JAHANZAIB WAHLAH, MEMBER JUDICIAL-III .----T wo identical appeals have been preferred by appellants against Order-in-Original No.37/2018-19 dated 30.10.2018, passed by the Additional Collector of Customs (Adjudication-II), Karachi. Since these two appeals have common question of law and facts, therefore, these were heard together and are being disposed of through this single order in the light of judgment of the Hon'ble High Court of Sindh in Customs Reference No.157/2008 (S.M.Naqi son of Syed Muhammad Hussain, Karachi).
2. Brief facts of case are that it has been reported by the Directorate General of Intelligence and Investigation, Customs Enforcement (FBR), Regional Office, Karachi received an information from that the Commodity Styrene Butadiene Rubber (SBR) grate 1502 is being imported and cleared by some unscrupulous importers by claiming benefit of exemption of sales tax against S.No.100 of Table to S.R.O. 1125(1)/201 1 dated 31.12.201 1, while the afore-said S.No. covers only SBR in latex form having usage in export-oriented textile, carpet, surgical and sports industry SBR 1502 which is normally imported in form of lumps / solid blocks, etc, has no usage in export-oriented section, hence not admissible to exemptio n. The relevant import data of the commodity for the period July, 2016 to date was retrieved from PRAL System. Scrutiny of the data revealed that majority of the consignments of SBR 1502 imported by tyres manufacturing or like industries were being cleared on payment of sales tax without any claim of S.R.O. 1 125(1)1201 1.
3. Show-cause notices issued and matter were referred for adjudication. The learned Adjudicating Authority passed aforementioned impugned order-in-originals as under: "I have gone through the case record and heard the argument put forth by the department as well as respondent.
Case of the department is that the comm odity Styrene Butadiene Rubber SBR grade 1502 is being imported and cleared by the importers, by unduly claiming benefit of exemption of sales tax against S.No.100 of Table to SRO 1125(I)/201 1, dated 31.12.201 1, while the afore-said S.No. covers only SBR in latex form having usage in export- oriented textile, carpet, leather , surgical and sports industry SBR 1502 which is normally imported in form of lumps / solid blocks, etc, has no usage in export-oriented sector , hence not admissible to exemption. Evasion of taxes and other allied taxes which are recoverable from the instant importer have been worked out to Rs.17,86,672/- for violation of the provisions of Sections 32(1) & (2) and 79 of the Customs Act, 1969, read with Sections 3, 6, and 7 of the Sales Tax Act, 1990, further read with Section 148 of the Income Tax Ordinances, 2001, and penal clause under Clauses 10 and 14 of Section 156(1) of the Act, 1969, Sections 33 and 34 of the Sales T ax Act, 1990.
The respondent on the other hand negated the charges and that his goods were assessed by the appropriate officer after due diligence after extendi ng the benefit of S.R.O. 1125(I)/201 1 dated 31.12.201 1 and released accordingly .
He stated that the issue in question as to whether the import which is "Synthetic Rubber SBR 1502" is entitled for exemption or S.R.O. 1125(1)/201 1 dated 31.12.201 1 is purely a question of law. If for the sake of discussion, it is supposed that there is some conflict between the Tariff and S.R.O. 1125(1)/201 1 even the provision of Tariff (Statute) will prevail and the description depicted against PCT 4002.1900 (SBR 1502, covered under " Other ")
He further stated that the Respondent have imported "Synthetic rubber SBR 1502" which is clearly mentioned In Serial No.100 of SRO 1125(1)1201 1 and, therefore, is entitled for the benefit of SRO 1125(I)/201 1. It is observed that in terms of Pakistan Customs Tariff the word latex" has been specifically mentioned under HS Code 4002.1 100 which is also mentioned under Sr.No.99 of SRO 1125(1)/201 1 whereas the HS Code mentioned under Sr.No.100 of SRO 1125(1)/201 1, 4002.1900 refers to "others" in Pakistan Customs Tariff which makes it abundantly clear that the goods imported by the Respondents as SYNTHETIC Rubber SBR 1502" falling under HS Code 4002.1900 are entitled for the benefit of SRO 1 125(1)/201 1.
He added that in practice the Collectorate of Customs has released, hundreds of identical / similar goods and the benefit of S.R.O. 1125 ibid was allowed to the similar goods since decades and that the Collectorate of Customs could not deviate the long established departmental practice of the Customs for allowing the benefit to many but deny the exemption of S.R.O. 1 125(1)/201 1 to the Respondent.
He claimed that the declaration of physical description of the goods in the impugned Goods Declarations as "Synthetic Rubber SBR 1502" has been confirmed by the appropriate officer of the customs in his examination Report of imported goods. Therefore by no process of reasoning the Respondent could be legally responsible and to have been alleged on account of mis-declaration Section 32(1) of the Customs Act, 1969. Similarly , provisions of Section 32(2) of the Customs Act, 1969, cannot be invoked as no collusion has proved on part of the Respondent.
The undersigned has thoroughly examined the facts of the case and observed that respondent has imported "synthetic rubber SBR 1502" which was declared by him in his GD with claimed benefit of S.No.100 SRO 1125(1)/201 1. The goods were examined by the examination staff which endorsed the declaration and was finally assessed by the assessing officer after giving benefit of SRO 1 125 under S.No.100.
Detailed scrutiny of the SRO 1125(1)/2 011, reveals that under S.No.99 of the SRO, the benefit of sales tax exemption is given to Rubber latex under PCT 4002.1 100 whereas under S.No.100, the benefit is given to SBR 1502 LATEX under PCT 4002.1900. Thou gh it is true that all kinds of synthetic rubber latex whether it's SBR 1502 LATEX or any other latex will be covered under S.No.99 of SRO having PCT 4002.1900, but it is also important to remember that the purpose of any SRO is to give benefit to the commodity and not to the PCT. Therefore when SBR 1502 latex is mentioned at S.No.100, it only means that the benefit is specific ally to SBR 1502 latex only and to no other commodity , no matter what PCT is written against it.
Department is very true while raising another important point that the S.R.O. 1125(1)/201 1 is limited ONLY to five export-oriented sectors of textile, carpets, sports, leather and surgical goods and that SBR 1502, as imported by the importer is not used in any of these sectors but mainly in the tyre making industry and therefore not entitled for the exemption sales tax under S.R.O. 1125(1)/201 1. Current Import data of SBR 1502 has been retrieved by the undersigned from the Clearance Collectorates and it has been observed that SBR 1502 is mostly imported by importers of tyre industry and they have never cleared it under the benefit of S.No .100 of S.R.O. 1125(1)201 1 but have always opted for full payment of sales tax. Had this benefit been available to this commodity , the tyre manufacturers would surely had availed the benefit. In short, SBR 1502, normally imported in the form of lumps/solid blocks, etc, has no usage in export- oriented sector , therefore not entitled for sales tax exemption under S.No.100 of S.R.0 1125(1)/201 1, besides being not specifically mentioned in S.R.O. The benefit of exemption of sales tax against S.No.100 of Table to S.R.O. 1125(1)/201 1, dated 31.12.201 1, is basically to SBR 1502 in latex form which is clearly mentioned against S.No.100 of S.R.O. and has its usage in export oriented industry in the manufacture of soft rubber products and coating material for lamination and as adhesive in the carpet industry .
Having said that, based on these observations, reasons, factual as well as legal position, charges of taking undue benefit of S.No.100 of SRO 1125(1)/201 1 dated 31.12.201 1 has been established. According, Messrs Ideal Industries 1 KM off Kerbath Solding, Badian Road, Lahore (NTN-2189317-9) is hereby directed to deposit the evaded amount of duty and taxes amounting to Rs. 17,86,672/- (Sales Tax amounting to Rs.17,86,812/-, Customs Duty to Rs. 303,502/- and Income Tax amounting to Rs.122,918/- (along default surcharges) into national exchequer immediately for violation of the provisions of Sections 32(1) & (2) and 79 of the Customs Act, 1969, read with Sections 3, 8 and 7 of the Sales Tax Act, 1990, further read with Sections 148 of the Income Tax Ordinance, 2001. A penalty of Rs. 500,000 on importer and Rs.100,000/- on Clearing Agent Messrs Commodity Service Agency , 16-Mehboob chamber Adamjee Dawood Road, Jodia Bazar , Karachi (CHA:-352) is also imposed under clauses (10) & (14) of Section 156(1) of the Customs Act. Department is also directed to approach FBR for making necessary correction of PCT against S. No.100 of S.R.O.
4. The appellant being aggrieved with the Order-in-Original filed the instant appeals before this forum the show- cause notice is discreetly silent on number of intelligible information which is needed to be addressed in accordance with law. It is well settled law that the show cause notice must disclose the exact nature of the allegations invoked therein, in the show-c ause notice GD numbers are not mentioned by the detecting department, therefore the show-cause is defected and liable to withdraw on this point. The main allegation is relevant import data of the commodity for the period July, 2016 to date was retrieved from PRAL system. Scrutiny of the data revealed that majority of the consignments of SBR 1502 imported by Tyres manufacturing or like industries were being cleared on payment of sales tax without any claim of S.R.O. 1125(1)/201 1. The directorate has not worked on the facts that above noted industries claims input adjustment of sales tax at the time of their final liabilities of sales tax. At the end they get enjoy more sales tax exemptions than the exemptions are available at import stage.
5. firstly the issue in question as to whether the imported goods which is "Synthetic Rubber SBR 1502" is entitled for exemption of S.R.O. 1125(1)/201 1 dated 31.12.201 1 is purely a question of law. It is in practice the Collectorate of Customs has released and billions of rupees of identical/similar goods and the benefit of S.R.O. (1)/1125 ibid was allowed to the similar goods since the past twenty five years. The deviation from the established departmental practice is denial to the exemption of S.R.O. 1125(1)/201 1 ibid. Secondly the show cause notice has been issued by invoking Section of the Sales Tax Act, 1990, which is without jurisdiction, insomuch as not in accordance with the legislative provisions of Section 32 of the Customs Act, 1969. The Directorate of Intelligence has not mentioned alleged GD numbers in the show cause notice and the provisions of Section 32 shall only and only be invoked where there is any evasion or found untrue statement having reasons to believe that such statement is false in the matter of "customs". In these cases, the issue in question relates to the exemption of sales tax and not customs, therefore by no process of reasoning Section 32 could be invoked in the matter which relates to purely the exemption of sales tax. There are plethora of judgments decided by the Honorable Supreme Court of Pakistan and High Court of Sindh that Section 32 shall only be where the importer has intended to evade the customs duty, sales tax or income tax due to reason customs authorities can collect sales tax and income tax but cannot issue show- cause notice for recovery of the said two taxes being comes in the jurisdiction of IRS. Thirdly as per allegation contained in the show-cause notice the DR is of the view that the goods in question are not eligible for exemption of S.R.O. 1125(1)/201 1 without any documentary evidence or basis. It is wonder as to how the goods are not eligible under serial 100 of S.R.O. 1125(1)/201 1 whereas as per serial 100 of S.R.O. 1125 ibid the impugned goods are specifically mentioned as "Synthetic Rubber SBR 1502 latex". Fourthly in terms of Order 101(B) of CGO 12/2002 the Federal Board of Revenue has made parameters that in such cases where there is no change of rate of duty on change of PCT Headings the question of taking cognizance of mis-declaration of description, value and PCT heading will not arise. In this case the customs duty on impugned goods 3% + 1% additional duty which does not change otherwise, if goods forbid the description or PCT heading is proposed to be revised or changed. A Copy of the above Order of CGO 12/2002 is enclosed herewith for the sake of ready reference. The DR may kindly be requested to clarify the above position as to how they could take cognizance for mis-declaration in this case whereas there is no change of rate of duty on impugned goods hence no government revenue is involved. Fifthly our declaration of physical description of goods in the GD as "Synthetic Rubber SBR 1502" have been confirmed by the appropriate officer of the customs in his examination report that what has been imported have actually arrived in territorial waters of Pakistan. Therefore by no process of reasoning the Respondent Company could be legally responsible and to have been alleged on account of mis-declaration Section 32(1) of the Customs Act, 1969. Therefore the show-cause notice in this account may kindly be vacated.
6. The burden of proof is under section 117 Evidence Act, 1872 (Order Shahadat, 1984) on the prosecution side as to prove the name of person with its relevant details. There is neither such docum entary evidence proved by the prosecution nor any evidence brought forwarded as to whom the Respondent Com pany is connived with. Therefore the allegation in terms of Section 32(2) of the Customs Act, 1969 is liable to be struck down and vacated. In this case there is no charge of mis-declaration of physical goods but only the allegation against claiming wrong PCT Heading which is in fact a purely questio n of law. Reliance is placed on various cases decided by the superior courts, there numbers and titles are mentioned in the grounds of appeals filed by the appellants.
7. The Tariff heading in the Pakistan Customs Tariff of Styrene butadiene rubber has been classified under heading 40.02 as below: 'Styrene butadiene rubber (SBR); Carboxylated Styrene butadiene rubber (XSBR): 4002.1 100--Latex 4002.1900--Other From the perusal of the above it is evident that styrene butadiene rubber latex is covered under heading 4002.1 100 and styrene butadiene rubber (other than latex) is classifiable under heading 4002.1900. (ix) That in terms of S.R.O. 1 125(1)/201 1 zero rating facility is available to synthetic rubber as below: S. No. Description PCT 99 Rubber Latex 4002.1 100 100 Styrene butadiene rubber SBR-1502 latex4002.1900 As explained in para 3 above that synthetic latexes are classifiable under heading 4002.1 100 and are covered against the description at S.No.99 above. There is no logic to create two different No. of HS codes for same category of compounds. It may be mentioned that styrene butadiene rubber SBR-1502 latex and styrene butadiene rubber SBR-1502 are used interchangeably having the same chemical composit ion. As such styrene butadiene rubber classifiable under heading 4002.1900 is covered against S. No.100 of the Table of S.R.O. 1125(1)/201 1 and facility of zero rating sales tax is available.
8. The styrene butadiene rubber SBR-1502 latex classifiable under heading 4002.1900 will only get benefit. Then S.No.100 of the Table, the same will become redundant as no latex could be classifiable under heading 4002.1900 in the law no redundancy could be attributed to the legislature and in such a situation the law of Harmonious Interpretation will be applied to the benefit of the tax payer as held by the superior courts.
9. The description at S.No.100 of the Table of S.R.O.(I)1 125/201 1 "styrene butadiene rubber SBR-1502 latex" is incorrect on face of it. The description Styrene butadiene rubber SBR-1502 and 'Styrens butadiene latex' are two separate descriptions. The word latex' has been uncorrected mentioned in the S.R.O. particularly when PCT heading 4002.1900 is mentioned. The benefit of zero rated sales tax is being allowed to 'Styrene butadiene rubber SBR-1502' under S.R.O. No.1125(I)/201 1 and earlier such change in practice is not allowed vide Para 74 of CGO 12/2002. The change is required to be notified which will be applied prospectively from the date the change is notified. Had the description given under S.R.O. No.1125 as "Synthetic rubber SBR 1502 latex" exist then it must have been imported and be assessed under Pakistan Customs Tariff and Trade Control.
10. Mr. Ejaz Khan, I.O. appeared and argued the matters in the light of show cause notice and subsequent impugned order-in-original with prayer that the same may be upheld being passed on the merits of cases.
11. I have gone through the arguments submitted during the course of hearing and have also gone through the record of the case. The importers in all these case have imported "Styrene Butadiene Rubber 1502" and declared the same by claiming the benefit of serial No.100 of Table-I of S.R.O. 125(1)/ 2011 dated 31.12.201 1, for the purpose of Sales Tax. The consignments were cleared by the Customs after examination/ assessment and goods went out of Customs charge. Subsequently , the Directorate of the Intelligence and Investigation-FBR, Regional Office, Karachi, initiated these cases on the ground that benefit of S.R.O. No.1125(I)/201 1 dated 31.12.201 1 is only available to Styrene Butadiene Rubber 1502 in latex form only and not otherwise.
12. The learned Adjudication Officer in the instant cases have not been able to appreciate the fact that Styrene Butadiene Rubbers (SBR) are classified under PCT heading 4002.1900. In case Styrene Butadiene Rubber is in latex form than it is classified under head ing 4002.,1 100 an& all those Styrene Butadiene Rubber which are not in latex form are classified under PCT heading 4002.1900. The exemption available at serial number 99 of the Table-I of S.R.O. 1125(1)/201 1 dated 31.12.201 1 is to All Rubber in Latex Form (PCT 4002.1 100). At serial number 100 exemptions is granted to Styrene Butadiene Rubber (SBR) 1502 latex form while indicating the PCT as 4002.1900, whereas Styrene Butadiene Rubbers (SBR) in latex form are not classified under this heading. Infact, exemption already stood granted to SBR Rubbers in Latex Form at serial number 99 of the said S.R.O. Being so, there was no need to grant exemption to the same item under a different serial number (i.e. 100). In case the contention of reporting agency is accepted it will make serial number 100 of the S.R.O. redundant as latex rubber will get benefit under serial number 99 and no SBR rubber in latex form can be classified under heading 4002.1900. In law no redundancy could be attributed to the legislature. In such situation the law, no Harmonious Interpretation applies i.e. "a provision of the statute should not be interpreted or construed in isolation but as a whole, so as to remove any inconsistency or repugnancy" along with Rule of Beneficial construction to benefit the taxpayer . Moreover , the field/clearing Collectorates have been extending exemption to Styrene Butadiene Rubber (SBR) (in non latex form) of PCT Heading 4002.1900, freely . The appellant has brought on record copies of various Goods Declarations on which field Collectorate has extended exemption to the impugned item. The appellant importers have been giving true declaration of description on the GD a "Styrene Butadiene Rubber SBR 1502". The same description has been confirmed during examination and Goods Declarations were accordingly processed with the same description and PCT, therefore, there arise no question of mis-declaration under section 32(1) of the Customs Act, 1968 on the part of appellant importers or clearing agents . Moreover , it is a settled law that claiming of incorrect SRO cannot be treated as misdeclaration under section 32 of the Customs Act, 1969. For this reliance is placed on the case decided by the Hon'ble Sindh High Court (Saadat Khan v. Federation of Pakistan through Secretary Revenue Division and 2 others ) reported as 2014 PTD 1615 wherein it was held that :- ".....It i a settled proposition of law that an interpretation of a notification as well as the classification of goods does not fall within the definition of mis-declaration."
13. What has been discussed herein above and by considering the legal propositions and facts described by the litigants, I hereby convinced that the charges framed against the appellant / importer and clearing agent are not sustainable under the law, therefore, the impugned order-in-original is set aside by vacating the show-cause notice and appeals are allowed accordingly .
14. Judgment passed and announced.