JEHANZAIB WAHLAH, MEMBER JUDICIAL-III.----Through this common order, I intend to dispose off 04 appeals bearing Nos. K-1499 to K-1502/2018 directed against the Orders-inOriginal Nos.43 to 46/2018-2019 dated 15.11.2018 passed by Additional Collector of Customs (Adjudication-II), Karachi.
2. Since, these 04 appeals pertains to same appellant and are based on identical fact and grounds. Hence, it is needless to reproduce facts and so the grounds of each case separately.
Therefore, facts of Appeal No.K-1499/2018 are taken into consideration for deliberation/decision, which are appellant is a commercial importer and stockiest of agricultural products, during the course of his business activities he imported a consignment of 25 MT Nutrifol 2-0-57 (KCI), 25 MT Nutrifol 19-19-19+TE & 25MT Agrosign 20-20-20 + TE from Messrs International Ferti Technology, Amman, Jordan, upon receipt of shipping documents he transmitted Goods Declaration with the MCC of Appraisement-East, under the provision of Section 79(1) of the Customs Act, 1969 (Act) and Rule 433 of Sub-Chapter III of Chapter XXI of Customs Rules, 2001 (Rules) and as per pre-requisite deposited upfront duty and taxes in NBP on the basis of declaration. Consequent to which GD was numbered as KAPE-HC-197469-12062017, which was selected for examination in terms of Section 198 and Rules 435 of the Act/Rules, wherein declaration was confirmed and report so prepared was uploaded in the reservoir of the GD , upon receipt of which on his workstation, the Assessing Officer, Group-II, MCC of Appraisement-East (Respondent No.2) passed assessment orders dated 09.08.2016 under Section 80 and Rule 438 of the Act/Rules after accepting the declaration in all aspects including the claimed exemption of sales tax under entry 99 of the Sixth Schedule to the Sales Tax Act, 1990 (STA), consequent to which the inbuilt authority of Customs Computerized System (CCS) passed clearance order under Section 83 and Rule 442 of the Act/Rules and the appellant obtained delivery of the goods from Terminal. After lapse of about an year, the Deputy Collector of Customs (R&D), MCC of Appraisement-East, (Respondent No.1) conducted audit on his own under section 26(2) of the Act of the scanned documents and GD of the appellant and thereafter framed contravention report with the allegation that the appellant availed the benefit of Sales Tax, which was otherwise not available on the imported goods, hence, caused loss to the exchequer to the extent of Rs.1,034,150.00 , which is an act of contravention of the provisions of Sections 32(1)(2), 32(3A), 79 of the Act, Sections 3, 6, 7 and 11 of the STA and Section 148 of the Income Tax Ordinance, 2001 (ITO) and forwarded that to the Collector of Customs, MCC of Appraisement-East, who after approving that forwarded it to respondent No. 3, who issued show- cause notice emanating the same facts and contravening provision as were narrated in the contravention report with the exception of the word "misinterpretation". An apt reply to which was submitted vide dated 17.09.2018, through which his jurisdiction and power under the provision of Section 32(3), in the matter of sales/income tax was challenged among rebuttal on the charges levelled in the show-cause notice. The respondent No.3 without rebutting a single grounds of the reply passed order dated 15.11.2018 holding the charges against the appellant established as levelled in the show-cause notice and ordering payment of short paid amount of taxes along with imposed penalty of Rs.500,000.00. Paras 6 to 9 of the order are relevant which are reproduced here-in-under for easement: "6. I have thoroughly examined the case record and have carefully considered all the written and verbal arguments put forth by respondents. Case of the department is that, Messrs Mian Shadi Agricultural Material, Chuk No.510, Gb, Mamoon Kanjan, Tandilia Wala, Faisalabad imported goods "Natural Fertilizer Nutrifol" from Jordan under PCT 3105.9000 vide GD No. KAPE-HC-197469- 12062017 and availed, benefit of 6th Schedule vide S.No.99 which is not admissible on import stage.
The exemption of Sales Tax and Additional Sales Tax is available to (composite) non chemical fertilizer) produced and supplied locally. This mis-interpretation resulted to short realization of government revenue of Rs. 1,572,306/- in terms of duty and taxes. The offending value of the goods amounts to the tune of Rs.7,416,536/-
7. The importer negated the charges and stated that Serial No.99 of the 6th Schedule pertains to Table No. I which carries the heading "Imports or Supplies" while Table No. II its for "Local Supplies Only". Admittedly, Serial No.99 is defined as "Compost (non-commercial fertilizer produced and supplied locally" which has led to mis-interpretation but not on the part of our client and custom authorities who examined, assessed and cleared the consignment but rather on the part of contravention framing authority and your authority. The exemption is available on import of the instant good by virtue of being included in the table for import or supplies, if the same was meant to be available on the goods that are meant to be supplied locally then it would have been included in Table-II , which is for "Local supplies only".
8. After detailed examination of the fact of the case, the undersigned is of the view that M/s. Mian Shadi Agricultural Material, Chuk No.510, Gb, Mamoon Kanjan, Tandilia Wala, Faisalabad, imported goods "Natural Fertilizer Nutrifol from Jordan under PCT 3105.9000 vide GD No.KAPE-HC-197469- 12062017 and availed inadmissible benefit of 6th Schedule vide Serial No. S.No.99. As it is evident at S.No. 99 of the sixth schedule the benefit is admissible to (composite non chemical fertilizer) produced and supplied locally and not to the imported one, therefore, the presence of the goods in Table of the import sixth schedule cannot justify the exemption. Moreover, imposed data of the same importer for the very same goods shows that he had time and again attempted to clear his goods claiming the same benefit of the sixth schedule and whenever the assessing officer withdrew the exemption, he straight away paid the sales tax without any objection or protest. For instance in five consignments of identical goods imported by the same importer from the same source vide GDs bearing Nos. KAPE-HC-75575- 26102017, KAPE-HC-137988-03022018, KAPE-HC- 124462- 12012018, KAPE-HC-132204-29032016 and KAPE-HC-176377- 03022018 exemption of Sales Tax under Serial No. 99 of the 6th Schedule was denied by the assessing officer and the importer paid the leviable Sales Tax immediately without questioning the reason of denial , which indicates that importer was not only well aware of the non admissibility of the claimed exemption but his attempt was with mala fide intention of inflicting loss to the exchequer.
9. Having said that, based on these observations and factual as well as legal position, charges of taking undue benefit of S.No.99 of the 6th Schedule has been established. Accordingly, M/s. Mian Shadi Agricultural Material , Chuk No. 510, Gb,- Mamoon Kanjan , Tandilia Wala, Faisalabad is hereby directed to deposit the evaded amount of duty and taxes amounting to Rs.1572306/- (Sales Tax: 1260811/- Additional Sales Tax Rs.222496/- Income Tax: Rs. 88999/-) , into national exchequer immediately for violation of the provision 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 Ordinance, 2001. A penalty of Rs. 500,000/- on importer under clauses (10) and (14) of Section 156(1) of the Customs Act, 1969 and Sections 33 and 34 of the Sales Tax Act, 1990.
3. The appellant preferred the instant appeal on the basis of grounds enumerated therein, the consultant/advocates on the date of hearing argued the case strictly in accordance with those. No cross objections under Section 194A(4) of the Act have been filed within the stipulated period of 30 days, resultant, lost their right of filing cross appeal within the contemplation of subsection (3) of aforesaid section.
However, on the date of hearing DR submitted comments which least qualify the definition of cross appeal instead as opinion observation having no legal force are kept in record of the case.
4. Argument heard and record perused the record and the relied upon citations by the appellant's. Prior to dilating upon other factual and legal aspect of the case, it is of vital importance for me to deliberate that as to whether respondent No.1 and his subordinates are empowered to conduct audit of the record of the importer under the provision of Section 26(2) of the Act, while encroaching the jurisdiction of Directorate General of Post Clearance Audit (DGPCA) established by the legislature under Section 3DD of the Act and power vested upon its officials through SRO 500(1)/2009 dated 13.06.2009 and under Section 25 of the STA and 177 of ITO and as to whether respondent No.3 has been appointed as an officer of Inland Revenue under Section 30 of STA and respective Section of ITO and is empowered to adjudicate the cases corresponding to the contravention of Section 11 of the STA and Section 162(1) of the ITO as objection qua jurisdiction is a basic lacuna on assumption of jurisdiction which can be raised at any stage of proceeding including appeal in as much as it goes to the very roots of the matter and render entire proceeding coram non judice. Beside, jurisdictional defect could not be removed by mere conclusion of proceeding and passing of order-in-original and order-in-appeal 2017 PTD 196 Collector of Sales Tax v, Khursheed Spinning Mills Ltd. and 2 others.
5. In order to decide first part of my observation recorded in para supra, Section 3DD of the Act has been examined by me, through which legislature formed /established DGPCA and its officers have been delegated powers through SRO 500(1)/2009 dated 13.06.2009 for conducting audit of the importer books of account maintained under Section 211 of the Act under the provision of Section 26(2) after serving notice/summon under clause (a) of Section 26A of the Act, they are empowered to look into every aspects of the declaration made by the importer and assessment order passed by the competent authority of the Clearance Collectorate under Section 80 and Rule 438 of Act/Rules and prepare audit observation and forwarded that to the importer for clarification, if the reply fails to settle the issue, frames contravention report and forward it to the Clearance Collectorate which onward forward to the respective Collectorate of Customs Adjudication for issuance of show-cause notice under Section 180 of the Act, and passing of order-in-original by the authority defined in Section 179 ibid. The respondent No. 1 assumed the powers of officials of DGPCA and conducted the Audit Post Clearance of the GD of the appellant under Section 26(2) while exercising the powers specifically delegated to the officials of the DGPCA. Neither respondent No. 1 nor his higher / subordinates are empowered to encroach the sovereign jurisdiction of DGPCA under any circumstances, as this will render the formation of DGPCA by the legislature under Section 3DD of the Act, and the powers delegated through SRO 500(1)/2009 dated 13.06.2009 redundant. Additionally, the respondent No.1 and his subordinates are also not appointed/designated as an "Officer of Inland Revenue" under Section 30 of the STA and Section 228 of the ITO. Resultant, are not empowered to conduct audit in the matter of Sales/Income Tax under the provision of B Section 25 of the STA and Section 177 of the ITO. Hence, respondent No 1 and his subordinates acted without power/jurisdiction, in conduction of audit of sales tax and income tax as evident from the contents of show-cause notice and order, rendering the act of conduction of audit and framing of contravention report ab-initio, null, void. It has been observed by me with great concerned that respondent No.1 and his subordinates are running a parallel department to the DGPCA and Directorate General of Internal Audit. This is not permitted under law, if it is left to be perpetuated, anarchy will prevail within the different organs of FBR to encroach powers/jurisdiction of each other, despite having no lawful authority/jurisdiction. This type of intention/act cannot be validated under any circumstances and has to be crushed in the initial stages for maintaining the integrity and sanctity of the different sovereign organs of FBR. Therefore, the conduction of audit post clearance of the GDs of the appellant under Section 26(2) of the Act, Section 25 of the STA and Section 177 of the ITO by the respondent No. 1 or his subordinates, for determination of short levied /collected amount of Sales Tax, Additional Sales Tax and Income Tax on the imported goods is without lawful authority/jurisdiction. Hence, ab-initio null and void and as such coram non judice. The superstructure built thereupon ought to be crumble down no matter how strong it may be.
6. The respondent No.3 invoked certain provision of STA and ITO without going through their expressions, and in negation of the ratio settled by the Supreme Court of Pakistan in reported judgment 2010 SCMR 1425 Section Officer Government of Punjab Finance Department and others v. Ghulam Shabbir that the Principle of Administration of Justice and Interpretation of Statute is that "the person who is performing the role of a judge, no matter even in quasi-judicial proceeding must wear all laws of the country on the sleeves of his robes and failure to do so by any reason is not an excuse". Sections 3, 6, 7, 33 and 34 STA and 148 of the ITO have been invoked. Section 3 is indeed a charging Section, under this Section the appropriate authority is Officer of Inland Revenue, whereas Section 6 defines mode and manners of collection of Sales Tax at import stage by the customs authority and on supply by the manufacturer/seller, resultant it is not a charging instead a machinery section. The liability to taxation of a registered person is determined for a tax period under Section 7, which stipulates that subject to the bar contained under Section 8, a registered person is entitled to deduct the input tax. that has already been paid from the output tax. The net amount arising thereby is paid along with the monthly return under section 26 in the Treasury.
Section 33 contains penal clauses synonymous to Section 156(1) of the Act and Section 34 speaks about default surcharge to be paid upon establishing the charges under the charging sections.
Likewise, Section 148 prescribes the procedure for collection of Income Tax at import stage by the authorities referred therein. Meaning thereby that these sections are independent, no charge could be invoked under these. Nevertheless, respondent No.3 invoked these despite irrelevant and so the section containing penal clauses/default surcharge. I have no words for this sort of ignorance, putting a big question mark on the competency of the respondent No.3. No show-cause notice can be issued under the aforesaid sections, which are independent and have no nexus D with each other. In the absence of invoking of relevant charging and applicable sections in the light of act and commission of the importer/ manufacturer/supplier of the STA and ITO. Renders it void and ab-initio and of no legal effect as held by the superior judicial fora in their judgments reported at Asst. Collector v. Khyber Elec. Lamps 2003 PTD 1275, DG Khan Cement v. Collector of Customs 2005 PTD 480, Caltex v. Collector 2003 PTD 1593, Union Playing Card Company v. Collector of Customs 2002 MLD 130, Atlas Tyres v. Addl. Collector 2002 MLD 180, State Cement v. Collector PTCL 2001 CL 558, Kashmir Sugar v. Collector 1992 SCMR 1898, Rose Color v. Chairman, CBR and 2013 PTD 813 Sarwar International v. Addl. Collector of Customs.
7. It has been forcefully contended by the Consultant/ Advocate of the Appellant that Respondent No.2 even has no mandate to issue show-cause notice in the matter of Sales Tax/Income Tax.
Whereas, Respondents are of the view that incorporation of the word "tax" in Sections 32(2) and (3) and 179 of the Act and the clarification issued by the Board vide C.No.3(32)Tar-1/90 dated 06.08.2012 and legal opinion of Ministry of Law vide No. F.242/2012-Law.I dated 11.07.2012 is sufficient for assuming powers under the charging Sections of Section 11 of the STA and 162(1) of ITO. Upon perusal of Section 32(2) and (3) of the Act, I have observed that although the word "tax" is available, this does not automatically empowers the Respondent No.3 to assume powers under the provision of Section 11(2) and (3) of the STA and 162(1) of the ITO, unless Legislature appoint officer of Customs/ respondent No.2 as "Officer of Inland Revenue/Commissioner of Income Tax", who has powers under these Sections to take cognizance in the matter relating to Sales Tax and Income Tax. It is to he noted that the word tax inserted in Sections 179 and 32 of the Act are only for assumption of powers of adjudication on the basis of involved duty and taxes by the appropriate adjudicating authority defined in Section 179(1) and in Section 32, for empowering the Officer of Customs to charge the tax payer under the said provision on the basis of amount of duty and taxes, punishable under the respective provision of Section 156(1) of the Act. Therefore, despite of insertion of the word taxes in both the Sections adjudicating authority including the Respondent No.3 have to issue show-cause notice within E the respective applicable provision of the Act only and not under any charging or Section 11 of the STA and Section 162(I) of the ITO, which are otherwise non existence in the show-cause notice and charge against the Appellant has been levelled under Sections 3, 6, 7, 33 and 34 of STA and 148 of the ITO, which are irrelevant. Even otherwise, the Respondent No.3 has also relied upon clauses (14) and (14A) of Section 156(1) of the Act, applicable in the case of mis-declaration falling within the ambit of Section 32 of the Act.
These clauses cannot invoked in the matter of Sales Tax and Income Tax falling under sections 11 and 162(1) ibid.
8. For lending further clarity to the issue, I have scrupulously gone through the provision of Section 30 of the STA and Section 228 of the ITO and observed that Respondents have not been appointed as an Officer of Inland Revenue under these Sections. Resultant, they are not empowered to exercise the powers under Section 11 of the STA and Section 162 (1) of the ITO, which empowers Officer of Inland Revenue / Commissioner of Income Tax to initiate adjudication proceeding for recovery of short collected/paid Sales Tax/ Income Tax either due to collusion or connivance or inadvertent, error or misconstruction. Hence, Respondents are not empowered to lay hands on any matter falling under the ambit of Section 11 of the STA and Section 162(1) of the ITO. Reliance on the clarification of the Board vide C.No.3(32)Tar-1/90 dated 06.08.2012 and opinion of the Ministry of Law vide No. O.M.No.F.242/2012- Law-I dated 11.07.2012 lend no help to the Respondent No. 2 as Board and Ministry of Law and Justice have no mandate to interpret the provision of the Act or amend the provision. It can only give opinion, it is for the judicial Fora to interpret the provision of statute and my opinion stand validated from the reported judgment 2005 PTD 2462 Messrs Lever Brother Pakistan Ltd. v. Customs Sales Tax and Central Excise Appellate Tribunal, Karachi that "CBR has no place to in the Scheme of Law, conferred with the jurisdiction to interpret any law, statutory or in exercise of any deliberate authority i.e. subordinate legislation". Whereas in reported judgment 2016 PTD (Trib.) 107 Qazi CNG Station, Gujrat and another v. Directorate General of Intelligence and Investigation-FBR, Karachi and 02 others, this Tribunal held that "statute can be amended by the Parliament and a notification not through notification not through any communication. In the absence of amendment of notification, clarification issued by the department could only be termed as opinion and it would not at all amend the notification".
Assuming powers on the strength of letter of the Ministry of Law and Justice is palpably illegal beside fatal to the health of the case. Even otherwise, the letter of the Ministry- of Law and Justice speaks about collection of Federal Excise Duty at import stage in the same manner and at the same time, as if it is a duty of customs payable under the Act, (IV of 1969) and for collection of the same the provision of Section 31A also apply. Reference of Section 7 of the Federal Excise Act, 2005 has also been given simply for clarification that for collection of Federal Excise Duty provision of STA is applicable. The emphasis in the O.M. is levy and collection. Therefore, to further elaborate and settling the issue to its logical conclusion, I add while referring to Section 6 of the STA and 148 of the ITO under which the Clearance Collectorates are empowered to collect the taxes on the imported goods as like customs duty. These sections least empowers the Officers of Customs including Respondent No. 3 to initiate adjudication / recovery proceeding for the short collected/paid, Sales Tax and Income Tax either due to collusion or connivance or inadvertent, error or misconstruction.
For proceeding with these type of recoveries a show-cause notice has to be issued under the Provision of, Section 11 of the STA and Section 162(1) of the ITO , by the authority expressed therein i.e. Officer of Inland Revenue/Commissioner of Income Tax under subsections (3) and (4) of Section 11 of the STA and Section 162(1) of the ITO. In these sections neither Officer of Customs and Respondent No. 2 figures anywhere. He assumed the power not vested with him under the provision of Sections 11 and 162(1) of the STA and ITO. Resultant, the Customs Collectorates does have powers to collect, Sales Tax and Income Tax as duty at import stage, conversely, to the plea that Customs is empowered to recover the short paid amount of sales tax and income tax at the import stage under Section 202 of the Act is based on mistaken belief, infact the Customs Collectorate could recover the amount of Sales Tax and Income Tax upon receipt of notice from the Officer of Inland Revenue and Commissioner of Income Tax in terms Section 48 of the STA and Section 140 of the ITO for recovery of the adjudged amount of Sales Tax and Income Tax after due process of law.
Therefore, it is my considered opinion that the Clearance Collectorates does have the authority to collect Sales Tax and Income Tax at import stage in the capacity of collecting agent and can recover escaped/short payment paid Custom Duty and Regulatory Duty levied on the imported goods under Section 18 of the Act under section 202 ibid., after due process of law, but have no powers to adjudicate the cases of short recovery of Sales Tax and Income Tax under sections 11 and 162(1) ibid. and this stood validated from reported/unreported judgments 2011 PTD (Trib.) 110 Messrs AGP (Pvt.) Ltd. v. Additional Collector of Customs, Karachi 2010 PTD (Trib.) 2086, Messrs Global Marketing Service and another v. Model Customs Collectorate and another, SCRA No. 01/2010 Collector of Customs, Islamabad v. Global Marketing Services and another v. Model Customs Collectorate and another 2004 PTD 801 Al-Haaj Industrial Corporation (Pvt.) Ltd., Peshawar v. Collector of Customs (Appraisement). C.P. No. D-216/2013 Messrs Lucky Cement Ltd. v. Federation of Pakistan and others, 2014 PTD 1963 Shujabad Agro Industry (Pvt.) Ltd. v. Collector of Customs and 8 others, 2015 PTD 702 Muhammad Measum and others v. FOP and 02 others, 2016 PTD (Trib.) 969 Asif Textile Trading v. Directorate General I&I-FBR, 2016 PTD (Trib.) 1008 Phillip Morris (Pakistan) Ltd., Karachi v. Additional Collector of Customs, 2016 PTD (Trib.) 2125 Al-Fajer Associates v. Directorate General of Intelligence and Investigations-FBR, Appeal No. K-1635/2014 Pepsi Cola Export Corporation, Karachi v. Directorate General of Post Clearance Audit and 2 others, Appeal No.K-1029/2016 Messrs M.R. Sons, Karachi v. Directorate General of Intelligence and Investigations- FBR, Appeal No. K-1030/2016 Messrs Muhammad Imran, Karachi v. Directorate General of Intelligence and Investigations-FBR, Appeal No. K-1343/2015 Messrs Rightway Trading Company, Karachi v. Deputy Collector of Customs, MCC of Appraisement-West and 3 others, 2016 PTD (Trib.)
2463 Messrs Zubair Wali Ahmed Zai Ltd. v. The Principal Appraiser, Directorate of Transit Trade and others and 2017 PTD (Trib.) 481 Singer Pakistan Ltd. v. Collector of Customs and 2 others. The opinion formed by me also have the validation of the judgments reported at 1994 CLC 1612, 1990 PTD 29, 2005 PTD 23 and in 2007 PTD 250 titled as Collector of Sales Tax and Federal Excise v.
Messrs Qasim International Container Terminal Pakistan Ltd., wherein it has been held that "There is a clear distinction between the charging provision of Statute and the machinery part thereof. It is axiomatic that mode of manner of recovery does not alter, the nature of tax nor a tax can be introduced or import by implication." In 2008 PTD 1973 Xen Shahpur Division v. Collector of Sales Tax (Appeal), Collector of Customs, Federal Excise and Sales Tax, Faisalabad, for clarity of the Rule of Interpretation of Statute, golden principle was outlined in so many words reading as "That fiscal law is to be applied with full authority and its natural meaning one has to look merely at what is clearly said and there is no room for any intendment --neither there is equity about a tax nor presumption as to tax - nothing is to be read in, nothing is to be implead - one can only look fairly at the language used" The Hon'ble Supreme Court of Pakistan in reported judgment 2006 SCMR 129 titled as DGI&I and others v. Al-Faiz Industries (Pvt.) Ltd. and others held that "If the law have prescribed method for doing a thing in a particular manner such provision of law is to be followed in letter and spirit and achieving or retaining the objective of performing or doing of a thing in a manner other than provided by law would not be permitted--- each and every words appearing in a Section is to be given effect and no other word is to be rendered as redundant or surplus -- when the legislature required the doing of a thing in a particular manner then it is to he done in that manner and all other manner or modes of doing or performing that things are barred -- if the doing of a thing is made lawful in a particular manner the doing of that thing in conflict with the manner prescribed will be unlawful as per maxim "Expression facit cessare taciturn".
I, therefore hold that the exercise of jurisdiction on this point by respondent 'No. 3 is without lawful authority and jurisdiction. Hence, issuance of show-cause notice and passing of Order-in-Original are abinitio void and as such coram non judice on this point also.
9. It is mandated upon the adjudicating, authority/respondent No.3 to remain within the ambit of show-cause notice while recording the judgment i.e. within the invoked provision of the law and spelled out grounds forming basis of the allegation. In case venturing contrary to the invoked provision and grounds not available therein. Renders the order palpably illegal. Upon examination of the order, I have observed that respondent No. 3 has made insertion in para 8 of the order reading as "for instance in 5 consignments of identical grounds imported from the same source vide GD's bearing No. KAPE-HC75575-26102017, KAPE-HC-13798803022018 , KAPE-HC-124462- 12012018, KAPE-HC-132204- 29032016 and KAPE-HC-176377-04042018 exemption of Sales tax under Serial No.99 of the 6th Schedule was denied by the assessing officer and the importer paid the leviable sales tax immediately without questioning the reason of denial, which indicates that importer was not only aware of the non-admissibility of the claim exemption but his attempt was with mala fide intention of inflicting loss to the exchequer." This ground has not been spelled in the show-cause notice, rather only revolves for not levying/collecting sales tax at the time of passing of assessm ent order by the appropriate authority due to "misinterpretation" of the Entry No. 99 of Sixth Schedule to the STA. The respondent No.3 consciously and intentionally travelled outside the charter of show-cause notice. Such type of orders are always declared by the Superior Judicial Fora as being passed without any lawful authority and palpably illegal as held in Collector Excise and Land Customs and others v. Rehm Din reported at 1987 SCMR 1840 and Adam v. Collector of Customs, Karachi PLD 1969 Supreme Court 446, Muhammad Sadqain v. Collector of Customs (Appraisement) 2006 PTD 2742 and Messrs Exide Pakistan Ltd. v. Deputy Collect of Customs (Adj- III), Karachi. 2004 PTD 1449, "wherein it has been held that "Order of adjudication, being ultimately based on a ground which was mentioned in the show cause notice is palpably illegal on the face of it".
10. That upon passing of assessm ent/clearance order under the provision of sections 80, 83 and Rules 438 and 442 of the Act/ Rules, the orders so passed became appealable and can be assailed before Collector of Customs (Appeals) under Section 193 of the Act and respondent No. 1 is empowered under the said Section. If he had any reservation against the passed assessment orders, the appropriate course of action was to assail the said orders before the Collector of Customs Appeals. Which had not been done within the stipulated period and order so passed on 17.06.2017 by the competent authority defined in Section 2(a) in exercise of the powers vested upon him through serial No. 30 of SRO 371(1)/2002 dated 15.06.2002 cannot be disturbed by any authority.
To the contrary, the respondents through conduction of audit under section 26(2) and issuance of show-cause notice/passing of order-in-original in fact opted to reassess the GD under section 80(3) in isolation without recourse to Section 80(2) of the Act and in the absence of mis- declaration in material particular in any aspect. Rendering the carried out entire exercise void and nullity to law. Mechanism for determination of validity/legality of any assessment order/order has been provided in the provision of Section 193(1) of the Act, i.e. filing of appeal by either respondent No. 1 or his subordinate before Collector of Customs Appeal. Who upon receipt of which have to go through its facts and grounds and thereafter if he think fit that in the case under adjudication correct duty and taxes has been either levied or short paid on the basis of found goods, is empowered to issue a notice under section 32 of the Act to the respondent (appellant) as expressed in 3rd proviso to subsection (3) of section 193 of the Act, and after receipt of reply to the said notice the Collector of Customs have to decide the appeal in the light of the issued show cause notice and reply. In the instant case no appeal has been filed by the respondent No.1 to this date despite mandated under law. Instead both assumed the powers under Section 195 of the Act and reopened a valid passed order under section 80 ibid. None of the respondents are empowered to reopen an order. Hence, both acted without power/jurisdiction, therefore, their action is without lawful authority and as such ab-initio, null and void as held by Superior Judicial Foras in umpteenth reported judgments e.g. 2014 PTD 1256 Messrs Paramount International (Pvt.) Ltd. v. FOP and others.
It is added further that assessm ent order in the subject case was passed on 17.06.2017 and the appeal against which could had been filed by the respondent No.1 on or before 16-7-2017 but had not filed and the passed assessme nt order attained finality and became past and closed transaction and cannot be disturbed or reopened by any authority or court as held in reported judgment 1989 MLD 4310 Messrs World Trade Corporation v. Central Board of Revenue that "if the order has attained finality through limitation. A fortiori; the Central Board of Revenue could not open up an order that had attained finality under the Sea Customs Act, 1878, and against which so suo motu revision lay under the Act" and 2004 PTD 3020, Glaxo Smith Kline Pakistan Ltd., Karachi v.
Collector of Customs, Sales Tax Central Excise, Karachi "that department could not re-agitate which had been decided against him --said order could be assailed in appeal or revisional proceedings, which in the present case were not initiated and therefore the same held the field and in the presence of earlier order another order contrary to the said earlier order could not be allowed hold the field for the simple reason that two contrary orders could not exists at one and a same time --- in the light of the settled law the initial assessment order attain finality by virtue of expiry of stipulated period expressed in subsection (2) and as such hold field and no subsequent order on these to be allowed to be piled upon these as this is not permitted beside tantamount to double jeopardy barred under Article 13 of Constitution of Islamic Republic of Pakistan.
11. Leveling allegation of contravention of Section 79(1) of the Act in the case in hand is misplaced due to the fact that aforesaid section is not a charging instead a machinery, outlining the procedure of transmitting GD with the Clearance Collectorate. No charge under the said Section could be invoked in the show-cause notice even in general not particularly, when the goods were selected for examination under the provision of Section 198 and Rule 435 of the Act/Rules, on the strength of which the competent authority defined in Section 2(a) had to pass assessment order under the provision of Section 80 and Rule 438 in exercise of the powers vested upon him through SRO 371(1)/2002 dated 15.06.2002 for levy of duty and taxes either with the application of Valuation Ruling issued by the Director , Directorate General of Valuation under Section 25A for the imported goods or in case of non availability of valuation ruling, the value of the identical/similar goods available in the data reservoir maintained by the PRAL under Rule 110 of the period given in Rule 107(a) of the Rules. Since, the goods of the appellant were not auto cleared by the CSS module, instead selected for examination, verification of declaration, which were found correct in all aspects. His case stands ousted from provision of Section 79(1) and transferred to the provisions of Section 80 and Rule 438 of the Act/Rules, which lays inbuilt duty on the Officer of Customs to check all the aspects of the imported consignment as evident from their expressions reading as 80(1) :- on the receipt of goods declaration under section 79, an officer of customs shall satisfy himself regarding the correctness of the particulars of imports, including declaration assessment, and in case of the customs computerized system payment of duty, taxes and other charges thereon." and "438: Where any declaration has been filed under Rule 433 or additional documents have been submitted under rule 437 the Customs shall satisfied itself as to their correctness including its value, classification claim of exemption, payment of duty and taxes and may re-assess the goods during or after clearance". As adumbrated, appellant consignment cannot be construed by any stretch of imagination/interpretation has to be cleared on self assessment basis under Section 79(1) of the Act. Therefore, no contravention of the said section despite machinery has been made by the appellant, invoking the contravention of section 79(1) by the respondent No. 3 in the show cause notice is erroneous/misplaced.
12. Invoking of provision of Sections 32 and 32A of the Act by the respondent No. 3 on the appellant in totality is illegal void, as no mis-declaration in material particular has been made by the appellant in the transmitted declaration, nor the goods so declared were found contrary in the examination report, instead as declared to every extent e.g. description, quantity in weight and PCT heading. Similarly, documents uploaded by him in the reservoir of the GD at the time of transmitting under Section 79(1) and Rule 433 of the Act/Rules were concocted, altered, mutilated, false, forged, tampered or counterfeit as such clauses (a) (b) and (c) of the Section 32A is not attracted and is inapplicable. Clauses (b) and (c) are also irrelevant as it is matter of fact that appellant never gave any information electronically or by any other mean corresponding to GD referred in the show-cause notice as such clauses (b) (c) are certainly not attracted, clause (d) also does not apply as he never altered mutilated or suppressed any finding of any customs functionaries or any documents or in the computerized record. Clause (e) is also obviously irrelevant as no attempt, abatement or connivance in any action mention in clauses (a), (b), (c) and (d). The show-cause notice in this context by virtue of invoking irrelevant sections ought to be without lawful authority and as such void and ab-initio. Rendering the show cause notice and order-in-original as of no legal effect being based on no evidence as held by Hon'ble High Court of Sindh in reported judgment 1991 PTD 551 that "Any action which is based upon no evidence is not permitted by law "and in 2006 PCr.LJ 1427 = 2006 PTD 2190 that "a mere assertion of the prosecution is no evidence".
13. With the incorporation of word misinterpretation in the show-cause notice by the respondent No. 3 the case in question is of non collection of sales/income tax due to error, omission and misconstruction, attracting the provision of Section 32(3) of the Act , the appropriate authority to issue show-cause notice and adjudicate the case under the said section rest with Principal Appraiser as evident from clause (ii) of Serial No.2 of SRO 371(I)/2002 dated 15.06.2002. To the contrary, respondent No.3 issued show-cause notice and passed order-in-original by usurping the power of Principal Appraiser, which is not permissible under law. This blatant illegality renders the show-cause notice and order-in-original without lawful authority and jurisdiction and as such ab- initio null and void as held by Superior Judicial Fora in umpteenth reported judgment. I also ponders on the rationale adopted by the respondent No.1 of implicating and respondent No.3 charging the appellant for an act of misdeclaration, despite non availability of that,, in any context and letting escort free the respondent No.2 who passed assessment order under the provision of Section 80 and Rule 438 of the Acts/Rules, despite standing on the same pedestal as of appellant.
The treatment given to appellant by the respondents Nos.l and 3 is nothing more than giving a partial and differential treatment, which is tantamount to discrimination, not permitted under Articles 4 and 25 of the Constitution of Islamic Republic of Pakistan. A person placed at the same pedestal cannot be treated differently as it would constitute a negation of Articles 4 and 25 of Constitution of Islamic Republic of Pakistan. The Honourable High Court of Sindh in its reported judgment 2002 PTD 976 held that "vacating the show-cause notice in one case and taking action against another person in similar situation, is amount to discrimination which is hit by Article 25". In reported judgment 2002 SCMR 312 and 2009 PTD 1507 the Hon'ble Superior Courts have observed that "there exists no power to target incidence of tax in such a way that similarly placed person be dealt not only this similarly, but discriminatingly". Whereas, in reported judgment 2005 SCMR 492 the Hon'ble Supreme Court held that "A facility allowed to some one and denied to other is discrimination". The Apex Court further held in reported judgment 2010 SCMR 431 that: "Doctrine of equality, as contained in Art.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 persons--- State may classify persons and objects for the purpose of legislation and make laws' applicable only to persons or objects within a class--- In fact all legislations involve some kind of classification whereby some people acquire rights or suffer disabilities whereas others do not--- What however, is prohibited under principle of reasonable classification, is legislation favouring some within a class and unduly, burdening others--- Basic rule for exercise of such discretion and reasonable classification is that all persons placed in similar circumstances must be treated alike and reasonable classification must be based on reasonable grounds in given set of circumstances but the same in any case must not offend spirit of Art.25 of the Constitution."
14. In the instant case the provision of Section 19A has to play a crucial role, evident from my deliberation in penultimate paras, reproduction of its verbatim is vital: "19A presumption that incident of duty has been passed on to the buyer:- Every person who had paid the customs duty and other levy or other goods under this Act shall unless the contrary is proved by him, be deemed to have passed on the full incidence of such customs duty and other levies to the buyer as part of the price of such goods."
The intention of the legislature in the said provision is that, that no person can claim refund of any duty or other levies which he paid on the goods imported and deemed to have been passed on full incidence of the paid duty/levies to the end buyer as a part of the price of such goods, unless contrary is proved by him through documentary evidence that he has not passed on the duty and levies paid at the time of clearance of the imported goods -to end consumer, if he successfully proves that he has not passed on these, his claim of refund is admissible and ought to be sanctioned. The said section has to he read in conjunction of Section 33 ibid, which governs refunds arising out of error, omission and misconstruction and for that reason proviso to subsection (1) of section 33 was inserted through Finance Act, 2009. However neither section 19A nor Section 33 are applicable on the refunds which are outside the ambit of Section 33 as held in umpteenth reported judgment of the Superior Judicial Fora.
The question arise that when the respondent No.2 has not charged/levied and collected taxes due to mis-interpretation, evident from the narration made in show cause notice, instead allowed exemption entry No. 99 of Sixth Schedule to the STA. How those can be collected subsequently after clearance of the goods, if the expression of Section 19A is read in juxtaposition, which shall be as follows: "19A. Presumption that incident of duty has not been levied and collected from the importer and not paid by him:- Every person who had not paid the customs duty and other levies or other goods under this Act, deems to have not passed any part of the incidence of such duties and other levies to the buyer unless the contrary is proved by the customs."
In the cases of the appellant under judicial scrutiny of the Tribunal, it is admitted fact that the respondent No. 2 and his subordinates have not charged the levied sales tax and income tax at the time of the passing of clearance/assessment order under sections 80 and 83 and Rules 438 and 442 of the Act/Rules. Levying these at belated stage through adjudicating proceedings is not correct being devoid from legal infirmity as the STA and ITO are silent in regards to mechanism that how the said levy can be passed on by the appellant to the end consumers, which is the spirit and essence of Sales Tax and Income Tax.
The approach of respondents Nos. 1 and 3 is not correct instead-nullity to law as no duty or taxes can demanded from the appellants just like the available provision of Section 19A explicitly expressing that when a person fails to prove that he has not passed duty and taxes paid by him at import stage, it is presumed to be passed on to the end consumer in full and as such is not entitled for refund. Additionally, one has to note that ever importer is duty bound to file return-cum- payment challan of a tax period under Section 26 of the STA, in which he is entitled to claim input of the paid taxes either at import stage or local buying , from which after making adjustment of the input tax charged by him from the buyer to whom goods were sold, in case input tax is excess, either he claimed refund for that or carry forward the said amount for adjustment in the return of subsequent month has expressed in section 7 of the STA. in case the output taxes are in excess to the paid input tax, he deposit the difference of the tax with the prescribed branch of NBP. Similarly, for paid income tax levied on imported goods importers files an annual statement with the FBR in terms of Section 115(4) of the ITO as final tax liability for the tax year. In the presence of availability of said mechanism, it is mandated on Officer of Customs to levy/collect duty and taxes correctly in accordance with the provision of STA/Sixth Schedule or infield notification on the imported goods, enabling the importer to declare the same in his monthly return of Sales Tax and Annual Statement of Income Tax as he has to charge the same from the buyer (end consumer) at the time of selling the goods. If taxes are not levied / collected by the Customs officials correctly due to "misinterpretation" those cannot be recovered subsequently through any mechanism e.g. through show-cause notice/order-in-original, as against the said short collected / paid amount of taxes, importer is unable to show the same as input tax, nor output in his monthly return for taxes after sale of the goods, after taking into account the cost of the goods amount of taxes and administrative/selling expenses, charging any amount subsequent to sale is neither ethical or legal. Meaning thereby, in such like situation for adjustment or claiming the short collected amount of taxes, no mechanism has been prescribed in any provision of STA and ITO. Resultant, it is deems to be not passed to the end consumer and cannot be recovered, with the exception of approaching the Board as per the expression of Section 65 of the STA for issuance of notification for regularizing of non collection of sales tax and income tax under the respective provisions of STA and ITO on the imported goods of the appellant and which read as follows: "65... Exemption of tax not levied or short levied as a result of general practice. Notwithstanding, anything contained in this Act, if in respect of any supply the Federal Government is satisfied that inadvertently and as a general practice ..--
(a) Tax has not been charged in any area or any supply which was otherwise taxable or according to the said practice the amount charged was less than the amount that should have actually been charged;
(b) The registered person did not recover any tax prior to the date it was discovered that the supply was liable to tax; and
(c) The registered person started paying the tax from the date when it was found that the supply as chargeable to tax.
It may by a notification in the official Gazette, direct that the tax is not levied or short levied as a result of that inadvertent practice, shall not be required to be paid for the period prior to the discovery of such inadvertent practice."
15. What have been discussed hereinabove, particularly the interpretations of law, legal propositions and observations made thereon and to follow the ratio decidendi observed by the Superior Courts, I annul the conducted audit and framing of contravention report by respondent No.1 and cancel/set aside the show-cause notices/ order-inoriginal issued,/ passed by respondent No.3 in totality being illegal, abinitio, null and void. Appeals are allowed accordingly with no order as to cost.
16. Order passed and announced accordingly.