. Of appeal under the heading 'Grounds'. For the sake of argument, if the provisions of section 27A does not specify the officer of customs empowered to allow denaturing/mutilation of imported goods as to how orders passed by the Deputy Collector could have been referred in terms of section 195 of the Customs Act, 1969 apart from the above discussed position, it is to submit that orders for charging customs duty @ 20% as per appropriate classification are maintainable under the law.
(xxv) That the contents of the appellant as appearing udder this para are self-contradictory to the facts and circumstances detailed under paras 23 and 24 of the meme of appeal. As stated herein above no permission for denaturing/mutilating the imported goods was ever granted, therefore, question of its withdrawal does not arise.
(xxvi) That every government functionary is under legal obligation to consider the dictums of honourable Superior Courts if same is appropriately relied upon and has relevancy with the matter under reference. In the instant matter, the appellant failed to place reliance upon relevant judgments which could be deemed most appropriate in this case.
(xxvii) No comments.
(xxviii) Lastly he prayed to dismiss the appeal.
6. The Departmental Representative opposed the contention raised by the learned counsel for the Appellants. The learned Assistant Collector of Customs assisted by the law officer could not controvert the appellantsstance that a request was made by the appellant in terms of Section 79(1) of the Customs act, 1969 of the Customs. Act 1969 for 1st Appraisement and denaturing/mutilation under section 27A ibid before filing of Goods Declaration and Deputy Collector of Customs duly accepted the appellants request. They could not also rebut the (3) reports of experts record which in unequivocal terms describe the goods as scrap. He supported the impugned orders on both factual and legal grounds and comments of respondent and prayed that the instant Appeal may be dismissed.
7. Case, was finally heard on 23-2-2011 and 11-4-2011. On the last date of hearing when the judgment was finally reserved the appellant produced the following Chart which briefly indicates the amount of taxes paid by the appellant against quantity of 763.250 Metric Tons of already mutilated goods, taxes demanded by the respondent on the balance quantity of 657.100 Metric Tons treated the goods as secondary quality and taxes which are payable on this aforesaid balance quantity of 657.100 Metric Tons as per appellant's stance:-- "763.205 MT X USD.352 = 26864.00 I.V. Rs. 23459891.00 0% 16% 3%Rs.00 Rs.3753583.00 Rs.816404.00 Rs.4569987.00Paid Against cutted goods 657.100 MT X USD.352 = 231299.20 I.V. Rs.20197176.00 20% 17% 3%Rs.4039435.00 Rs.4120224.00 Rs.850705.00 Rs.9212336.00Taxes on Secondary Quality as per order-in- original 657.100 MT X USD.352 = 231299.20 I.V. Rs.20197176.00 0% 17% 3%Rs.
Rs.3433520.00 Rs.708921.00 Rs.4142441.00Taxes Comes Payable on Balance 657.100
8. Rival submissions heard. Case record examined. Following observations are made by this forum after a scrutiny of the documents on record:--
(i) The appellants submitted their required dated 4-2-2010 to the Deputy Collector of Customs (Shed), Karachi for allowing inspection under section 79(a) of the Customs Act, 1969 and cutting/de-shaping of their goods under section 27A ibid. Of their consignment before filing goods declaration. The request for examination of the appellant was allowed under customs supervision by the Deputy Collector of Customs vide his autograph order dated 4-3-2010 on the request of the appellant. The 'customs staff confirmed on the same request/application. Vide their remarks that "as per computer record no GD has been filed as yet"
(ii) The appellant filed GD with the Customs. Authorities under Machine No, HC-68402 dated 15-3- 2010. The description of the goods in the relevant column on the GD was given as. Re-rollable Thick Plate over size comprising of two items. The examination report on the reverse of the Goods Declaration shows the following description of the goods physically examined by the Customs Staff.
Hot Rolled Plate of Secondary Quality of Various/Thickness and sizes like 220 cm x 390 m x 2.5 cm 40: N/shown 170 cm x 38 cm x 1.7 cm PCT 7211-1410 373 cm x 38 cm x 3.3 cm etc., check wt. 100% at the time of delivery confirmed that the goods are of secondary Quality, Group may check all aspects including value classification in the light of examination report and import documents
(iii) The goods are not prohibited/restricted in terms of section 16 of the Customs Act, 1969.
(iv) The charge of miss-declaration cannot be legally leveled against the appellant since the appellant filed the Goods Declaration with the customs authorities in terms of section 79(I) of the Customs Act, 1969. The relevant section 79(I)(b) is reproduced below for ease of reference:-- "assessing and paying his liability of duty, taxes and other charges thereon, in case of registered user of the Customs computerized System: Provided that if, before a goods declaration 'the owner makes a request to an office of Customsnot below the rank of an Assistant Collector that of he is unable, for want of full information, to make a correct and complete declaration of the goods, then such officer, subject to such conditions as he may deem fit, may permit the owner to examine the goods and thereafter make entry of such goods by tiling a goods declaration after having assessed and paid his liabilities of duties, taxes and other charges.
Provided further that no goods declaration shall be filed prior to ten days of the expected time of arrival of the vessel."
(v) Though all the requirements envisaged under the aforesaid statue were duly fulfilled in all respects, the appellant in this case has not been allowed the benefit of the provisions thereunder as well as the ratio decidendi issued in this respect by a number of judgments of the superior judicial fora. In the first place, the appellant through his declaration on the face of Goods Declaration for 100% examination in terms of section 79(1) of the Customs Act, 1969 did not make a categorical declaration that the goods imported-by him were re-rollable scrap. He made this statement regarding the description of the goods subject to their 100% examination by the relevant customs authorities. Even the customs authorities cannot allege the plea of selectivity criteria often taken up by them for clearance under PaCCS as such no charge of miss-declaration can be alleged when the assessm ent of goods was made under the -First Appraisement System as held by Honorable High Court of Sindh Karachi in the case of Messrs Akhtar Hussain v. Collector Appeals Karachi reported as 2003 PTD 2090 wherein it was held that:- "In , the case of option given for First appraisement for the determination of correct description of PCT heading, quantity of goods, no miss-declaration shall be charged for miss-declaration under section 32 of the Customs Act, 1969".
The same position has been taken followed in a number of subsequent judgments reported as 2003 PTD 2821, 2005 PTD (Trib.) 1826.
(vi) In Customs Appeals Nos.144 of 2006, 728, 729/2007 and 104 o4 2008, the Customs Appellate Tribunal has elaborated this point in a very suitable words; "Rival Parties have been heard; case record has been examined. From the perusal of show cause notice it is evidence that the declaration of the importer was never accepted and goods were Examined under First Appraisement. In these circumstances as alleging of miss-declaration under section 32 of the Customs Act, 1969 is not called for as under section 80 of the Customs Act, 1969 it is the duty of the Assessing Officer who processes tire release application to assess import levies on the basis of examination and on the quantities so ascertained by the Examining Officer. In the present case import-levies have been properly charged on the basis of examined goods and on the quantities as record by , the Examining Officer. In these circumstances alleging of miss- declaration is not legally maintainable as there is no evidence to establish the means rea in these circumstances the impugned order are set aside and these appeal are accordingly allowed."
"From a plain reading of the relevant provisions of customs law it transpires that before adjudging the bona tide or mala tide intentions of an importer, mechanism devised in the aforesaid Sections of law and Rules is to be kept in mind as a whole. Before, invoking provisions of section 32, of the Act, as the case may be, the adjudicating officer must satisfy himself that the case squarely falls within the ambit of section 32 of the Act. As such the appellant has not indulged into the alleged act of miss-declaration within the ambit of mischief of section 32 of the Customs Act, 1969"
(vii) Even the charge of miss-declaration abates and cannot be pressed against the appellant since the appellant at the very outset through his application dated 4-2-2010 requested for First Appraisement in terms of section 79(1) of the Customs Act, 1969 and also for denaturing/de- shaping of the consignment of scrap if found to be otherwise after 100% Examination First by the Customs Authorities in terms of section 79(1) ibid. The cannons of tax law duly backed by a number of judgments of the highest judicial authorities from jurisprudence of various origins advocate in categorical terms that there is no room a for presumption in tax law. The charge of miss- declaration in presence of request of the appellant in terms of aforesaid two sections of the Customs Act, 1969 is highly presumptuous, arbitrary and of no legal significance.
(viii) The allegation of miss-declaration against the appellant in terms of section 32 of the Customs Act, 1969 cannot be taken against the appellant in isolation. The Goods declaration of the subject goods was tiled under First Appraisement system in terms of section 79(1) of the Customs Act, 1969 read with section 80 and section 83 ibid on the basis of commercial documents andphysical examination by the examining and Assessing Officer. The examination clearly depicted the end cuts of "various thickness,",, of hotrolled plates, not capable of any other use except for re-rolling.
Furthermore the goods referred for the expert opinion from, the following experts, Karachi Shipyard and Engineering works, Pakistan Steel Mills and-Pakistan Iron and Steel Merchant Association also confirm that the goads are re-rollable scrap.
Karachi Shipyard and Engineering WorkdsPakistan Steel Mills Pakistan Iron and Steel Merchant's Association From the conclusion at para 3 above derived from observations at para 2, it is my considered opinion that the captioned consignment may be considered as off- cust I scrap of thick steel plates for re-rolling purposes under the PCT heading 7207- 2090 and 7204-4910".Considering the facts as mentioned in Paras. 2, 3 and 4/N, based on physical inspection, it is concluded that the subject that the subject consignment vide IGM No. 6955, dated 25-2-2010 Index No.108, of weighting 1420 tons is found to be thick plate end cut scrap, which can be use for re- rolling purpose."Keeping in view of the above facts the material imported as Re-Rollable (Scrap) not as finish products of the Steel Plate Bars. Furthermore material does not fall under the category of the finish product, and we confirm that the said material will be used/consumed as for Re- rollable."
(ix) In this situation the benefit of doubt needs to be given to the appellants since the appellantsdeclaration is endorsed by the examination report and the three expertsopinions. This view is fortified by the judgments reported as reported as 2005PTD 1949, 2006 PTD 2053, 2009 PCr.LJ 50, PLD 1973 Kar. 659, 2010, SBLR 120 (sic) and 2008 PTD 1589. In a receipt judgment dated 28-3-2011 the honourable High Court of Sindh in Spl. Customs Reference Application No,270 of 2010 has graciously concurred with the findings of this Tribunal based on the Expert Committee report by declaring the order of the this tribunal as unexceptional. The relevant extract is reproduced as under:- "....We are therefore of the opinion that the Tribunal has rightly relied upon the Expert Committees Report and allowed the appeal. We are of the opinion 'that the order of the Tribunal is unexceptional and no interference is called for by this Court, therefore the present Reference is dismissed in limine."
In view of the above Expert Committeesreports and various judgments of honourable High Courts Collector may consider taking appropriate action against the Examining Officers who have tendered incorrect findings causing unnecessary financial loss and mental torture to the appellant for no fault of their own. Due to continued detention of the earlier part of consignment the appellant has reportedly paid a sum of more than 2.5 million rupees by way of demurrage and huge amountas mark up to the Banks and which was not warranted and which precipitated only on account of the incorrect findings given by the customs staff. Being a genuine hardship case, it, also necessities for issuance of delay and detention certificate to the appellant to take up the matter of refund of demurrage paid earlier at the time of release of mutilated portion of goods with the terminal operator in view of the recent judgment of the honourable High Court Sindh in the case of Messrs A.R. Autos v. Secretary Revenue Division, F.B.R., Islamabad and another reported as 2011 PTD 183.
(x) In this case, admittedly by giving declaration under section 79(1) of the Customs Act, 1969 the appellant pre-empted himself from the operation of the penal provisions since according to the aforesaid judgment section 32 does not cover every untrue declaration having nothing to do with evasion of customs duty and other charges but such statement must indicate an attempt to defraud public revenues. The request for First Appraisement as well for denaturing/mutilation/de- shaping of the consignment made by the appellant prior to the filing of the goods declaration clearly excludes it from any attempt for evasion of customs duty or for defrauding the revenue authorities. In their zeal to make out the subject case of miss-declaration respondents have stretched the provisions of section 32 of the Customs Act, 1969far beyond their true essence and original sprit in all fairness to a breaking point particularly in presence of the three expertsopinions which in unequivocal terms declare goods as remittable and re-rollable scrap.
(xi) At the time of the subject importation the relevant section 27A of the Customs Act, 1969 in respect of allowing denaturing or mutilation of goods read as under:- "27-A. Allowing denaturing or mutilation of goods.---At the request of the owner, [to be made before the filing of goods, Which are ordinarily used for more than one purpose, may be allowed, as prescribed by rules so as to render them unfit for one or more such purposes and where any goods are so denatured or mutilated or scrapped they shall be chargeable to duty at such rate as may be applicable if the goods had been imported in the denatured or mutilated form or as scrap]
(xii) The aforesaid section 27A of Customs Act, 1969 after a recent amendment vide Finance Act, 2010-11 reads as under: "27-A. Allowing mutilation or scraping of goods.---At the request of the owner mutilation or scrapping of goods as are notified by the Board, may be allowed, in the manner as prescribed by the rules and where such goods are so mutilated or scrapped they shall be chargeable to duty at such rate as may be applicable to the goods as if, they had been imported in the mutilated form or as scrapped."
(xiii)In terms of the said amendment the importer can even make a request to the Customs Authorities for denaturing/mutilation or scraping of its imported goods which are ordinarily used for more than one purpose even after the filing of Goods Declaration. Clearly, any imported goods which can be put to more than one use can be mutilated/denatured/scrapped under the above- quoted provision of law and the purpose of such mutilation/denaturing/scrapping is to render the goods unfit for more than one use. Thus, there is no doubt that denaturing/ mutilating is meant to render the imported goods unfit for more than one use and the respondent's view regarding inadmissibility of benefit of the provisions of section 27-A of the Customs Act, 1969 to this case is not in conformity with the provisions of law reproduced above is misconceived. Moreover, it is now a settled law that if any provisions of law are considered susceptible to two interpretations, the interpretation that favors the citizens would need to be adopted and in the context of the instant case it means that an importer can apply for cutting/mutilating of any imported goods under section 27-A of the Act. This principle fully borne out from the Judgments reported as PLD 1953 Lahore 433 (a) 1993 SCMR 274 (C), PLD 1964 SC 113, AIR 1943 Madras 733(b), PLD 1984 Kar 345(6) and 1996 SCMR 1470 (d) etc.
(xiv) The subject goods are not restricted goods and cannot be refused mutilation or scraping by the customs authorities since these goods have duly been notified by the Federal Board of Revenue vide, S.R.O.250(I)/2011 dated 1-3-2011. The request of the appellant was made for de- shaping the goods much before filing of the Goods Declaration as is evident from his request dated 4-2-2010. This view gains strength from the judgment of the Hon'ble High Court of Sindh at Karachi reported as 2010 PTD 826, wherein it was observed that; "Such benefit could be extended to importer, if same was claimed by him prior to filing of said declaration, but not thereafter in any case---No provision would be read in a manner to render same as redundant or superfluous--- Granting of such benefit to importer as claimed by him would render provision of S.27-A of Customs Act, 1969 as redundant"
Section 27-A of the Act does not specify the officer of customs who is empowered to allow or refuse se permission to cut/ mutilate imported goods. However, under Public Notice No, 19/ 2006-III(A) dated 19-8-2006, as amended through Public Notice No, 2 of 2007-III(A) dated 6-2-2007, issued by the Collector of Customs (Appraisement), Custom House, Karachi. Deputy/ Assistant Collector concerned has been authorized to exercise such powers. However, neither under section 27-A of the Act nor under the above-mentioned public notices the Deputy/ Assistant Collector has been empowered to withdraw the permission of denaturing/mutilating of goods once he has granted such permission. However, if any such proceedings, order or permission is required to be withdrawn the same can be done by the Collector of Customs concerned within the meaning of section 195 of the Act, which is reproduced as under for the ease of reference:-- Section 195 of the Act 30[195. Powers of Board or Collector 31[*1 to pass certain orders.---(1) The Board or the Collector of Customs 32/ 32A(****) may, within his jurisdiction, call for and examine the records of any proceedings under this Act for the purpose of satisfying itself or, as the case may be, himself as to the legality or propriety of any decision or order passed by a subordinate officer and may pass such order as it or he may think fit: Provided that no order confiscating goods of greater value or enhancing any fine in lieu of confiscation, or imposing or enhancing any penalty, or requiring payment of any duty not levied or short-levied shall be passed unless the person affected thereby has been given an opportunity of showing cause against it and of being heard in person or through a counsel or other person duly authorized by him..
(2) No record of any proceedings relating to any decision or order passed by an officer of customs shall be called for or examined under subsection (1) after the expiry of two years from the date of such decision or order.]
(xv) In view of above-reproduced letter of law, the/order passed by the Deputy Collector by way of allowing cutting/mutilating of the goods could have been reversed only by the Collector and that too by providing an opportunity of defense to the appellant because in the cut/mutilated shape the goods would have been treated as re-rollable scrap of PCT heading 7204.4910 chargeable to customs duty @ 0% whereas the reversal of Deputy Collector's order meant that customs duty @ 20% would be charged on the goods. Arbitrarily, that was not done. Thus, the order dated 25-5- 2010, 'of withdrawing the permission of cutting/mutilating the impugned goods accorded vide order dated 5-3-2010, was unlawful and void ab initio. Therefore, the original permission of cutting/mutilating the impugned goods still holds the field. Moreover, the aforesaid withdrawal order was improper as well, besides being unlawful. A considerable position of the goods had already been cut/mutilated and the cutting work was well in progress when the same was stopped we are of the considered view that the arbitrary withdrawal of permission for denaturing has interfered with the vested rights of the appellants and is, therefore, unlawful and illegal. We are, therefore, of the opinion that one best and most legal course of action would be to allow to carry on the denaturing of the balance portion of impugned goods.
9. In view of the various factual and legal aspects of the case discussed supra, it is evident that allegation of miss-declaration under section 32 of the Customs Act, 1969 cannot be leveled against the appellants namely the Importer and that, too, in isolation since they at the very outset preempted themselves by making their request to the Deputy Collector in terms of section 79 of the Customs Act, 1969 for 100% examination for their denaturing and scrapping in terms of section 27-A ibid. The denaturing and scraping in terms of section 27-A ibid. The various judgments discussed supra preclude the allegation of miss-declaration in terms of section 32 of the Customs Act, 1969 against the appellant in similar situations. In the facts and circumstances of the case the allegation of miss-declaration against the appellants is misconceived and is, therefore, quashed.
The orders passed by the forums below are set aside. The goods may be delivered to the appellant after scrapping in their presence and at their expanse. The respondent department is also instructed to issue delay and detention certificate to the appellants if required. The subject appeal is allowed in the above terms.