' GHULAB SHAH AFRIDI, MEMBER (JUDICIAL).---This judgment will dispose of the appeal filed by Muhammad Inam etc. Against the Order-in-Original No.18 of 2013 dated 13-10-2013 and appeal filed by Aneel Badshah etc. Against the Order-in-Original No.20 of 2013 dated 13-11-2014, both passed by the Adidtional Collector (Adjudication) Customs, MCC Peshawar.
2. Brief facts of the case as reported by the Deputy Superintendent (Car Cell), Customs Dryport, Peshawar that on 14-3-2013, post importation scrutiny of the record pertaining to import and clearance of luxury vehicle was conducted and it was observed that one Muhammad Inam son of Abdul Ghafar imported BMW750LI Car Model 2007 having Chassis No. WAHMA2060DE38546 vide GD No. 4153 dated 17-6-2011 through Messrs Ittehad Customs Agency, Al-Jalil Medicine Mewa Mandi, Peshawar. During the course of audit it was observed that the vehicle in question has been assessed to duty and taxes on the value provided by Messrs Dewan Motors. However, the value of optional accessories Euro 13682 mentioned in Dewan Motors letter has not been considered for assessm ent. The examination report on the back side of TP is showing details of standard and optional accessories. Therefore, the duty and taxes involved on the value of optional accessories is as under:-- Value of optional accessories13582 Euro After adding 1% LC-1% insuranceRs.138849.9982 Pak Rs. @ 118.80 Rs.1645974 60% depreciation Rs.987584 Deference Rs.658390 Amount for Assessment.
Customs Duty 100% Rs.658390 RD 0 50% Rs.329195 Sales Tax 0 16% Rs.263356 AIT a 5% Rs.95467 Total. Rs.1346408 ' In view of the facts explained above, the short realized amount of duty/taxes to the tune of Rs.13,46,408 is recoverable from the importer/ clearing agent under Section 32(3) of the Customs Act, 1969.
3. Subsequently, after completion of the requisite formalities, the matter was placed before the Additional Collector (Adjudication) Customs Peshawar, who vide Order-in-Original No.18 of 2013 dated 13-11-2013 ordered to deposit short paid amount of duty and taxes i.e. Rs.13,46,408 into Govt.
Treasury forthwith.
4. Aggrieved of the Order-in-Original(s), the appellants filed appeal before this Tribunal on the following grounds:---
(1) That no Show-cause notice under Section 180 of the Customs Act, 1969 was issued to the owner of the vehicle, except clearing agent. (Annex-B) Attention in this regard is also invited to the provisions of Section 180 of the Act, which lays down a mandatory duty on the part of adjudication officer to issue a show-cause notice before imposition of responsibility.
(2) That the Adjudicating authority had decided the unheard case against the appellants, whereas, on the dates of hearing when the Counsel of the appellants did appear at the specified place but the hearing did not took placed due to non-availability of the adjudication authority.
However, Order-in-Original was not served on the appellants, thereby rendering Show-cause notice and subsequent Order-in-Original ab initio null and void as those were passed without fulfilling the mandatory requirements of law pertaining to "service" which was basic requirement for the ward "served" as per wording of Section 215 of the Customs Act, 1969.
(3) That in absence of the copies of Order-in-Original, they are in no position either to respond to the said notices or to have resort to other legal remedies available to them under the Customs Act, 1969 or law, therefore after the issuance of demand notice (Annex-C) and for filing of appeal the authorized counsel on his personal visits received photo copy of the Order-in-Original, from the staff of adjudication authority.
(4) It is the first principle of natural justice to issue a show-cause notice to the person concerned.
It is a mandatory requirement for crystallization of monetary liability against the taxpayer through stating of material particulars of the case along with applicable provisions of the relevant law.
(5) It is a well settled proposition of law that if a thing is required by law to be done in certain specific manner it must be done in the same manner as prescribed by law or not at all as per maxim "Expressum Facit Cessare taciturn" as observed by the Apex Court in their judgments reported as PLD 1964 SC 536, 2003 SCMR 1505, 2006 SCMR 129.
(6) Violations of principle of natural justice can be equated with the violations of provisions of statutory instruments. It is the common principle which governs the administration of justice in Islam that in case of liability with penal or quasi penal consequences and/or deprivation of basic rights, a notice as well opportunity of hearing is absolutely necessary. This by itself has to be recognized as a basic right as observed by Honourable Supreme Court, Shariat Appellate Bench in the case of Pakistan v. Public at large reported as PLD 1987 Supreme Court 304.
(7) Even issuance of a proper show-cause notice to a person is an essential ingredient of the expression "audi alterm partem" which literally means that no man shall be condemned unheard.
The right of being issued with a show-cause notice and the right of being personally heard are inseparable and inalienable rights of the. Defendant and cannot be denied to the person concerned under any circumstance.
(8) That in compliance of responsibilities prescribed under rule 101 of Chapter VIII of S.R.O.
450(I)/2001 dated 18th June, 2001 (known as Customs Rules, 2001) they have informed the concerned authorities vide application dated 4-12-2012 (Annex-(D) regarding the precautions in time, before the Government suffered any loss of revenue but nothing happened in this regard.
(9) That once again we would like to bring to your notice to kindly inform the concerned office of Excise and Taxation MRA, for the recovery of Federal Government's so-called short paid duty/ taxes, as and when the owner of the vehicles approach the said office for renewal of Annual Token Tax or Transfer of Ownership.
(10) That in the past it has been kept in practice that in response to Custom department letters the Excise and Taxation Office MRA was provided Registration Number of the vehicles against which the Government dues are pending and after the production of Registration Numbers, the Custom department realized the recoverable amount through impounding of vehicles. (Annex-E)
(11) That the Customs Agent. Had filed GDs on the basis of correct and true documents delivered to them by the importer and as such taking recovery action against them was totally unjustified, because it is not disputed here that the statement made in the Customs documents regarding the nature and particulars of the goods imported were in any way wrong; rather that information was found correct and true.
(12) That amongst other things, said provisions provides that an affected person is to be informed in writing of the grounds on which it proposes to impose responsibility. In the instant case the show-cause notice does not reveal grounds or a cause against the agent. In fact, the show-cause notice only addresses grievance of the customs and that too against the importer. The grounds on which customs proposed to take action against the agent were never revealed. The initiation of action against the agent was thus in violation of the provisions of Section 180 of the Act.
(13)That the customs have failed to bring out on record any material as an outcome of their inquiry by which it can be assumed that agent was in any way linked with a plan to so-called defraud the government. It is surprising that in the instant case no specific charge has been levelled against the agent in the show-cause notice. An examination of Para 3 of the show-cause notice reveals that rather than accusing the agent for a specific act and providing the basis and evidence, the authority who did issue the notice held him guilty of the offence falling under Section 32 read with clause (14) of subsection (1) of Section 156(1) of the Act, without any basis.
This act in itself violated the principles of natural justice. In these circumstances applicability of section 32 was ab initio wrong and the act of customs to malign the agent unnecessarily and to issue him a show-cause notice was an act of abuse of power.
(14)That the above mentioned Order-in-Original/Show-cause notices issued by the adjudicating authority are defective and illegal in as much as that it held the clearing agent guilty without providing him an opportunity of hearing and without delivering him the evidence for the cause shown in the notice, and without providing him the detail regarding the fixation of responsibility upon the clearing agent and other persons involved for the said so-called short assessment of duty/taxes, thereby violating the mandatory provisions of Section 180 the Act.
(15)That about the role of clearing agent, the provisions to subsection (3) of Section 209 of the Customs Act, 1969 are very clear. The said Section says that where any duty is not levied or is short levied or erroneously refunded on account of any reason other than willful act, negligence or default of the agent, such duty shall not be recovered from the agent. In this case it is to be ascertained as to whether it was a willful act or negligence or default on the part of the agent or it was mere omission then the clearing agent cannot be held responsible.
(16) That the assumption of the customs that the said so-called short realization did take place due to the willful act of the agent; appears to be wrong. In fact, the charge against the agent was wholly misconceived, as his actions do not fall within the operative mechanism of Section 32 of the Act. A study of sections 79 and 80 of the Act reveals that the importer or his agent has to file a bill of entry for release of goods on which the assessing officer has to make an assessment. Any claim made by an importer is subject to scrutiny by the assessing officer who has been vested with unfettered powers to complete an assessment. A claim is a request subject to approval by a competent officer, and where a competent authority grants or rejects the claim, no charge of fraud or otherwise can be linked to the agent or to his principal, whose duty is to submit relevant documents for processing of release application. It appears that the officer who issued the show- cause notice grossly understood the scheme, meaning and operative mechanism of the assessment provisions of the Act.
(17) That in term of Section 79 of the Act, the Federal Board of Revenue did prescribe form, known as GD whereas, manner and particulars of a GD to be filed by an intending importer/agent. The format of GD so prescribed requires submission and reporting of detailed information's including description of goods, its weight and value. After processing the said information, the assessing officer has to get the goods examined or tested (as the case may be) for determining, rapture, quantity and description of goods to assess the amount of duty and taxes leviable thereon.
(18) The assessment procedure as provide in Section 80 of the Act, is quite exhaustive and detailed. The assessing officer can call for all the relevant documents and any other information which he deems necessary, and the assessing officer can put questions or require submissions of additional information for the purpose of completing the assessment. A perusal of Section 32 of the Act reveals that in addition to declaration any communication or answer to question put by Customs and found wrong in material terms do qualify to constitute an offence within the framework of said section. So in order to bring an act or action within the framework of word 'false' as used in Section 32 of the Act, the act should either be a conscious wrong or culpable negligence and should signify knowingly or negligently untrue.
(19) That we have submitted the written reply on 4-9-2013 (Annex-F) in response to the show- cause notice but the adjudication authority deliberately and intentionally had not mentioned in the order-in-original. One of the general principles of adjudication as pronounced by the Higher Courts and as provided in the, Act, is as under:-- "It is not enough to say "the explanation by the person is unsatisfactory". Such a statement should not appear in order. Instead, each plea advanced by the person should be brought but in the order and if not admitted it should only be rejected with the reasoning. The adjudicating officer should make a speaking order and should give reasons in support of his conclusion. It should not be left to the Appellate Authorities to search for the reasons in the records of the case and to speculate upon what induced the tribunal to come to a particular conclusion"
(20) That in view of Section 209 of the Act, and in the circumstances of these particular cases no liability did exist against the agent. However, an order issued by the Adjudicating Authority should be a speaking and judicial order and should not be devoid of reasons; otherwise, it would not be sustainable in the eyes of law, being in contravention of law.
5. In rebuttal, the respondent-department filed then parawise comments as under:-
(1) In this case the GD was filed by Messrs lttehad Customs Clearing Agency on behalf of the Importer. The letter of clearing agency dated 4-12-2014 addressed to the Deputy Collector Customs Dryport Peshawar confirms that it was in the knowledge of the Customs agent that an amount of Rs.36 million was short realized. The requisite letter also confirmed the short assessment pointed out by the audit team. The clearing agent filed the GDs on behalf of the importer and now he is contesting the case on behalf of the importer. Contrary above, the Customs agent in his letter dated 4-12-2012 has mentioned that the actual owner and also presented passport and other documents in the name of importer for clearance of the vehicle.
However, the actual owner as pointed out by Customs Agent, who managed to import the vehicle is not on record. The Customs agent while knowing the fact that actual importer is some other person, presented the GD and concealed the fact from Customs which constitutes an offence under Section 32(1) of the Customs Act, 1969. Besides, under Rule 101 of Customs Rules, 2001 notified vide SRO 450(1)/2001 holds the Customs Agent responsible for any and all other documents signed by him and to pay duty and taxes evaded under clauses C & E of rules ibid. In this case the letter of Customs agent dated 4-12-2012 in itself is an admission of fact that the clearing agent knew the quantum of evaded amount and event then he managed to cleared the vehicle against less duty and taxes and concealed the facts. However, when later on he felt that the evaded amount has been detected, he tried to present himself innocent. Therefore, the evaded amount is recoverable from Customs Agent, if the importer fails to deposited the same.
(2) Incorrect. As pointed out above, the defaulter's name is on record, therefore, the recovery proceedings be initiated against him. The contention of the Customs agent to recover the evaded amount through FTO is contrary to the Customs agent letter dated 4-12-2012.
(3) Incorrect. Against Para-2 above.
(4) Incorrect. The Customs agent's letter dated 4-12-2012 'does not support that he has failed GD on the basis of correct documents. On one hand, he states that GD was filed on the basis of correct documents while in his letter dated 4-12-2012 he has stated that actual owner is some one else.
(5) Incorrect. The show-cause notice provides opportunity of being heard to the defaulter and to defend his position which was provided to the importer/customs agent.
(6) Incorrect. As against para-5 above.
(7) Incorrect. As against proceedings paras.
(8) Incorrect. The Customs agent is trying to divert from the responsibilities of Customs Agent notified under Rules 101 of the Customs Rules, 2001.
(9) Incorrect. The willful act of untrue statement of Customs Agent is proved from his letter dated 4-12-2012.
(10)Incorrect. The duty and taxes short assessed are always recoverable. In this case the Customs Agent was aware of the short assessed amount but he deliberately concealed this fact and when he came to know that the short assessed amount has been detected he wrote a Letter to Deputy Collector Customs Dryport Peshawar and pointed out that Rs.3.6 million needs to be recovered from a person whose name is not on record as actual importer. Therefore, Customs agent may be directed to deposit the admitted evaded amount.
(11)Incorrect. As against Para-10 above.
(12) Incorrect. As against Para-10 above.
(13) Incorrect. The adjudicating officer has decided the case on the basis of evidence available on record and written reply to show-cause notice.
(14) Incorrect. As against Para-13 above.
(15) Incorrect. Under Rule 101 of the Customs Rules, 2001, the responsibilities of Customs Agent has been determined which have been violated by the Customs Agent as is confirmed in his letter dated 4-12-2012, therefore, he is required to deposit the evaded amount.
6. In response of the above parawise comments, the learned counsel for the appellants also filed rejoinder to the following effect:--
(1) As mentioned in the Order-in-Original No. 18 of 2013 dated 13-11-2013, it was pointed out during the Post importation scrutiny that, short assessment was done at the time of assessment in the GD No. 4153 dated 17-6-2011, resultantly, the amount of Rs.1346408 has been short paid by the importer and the Clearing Agent, which is recoverable from them.
(2) It was revealed from the record maintained at dryport, Peshawar that the Post importation scrutiny was conducted in June 2012, whereas the Show-cause notice C.No. Cus- Adj/Add.C/71/2013/ 7281 wad issued on 27-8-2013. It is questionable why the customs authorities incurred a long delay in issuance of Show-cause notice (i.e., 14 months).
(3) Later on, the information regarding the proposed auction of some vehicles imported at dryport Peshawar was communicated to the Clearing Agent vide notice C.Na. DC/Auction/25/2009/ Pt/2194 dated 20-11-2012. Notably the copy of the said notice was simultaneously endorsed, to one "Mr. Natiq Hussnain Shah" on the grounds that his name was mentioned as "notified party" in the B/L's.
(4) The Clearing. Agent responded vide his letter dated 4-12-2012, that the name of the said person was also incorporated/notified in the B/L's pertained to the vehicles wherein, as contended by the respondent department duty/taxes were short levied. The rationale behind the letter dated 4-12-2012, was that, at the least it is necessary to scrutinize the data carefully, if not anything else, possibilities of which appear abundant that behind the screen the same person was the actual owner of all these vehicles and at this particular stage short realization (if any) can be easily recovered. But nothing happened in this regard.
(5) As a matter of fact, the customs staff at dryport, Peshawar cannot be expected to be unaware of these facts. This is inefficiency and carelessness on the part of respondent department. It, thus, appears that, this otherwise an extraordinary and urgent matter was handled routinely and ordinarily by the customs authorities at dryporf, Peshawar.
(6) It is not understandable that at one side, the DR, of the respondent department vehemently emphasized that Customs authorities at dryport, Peshawar cannot issue any notice to the person who's name is mentioned as "notified party" in the B/L's, while on the other hand notice issued vide C.No. DC/Auction/ 25/2009/Pt/2194 dated 20-11-2012 duly endorsed to the person whose name was mentioned in the B/L's as "notified party".
(7) The DR contended during the hearing that, the customs authorities cannot take any action on the basis of grounds provided by the appellant (Mentioned in Para 4 Supra). This raises the obvious question, why the aforesaid auction notice was endorsed to the person, who was not importer in such cases (As per GD). What was the justification with the respondent department for not taking timely action, when there was neither any bar on customs authorities for consulting other sources nor, was it inappropriate to double check the truth and accuracy of any information submitted by the Clearing Agent vide letter dated 4-12-2012. However, the stance taken by the respondent department in their Para wise comments is obviously false and misleading.
(8) As such the reply of the Clearing Agent vide letter dated 4-12-2012, was issued on the basis of instructions as prescribed in sub-rule (i) of Rule 101 of S.R.O. 450(1)/2001 dated 18-6-2001.
(9) At this juncture in order to place the matter regarding responsibilities of the Clearing Agent in its proper context, it will be necessary to examine the clause (i) of Rule 101 of S.R.O. 450(1)/2001 dated 18-6-2001. For ease of reference we have reproduced below: 101.Responsibilities of licensee: - A licensee shall,-
(i) "where he knows that a client has not complied with the law or has made any error or omission in any document immediately bring the matter of such non-compliance, error or omission to the notice of the appropriate officer of Customs". (Bold/underlined to stress)
(10) Failure to acknowledge and respond to the Clearing Agent's letter is not only a violation of the F BR ' s own instructions vide standing order No. 6(23) Coord/2011 dated 3-3-2011, but it also constitutes neglect. Moreover, at the cost of repetition of irrelevant submissions does not absolve customs authorities from their responsibilities.
(11) The foregoing situation clearly shows neglect, inattention, delay, incompetence, inefficiency and ineptitude, in the administration or discharge of duties and responsibilities of respondent department.
(12) The adjudicating officer had mentioned in Para (4) of the Show-cause notice that "importer may produce any documentary evidence to prove the legal import and or lawful possession of the seized vehicle," besides, the fact that Para (1) provided that, "the value of optional accessories fitted at the time of manufacturing, mentioned in local agents letter has not been assessed". Both the Paras were contradictory to each other."
(13) In the instant case the Show-cause notice does not reveal the actual facts/grounds, thus, it is proved that, Show-cause notice was issued on frivolous grounds and this was caused due to non- application of mind to the facts/law, hence, the Show-cause notice issued by the adjudicating authority was contrary to law. In the case of "Ali Haider v. Ijaz Hussain Malik etc., reported as 1968 PCr.LJ 127" While addressing the object of issuance of Show-cause notice, their lordships observed: When a Show-cause notice is given, the object is that the person on whom it is served gets an opportunity to explain the allegations against him for which action is proposed to be taken. If the Show-cause notice is not to be reduced to a mere formality, the contents of reply in response to the Show-cause notice must receive due consideration. The grounds mentioned in the Show- cause notice cannot become reasons for the action that may be taken unless the grounds are tested in the light of the explanation tendered and stand the scrutiny of the authority who has to take action on an objective assessment of the material supplied in proof of the allegations contained in the Show-cause notice. When the statute enjoins that the reasons must be recorded in writing, the plain meaning is that the reasons must be manifested in the order itself to be self- explanatory for the purpose of showing that the order has a foundation in reason and is not capricious or arbitrary. . ."
(14) The provisions regarding the determination of customs values of imported goods/vehicles are available under Section 25A of the Customs Act, 1969; the said provisions are reproduced below: "25A. Power to determine the customs value.--(1) Notwithstanding the provisions contained in Section 25, the Collector of Customs on his own motion, or the Director of Customs Valuation on his own motion or on a reference made to him by any person or an officer of Customs, may determine the customs value of any goods or category of goods imported into or exported out of Pakistan, after following the methods laid down in Section 25, whichever is applicable."
"(2) The Customs value determined under subsection (1) shall be the applicable customs value for assessment of the relevant imported or exported goods."
15. That, in exercise of the powers conferred under Section 25A of the Customs Act, 1969 the customs values of vehicles above 1800cc were determined by the Director, Directorate General of Customs Valuation Karachi vide Valuation Ruling No. 665/2014 dated 28-3-2014. It would be appropriate to analyze the scheme and mechanism provided in the aforesaid valuation ruling for the determination of customs values of used imported vehicle. For ease of reference, the relevant contents are reproduced below: Meetings were held with stake holders on 7-11-2013, 26-11-2013 and 23-1-2014. The representatives of all Pakistan Motor Dealers Association were of the view: "That the Director of Customs Valuation Karachi had given 20% discount on account of local taxes/commission in FOB values of different vehicles at the time of issuance of previous Valuation Ruling, therefore, the practice of 20% discount may be continued:"
"The representatives of MCC, Appraisement-West reiterated the view point of the collectorate regarding 20% discount, that the same may be continued as it was in line with the long standing assessment practice of Custom House, Karachi."
(16) That the customs authorities at Karachi were releasing vehicles imported by Overseas Pakistanis on the basis of FOB, values determined after reduction of 20% discounts on account of local taxes/commission. But the Peshawar customs had refused to provide similar treatment to the vehicle imported by the appellant.
(17) The assessment made by the customs authorities in GD No; 4153 dated 17-6-2011 was ill- conceived, unjust and discriminatory. Consequently, importer at Peshawar had been placed at a serious disadvantages viz importers at Karachi. The pinch of injustice and discrimination gets aggravated due to the preferential treatment to the importers at Karachi as compared to the importer at Peshawar. The injustice and discrimination nature of the assessment is too apparent, also ignored and overlooked by the adjudicating officer. However, discrimination involved in this case was in clear violation of Article 25(l) of the Constitution of Pakistan, section 24A(I) of the General Clauses Act, 1897.
(18) The DR's explanation regarding the assessment, that it was done on the basis of Provisions prescribed under CGO 14 of 2005 dated 6-6-2005, does not extenuate the injustice or discrimination involved in assessme nt, nor does it absolve the customs authorities from its abiding responsibility to obviate any chances of discrimination and injustice while preparing assessment.
(19) As regards the issue that the assessment was made on the basis of CGO 14 of 2005 dated 6- 6-2005, the same is not applicable in this case on the grounds that the Customs General Order is issued for guidance of field staff to achieve the purpose of the statute where such departmental instructions are in conflict with the statutory law or tends to undo any such law, then the same has no legal effect. The refusal of the legitimate statutory concession made available by the Government through the departmental instructions in the form of Customs General Order would amount to undo the effect of powers of Director, Customs Valuation Karachi conferred under Section 25A of the Customs Act, 1969. The departmental instructions such as Customs General Order is issued for guidance of the field staff to achieve the purpose of the Statute, and if such departmental instructions are issued in conflict to statutory law or to undo any such law, the same would not have any legal effect.
(20) By issuing a General Order or a Public Notice a right given by a specific provisions of Statute, could not be withdraw. This issue came up for scrutiny before their lordships of Lahore High Court in the case of United Refrigeration Industries (Pvt.) Ltd. v. Federation of Pakistan 2000 CLC 1660. The Court accordingly held "that any refusal to available statutory concession by Customs General Order or through a Public Notice was illegal"
(21) Similar views were taken by Customs Appellate Tribunal Karachi in Appeal No. K-1899 of 2001, decided on 24 January, 2002. (Omalsons Corporation v. Deputy Collector of Customs Adjudication Karachi)
(22) Intact, if the customs authorities has made assessment on the basis of scheme and mechanism, as provided in the Valuation Ruling No. 665 of 28th March, 2014 issued by the Director, Directorate General of Customs Valuation Karachi, in exercise of the powers conferred under Section 25A of the Customs Act, 1969, then, in all probabilities the amount which was paid by the appellant at the time of clearance of his vehicle, will exceed from the leviable duty/taxes.
(23) As per the Show-cause notice the appellants was charged under Section 32 of the Customs Act, 1969, irrespective of the fact that, the declarations and relevant documents presented by the appellants at the time of import/clearance before the competent authority were found true and correct in all aspects, as confirmed by the DR, during the hearing. Hence, in the light of law, laid down in Para 101B of CGO 12 of 2002 dated 15-6-2002. "Section 32 of the Customs Act cannot be invoked and the importers may not be charged for misdeclaration under section 32 of the Customs Act, 1969, in the following situations."
(i) Where an importer makes a correct declaration on bill of entry or opts for 1st appraisement for determination of correct description, PCT heading of quantity of goods. (Bold/Underlined to stress)
24. Hon'ble Supreme Court of Pakistan in the case of Collector of Customs (Preventive) Karachi v.
Pakistan State Oil Karachi, reported as 2011 SCMR 1279 = 2011 PTD 2220. While interpreting Section 32, their lordships observed.
"The language as employed in Section 32 of the Customs Act, 1969 is plain and simple and no scholarly, interpretation would be needed. The provisions as envisaged in Section 32 of the Act would be attractive in the following cases:-
(i) On filing deceptive, false and fake declaration; notice, certificate, document or statement;
(ii) Issuance of notice within a period of three years (now five years) for payment of specified amount in case of short levied of duty, its non-payment, erroneously refunded as a result of some collusion;
(iii) In case of inadvertence, error or misconstruction, non-levied or short levied of any charge/duty, the payment shall be made subject to notice within six months (now three years)".
(25) It was held by the Hon'ble Supreme Court of Pakistan in its judgment reported, 2001 SCMR 838 "that, the notice under subsection (3) of Section 32 of the Act should speak of inadvertence, error or misconstruction and without such allegations the notices would be defective and against law".
(26) The charge framed in the Show-cause notice under section 32(3) of the Customs Act, 1969, relates to inadvertence, error or misconstruction, therefore, it will be necessary to examine the interpretation of the said subsection in the light of clear verdict given by the Hon'ble Lahore High Court in its judgment reported as 2003 PTD 1797. Therein, their lordships observed: "Although the word "deliberate" is not used in subsection (2) of Section 32 of the Customs Act, 1969, but it contains the element of collusion and some false statement on the part of the importer while subsection (3) of Section 32 relates to inadvertence error or misconstruction on the part of the importer" (Bold/Underlined to stress)
(27) Similar views were taken by Hon'ble Supreme Court of Pakistan in the case of (Federation of Pakistan through Secretary of Finance v. Messrs Ibrahim Textile Mills Ltd. And others) reported as 1992 SCMR 1898. Therein, their lordships observed: "Due consideration was given as to whether the respondents should not pay the short-levied duty and whether the State should suffer in public finance. But the cardinal principle of law is that all are equal before law, whether citizen or State."
(28) It was admitted by the respondent department, as mentioned in para (1) of the order-in- original, that the vehicle in question has been assessed as per the value provided by Messrs Dewan Motors (i.e., authorized local agent of the manufacturer). While, making assessment the amount of taxes has been short assessed, reasons behind, the value of optional accessories fitted at the time of manufacturing was not included in the assessable value. However, evidently the said contention was contrary to the procedure, envisaged in CGO 14 of 2005 dated 6-6-2005. In order to ascertain the factual position in this case, we reproduced the relevant extract of para (7) of CGO 14 of 2005 dated 6-6-2005: "The value of optional/additional accessories shall also be included in the assessable value of the vehicle, which shall be subjected to the rate of duty and taxes applicable to the vehicle in which the accessories are fitted."
(29) In view of the facts, mentioned in para 28 supra, it is incontrovertibly established that value of optional accessories shall be included, which are fitted at the time of import/physical examination. The rationale behind, that according to the permissible age limit under the import policy order, overseas Pakistanis importing used vehicles upto the age 05 years old and probably, many alterations have taken place during its usage within 05 years.
' PRAYER ' In view of the foregoing, therefore, it is incontrovertibly established that the case decided against the importer and the Clearing agent vide Order-in-Original No. 18 of 2013 dated 13-11-2013, was not warranted by the law and thus, arbitrary, unjustified, illegal and liable to be set-aside. Any other relief which this Hon'ble Court may deem fit and appropriate in the circumstances of the case may also kindly be granted to the importer.
7. The present appeal has been brought against the Order-inOriginal No.18 of 2013 dated 13-11-2013, passed by the Additional Collector of Customs (Adjudication) Peshawar, whereby the appellants has been held guilty under Section 32(3) of the Customs. Act, 1969, (hereinafter referred to as the Act) for the short paid amount of duty/taxes amounting to Rs.1346408 on the basis of inadvertence, error, or misconstruction. The adjudicating officer while concluding the dispute observed as under:- - "The case record has been examined. The respondents have been provided hearing opportunity to defend the case but they have not bothered to appear nor have any written reply to the Show- cause notice been received from them. I have no doubt that the version of the department is correct. The charges leveled in the Show-cause notice stand fully established beyond any shadow of doubt in the absence of any evidence or cogent argument to the contrary. I, therefore, order Mr. Muhammad Inam son of Abdul Ghaffar and Messrs lttehad Customs Agency, Peshawar to deposit the short paid amount of duty and taxes into Govt. Treasury forthwith."
8. Brief necessary facts of the case for the disposal of this appeal are that Mr. Muhammad Inam imported a vehicle, used BMW Car Model 2007, bearing Chassis No. WAHMA2060DE38546 and filed GD No. 4153 dated 17-6-2011 through Messrs lttehad Customs Agency, Peshawar, for the release of said vehicle. At the assessm ent stage the importer requested the concerned authorities through GD, under section 79 of the Act, to allow release of goods after payment of leviable duty/taxes, as assessed by the customs authorities. The competent authority after due consideration allowed appellant's request and released the vehicle on payment of duty/taxes as assessed by the concerned authorities.
9. At a post clearance scrutiny, a customs officer observed that release of the said car was not in order as the said action was not inconformity with the FBR's instructions contained in its CGO 14 of 2005 dated 6th June, 2005. The said instrument directed that, the value of optional/additional accessories which are fitted shall also be included in the assessable value of the vehicle. However, the value of optional accessories fitted at the time of manufacturing, mentioned in local agents letter has not been considered, which resulted into short assessment of Rs.1346408. The customs thus prima facie, believed that the short assessment was caused due to inadvertence, error or misconstruction on the part of the importer with the assistance of the clearing agent.
10. The customs acting under the said belief, charged the importer and the clearing agent for violation of the provisions of subsection (3) of Section 32 of the Act, and the adjudicating officer issued a Show-cause notice, whereby both the importer and agent were called upon to Show Cause as to why the short levied amount be not recovered from them and as to why penal action under clause (14) of subsection (1) of Section 156 of the Act, be not taken against them.
11. During the adjudication proceedings, the appellant No. 2 denied the said charges as being baseless and pleaded for the vacation of the Show-cause notice vide his reply dated 4-9-2013 because as contended by the appellant No. 2 that the hearing was not taken place due to non- availability of the adjudicating officer. However, the adjudication officer has mentioned that, on the date of hearing (i.e., 5-9-2013) the advocate appeared and submitted only application for adjournment which was accepted and next dates of hearing were fixed on 11-9-2013 and 7-10-2013.
However, neither the respondent appeared nor submitted any written reply to the Show-cause notice. At the end for the violation of section 32(3) read with clause (14) of subsection (1) of section 156 of the Act, has ordered to porter and his clearing agent to deposit the short paid amount of duty and taxes into. Govt. Treasury forthwith. Being aggrieved, this appeal has been filed to challenge the vires of the said order.
12. Mr. Aamir Bilal, the learned counsel for the appellants has urged that, no specific act of omission or of commission to bring the conduct of the appellants within the fold of alleged offences has been specified; a study of Para three of the Show-cause notice would reveal that his client was held guilty and a judgment was passed without providing him any opportunity to defend the allegations, or to know the evidence or the basis for arriving at the said conclusion.
13. Mr. Javed Iqbal and Mushtaq Hussain, the learned departmental representatives (hereinafter referred to as the DR) has supported the impugned older by arguing that the relationship between the importer and the agent having genesis in Section 209 of the Act, which essentially is a type of an agreement between principal and agent and as the appellant was expressly authorized by the owner, his acts are cognizable in terms of Section 32 of the Act.
14. In order to ascertain the above fact, it is expedient to analyze the Show-cause notice and the admitted nature of dealings between the customs, the importer and the agent. Under the Show- cause notice as explained by learned counsel, the respondent has failed to specify the nature of act and its character in order to implicate the appellant and to bring his conduct within the fold of section 32 of the Act. Thus it is necessary to find out-- (a) the true purport and amplification of section 32 of the Act;
(b) the role of the agent in terms of section 209 of the Act, and ensuing liabilities of the parties;
(c) the impact of the order of the Hon'ble Supereme Court of Pakistan, in the case of Pakistan State Oil, Karachi. (2011 SCM R 1279 = 2011 PTD 2220) read with para 101B of. CGO 12/2002 dated 15-6-2002.
15. First of all I shall take the primary plea of the respondent's side qua the inadvertence, error or misconstruction of the appellants. Section 32 of the Act, defines an offence under the Act in the following terms: ". . . 32 Untrue statement, error, etc.-- If any person, in connection with any matter of customs,--
(a) makes or signs or causes to be made or signed, or delivers or causes to be delivered to an officer of customs any declaration, notice, certificate or other document whatsoever, or
(b) makes any statement in answer to any question put to him by an officer of customs which he is required by or under this Act to answer,
(c) submits any false statement or document electronically through automated clearance system regarding any matter of Customs, [Knowing or having reason to believe that such document or statement is false in any material particular, he shall be guilty of an offence under this section.
(2) Where, by reason of any such document or statement as aforesaid or by reason of some collusion, any duty or charge has not been levied or has been short-levied or has been erroneously refunded, the person liable to pay any amount on that account shall be served with a notice within five years of the relevant date, requiring him to Show Cause why he should not pay the amount specified in the notice.
(3) Where, by reason of any inadvertence, error or misconstruction, any duty or charge has not been levied or has been short levied or has been erroneously refunded, the person liable to pay any amount on that account shall be served with a notice within three years of the relevant date requiring him to Show Cause why he should not pay the amount specified in the notice. . ."
16. From the above, it is clear that in order to attract these provisions and to bring an act within the fold of clause (14) of section 156(1) of the Act, the presence of following factors is necessary:
(a) to make any declaration, notice, certificate or other document;
(b) to sign any declaration, etc;
(c) to cause to be made or signed any declaration, etc;
(d) to deliver or cause to be delivered any declaration, etc, to an officer of Customs;
(e) to make any statement in answer to any question put to him by an officer of Customs, which he is required by or under this Act to answer.
17. After setting the above criteria, it should now be judged, whether on the basis of submission of documents or in the light of admitted facts relating to customs transactions conducted by the appellants, was there an act which can be termed as an inadvertence, error or misconstruction in material particular. As per the Show-cause notice and as verbally explained by learned counsel for the parties, the appellants was held guilty for an offence attracting the provisions of Section 32(3) of the Act.
18. Here the only charge against the appellants is that, they filed GD and the value of optional accessories fitted at the time of manufacturing, mentioned in local agents letter has not been assessed, which resulted into short assessm ent of Rs.1346408. There is no charge that his declaration in respect of nature, description and origin of the vehicle was found to be wrong. It is not disputed here that the statement made in the customs documents regarding the nature and description of the goods imported were in any way wrong; rather that information was found correct and true.
19. The learned counsel appearing on behalf of the appellants has reiterated the same arguments as put forward before the respondent, written as well as verbal. On the other hand, the DR pleads that the clearing agent was actively involved with the importer to cheat the Government. He was confronted to show the evidence linking the clearing agent with any specific charge. To that he relied upon the GD, which was filed by the clearing agent on behalf of the importer under section 79 of the Act.
20. As such issuance of Show-cause notice and the appellants has been held guilty under Section 32(3) of the Act, was ab initio wrong as within the framework of Section 32, no untrue statement, inadvertence, error or misconstruction was ever made either by the importer or by the agent. The effect of said provisions was interpreted by the Hon'ble High Court Lahore in the case of DG Khan Cement Lahore v. Collector of Customs, Sales Tax and Central Excise Multan reporter as 2003 PTD 1797. While addressing the object of subsection (3) of Section 32 of the Act, their lordships observed:-- "Although the word "deliberate" is not used in subsection (2) of Section 32 of the Customs Act, 1969, but it contains the element of collusion and some false statement on the part of the importer while subsection (3) of section 32 relates to inadvertence error or misconstruction on the part of the importer." (Bold/Underlined to stress)
21. A perusal of sections 207, 208 and 209 of the Act indicates that an agent represents his principal and unless by direct evidence it could be shown that he was committing some activity by which the state suffers a loss in public finance, he cannot be declared as responsible for such loss.
Reliance can be placed on the Judgment passed by the Hon'ble Supreme Court of Pakistan in the case of (Federation of Pakistan through Secretary of Finance v. Messrs Ibrahim Textile Mills Ltd and others) reported as 1992 SCM R 1898. Therein, their lordships observed:-- "Due consideration was given as to whether the respondents should not pay the short-levied duty and whether the State should suffer in public finance. But the cardinal principle of law is that all are equal before law, whether citizen or State."
22. The assumption of the customs that violation of the said section did take place appears to be wrong. In fact, the charge against the agent was wholly misconceived, as his actions do not fall within the operative mechanism of Section 32 of the Act. A study of sections 79 and 80 of the Act reveals that the importer or his agent has to file a bill of entry for release of goods on which the assessing officer has to make an assessment. Any claim made by an importer is subject to scrutiny by the assessing officer who has been vested with unfettered powers to complete an assessment.
A claim is a request subject to approval by a competent officer, and where a competent authority grants or rejects the claim, no charge of fraud or otherwise can be linked to the agent or to his principal whose duty is to submit relevant documents for processing of release application. It appears that the officer who issued the Show-cause notice grossly misunderstood the scheme, meaning and operative mechanism of the assessment provisions of the Act.
23. The customs have failed to bring out on record any material as an outcome of their inquiry by which it can be assumed that agent was in any way linked with a plan to defraud the government.
It is surprising that in the instant case no specific charge has been levelled against the agent in the Show-cause notice. An examination of Para 3 of the Show-cause notice reveals that rather than accusing the agent for a specific act and providing the basis and evidence, the authority who did issue the notice held him guilty of the offence falling under Section 32 read with clause (14) of section 156(1) of the Act, without any basis. This act in itself violated the principles of natural justice.
In these circumstances applicability of Section 32 was ab initio wrong and the act of customs to malign the agent unnecessarily and to issue him a Show-cause notice was an act of abuse of power.
24. In the present case there is nothing on record to corroborate any act of the agent to establish mons rea or at least a guilty knowledge. This is not a case of absolute liability nor can the proposition propounded by the respondent that an agent must necessarily, be fixed with the knowledge of fraud of his principal merely because he presents documents on his behalf can be accepted.
25. There is no duty cast on an agent to carry out an independent investigation before filing the documents with the customs. It is. Preposterous to suggest that merely because an agent picked up documents for release of goods he must have some guilty knowledge.
26. It was the duty of prosecution, if they wanted to rope in the agent; to prove by some cogent reasons that the agent was an associate of those who were guilty of making an untrue statement, inadvertence, error or misconstruction before the Customs. In the absence of such evidence, this Tribunal is unable to agree with the prosecution's proposition.
27. Attention in this regard is also invited to the provisions of section 180 of the Act, which lays down a mandatory duty on the part of I adjudication officer to issue a Show-cause notice before imposition of penalty. For ease of reference, the said provisions are reproduced below: ". . .
180. Issue of Show Cause before confiscation of goods or imposition of penalty.---No order under this Act shall be passed for the confiscation of any goods or for imposition of any penalty on any person, unless the owner of the goods, if any or such person--
(a) is informed in writing (or if the person concerned consents in writing, orally) of the grounds on which it is proposed to confiscate the goods or to impose the penalty;
(b) is given an opportunity of making a representation in writing (or if the person concerned indicates in writing his preference for it orally), within such reasonable time as the appropriate officer may specify, against the proposed action: and
(c) is given a reasonable opportunity of being heard personally or through a counsel or duly authorized agent. . ."
28. In the instant case the Show-cause notice does not reveal grounds or a cause against the agent. In fact, the Show-cause notice only addresses grievance of the customs and that too against the importer. The grounds on which customs proposed to take action against the agent were never revealed. The initiation of action against the agent was thus in violation of the provisions of Section 180 of the Act.
29. As regards subsection (3) of section 32, the same is not applicable in this case as neither any violation of the terms and conditions of the relevant subsection were ever made by the appellant, nor has it been alleged in the Show-cause notice. Therefore, the said provision has no relevance to the merits of the case. Clause (14) of subsection (1) of section 156 provides imposition of penalty where an, offence under Section 32 did take place. As is evident I do not find presence of any fact or circumstances where by any stretch of imagination it can be assumed that in offence under Section 32 did take place and that too on the part of agent. Therefore, any action under the said clause would have no relevance to the facts of this case. As regard section 209 read with Rule 101 of S.R.O. 450(1)/2001 dated 18-6-2001, it refers to liability of principal and agent. These provisions are only applicable in cases, where any duty is not levied or is short levied due to the willful, negligence or default of the agent. In the present case no such circumstances did exist, therefore, provisions of section 209 were not attracted. In fact, there was no offence which the agent was under an obligation to report. Accordingly, it is evident that the said provisions of law are not attracted in this case.
30. Now attending to the submission of the learned DR, that impugned order was legally correct, it is observed that he has not been able to bring on record any evidence whereby it can be assumed that the importer and the agent did violate any provision of law. However, it has been confirmed from the GD No. 4153 dated 17-6-2011 that, at the time of import/physical examination at Dryport, Peshawar the optional/ additional accessories as shown in the local agents letter were not fitted in the subject vehicle (As evident from the examination report). When confronted with aforementioned legal position emanating from the case, he conceded that the departmental action *as wrong and that too without any basis.
31. It was further contended by the learned counsel on behalf of the appellants that Section 25A of the Act conferred powers upon the Director Valuation for determination of customs values of the imported goods and by exercising these/powers the Director Valuation Karachi had allowed 20% discount on account of local taxes/commission at the time of determination of customs values of different type of vehicles, on the grounds/basis that it was in line with the long standing assessm ent practice of Customs House, Karachi. He alleged that the Peshawar Customs had refused to provide similar treatment to the vehicle imported by the appellant No. 1 at Peshawar Dry port.
32. Responding to the averments of learned counsel of appellants, the DR stated that vehicle was assessed in accordance with the procedure, as prescribed in CGO 14 of 2005 dated 6-6-2005.
When, asked whether any refusal to available statutory concession by Customs General Order can be termed as lawful order. The answer was in the negative. It thus, proved that the assessment done by the respondent in the subject case was evidently discriminatory. The DR's explanation does not extenuate the injustice or discrimination involved in the assessment. Nor does it absolve the customs authorities from its abiding responsibility to obviate any chances of discrimination and injustice while preparing such assessments. However, it is a well settled law that, the provisions conferred by statute cannot be curtailed by an executive order unless statute itself permitted so.
33. As such the assessm ent made by the Peshawar Customs in the instant case seriously suffers from rationality deficit due to injustice and multiple discriminations involved in it. It also involves a departure from the established practice of providing equal treatment to the tax payers in all over the country. There can be no cavil that it is a paramount L responsibility of the customs authorities to ensure that there was no injustice or discrimination involved in the conceptual from work of such assessm ent. It may therefore, be helpful for FBR to issue appropriate direction to all customs stations to treat the importers fairly, justly and uniformly across the country.
34. As regards the findings of the Additional Collector Customs (Adjudication), he has completely ignored the facts and evidence available on record. The order cannot be termed as a quasi-judicial order. There is yet another aspect of the case, which cannot be ignored. After the examination of the impugned order we find that the same is sketchy, slip-shod and devoid of reasons. The said order is not at all a speaking order and cannot be called a "quasi judicial order" within the parameters set up by law.
The tenor of the order amply manifests non-application of judicial mind and no reasons have been assigned by the learned adjudicating officer in coming to the impugned conclusions. Even it has been enjoined upon an executive authority, as per section 24(A) of General Clauses Act, 1897 (inserted by General Clauses Amendment Act, 1997, Act No.XI of 1997) to give reasons for making the order.
35. The Hon'ble Supreme Court of Pakistan has time and again disapproved the passing of such perfunctory orders in the cases involving valuable rights of the parties. It is settled law that a quasi-judicial order must be a speaking order manifesting by itself that the Tribunal has applied its judicial mind to the issues and the points of controversy involved in the cases. Furthermore, when the reasons would not be forthcoming, obviously the Appellate Court would be deprived of the views of the subordinate forum. In any way the impugned order, which is not a speaking order and devoid of reasons is not sustainable in law being in contravention of law declared by the Hon'ble Supreme Court of Pakistan in various cases like Adamjee Jute Mills Ltd. v. The. Province of East Pakistan and others (PLD 1959 SC (Pak) 272), Gouranga Mohan Sikdar v. The Controller Import and Export and 2 others (PLD 1970 SC 158), Mollah Ejahar All v. Government of East Pakistan and others (PLD 1970 SC 173) and Muhammad Ibrahim Khan v. Secretary, Ministry of Labor and others (1984 SCM R 1014) etc. After Section 24-A GCA the obligation to advance reasons is now a statutory requirement and cannot be casually ignored (see Airport Support Services v. Airport Manger QIA)
(1998 SCM R 2268).
36. In the light of what has been stated above, I do not find that the respondent has been able to make out a prima facie case that leviable duty/taxes were short assessed, because inadvertence, error or misconstruction was done by the importer and the agent. Be that as it may, it is observed that:--
(a) The Show-cause notice was defective and illegal inasmuch as that it held the appellant guilty without providing him an opportunity of hearing and without delivering him the evidence for the cause shown in the notice, thereby violating the mandatory provisions of Section 180 of the Act.
(b) In view of Section 209 of the Act, and in the circumstances of this particular case no liability did exist against the agent. Any presumption of guilt against the agent was wrong.
(c) The matter having been decided by the Hon'ble Supreme Court of Pakistan (reported as 1992 SCM R 1898) in favour of the importer, "that cardinal principal of law is that all are equal before law, whether citizen or state"
(d) It was held by the Hon'ble Lahore High Court Lahore (2003 PTD 1797) "While subsection (3) of section 32 relates to inadvertence, error or misconstruction on the part of the importer"
(e) No offence under clause (14) of Section 156(1) of the Act, whatsoever took place.
(f) The department has conceded that their action was wrong.
37. Having said that, this appeal is allowed. I do not find any merit in the impugned Order-in- Original No. 18 of 2013 dated 13-11-2013, the same is accordingly set aside. Respondent No. 1 is directed to release the vehicle in the light scheme and mechanism, which are being adopted by the Director Customs Valuation Karachi, for the determination of customs values of used imported vehicles, by exercising his powers, conferred upon him under Section 25A of the Customs Act, 1969.
38. The order shall also apply mutatis mutandis to the following appeal, being identical in nature and involving the similar points of law and facts:-- Name ofGD No. andShow-Cause Order-in- Appeal Importer Date Notice No. and DateOriginal No. and DateNo.
Aneel 441 datedCus-20 of 2013 datedCus- Badshah23-8-2011Adj/Add.C/71/13-11-2013 21/PB/ 2013/7282 2014