QURBAN ALI KHAN, MEMBER (TECHNICAL).--- This appeal filed by Messrs Khyber Tea and Food. Company Peshawar Head Office Shop No. 143 Ashraf Road, Katchery Gate Peshawar having name and style of Khyber Tea and Food Company NTN No. 1021567-7 and STRN No. 0501090208964 against the Order-in-Appeal No. 145/2017 dated 09.11.2017 passed by the Collector of Customs (Appeals), MCC, Peshawar whereby he while maintaining the Order-in-Original No. 33/2017 dated 16.6.2017 dismissed the appeal.
2. Brief facts of the case are that the Customs Mobile Squad Mardan on 26.9.201 6, in pursuance of prior information, a Truck bearing Registration No. P-3334 Peshawar was intercepted at Mardan. Search of the vehicle resulted into foreign origin goods (as detailed in the recovery Memo. 17/2016 dated 26.9.2016). On demand, the occupants of the vehicle namely (1) Noman son of Ijaz resident of Peshawar (2) Salman son of Gufran resident of Peshawar failed to produce any legal documents/lawful possession of the said goods so recovered. Therefore, the Customs staff seized the foreign origin smuggled goods along with the said vehicle under Section 168 of the Customs Act, 1969 for violation of Sections 2(s), 16 and 157 ibid read with Section 3(1) of the Imports and Exports (Control) Act, 1950 punishable under Section 156(1)(8), (89) of the Customs Act, 1969 read with Section 3(3) of the Imports and Exports (Control) Act, 1950.
3. Subsequently , after completion of the requisite formalities, the matter was placed before the Deputy Collector Adjudication Customs Peshawar , who vide Order-in-Original No.33 of 2017 dated 16.6.2017 ordered outright confiscation of the seized goods and released the vehicle against 20% redemption fine @ Rs.3,00,000/-
4. Appeal was filed against the Order-in-Original No. 33 dated 16.6.2017 before the Collector Appeal Customs Peshawar , who dismissed the appeal vide Order-in-Appeal No. 145/201.7 dated 09.1 1.2017.
5. Aggrieved from the Order-in-Original No. 33 of 2017 dated 16.6.2017 and Order-in-Appeal No. 145 of 2017 dated 09.11.2017, the appellant filed appeal before this Tribunal with the following grounds.
1. That the seized/confiscated goods were lawfully imported legitimately locally purchased and bona fidely transported duly supported with sales Tax Invoices and Bilities.
The appellant registered as manufacturer , income tax department as well as sales tax department. The seized goods after mixing, blending, cutting, processing and assembling packed in plastic bags and cartons bearing appellant's firm address, trademark and Monogram. The Customs department seized the imported goods without detention under section 17 and no notice issued under section 26 of the Customs Act, 1969.
2. That respondent No. 2, never enquired from the detecting staff as to how the CIF value of the seized goods amounting to Rs.11300000/, was determined and did not bother to know the reasons of 2nd valuation and assessment in one and same case.
3. That respondent No. 2, did not bother to call for the appraiser to know as to how he evaluated the seized goods and why he did not associate the respondent (now appellant) at the time of evaluation and assessment of seized goods.
4. That the value determined by the appraiser is not a fair value having no legal sanctity as the same has not been approved by the competent authority .
5. That content of the Affidavits given the appellant are to be admitted as the prosecution has failed to give counter -affidavits.
6. That the provisions of Section 2(s) of the Customs Act, 1969 are not applicable in this case.
7. That the provisions of Section 16 of the Customs Act, 1969 are not applicable in this case because;
(i) the seized/confiscated goods are freely importable.
(ii) there is no prohibition or restriction on the import of the seized/confiscated goods.
(iii) The seized/confiscated goods were supported with legal documents.
8. That the provisions of Section 157 of the Customs Act, 1969 are not applicable in this case because;
(i) the owner of the vehicle was not travelling with the seized vehicle. When intercepted.
(ii) The prosecution did not bring any evidence on record which prove any criminal link or association with the owner of the seize goods.
(iii) The owner of the vehicle was never issued show-cause notice and in absence thereof no penal or punitive action can be taken against the owner of the vehicle nor any redemption fine could be imposed on the vehicle.
6. In rebuttal, the respondent-department filed their parawise comments as under:--
1. Incorrect. At the time of interception of the vehicle the owner/ driver did not produce GD except sales Tax invoices, billies to the seizing officer from the recovery memo.
The seizing officer accordingly got signature from the owner/driver on recovery memo.
2. No comments
3. Incorrect. The appraiser was not under obligation to associate the accused person while assessing the duty and taxes. The Collector or Director valuation has the power to re-examine the assessment made under Section 80 of the Customs Act, 1969 if he is not satisfied. Section 25D of the Customs Act, 1969 empower the Director General valuation to hear appeal if filed by an aggrieved person.
4. Incorrect.
5. Incorrect.
6. Incorrect.
(i) Incorrect.
(iii) Incorrect.
7. I have heard both the parties and perused the record with their assistance. On the way to Mingora Swat the Customs Squad Mardan stopped the vehicle. Driver of the vehicle showed the sales tax invoices to the customs officials where the customs officials denied to accept the sales tax invoices Nos. 4, 5 and 6 dated 06.9.2016 and brought the vehicle to customs of fice Mardan and seized the said goods along with vehicle and served notice under section 171 of Customs Act, 1969.
8. It also transpires from the affidavits that initially the driver shown the sales tax invoices issued by Messrs Khyber Tea and Food Company Peshawar . There is no any counter affidavit on behalf of seizing officer till date. It is a settled law if a fact which is not rebutted, it amounts to admission. Reliance takes place on 2007 PTD 167. The prosecution while not submitting counter af fidavit has admitted the facts narrated by the appellant in his af fidavit and the af fidavits produced in support of his version.
9. Departmental Representative stated that at the time of seizure the driver of the vehicle submitted an affidavit that he is ready to pay relevant duty and taxes. I have perused the said affidavit. The said affidavit was submitted to the seizing officer prior to the issuance of show-cause notice. It was not submitted to the adjudication officer at adjudication stage. Therefore such affidavit has no legal value. Further it seems that the said affidavit has forcibly been obtained by the seizing officer from the driver of the vehicle.
10. The perusal of seizure report reveals that the seizing officer by himself has determined the approximate value of the seized goods however the determination of the value of the seized goods is the domain of appraiser not Superintendent Customs of the seizing agency . The domain of Superintendent Customs of the seizing agency is to prevent the smuggling and not to determine the CIF value of the seized goods. Further approximation of valuation of seized goods has no room in the law rather the perfect valuation has the value in the eye of law. Moreover the seizing officer didn't associate the appellant during the proceeding of evaluation and assessment of seized goods.
However it is mandatory for the seizing officer to associate the owner of the goods or his agent at the time of evaluation and assessment of the seized goods. The adjudication of ficer and Collector Appeals as well have been failed to adjudge this import aspect of the case.
11. Further the duty and taxes involved in this case are of Rs. 5233600/-. Therefore Deputy Collector wrongly assumed the jurisdiction by issuing the show-cause notice, the Order-in-Original No. 33/2017 dated 16.6.2017 passed by Deputy Collector Adjudication MCC Peshawar was violation of section 179(iii) of the Customs Act, 1969. Reliance takes placed on 2015 PTD 462 Sindh High Court, 1999 PTD 4126 (Peshawar High Court) and 2006 SCMR 1713 .
12. The order-in-original show that the documents produced by the appellant were found afterthought. I am not agree with the plea of learned DR that the documents presented were afterthought. If the said documents were afterthought, so why the adjudication officer has issued show-cause notice and why he called upon as to penal action should not be taken against the appellant and why the seized said goods should not be confiscated. The purpose of issuance of show-cause notice is that the accused should know about the allegatio n levelled against him and he prepared his defense. This is the right of appellant to defend himself and produce the evidence of legal import and lawful possession of the goods. There is no provision in the Custom s Act, 1969 and the other laws of land that the accused cannot produce the documentary evidence in support of his version at any stage.
13. The show-cause-notice in this case was issued on 07.11.2016. The provisions of section 179(3) of Customs Act, 1969 required that the case should be adjudicated within a period of 120 days from the date of show-cause notice. The period between the issuance of show-cause notice and passing of the Order-in-Original is 6 months.
Therefore,. the order-original is barred. Neither the Order-in-Original No. 33/2017 dated 16.6.2017 speaks about any approval of extension of time by the Collector in this Adjudication period. Where law requires a thing to be F done in a particular manner , it would be legal and valid only if it was done in that manner and not other wise. It was mandatory to decide the case within the period specified by the Customs Act, 1969. Reliance takes placed on 2017 SCMR 1427 = 2017 PTD 1756 , 2007 SCMR 1095 , G 2008 PTD .60 , PLD 2005 Pesh 214 and 2007 SCMR 1256 , 2010 SCMR 1408 , 2006 PTD 340 and PTCL 2005 CL 841 (President of Pakistan).
14. Moreover once the goods imported into the country for home consumption and issue a sales tax invoice under section 23 of Sales Tax Act, 1990 in respect of the import goods. The provision of Customs Act, 1969 are not applicable because the importer has already paid customs duty, sales tax, income tax, regulatory duty, federal excise duty as well as additional customs duty etc at import stage.
15. The learned Departmental Representative contended that the marks and number of recovered seized goods don't tally with the Goods Declaration. The record has been examined which revealed that the seized goods were imported by Messrs Khyber Tea and Food Company Peshawar vide GD No..KAPW -HC-136690 dated 25.3.2016, KAPE-HC-140255 dated. 15.1.2016. According to available record the shape of seized goods at import stage and shape after manufacturing is tabulated as under; S. No. Shape at Import Stage in GDs (Raw Shape)Shape at Seized time (Finished Shape after Manufacturing)
Reshaped
1. Black tea Kenya Origin Garden Name Gatuti, Nadeema, Munanga PF-1, Mfg 03/2015 Exp 03/2018 (200 bagsx68KG)= 13600KG India Black tea Garden Mehak and Charminar PF-1 Mfg 02/2016Blended Black tea (Khyber Trade Mark)
(100 Bags x20 Kg)=1200 KG (10 Bags x25 Kg)=250 KG (10 Bags x20 Kg)=200 KG (10 Bags x10 Kg)=100 KG Exp 02/2019 (200 bagsx70KG)=14000 KG
2. Vietnam Origin Black pepper whole (50 bags x25kg)=1250 KGGrinded Black Pepper (Khyber Trade Mark)
(50x12)= 600KG
3. Guatemala Green Cardamom (50 ctn x 40kg)=2000 KGGrinded Green Cardamom (Khyber Trade Mark)
(100 bags xl2kg)=1200 KG
4. Cloves whole (100 bags x30 kg)=3000 KGGrinded Cloves (Khyber Trade Mark) (100bags x20kg) = 2000 KG
5. Cumin Seed (20 bags x20kg)=400 KGCumin powder (Khyber Trade Mark)
(20bags x15 kg)=300 KG
6. Indian Dry Copra (50bagsx50kg) = 2500KGGrinded Dry Copra (Khyber Trade Mark) (50bags x30kg )=1500 KG
7. Indian Ispaghol Husk (10 bags x20 kg)=200 KGIspaghol Powder (Khyber Trade Mark) (10bags x10 kg)=100 KG
8. Cassia whole (100 bagsx30 kg) = 3000 KGGrinded Cassia (Khyber Trade Mark) (100 bagsx 20kg )=2000 KG
9. Ziffle and Jalwatry (100 bagsx40kg)=4000 KGGrinded Zif fle and Jalwatry (Khyber Trade Mark) (100 bugs xl2kg)=1200 KG
10. Indian Black Cardamom (100 bags x40kg)=4000 KGGrinded Black Cardamom (Khyber Trade Mark) (100 bags xl2kg)=1200 KG
11. Holland Milk powder (100 bagsx25kg)=2500 KGMix Milk Powder (Khyber Trade Mark) (100 bags xl2kg)=1200 KG
12. Nut Meg, Almond, Ground Nut and Peanut, Kajoor (100bags x30kg)=3000 KGKheer Powder/mix Mawa (Khyber Trade Mark)
(50bags x 12kg)=600 KG
13. Red Chili whole (50 bags x30kg)=1500 KGGrinded Red Chili (Khyber Trade Mark) (50 bagsx 12kg)=600 KG
14. Green Tea leaves and stick Vietnam Mfg 03/2015 Exp 03/2018 (200 bagsx70KG)=14000 KG (20 bags x 35kg)=700 KG (20 Ctns x 20kg)=400 KGMixture Green tea (Khyber Trade Mark)
(40 Ctns x 12kg)=480 KG (30 Bags x 25kg)=750 KG
15. China sewing machine parts (20 ctn) = 1000 KGLocal assembled sewing machine (Khyber Trade Mark)(40 PCS)
16. Srilankan Broom sticks (6ft) Local assemble broom (3ft) (Khyber Trade Mark)
17. China Stationary paper in size24 x 18 = 3000KGStationary paper size 12 x 9 = 2000 KG
18. China Tissue paper roll 12 x 12 = 3000KGTissue paper in packets (Khyber Trade Mark) 6 x 4 = 1000 KG
19. China Iron sheet without color 20 x 20 = 4000KGIron sheet in 4 color 20 x 20 = 4000KG
16. NON-P AYMENT OF MINIMUM V ALUE ADDITION TAX @ 3% TAX AT IMPOR T STAGE :-- The learned Departmental Representative pointed out that the appellant didn't pay 3% value addition tax which is chargeable on the goods mentioned in the GDs produced by the appellant and placed reliance on SRO 480(I)/2007 dated 09.6.2007. He further contended that the appellant has also violated sections 3(1A), 3 (2) (a), 3 (5), 6, 7A(1) and 7A(2) of Sales Tax Act, 1990. According to the available record appellant is importer manufacturer and 3% of value addition tax is not applicable to the present appellant because in Sales Tax Special Procedures Rules, 2007 proviso to the rule 58-B exempts the importer manufactures from 3% value addition tax therefore the question raised by the learned DR has no force and has been turned down. Sales Tax Special Procedures Rules, 2007 of the Sales Tax Act, 1990 of Rules 58-B is reproduced as under: Sales Tax Special Procedures Rules, 2007 of the Sales Tax Act, 1990 [Chapter X SPECIAL PROCEDURE FOR P AYMENT OF SALES TAX BY [***] IMPOR TERS [58A. Application .---The provisions of this Chapter shall apply to imports of all taxable goods as are chargeable to tax under section 3 of the Act or any notification issued there under .] [58B. Payment of sales tax on account of minimum value addition.---(1) The sales tax on account of minimum value addition (hereinafter referred to as value additio n tax in this Chapter), shall be levied and collected at import stage on goods as specified aforesaid at the rate of [three] percent of the value of goods in addition to the tax chargeable under section 3 of the Act or a notification issued there under-- [Provided that the value addition tax shall not be charged on-
(i) The goods as are imported by a manufacture for in house consumption;
(ii) The POL products, imported by an Oil Marketing Company for sale in the count ry, whose prices are regulated under a special pricing arrangement by the Government of Pakistan or by a regulatory authority working under the Government of Pakistan.
(iii) Registered service providers importing goods for their in-house business use for furtherance of their taxable activity and not intended for further supply .]
(2) The value addition tax paid at import stage shall from part of input tax, and the importer shall deduct the same from the output tax due for the tax period, subject to limitations and restrictions under the Act, for determining his net liability . The excess of input tax over out put tax shall be carried forwarded to the next tax period as provided in section 10 of the Act.
[58C. T ax not to be refunded ---(1) In no case, the refund of excess input tax over output tax, which is attributable to tax paid at import stage, shall be refunded to a registered person.
(2) The registered person, if also dealing in gods other than imported goods, shall be entitled to file refund claim of excess carried forward input tax for a period as provided in section 10 or in a notification issued thereunder by the Board after deducting the amount attributable to the tax paid at import stage i.e. sum of amounts paid during the claim period and brought forward to claim period. Such deducted amount may be carried forward to subsequent tax period.)
[58D. Treatment of existing stocks of commercial importers .---The closing stocks of imported goods held by commercial importers on 30th June 2008 on which additional sales tax at two percent was paid at import stage shall be disposed of under the provisions of this Chapter as in force before 1st July, 2008. The differential amount payable, in case tax charged was higher than that paid at import stage, shall be paid on the monthly return as arrears of tax.] [58E filing of return and audit.---(1) The importers paying value addition tax under this Chapter shall file monthly return as provided in Chapter II of the Sales Tax Rules, 2006.
17. NON P AYMEN OF FUR THER TAX @ 2% UNDER MISINTERPRET ATION OF THIRD SCHEDULE .
The learned DR also raised a question that the appellant has made supplies of black tea, Green tea, dry copra, ground nuts, peanuts, tamarind seeds, cumin seeds, cassia whole, cardamom and black pepper to unregistered person without charging/paying further tax @ 2% on the value of supplies leviable in terms of section 3(1A) of the Sales Tax Act, 1990. Therefore the appellant has violated the provisions of sections 2(27), 3(1A), 3(2)(a), 3(5), 6, 7 A(1) and 7A(2) of the Sales Tax Act, 1990 read with rule 58 B of Chapter-X of the Sales Tax Special Procedures Rules, 2007. In rebuttal the AR produced SRO 648(1)/2013 dated 9.7.2013 amendment in subsection (1A) of section 3 of the Sales Tax Act, 1990 [See Para (1) of FBR letter C. No. 1/93-STB of 2015 dated 7th July 2015] which is reproduced as under; In exercise of the powers conferred by the proviso to subsection (1A) of section 3 of the Sales Tax Act, 1990, the Federal Government is pleased to direct that further tax @ 2% shall not be charged, levied or paid on the taxable supplies mentioned in column (2) of the Table below namely; Serial No. 6 of the table provides that items failing in the third schedule to the Sales Tax Act, 1990 while at serial No. 14 of the third schedule tea is mentioned whereas at serial No. 18 of the said schedule spices sold in retail packing bearing brand names and Trade Marks is mentioned. The crux of the above mentioned is that further tax at the rate of 2% shall not be charged, levied or paid on the tea and spices etc. GOVERNMENT OF P AKIST AN MINISTR Y OF FINANCE ECONOMIC AFFAIRS STATISTICS AND REVENUE (REVENUE DISISION)
Islamabad: the 9th July , 2013 NOTIFICA TION (SALES TAX)
S.R.O. 648(1)/2013.--- In exercise of the powers conferred by the proviso to subsection (1A) of section 3 of the Sales Tax Act, 1990. The Federal Government is pleased to direct that further tax at the rate of two percent shall not be charged, levied or paid on the taxable supplies mentioned in column (2) of the T able below namely:-- TABLE S.No. Description of goods
(1) (2)
1. Electrical energy supplied to domestic and agricultural consumers
2. Natural gas supplied to domestic consumers
3. Motor spirit, diesel oil, jet fuel, kerosene oil and fuel oil
4. Goods sold by retailers to the end consumers
5. Supply of goods directly to the end consumers including foods and beverages, fertilizer and vehicles
6. Items falling in the Third Schedule to the Sales Tax Act, 1990.
7. Second hand worn clothing and other worn articles falling under PCT heading 6309.000].
This notification shall be deemed to have taken ef fect from the 13 day of June, 2013.
Mohammad Raza Baqir Additional Secretary The Sales Tax Act, 1990 THE THIRD SCHEDULE See [clause (a) of subsection (2) of section 3] Serial No.Description Heading Nos. of the First Schedule to the Customs Act, 1969 (IV of 1969)
() (2) ()
1 Fruit juices and vegetable juices20.09 2 Ice cream 21.05 3 Aerated waters or beverages22.01 and 20.02 4 Syrups and squashes Respective headings 5 Cigarettes 2402.2000 6 Toilet soap 3401.1 100 and 3401.2000 7 Detergents 3402.2000 8 Shampoo 3305.1000 9 Tooth paste 3306.1010 10 Shaving cream 3307.1000 11 . Perfumery and cosmetics Respective sub-headings of 33.03 and 33.04 12 Omitted 13 Omitted 14 Tea Respective sub-headings of 09.02 15 Powder drinks 21.06 16 Milky drinks 2106.9090 17 Toilet paper and tissue paper4818.1000 and 4818.2000.
18 Spices sold in retail packing bearing brand names and Trade Marks09.04, 09.06, 09.08 and 09.101 3 19 Omitted 20 Omitted 21 Shoe polish and shoe cream 3405.1010.
22 Finished or made up articles of textile and leather , including garments, footwear and bed wear sold in retail packetRespective heading 23 Omitted Omitted 24 * 25 * 26 * 27 * 27 * 28 * 29 * 30 * 31 * 32 Fertilizers Respective headings 33 Cement sold in retail packing Respective headings 34 * 35 * 36 * 37 Mineral bottled water Respective headings Recently Finance Bill for the year 2018-2019 has been passed and further tax has been increased from 2% to 3%. The increased rate of 3% is not applicable upon the items mentioned in 3rd schedule of Sales Tax Act, 1990.
The appellant also produced the certificate of Ministry of Commerce and Trade which shows that the appellant company has been registered with Trade Mark or Brand name by the Intellectual Property Right Certificates and is using the same since 2002..
18. The learned DR contended that the appellant has sold the tea and spices in huge quantity and the learned DR has also admitted that the seized goods are in retail packing of 25KG 20 KG,10 KG (Hotel Pack), 5 KG, 2 KG, 1 KG, 500gm, 250 gm, 50 gm, 25 gm and 100gm sachet of packets which also carries the Trade Mark of the appellant's company , retail price and sales tax also mentioned on the bags, cartons and packets. I have examined the SRO 648(1)/2013 dated 09.7.2013 along with the 3rd schedule. It is no where mentioned in the law and in schedule as well that the manufacturers will not sale the tea and spices in huge quantity . Therefore, this plea of DR has no force hence turned down.
19. The learned Departmental Representative raised a question that the blending, mixing, cutting and repacking of tea and spices etc. were made un-necessarily is also a frivolous while the Messrs Khyber Tea and Food Company Peshawar is a registered manufacturer with FBR. Messrs Khyber Tea and Food Co. Peshawar being manufacturer mixed/ blended the tea in question at registered factory premises situated at Katchery Gate Peshawar and repacked the same in bags having Khybe r brand name and Trade Mark.
The learned DR produced FBR Income T ax Circular No. 03 of 2009 dated 17.6.2009 Para. No. 34 where it has clearly been defined "person engaged in packing and repacking have been excluded from the definition of manufacturer"
For the purpose of section 153 of Income Tax Ordinance, 2001 and as per Finance Act, 2009 the packing and repacking activities have been excluded from the definition of manufacturer . It is correct that the Finance Act and the above noted circular excluded the packing and repacking activities from the definition of manufacturer . But the provision of Finance Act, 2009 and the above mentioned circular did not exclude the process of assembling, mixing, cutting or preparation of goods in any other manner from the definition of manufac turer . The business activities of Messrs Khyber Tea and Food Company Peshawar is of mixing and blending of various tea with each other in order to create taste and flavor of tea. Thus the business activities of Messrs Khyber Tea and Food Company Peshawar falls within the scope and definition of manufacturer under section 2 (16) and (17) of the Sales Tax Act, 1990, section 153(7)(iv)(b) of Income Tax Ordinance, 2001 and section 2(25) of Federal Excise Act, 2005 as well. The sections of law ibid reproduced as under; Section 2 (16) of Sales T ax Act, 1990 provides as under: "Manufacture" or "produce" includes;
(a) any process in which an article singly or in combination with other articles, materials, components, is either converted into another distinct article or product is so changed, transformed or reshaped that it becomes capable of being put to use differently or distinctly and includes any process incidental or ancillary to the complet ion of a manufactured product;
(b) process of printing, publishing, lithography and engraving; and
(c) process and operations of assembling , mixing , cutting , diluting, bottling, packaging , repacking or preparation of goods in any other manner .
Section 2 (17) of Sales T ax Act, 1990 provides as under : "manufacturer " or "producer " means a person who engages, whether exclusively or not, in the production or manufacturer of goods whether or not the raw material of which the goods are produced or manufactured are owned by him; and shall include--
(a) a person who by any process or operation assembles , mixes , cuts, dilutes, bottles, packages, repackages, or prepares goods by any other manner;
(b) an assignee or trustee in bankruptcy , liquidator , executor , or curator , or any manufacturer , or producer and any person who disposes of his assets in any fiduciary capacity; and
(c) any person, firm or company which owns, holds, claims or uses any patents, proprietary , or other right to goods being manufactured, whether in his or its name, or on his or its behalf, as the case may be, whether or not such person, firm or company sells, distributes, consigns, or otherwise disposes of goods.
Section 153 (7) (iv) (b) of Income Tax Ordinance, 2001 Provides as under ; "Manufacture" or "produce" includes; "Manufacturer" for the purpose of the section means, a person who is engaged in production or manufacturer of goods, which includes:-
(a) any process in which an article singly or in combination with other articles, material, components, is either converted into other distinct article or produce is so changed, transferred , or reshaped that it becomes capable of being put to use dif ferently or distinctly; or
(b) a process of assembling, mixing, cutting or preparation of goods in any other manner .
Some examples of manufacturing are as under : i. Grinding and mixing of dif ferent items which create the spices. ii. Blending of dif ferent origin of black tea in order to create taste and flavor . iii. Powdering of leaves and sticks of green tea after mixing with green cardamom makes a marketable product. iv. Grinding and mixing of dry fruits i.e. almonds, peanuts, nutmeg, and dry fruits etc. for kheer etc. v. Cutting of tissue paper roll in small size. vi. Cutting of broom stick into small size. vii. Act of cutting the tin plates to size. viii. Assembling of dif ferent parts of sewing machines. ix. Cutting of iron sheet for making cupboards, boxes, doors etc. x. Mixing of milk of buf falo, goat and cow .
Hence reliance takes placed on 2004 PTD 791 Karachi High Court, 2012 PTD 1343 , 2012 PTD 1632 ; 2002 PTD 470, 2001 PTD 2097 = 2001 SCMR 1376 , 2001 PTD 2982 , 2004 PTD 788 , 2013 PTD (T rib.) 600 , 2016 PTD 80 , 2015 PTD 990 , 2013 PTD 327 , 2015 PTD 2480 , 2017 PTD 1497 Sindh High Court and 2006 PTD 1056 .
20. That the recovered black tea, food grains, spices items; mixed dry fruits were in plastic bags bearing the brand name and Trade Mark of Messrs Khyber Tea and Food Company Peshawar along with address which means that the said seized goods in question were locally manufactured. The locally manufactured goods were illegally detained, seized and confiscated. The law of land doesn't permit to detain, seize and confiscate locally manufactured goods.
Messrs Khyber Tea and Food Company Peshawar is registered with FBR as manufacturer; therefore the Company is bound under the law that it cannot sale out its import goods in the original import shape/packing, mark and number . The company must sale out the same after manufacturing, processing, mixing cutting and then repacked it in other bags, cartons and packets with its own brand name and Trade Marks.
21. Contention of appellant was that he possessed necessary manufacturing facility to be entitled to exemption from payment of 3% value addition sales tax imposed under Sales Tax Special Procedures Rule, 2007. Department plea was that appellant ought to maintain process like that of other manufacturers to qualify the definition or status of a manufacturer . According to section 2(16) of Sales Tax Act, 1990 and section 153(7)(iv)(b) of Income Tax Ordinance, 2001 even mixing of different qualities of tea or blending the same would form part of word "manufacture". The appellant produced a judgment of Inland Revenue Appellate Tribunal Karachi reported in 2016 PTD (Trib.)
80. Wherein the learned Appellate Tribunal Karachi held that theo appellant is a manufacturer . In another judgment reported in 2015 PTD (Trib.) 2480 the learned Customs Appellate Tribunal Peshawar Bench also held that appellant is a manufacturer . The learned Customs Appellate Tribunal Peshawar Bench in the same judgment also held that mixing, blending and packing process fall within the definition of manufacturer under section 153, I.T.O., 2001. The learned Customs Appellate Tribunal Peshawar Bench in judgment reported in 2013 PTD (Trib.) 600 again held that present appellant is a manufacturer and being a manufacture appellant can repack black tea in other bags carrying its own Trade Mark, as all the black tea are being blended by the manufacturer . Further the Commissioner Inland Revenue (Appeals) Peshawar in Appeal Order Nos. 455 to 457 dated 17.5.2016 while considering the appellant as manufacturer has directed the authorities concerned to release the Income Tax Refund to appellant for the tax years 2011, 2012 and 2013. Even the appellant is registered with Intellectual Property Organization with its own Trade Mark and using the same Trade Mark since 1999.
The appellant is legally authorized for sale of tea under its own Trade Mark and permitted under law for blending and mixing of tea and spices etc. According to section 2 subsection (17) clause C of Sales Tax Act, 1990 "any person firm or company which owns, holds, claims or uses any patents, proprietary , or other right to goods being manufactured. Reliance takes placed on PLD 1992 SC 364". In another judgment reported in 2017 PTD 1497 the Honorable Sindh High Court held that there appears no provision in Sales Tax Act, 1990, which could exclude a person who doesn't posses its own facility of manufacturing and get his products and gets his products manufactured from tall manufacturing from claiming his self as manufacturer . In the instant case it has been proved that the appellant has its own facility of manufacturing.
The record shows that the appellant is a manufacturer . The August Supreme Court of Pakistan in its judgment reported in PLD 2017 SC 99 held that tax laws should be construed in favour of tax payer in any substantial doubt should be resolved in favour of citizen and against the government. The record shows that Khyber Tea and Food Co. Peshawar is a taxpayer and he has used to pay taxes in dif ferent eras.
22. The learned Department Representative raised a point that the tea doesn't fall within the ambit of manufacturing. The learned counsel for appellant produced a judgment dated 06.1.2017 passed by the Commiss ioner Income Tax Appeals-II Karachi wherein the Commissioner Appeal held that "apex courts have already settled the issue in case of Tapal Tea and M.M. Ispahani Tea (Pvt.) Ltd. holding that the business of blending, mixing and packaging of tea is a manufacturing process". Ther efore, I also hold that the appellant is a manu facturer . The Taxation Officer is directed to accept the claim of the appellant as manufacturer and issue the Incom e Tax Refund of the excess deduction of the year under appeals".
The appellant has the same business activities that of the companies mentioned above. The plea of appellant is that refund income tax has already been released to the above mentioned companies. The rejection of refund Income Tax to the appellant is the violation of Article 4 of the Constitution of Islamic Republic of Pakistan, 1973. It is inalienable right of every citizen of Pakistan to have protection of law and to be treated in accordance with law. Further Doctrine of equality , as contain in Article 25 of the Constitution, enshrine golden rules of Islam and states that every citizen, no matter how high so ever , must be accorded equal treatment with similarly situated person.
Ignoring the case laws by the Collector Appeals is the violation of Article 201 of the Constitution of Pakistan, 1973. The said article provides that the decisions of High Court are binding on the subordinate courts. Reliance takes placed on 2013 PTD (T rib.) 600 ..
I also take reliance on the above noted judgment of the apex court because the above noted judgment has the binding force under Article 201 of the Constitution of Pakistan, 1973.
In other similar cases of tea the Commissioners of Income Tax of various zones including Karachi have also issued exemption certificates to the tea manufacturers under section 159(1)(b) of the I.T.O., 2001. The appellant as evidence produced the exemption certificates issued to Messrs SPATCO'S Karachi, Messrs Kohistan Tea Company Karachi, Messrs. Decent Enterprises Karachi and Messrs Muqeet Brothers Karachi dated 28.1.2012. The perusal of above mentioned certificates reveal that the Commissioner Income Tax of the relevant zones issued the certificates that advance income tax at the rate of 3% shall be collected deposited under subsection (1) of section 148 of the Income Tax Ordinance, 2001.
Tea and Food Company Peshawar) on 21.5.201 1 requested the Commissioner Inland Revenue Zone-I RTO. Peshawar for issuance of exemption/ reduted rate certificate under section 159(1)(b) of the I.T.O., 2001 because the appellant (Khyber Tea and Food Company Peshawar) has the same business activities such like mixing/blen ding of tea that of the above mentioned companies.
The Commissioner Inland Revenue Zone-I RTO Peshawar accepted the request of appellant (Khyber Tea and Food Company Peshawar) and directed the- Deputy Commissioner E&C-I RTO Peshawar to issue the reduce rate certificate to the appellant. The DC E&C-I RTO Peshawar issued the reduce rate certificate with the findings that Income Tax @ 3% is presently applicable in the case of appellant on import of tea, spices etc. The letter/order concerned is reproduced as under; OFFICE OF THE DEPUTY COMMISSIONER INLAND REVENUE (ENFORSEMENT AND COLLECTION-01)
REGIONAL TAX OFFICE JAMRUD ROAD, PESHA WAR.
No DCIR/E&C-01/R TO-pr/2010-1 1/660 Dated: 23/05/201 1.
To Messrs Khyber Tea Co. (Regd.).
Importers, Exporters and General Order Supplier Room No. 13, Suleiman Plaza Katchery Gate Peshawar Subject: CLARIFICA TION REGARDING APPLICABILITY OF T AX RA TE UNDER SECTION 148 FOR IMPORTERS-CUM-MANUF ACTURERS.
Please refer to your application dated 21st of May , 201 1 on the above mentioned subject.
Your record has been checked with reference to your application and found that your business concern is on the income tax National Tax Number 1021567-7 as well as Sales Tax Registration Number 05.01.0902- 089-64. It is further clarified that since as per record, you are "Importer , Exporter , Manufacturer and General Order Supplier as well as Whole seller" of Tea and Food items i.e. Spices etc, as such under section 148 read with Clause-(9A) of Part-II of the 2nd Schedule to the Income Tax Ordinance, 2001 income tax @3% is presently applicable in your case on import of Tea, Spices etc. This clarification is being issued on your specific request referred to above -do- (MRS. SAIMA IJAZ)
DEPUTY Commissioner (P. NO. 091-9216145)
After expiry of the reduced rate certificate dated 23.5.201 1, the appellant (Khyb er Tea and Food Company Peshawar) again made an application on 30.7.201 1 to the Commissioner Inland Revenue Zone-I RTO Peshawar for issuance of reduce rate certificate under section 159(1)(b) of I.T.O., 2001. Muhammad Nawaz DC E&C-I RTO Peshawar accepted the application of appellant and issued reduce rate certificate on 30.7.1 1, wherein the said DC clearly mentioned that the appellant is a manufacturer and Income Tax @3% is presently applicable in the case of appellant on import of tea and spices etc. The letter concerned as evidence is reproduced as under; OFFICE OF THE DEPUTY COMMISSIONER INLAND REVENUE (ENFORSEMENT AND COLLECTION-01)
REGIONAL TAX OFFICE JAMRUD ROAD, PESHA WAR.
No. DCIR/E&C-01/R TO-pr/2010-1 1/35 Dated: 30/07/201 1.
To M/S Khyber Tea Co. (Regd)
Importers, Exporters and General Order Supplier Room No. 13, Suleiman Plaza Katchery Gate Peshawar Subject: CLARIFICA TION REGARDING APPLICABILITY OF TAX RATE UNDER SECTION 148 OF THE INCOME TAX ORDINANCE, 2001 FOR IMPORTERS/CUM- MANU-F ACTURERS .
Please refer to your application dated 30-07-201 1 on the above mentioned subject.
Your record has been checked with reference to your application and found that your business concern is on the income tax National Tax Number 1021567-7 as well as Sales Tax Registration Number 05-01-0902-089-64. It is further clarified that since as per record, you are "Importer , Exporter , Manufacturer and General Order Supplier as well as Whole seller" of Tea and Food items i.e. Spices etc, as such under section 148 read with Clause-(9A) of Part-II of the 2nd Schedule to the Income Tax Ordinance, 2001 income tax 03% is presently applicable in your case on import of Tea, Spices etc. This clarification is being issued on your specific request referred to above -do- (MUHAMMAD NA WAZ)
DEPUTY Commissioner (P. NO. 091-9216145)
Copy to;-
1. The Commissioner Inland Revenue Zone-01 Regional T ax Office, Peshawar . i. On expiry of previous reduce rate certificate the appellant on 27.7.2012 made an application to Commissioner Inland Revenue Zone-I RTO Peshawar for renewal of reduce rate certificate. ii. Then before issuance of exemption certificate the Deputy Commissioner conducted inquiry through Inspector Mr. Muhammad Zahir Shah on 06.8.2012 and the said Inspector after visit and inspection of the appellant's factory reported the following comments; As per local and spot information the taxpayer imports ready made tea from India, China, Kenya and Vietnam and remix the same tea in different packs i.e. 100 gram, 250 gram, 500 gram and 1 Kg.
For the packing process they have installed 3 mixing machine, wherein they remix the tea with a particular ratio.
In my opinion the taxpayer is not a manufacturer , as the tax payer imports ready made tea from 4 countries and remix the same in a particular way . iii. That, the Deputy Commissioner while rejecting the application of appellant refus ed to renew the reduce rate certificate vide order No. E&C-I/Zone-I/217 dated 10.8.2012 on the following grounds; a. You are an importer of finished product of tea and not of raw material.b. During the visit of this office Inspector , no process like that of TAPAL and Lipton was observed at any stage can return as manufacturing. c. No process of manufacturing in involved accepts manual mixing of high and low quality tea.
Thus on the basis of above facts you are commercial importer of tea only .
The learned Deputy Commissioner E&C-I, Zone-I RTO Peshawar wrongly observe d the inquiry/inspection report submitted by Inspector . Wherein he clearly mentioned that the importer remixes the imported tea in different packs i.e. 100 gram, 250 gram, 500 gram and 1 Kg. He further mentioned that for packing process the tax payer (Khyber Tea and Food Company Peshawar) has already installed 3 mixing machines, where in he remixes the tea with a particular ratio. In this connection the report of said Inspector fulfills the definition of manufacturing. Definition of manufacturing can be easily understood from below sections of law; iv. That, after rejection of exemption certificate the appellant filed an application for review before the Chief Commissioner RTO Peshawar and during the hearing the appellant produced the exemption certificates issued to Messrs Kohistan Tea Company Karachi, Messrs SPATCO'S Karachi, Messrs Decent Enterprises Karachi and specially the certificate of Reduce Rate already issued to the appellant by Muhammad Nawaz Deputy Commissioner dated 30.7.201 1 valid up to 30.6.2012. The Chief Commissioner extending the rule of consistency and keeping in view the locus potentia accepting the revision set-asided the orders/findings of Deputy Commissioner passed in order No. E&C-I/Zone-I/217 (CIR Zone-I Peshawar) dated 10.8.2012 with directions to the Commissioner Zone-I RTO Peshawar to issue exemption certificate to the Tax Payer (Appellant) vide order No. 463 dated 07.5.2013 is as under: OFFICE OF THE CHIEF COMMISSIONER (INLAND REVENUE)
REGIONAL TAX OFFICE, PESHA WAR National T ax Number 1021567-7 Name and Address of the tax payerMessrs Jan Alam Khyber Tea and Food Company Ashraf Road, Peshawar Status AOP Order Under Section 122B Dated of order 7-5-2013 No. 463 ORDER UNDER SECTION 122B OF THE INCOME T AX ORDINANCE, 2001 The Tax Payer is an AOP, deriving incom e from import of tea under the name and style of Messrs Khyber Tea and Food Company , the taxpayer had applied for exemption certificate under section 148 read with section 59(1)(b) of the Income Tax Ordinance, 2001 for reduce rate @3%. The Commissioner IR Zone-I RTO Peshawar regretted the exemption on the plea that the tax payer imports ready made tea (finished goods) from four countries i.e. China, India, Vietnam and Kenya and simply mixed the same in the particular ratio and supplies the mixture.
Against the above rejection the taxpayer filed application under section 122B of the Income Tax Ordinance, 2001 before the undersigned on the grounds that he is a manufacturer and manufacture or producer means a person, who engages, in the production or manufacture of goods which include a person, who by an process or operation assembles, mixes, cuts, dilutes, bottles, packages, repackages and prepares goods by any other manner . Moreover he also provided a copy of exemption certificate in the case Messrs Kohistan Tea Company , issued by Commissioner Zone I Regional Tax Office-III Karachi vide certificate No. 149 dated 31/07/2012 wher ein tea has been termed as raw material.
The case fixed for hearing on 30-04-2013, AR Pir Alam Shah attended the office on the due date and the case was discussed with him in detail. During the course of discussion submitted related documents, perused and POF. Plea of the tax payer was examined with the devision made by the CIR Zone I Peshawar and it was concluded that in similar nature of cases the taxpay ers availing the facility lower rate tax deduction hence the order of the CIR Zone I is set-aside with the directions to him to issue exemption certificate to the tax payer . -do- (YUSUF GHAFF AR KHAN) CHIEF COMMISSIONER (P . NO. 091-9216145) v. That, after direction to Commissioner Zone-I Peshawar , the Commissioner Zone -I RTO Peshawar denied the order of Chief Commissioner RTO Peshawar by presenting SRO 140(1)/2013 dated 26.2.2013. The Commissioner Zone-I RTO Peshawar wrote in his order that through said SRO. 140(1)/2013 dated 26.2.2013 the facility of low rate certificate under clause 9A of Second Schedule was withdrawn and after that no reduced rate certificate could be issued. vi. Thereafter , the appellant approached to Chief Commissioner RTO Peshawar by explaining the reason that Commissioner Zone-I RTO Peshawar doesn't allow us low rate certificate under SRO 140(1)/2013 dated 26.2.2013. Appellant also requested the Chief Commissioner RTO Peshawar that now we would be treated as a manufacturer or Commercial. In this connection Chief Commissioner RTO Peshawar issued a clarification regarding manufacturing order under section 122B of the Income Tax Ordinance, 2001 vide order No. CCIR. R TO (HQ)/2013/35 dated 07.8.2013 which are as under; OFFICE OF THE CHIEF COMMISSIONER INLAND REVENUE REGIONAL TAX OFFICE PESHA WAR.
No. CCIR.R TO(HQ)/2013/35 Dated: 07/08/2013.
To Messrs Khyber Tea and Food Company Ashraf Road, Peshawar Subject: CLARIFICA TION REGARDING "MANUF ACTURER"-ORDER UNDER SECTION 122-B OF THE INCOME TAX ORDINANCE, 2001.
Please refer to your application dated 17.7.2013 filed under sections 221/122B, wherein you have sought clarification "regarding treatment as "Manufacturer" in the order already passed under section 122B vide No. 463 dated 07.5.2013.
It is clarified that the undersigned agrees with the fact that keeping in view the nature of your business activities and processes, you are covered under the provision of section 153(7)(iv)(b) of the Income Tax Ordinance, 2001. -do- YUSUF GHAFF AR KHAN Chief Commissioner The appellant also produced Income Tax Refund order under section 122(1) read with section 122(5) of the Income Tax Ordinance, 2001 dated 6.8.2012 passed by officer of Inland Revenue RTO, Karachi in favour of Messrs SPATCO'S Karachi through which the officer IR RTO Karachi issued Income Tax Refund under section 148 of the Income Tax Ordinance, 2001 of Rs. 81258461/- for the tax year 2012 dated 06.8.2012, Rs. 35,392,500/- for the tax year 2013 and Rs.
91,734,508/-for the tax year 2014, The said order shows that Messrs SPATCO's engaged in running the business of tea blending and mixing of black tea and green tea as well as leaf tone and spices etc.
23. Refund is an Amant and the public servants held such amount as an Amant and were supposed to refund/return same to the person entitled to it. Non returning or non refunding the Amant was tantamount to Khayant and could be termed as sin and against the cannon/ teachings/ injunction of Islam.
24. It is evident from the Bill of Entries produced by the appellant that the goods in question were imported by the appellant. Furthermore all the relevant documen ts were produced and according to Section 187 of the Customs Act, 1969 as held in 2012 PTD 428 Karachi HC, 2012 PTD 28 QHC the onus of proof lies on the shoulder of the prosecution to proof its case. That, the seizing staff seized the import goods illegally despite the fact that all the relevant import documents along with sales tax invoices were produced and the adjudicating officer as well as Collector Appeals Peshawar confiscated the goods in violation of Section 25-A of the General Clauses Act because it was the duty and obligation of the public functionaries to redress the grievances of citizen with reasons after applying independent mind as per principles laid down in 1998 SCMR 2268 ; and
27. In view of the above discussions I came to the conclusion that the respondent could not prove its case against the appellants regarding violation of Section(s) 16 and 157 of the Customs Act, 1969 read with Section 3(3) of the Imports and Exports (Control) Act, 1950 punishable under section 156(1)(8)(89) of the Customs Act, 1969. Seized goods are notified items but don't fall in the Appendix-A and are not bended items. It is freely importable under the import policy , any presumption of its being smuggled requires direct evidence which is absent in the present case. Consequently , this appeal is allowed and the respondents are directed to immediately work out the entire sales proceeds that are payable to the Appellant accordingly and release the vehicle unconditionally , the redemption fine imposed on the vehicle is also remitted.