JEHANZAIB WAHLAH (MEMBER JUDIC IAL-III). Through this order , I intend to dispose off Appeal No. K-74//2018 directed against the Order-in-Original No. 218/2017-2018 dated 05.09.2017 passed by Additional Collector of Customs, Adjudication-H, (Respondent No. 2).
2. Briefly facts of the case as reported by the appellant are that respondent No. 1 imported 02 consignments of shredded/grated cheese of European origin falling under PCT Heading 0406.2000, which is leviable to 17% sales tax from Model Custom Collectorate of Appraisement (East) vide GDs No. KAPE-HC-31777-04.09.2015 and KAPE-HC-8128- 19.07.2016 by misdeclaring classification i.e. under PCT Heading 0406.1010 for availing the benefit/exemption of sales tax under Sixth Schedule of the Sales Tax, 1990 despite not admissible for short paying/evading amount of taxes (sales/income tax) of Rs.1,512,282.00. Audit observation was served on respondent No. 1 for justification, which was submitted. Since that was not convincing, contravention report was framed against the respondent No. 1 and was forwarded to respondent No. 2 with the said effect, for issuance of show-cause notice. The respondent No. 2 issued show-cause notice dated 15.05.2017 to the respondent No. 1 for submitting reply , which was submitted vide dated 20.05.2017. The respondent No. 2 after conduction of hearings on multiple dates and perusal of the reply passed order dated 05.09.2017 through which show-cause notice was vacated, while observing in para 7 that: 7- I have examined record of the case, in written reply as well as the verbal arguments of the learned Advocate of the respondent and also those of the representative form the case making agency i.e. PCA, Karachi. Perusal of the show-cause notice reveals that the main allega tion is that the respondents imported 02 consignments of Shredded/crated Cheese, and cleared the same by misdeclaration the PCT classification /heading of the both consignments as 0406.1010 in order to avail benefits/exemption for sales tax under 6th schedule of the Sales tax Act, 1990. As per the PCA the goods were correctly classifiable under PCT heading 0406.2000. Hence, chargeable, to sales tax CBS 17% and income tax 6%.
Hence the respondent was alleged to have caused a loss to the exchequer of Rs.1,512,282/- The contention of the representative of the PCA is that as per .images the goods appear to be shredded/graded cheese.
The contention of importer is that cheese was processed and not grated. The risen given by PCA is not convincing as he impugned goods were examined, assessed and cleared in the years 2015 and 2016. It is observed that as physical examination of the goods was conducted by the Collectorate and same were found as per declared description of the respondent. No such discrepancy was reported at the time of examination by the official of the clearance Collectorate. The instant allegation by PCA which has been levelled approximately 01 to 02 years after the clearance of the goods and that so without having any sample of goods to validate claim but in fact just on the basis on grainy images is nothing but an exemption and presumption of the case. Therefore, it is concluded that charges levelled agains the respond and not established the Show-Cause Notice No. Adj-II/Add.Coll / SCN/PCA/Ekada Corporation./2017 dated 15.05.2017, therefore , disposed off accordingly .
3. The appellant filed the instant appeal on the basis of grounds enumerated therein, the representative of the appellant on the date of hearing argued the case strictly in accordance with those. Cross objections under subsection (4) of section 194A of the Act has been filed by the respondent No. 1 on 26.03.2018 i.e. within the stipulated period of 30 days from the date of notice of the Tribunal in appeal, qualifying as cross appeal filed under subsection (4) as expressed in aforesaid Section and as such have legal force and ought to be considered as a valid piece of document.
4. Rival parties heard and case record perused. Prior to determination of the factual aspect of the case in the light of impugned show-cause notice/order-in-original and memo. of appeal. It is to be looked in that as to whether the appellant during the course of audit acted within the parameter of expression of section 26A of the Act and as to whether appellant and his subordinate/ respondent No. 2 were/are empowered to initiate proceeding in the matter of Sales Tax and Income Tax. For obtaining answer to the first part of my observation in regards to mechanism/devised procedure of audit, reproduction of section 26A is of vital importance: "26A Conducting the Audit:- (1) the appropriate officer of Customs conducting any audit under this Act shall proceed in the manner as the Board may by rules prescribe.
(2) Where any audit or inquiry or investigation is to be conducted for the purpose of ascertaining the correctness of any declaration or documents or statement, for determining the liability of any declaration or document or statement, for determining the liability of any person for duty, taxes fees surcharge fines and penalties, or for ensuring compliance with all other laws administered by the Customs, an appropriate of ficer of Customs may;-
(a) Examine, or cause to be examined upon reasonable notice, any record of any statement or declaration or document described in the notice with reasonable specificity , which may be relevant to such audit, inquiry or investigation:
(b) Summon, by giving a notice and reasonable time,-
(i) The person who imported, or exported or transported or stored or held under customs bond, or filed a goods declaration, drawback or refund claim,
(ii) Any of ficer, employee or agent of any person described in clause (a); and
(iii) Any person having possession custod y or care of records and documents required to be kept under the Act and any other person , as deemed proper , to appear before him at a reasonable-time and to produce such records and documents as specified in."
From bare reading of the provision of section '26A of the Act, it is abundantly clear that the appropriate designated Officer of Customs empowered by the Board for conducting audit of the record of the importer in the manner prescribed by the Board in Rules. To date no Rules are framed /issued by the Board despite insertion in section 26A of the Act through Finance Act, 2006, resultant, the audit of an importer accounts/record maintained by him under the provision of Section 211 and Chapter XI of Act/Rules, has to be conducted by the appellant or his subordinates as per the mechanism provided in the Section itself, wherein appropriate officer of Customs is empowered to conduct audit or inquiry or investigation of an importer to the purpose of ascertaining the correctness of any declaration or documents or statement, for determining the liability of any declaration or document or statement, for determining the liability of any person for duty, taxes, fees, surcharge, fines and penalties, or for ensuring compliance with all other laws. However , prior to proceeding with the said exercise, the appropriate officer appointed under section 3DD of the Act for the said purpose and empowered through SRO 500(1)/2009 dated 13.06.2009, which are appellant or his subordinate in the first place have to either summon or give a notice and reasonable time to an importer for the conduction of audit and for the said purpose production of accounts and record as per the expression of clause (b) of subsection (2). The first ground of the respondent No. 1 in cross objections is that the appellant or his subo rdinates have not either issued to him any notice or served a summon for the purported exercise of audit despite mandated under law. This lapse renders the audit so conducted; which is the root cause of the impugned show cause notice as of no legal effect. It is admitted fact, no notice or summon has been issued /served by the appellant or his subordinates to the respondent No. 1 as no copy of those were annexed with the memo. of appeal, the representative of appellant was asked to place the copy of the notice/summon forwarded/served to the respondent No. 1, as the copies of the same would had been available with them in the case file. The query was replied in negative, which flabbergasted me, another query was made from him that how the audit was conduct ed, without asking for the accounts and record of the import, the answer was on the basis of GD available in the data reservoir maintained by PRAL under Rule 110 of Rules, upon this the representative of appellant was confronted to read out the passage available in section 26A, wherein audit of any importer is permitted on the basis of the record available in the CCS Module, to this the answer was given in negative confirming that audit of the importer accounts/book could only be conducted after issuance/serving of notice/summon. In the absence of that conduction of audit on the basis of the record available on the CCS Reservoir is not permitted as it is settled proposition of law that a thing has to be done as it has been prescribed to be done, in case of doing the same in any other manner render it illegal and as such void and ab-initio and this have been held in countless reported judgments, reference is 2002 PTD 2457 that "the thing should be done as they are required to be done, or not at all". The Apex Court held in judgment PLD 1971 Supreme Court 61 "neglect of plane requirement of an absolute statutory enactment prescribing how something is to be done, would invalidate thing being done in some other manner" and in PLD 1973 Supreme Court 236 "it is now well established that where an inferior Tribunal or Court has acted wholly without jurisdiction or taken any action "beyond the sphere allotted to the Tribunal by law and therefore outside the area within which to law recognizes a privilege to err" then such action amounts to a "usurpation of power warranted by law" and as such an act is a nullity that is to say the result of a purported exercise of authority which has no legal effect whatsoever" in such a case, it is well established that a Superior Court is not bound to give effect to it." The said ratio was maintained, in the case of E.A Avans reported as PLD 1964 SC 536 "where it has been unambiguously and categorically held that if the doing of a thing is made lawful in a manner than doing of that thing in conflic t with the manner prescribed will be unlawful." The Hon'ble Apex Court in 2001 SCMR 838 and 2003 SCMR 1505 held that "while considering the impact of violation or non-observance of the method prescribed by law for doing an act in a particular manner or mode, such provision of law is to be followed in letter and spirit and achieving or attaining the objective of performing or doing of a thing in a manner other than provided by law would not be permitted. The same observation has been made by the Hon'ble Supreme Court of Pakistan in the Civil Petition filed by Director General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others reported as 2006 SCMR 129 "if the law had prescribed method for doing of a thing in a particular manner , such provision of law is to be followed in letter and spirit and achieving or attaining the objective of performing or doing of a thing in a manner other than provided by law would not be permitted:. The super structure built on such foundation namely audit observation show-cause notice and order-in-original no matter how strong those may be have to fall, reference is made to PLD 1996 Karachi 68 which laid down that " where the initial order or notice was void all subsequent proceedings, orders or super structure built on it were also void. In reported judgment 2006 PTD 978 it is held that "the entire proceeding initiated by the Adjudicating authority and further super structure thereon including the order passed by the learned Tribunal are without jurisdiction void and in-operative." The Apex Court in PLD 1971 Supreme Court 184 held that "order of a Tribunal found to be without jurisdiction ---all successive orders based upon it illegal and liable to be quashed".
5. It has also been observed, that the appellant and his subordinates proceeded in the matter of sales tax without going through the expression of Section 30DD of the Sales Tax Act, 1990 (STA) and SRO 42(1)/2010 dated 23.01.2010. If that would had been done, they would had not conducted the audit /issued audit observation in the case of respondent No. 1, wherein audit observation has been issued by the Depu ty Director of PCA instead of the authority notified in column 3 of S.R.O. which speaks about Deputy Commissioner of Inland Revenue. The Deputy Director of PCA figures nowhere, hence, he was not empowered to issue c audit observation in the matter of sales tax. Rendering the audit observation corresponding to sales tax and connected show-cause notice without power/jurisdiction, hence void and ab-initio as held in the reported judgments PLD 1971 SC 197 Chittaranjan Cotton Mills Ltd. v. Staff Union (PLD 1973 SC 236), Raunaq Ali's case (2002 PTD (Trib.) 889) in Messrs Unitex Tower Factory v. The Collector of Customs (Appeals ) and others, K-106/03 in Messrs Silver Corporation v. The Additional Collector of Sales Tax (Adjudication), Karachi III, Major Syed Walayat Shah v.
Muzaf far Khan and 2 others (PLD 1971 SC 184), Omer and Company v. Controller of Customs , (Valuation): (1992 ALD 449 (1) Karachi AAA Steel Mills Ltd. v. Collector of Sales Tax and Central Excise Collectorate of Sales Tax (2004 PTD 624), PLD 1976 Supreme Court 37 Ali Muhammad v. Hussain Buksh and others and PLD 2001 Supreme Court 514 Land Acquisition Collector , Noshehra and others v. Sarfraz Khan and others .
Similarly , appellant and his subordinates are not designated as officer of Inland Revenue under section 228 or any other section of the Income Tax Ordinance, 2001 (ITO) and as such is not empowered to carry out audit under the D provision of section 177 of ITO, rendering the exercise conducted in the case of the respondent No. 1 to the extent of income tax as well of no legal effect instead coram non judice, hence void and ab-initio similarly , respondent No. 2 is also not designated an Officer of Inland Revenue under section 30 of the STA and under any Section of the ITO and as such is not empowered to exercise powers under any section of STA and under Section 207 of the ITO. Meaning thereby that he was not empowered to exercise powers either under the provision of Section 11 of the STA and Section 162(1 ) of ITO under which powers have to be exercised by Officer of Inland Revenue/Commissioner of Inland Revenue, rendering the show-cause notice and anticipated Order-in-Original without power/jurisdiction, hence void and ab-initio and coram non judice and this has been held in reported judgments Messrs AGP (Pvt.) Ltd. v. Additional Collector of Customs, Karachi 2011 PTD (Trib) 110, Messrs Global Marketing Services and another v. Model Customs Collectorate and another 2010 PTD (Trib.) 2086, 2014 PTD (Trib.) 299, M.I. Traders v. Additional Collector of Customs , 2004 PTD 801 Al-Haaj Industrial Corporation (Pvt.) Ltd. Peshawar v. Collector of Customs (Appraisement), Messrs Lucky Cement Ltd. v.
Federation of Pakistan and others C.P. No.D-216/2013, 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 2 others , 2016 PTD (Trib.) 925 Abdul Aziz and Brothers, Karachi v. Directorate General I&I FBR, 2016 PTD (Trib.) 969 Asif Textile Trading v. Directorate General I&I-FBR , 2016 PTD (Trib.) 79(1) 3 Muhammad Ilyas v. Director General of PCA, Karachi , 2016 PTD (Trib.) 1008 Phillip Morris (Pakistan) Ltd. Karachi v. Additional Collector of Customs .
6. Notwithstanding to the adumbration made here-in-above, it is to be noted that the order passed by the competent authority defined in Section 2(a) under the provision of sections 80 and 83 of the Act and Rules 438 and 442 of the Customs Rules, 2001 (Rules) can only be corrected by the revisional authority in exercise of the power of Section 195 of the Act which empowers the Board or Collector of Customs to examine suo motu the record of any proceeding (passing of assessment order is a proceeding by all mean/standard) for the purpose of satisfying itself or as the case may be, himself as to the legality or propriety of any decision or order passed by subordinate officer. Meaning thereby that after reopen ing the existing order the Board or Collector may pass afresh order to as it or he may deem think fit after issuance of show cause notice to the effected person in exercise of the power vested under the aforesaid section. Neither appellant or his subordinates nor respo ndent No. 2 are vested with the powers under section 195 of the Act. Both usurped the powers not vested with them . Resultant, the act of preparing contravention report and issuance of show-cause notice suffer from lack of power under the aforesaid provision rendering these, void and ab-initio as held by Superior Court of Pakistan in umpte enth judgments e.g. PLD 1975 SC 331, 2002 CLC 705, 2004 PTD 624, 2004 PTD 3020 , 2007 PTD 1895 , 2009 PTD (Trib.) 1925, 2005 PTD (Trib.) 135, 2010 PTD (Trib.) 759; 2010 PTD (Trib.) 1283, 2010 PTD (Trib.) 2523. Even otherwise, on conclusion of the transaction, under the provision of Sections 80 and 83 and Rules 438 and 442 of the Act/Rules, the orders so passed becomes an appealable order under Section 193 ibid. before the Collector of Customs (Appeals). Which could be either preferred by Deputy Director of PCA or Deputy Collector of the Group of the Clearance Collectorate in case of a by reservations against the passed assessment orders, the proper course of action was to assail that before the Collector of Customs Appeal s. This have not been done within the stipulated period and orders so passed under Section 80 of the Act by the competent authority defined in Section 2(a) ibid. became final and that cannot be disturbed by any authority .
7- In case of filing appeals by the officials of DGPCA or Deputy Collector of the Group of MCC of Appraisement- East before the Collector of Customs Appeals under Section 193 of the Act, emanating the facts of the case and the relevant provision of law. The Collector of Customs Appeals upon taking up the appeal as mandated upon him, have to go through the facts and grounds of those and thereafter if he think fit that in the cases under adjudication correct duty and taxes have not been either levied or short paid on the basis of found goods, is empowered to issue show cause notice under Section 32 of the Act as contemplated in 3rd proviso of aforesaid Section to the appellant/importer and after receipt of reply to the said notice the Collector of Customs have to decide the appeals in the light of the issued show-cause notice and reply . In the instant case no appeals have been filed by either appellant or his subordinate or by Deputy Collector of the Group of MCC of Appraisement-East instead Deputy Director of PCA and respondent No.2 assumed the powers under Section 195 of the Act and reopened .a valid assessment orders passed under the provision of Section 80 ibid. Neither appellant or subordinate/ respondent No. 2 is empowered to reopen a valid assessment orders passed by the Adjudicating Authority defined in Section 2(a) of the Act in exercise of powers vested through SRO 371(I)/2002 dated 15.06.2002, both acted without power/jurisdiction, hence their actions are deemed to be without any 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 . Assessment Orders in the subject cases had been passed by the competent authorities and the appeal against which could have been filed by either officials of DGPCA or his superiors. Failure to do so led to the assessment orders attaining finality and becoming a past and closed transaction which 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 suo motu revision lay unde r 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 prese nt case were not initiated and therefore the same held the field and in the presence of earlier orders another order contrary to the said earlier order could not be allowed to hold the field for the simple reason that two contrary orders could not exists at the same time" . Despite these precedents the appellant prepared contravention report and respondent No. 2 issued show-cause notice. Rendering the whole exercise nullity in the eyes of law as per the adumbration made in para supras. Beside, said act is also tantamount to double jeopardy not permitted under Article 13 of the Constitution of Islamic Republic of Pakistan and in conflict with the law laid down by the Superior Courts of Pakistan.
8. The respondent No. 1 obtained clearance under PCT 0406.1010 which was found correct and applicable and the Officials of Clearance Collectorate passed the assessment orders under section 80 and Rules 438 and 442 of the Act/Rules and thereafter passed order of clearance under section 83 ibid. Ironically , they are let off scot free, despite standing on the same pedestal. The treatment given to the respondent No.1 by the appellant and respondent No. 2 is nothing more than a partial and differential treatment. 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 dis-similarly , but discriminatingly" . Whereas, in reported judgment 2005 SCMR 492 the Hon'ble Supreme Court held that "A facility allowed to someone and denied to other is discrimination" . The Apex Court further held in reported judgments 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 of fend spirit of Article 25 of the Constitution."
9. Reverting back to the core issue of the case the opinion of the appellant and his subordinates is without any substance and based on assumption/presumption and conjectures as respondent No. 1 along with "Shredded/Grated Cheese" also imported "Cheese" and "Processed Cheese not grated or powdered" falling under PCT 0406.1010 and 0406.3000, which are exempted from payment of sales tax at import stage and was accordingly allowed by the official of Clearance Collectorate as against shredded/g rated falling under PCT heading 0406.2000 on which respondent No. 1 paid sales tax @ 17% as evident from the annexed GDs by the appellant.
The opinion of the appellant is that the entire cheese imported by the respondent No. 1 despite, being not shredded or grated be construed as shredded/grated. The said opinion is not supported by any tangible incriminating evidence in the shape of either samples or test reports, with the exception of grainy images proving nothing in categorical terms. Rendering it absurd and based on assumption/presumption and conjecture and fishing inquiries which is not permitted under law as per law laid down by the Hon'ble Supreme Court of Pakistan in reported judgment PLD 1992 Supreme Court 485. The Assistant Director Intelligence and Investigation v. B.R.
Herman Mohattas (Pvt.) Ltd., Karachi that "it cannot make a rowing or fishing inquiry or issue a notice by merely shooting in the dark in the hope that it will be able to find out some material out of those documents and then charge the party of irregularity or illegality". The said principle was subsequently held by the Superior Judicial Fora in reported judgment (1957) 32 ITR 89, (1967) 64 ITR 516, 1TAs. 2400/2401/KB/91-92, (1995) PTD (Trib.) 580, (1995) PTD (Trib.) 1152, (1982) 1381 ITR 742, 1993 PTD 206, 1997 PTD (Trib.) 2209 and 2013 PTD (Trib.) 353.
And in derogation of the settled law that "Tax cannot be charged and levied unless it falls squarely within the purview of the charging provision". Taxing laws are not to be extended by the implic ation beyond the clear import of language used. To hold otherwise would violate another principle of interpretation of taxing statute: that tax law should be construed in favour of the citizen and against the Government. This principle is based on the fact that taxation is a process which interferes with the personal and property right of the people, although it is necessary inference. But it does take from the people portion of their properties. The tax law must be construed in favour of the tax payer (PLD 2017 SC 99) Chairman, Federal Board of Revenue, Islamabad v. Al-Technique Corporation of Pakistan, Ltd. and others , and "no tax could be levied against a person beyond the scope of a charging section and it had to be construed and applied strictly before taxing any person, it must be shown that he fell within the ambit of charging section by clear words used therein. If the case did not falls within the four corners of the charging section, no tax could be imposed by inference, analogy or trying to probe into the intention of the legislature " (2017 SCMR 884) Collector of Customs, Sales Tax and Central Now Federal Excise v. Haji Mahmood Essa & Co. and another . No sales tax is payable at import stage on either imported "Cheese" of heading 0406.1000 or "Processed Cheese not grated or powdered" of PCT 0406.3000, as these are exempted under Serial Nos. 79 and 80 of the Sixth Schedule to the ST A, verbatim of which are reproduced here-in-under: "79. Cheese, excluding that sold in retail packing under a brand name0406.1010
80. Processed Cheese not grated or powdered, excluding that sold in packing under the brand name."0406.3000
10. What have been discussed herein above, particularly the interpretation of law, legal propositions and observations made thereon and to follow the ratio-decidendi observed by the Superior Courts, the order passed by respondent No. 2 is maintained and appeal is dismissed as of no substance and of no legal effect with no order as to cost.
11. Judgment passed and announced accordingly .