ABDUL JABBAR QURESHI, MEMBER JUDICIAL-I. By this Judgment, we intend to dispose of Customs Appeal No.K-7075/2021 filed by the Appellant against the Order-in-Original No.1647786 dated 25.02.2021 passed by the Collector of Customs (Adjudication-I), Custom House, Karachi.
2. Brief facts of the case as stated in the MCC-Port Muhammad Bin Qasim Karachi in their contravention have reported as,
1. Case No. KPPI-HC-41504-01-12-2020.
2. Name and Address of the importer M/S A.M.K. STEEL (PVT.) (NTN: 1693784),
3. Name and address of the clearing agent M/s. SUB LINE GROUP (CHAL: 2965).
4. Date and place of contravention 11-12-2020.
5. Declared description of the goods and weight IRON AND STEEL RE-ROLLABLE SCRAP.
6. Declared H.S. Code 7204.4910. 7.
Ascertained description of the goods and weight I) Flame Cut Cuttings of Rectangular And Square Billets of Length 4.8-5 Feet In Bundles, QTY 210120 Kgs 2). Flame cut Iron and Steel Flexible Rods of Length 5 Feet In Bundles, QTY 35000 Kgs 8. Declared value of whole consignment US$ 98,0481= Rs.15,682.777.6/ 9. Ascertained value of whole consignment US$ 120,804/= Rs.19,322,599.8)/- 10.
Ascertained value of offending goods USS 120,804/ = Rs.19,710,984/- 11. Total taxes involved in offending goods Rs.8734742/-. Nature of offence Attempt to evade duty and taxes through mis- declaration of the imported goods in terms of description, quantity, classification, undeclared goods and value thereof. Section of law violated Sections 32 (1) & (2), 79 and 192 of the Customs Act, 1969 read with Sections 3 and 6 of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2001,
44. Punishable clauses 14, 14-A, 43, 45 and 86 of Section 156(1) of the. Customs Act, 1969 read with Sections 33 and 34 of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2001 further read with SRO.499(I)/2009 dated 13.06.2009.
3. And whereas, M/s. A.M.K. STEEL (PVT.) LTD. imported a consignment declared to contain "IRON AND STEEL RE-ROLLABLE SCRAP" in the Goods Declaration and filed GD bearing No. KPPI-HC-41504-01-12- 2020, vide IGM No. 483 dated 01.12.2020. Index No. 37 through their authorized clearing M/s: SUB LINE GROUP (CHAL: 2965), with following declaration: "IRON AND STEEL RE-ROLLABLE SCRAP". The goods were examined by the Shed staff and as per Examination report are reproduced as Flame Cut Cuttings of Rectangular and Square Billets of Length 4.8-5 Feet in Bundles. QTY: 210,120 Kgs. 2).
Flame Cut Iron and Steel Flexible Rods of Length 5 Feet in Bundles. QTY: 35000 Kgs.
4. And whereas, the above items are found different / undeclared to the declared goods in terms of description, classification, quantity and value, as per examination report. As per above findings in the examination report mentioned above, the importer has willfully and deliberately mis-declared the description, PCT, value and quantity of imported goods to evade government legitimate revenue / duty and taxes. The value of the offending goods is calculated and is worked out to US$ 120,804/= Rs.19,710,984/-. Had this willfull and deliberately offence gone undetected and goods had been released under the garb of declared quantity, the government would have suffered a loss of revenue to the tune of Rs.8734742/in terms of duty / taxes.
5. And whereas, this act of the importers and their clearing agents constitutes offence in terms of Sections 32 (1) & (2), 79 and 192 of the Customs Act, 1969 read with Sections 3 and 6 of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2001. The offence is punishable under clauses 14, 10-A, 43, 45 and 86 of Section 156(1) of the Customs Act, 1969 read with Sections 33 and 34 of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2001 further read with SRO 499(1)/2009 dated 13.06.2009.
19. Now therefore, in the light of above reported facts, M/S A.M.K.
STEEL (PVT.) LTD. (NTN: 1693784) along with their clearing agent M/s. SUB LINE GROUP (CHAL: 2965) are called upon to show-cause as to why evaded amount of duty and taxes amounting to Rs.8734742/-, should not be recovered from them 'and penal action as warranted under the above mentioned provisions of law taken against them. The written reply to the Show Cause Notice accompanied by supporting documents should reach this office at the earliest.
6. The adjudicating officer vide Order-in-Original No. 1647786 dated 25.02.2021 held that the charges against the Appellant stood established. The operative part of the impugned order reads as under:- "I have gone through the written as well as verbal submissions of both the sides. The basic issue under discuss on is old and ongoing, which should have been settled much earlier, but unfortunately persistent attempts of mis-declarations and ever changing stance of reporting MCC on the selectivity criteria (reasons best known to reporting MCC) coupled, with MCC's ever changing assessm ent criteria, besides discriminatory treatment meted out to same goods/items in respect of various importers has allowed it to linger on. To start off, the reporting MCC vide their online Contravention Report dated 14-12-2020 has alleged that the respondent importers mis- declared the impugned goods, i.e. flame cut rectangular/square Billets (4.8 feet to 5 feet length) and flame cut iron and steel rods (of 5 feet length) in bundles under the garb of re-rollable scrap and thus have attempted to evade duty and taxes to the tune of Rs 8.734 millions. The respondent importers have declared them under PCT heading 7204.4910, whereas the goods have been classified under PCT headings 7207.1210 and 7213.9910 respectively by the reporting MCC. On the other hand, the respondent importers, in reply to the show-cause notice, have denied the charges on the basis of Chapter Notes of Pakistan. Customs Tariff and WCO Explanatory Notes. Vide Para
(iv) of their reply the respondent importers have contended that their goods are re-rollable scrap".
They have further contended that scrap is article" of iron and steel, which is not "usable" for their original purpose or design for which it was produced; vide Paras (v) and (vi) (vii) of their reply, they have made reliance on "definition" of re-rollable scrap from the Import Policy Order (IPO) and have claimed that a scrap is mainly "Mill Rejects". Vide Para (viii) of their reply, they have further contended that the MCC has ignored its own "practice" established over many years for Clearance of such goods as re-rollable scrap and finally vide Para (ix) of their reply, they have made reliance on FBR's letter. C. No. 1(6) Tar-III/2019/235527-R dated 11.12.2020, addressed to DG intelligence and Investigation-Customs, in response to a reference sent in relation to import of prime quality cut- to-size steel bars imported by M/s Riaz Afridi Steel Furnace vide GD No. KPPI-EL-36804 dated 15-11- 2020, wherein the Board has directed the formation to release the consignments as per "established practice". The said import contained a huge portion of cut-to-size steel bars of prime quality, yet on referral a the issue to MCC from I&I, the MCC initially forwarded one Contravention Report to additional Collector (Adjudication-1) but surprisingly the MCC vide their letter C. No. ADC- 111/02/2020-PQ dated 18-12-2020, withdrew the same for verification of the "facts". However, the same has not been re-sent for adjudication till to date. However, since in the subject case under adjudication, considerable chunk/portion of similar goods have been reported to have been found, therefore, the MCC was directed to furnish a detailed report regarding the similarities/dis- similarities in both the consignments. The Deputy Collector appearing on behalf of the MCC submitted a report in respect of both the consignments, but his reply was quite ambiguous, as despite the fact that the import of M/s Riaz Afndi Steel furnace vide GD No 36804 dated 15-11-2020 comprised 89 MT of cut-to-size steel bars, yet not a single word has been uttered in respect of these cut to size steel bars in their comments , on which reliance by the respondent importer was made. As mentioned earlier, the reference to import of M/s Riaz Afndi Steel Furnace was made to see the MCC's response towards compliance of FBR's instructions on "established practice" to compare it to the instant case of similar import. Since import of M/s. Riaz Afndi Steel Furnace vide GD No. KPPI-EL-36804 dated 15.11.2020 is not part of the present case. I. therefore, refrain from further comments on the same. The DC, representing the MCC made following item-wise comments in respect of impugned goods, which are discussed below: I, Flexible iron rods with plain surface: The DC has contended that the goods are found as flexible iron rods with plain polished surface and goods as presented, did not meet the criteria defined for re-rollable scrap as per Appendix-A of IPO. Besides, the item "Rod" is not included in items specified in "definition" of re- rollable in IPO. He, at later part of his comments, has. tried to prove that since there are multiple alternate "uses" of this 'item', hence the same cannot be treated as "scrap". ii.
Rectangular/square/round billets in length of 5 feet: The DC has termed "this"item" as "semi- finished products" winch are further rolled. And since they were in standard size (despite being of length within the so-called parameters of IPO length), still the MCC reported the same as "cuttings of billets" instead of re-rollable scrap, prima facie, this seems to be a case of one off attempt of evasion by an individual importer but a thorough and detailed scrutiny revealed that this case would have far-reaching effects on over all imports of the similar goods which is apparent due to inconsistent practice of assessm ent of impugned goods by the.. MCC on one hand, and a continuous attempts of their mis-declaration by various importers on the other. I make my detailed observations on reporting MCC's role and its item-wise stance/reaction as under; I Rectangular/square/round Billets (PCT 7213.9910): In the subject import, the MCC, despite items having the lengths within IPO conditions, has not accepted these goods to be re-rollable scrap on the ground that that the same are "semi finished" products and require further processing. In this regard, I would like to place on record the MCC's conduct in relation to a case adjudicated by my predecessor vide Order-in-Original No. 418/2020-21 dated 18-12-2020 in respect of GD numbers KPPI-HC-18506 dated 11-09-2020 and KPPI-HC-18506 dated 11.09.2020 filed by Mis Naimatullah Steel, wherein despite the importers' self declaration to the extent of a smaller portion of consignment as "Semi-finished" Cobble Plates under PCT heading 7207.2090, a huge quantity of 480 MT of these semi-finished" products were assessed and cleared by the MCC as re-rollable scrap on the basis of size parameters of Appendix-A of the IPO. The Learned Collector (Adjudication-1) decided the case in favour of the respondent importers on a single point of practice' in light of FBR's letter dated 11-12-2020. Since the Order-in-Original has already been issued and the reporting agency is at liberty to act as per law in the above matter, I refrain from any further comments on the decision/Order-in-Original. ii. Flame cut Iron and Steel flexible rods (PCT 7213.9910): The MCC has classified the goods under PCT heading 7213.9910, which describes the rods containing "deformations" produced during the rolling process. However, the examination and assessm ent staff of the MCC have not reported any deformation, due to which these goods fall within the proximity of PCT heading 72.14. Though neither PCT heading 72.13 nor 72.14 of Pakistan Customs Tariff describe the physical attributes of the goods, yet the assessment staff of the MCC has assessed the goods while using terms "flame cut". "Flexible Rods" in "bundles", probably keeping the conditions of IPO in mind. 'Though the instant case has been reported by the MCC after issuance of FBR's letter dated 11-12-2020. yet the MCC has itself discarded its own "practice". Since in this instant case, the MCC has resorted to merits of the issue instead of relying on past practice, hence the case is being decided on merit and in accordance with the law, which is supported by a case of 2010 PTD 870 passed by Divisional Bench of High Court of Sindh comprising Honourable Justice Gulzar Ahmed and Honourable Justice Irfan Saadat, ratio decidendi thereof was that "the issue and the practice cannot over ride/overrule the law and the statutory requirements". The reliance in this respect was made on number of references of apex Courts. Since the respondent importers have tried to seek refuge in CGO 12 and explanatory Notes. etc. and surprisingly both the MCC as well the respondents have repeatedly relied on IPO to their own understandings, I, therefore find it necessary to comment on both these aspects in detail as under: (i) The Import Policy Order
(IPO) is a regulatory document that outlines the restrictions and procedural requirements associated with imports into Pakistan. It is by no means a glossary of definitions. The dimensions and criteria set down vide serial No 7(2) of Appendix-A of the IPO are prescriptive of "the scrap" that is importable and certainly not the definition of re-rollable scrap (7204.1010, 7204.4910). It is therefore opined that in order to safeguard Pakistan against old and used substandard building material and subsequent faulty constructions, a mandatory limit has been imposed on its dimensions at import stage. This opinion is further strengthened by the amendment in section 27A of the Customs Act, 1969, wherein mutilation is allowed in case the goods are not imported in new condition. Otherwise they shall be classified and chargeable to leviable duty and taxes as new goods. However, an analysis of clearances show that any product or article of iron and steel."
7. Being aggrieved and dissatisfied with the Order-in-Original, the Appellant filed the instant appeal before this. Tribunal on the grounds, which are reproduced as under:- a) That the Respondent Collectorate has alleged that the above items are undeclared of viz. the declaration of the Appellant / Importer. This allegation is misconstrued, mala fide being in correct and baseless. That the heading 7204 covers waste and in scrap of iron and steel as defined in Note 8 (a) to Section XV. Such waste and scrap of iron and steel is of miscellaneous nature and generally takes the form of waste and scrap from the manufacture of mechanical working of iron and steel e.g. crop ends, filing and turnings. That Explanatory Notes to HS (as modified in led December 2019) page XV-7204-1 categorically reflect that article of iron and steel definitely not useable as such a) because of cutting (shearing or flame cutting in of heavy and long pieces) fall in category of waste and scrap. b) That the Respondent Collectorate is of the view that Appellant/Importer has imported "semi- finished iron and steel slabs" (PCT 7207.1210 and 7213.9910) under the garb of Re-Rollable scrap (7204.4910). This charge is not correct in light of development of definition of negative list Appendix in Import Policy Order in conjunction with 7204.4910. That the Respondent Collectorate neither kept in view the development of definition of Re-Rollable scrap in Pakistan Customs Tariff and Import Policy Order during many years and also ignored the practice of releasing such products under category of Re-Rollable scrap and not under category of semi-finished goods / steel slabs. That the definition of scrap as reflected in the Explanatory Notes is mandatory to be abide by in light of GIR. Pakistan Rule 1, which states that WCO Explanatory to HS "shall be considered the authentic source of interpretation of HS". Therefore, for Pakistan Customs Tariff the definition of Iron scrap (or Re-Rollable scrap) emanates from the fact that scrap is any article of iron and steel which is not usable for the original purpose or design for which it was produced. c) That the Respondent Collectorate assertion that FBR letter's is not applicable to instant case amount to defying Section 223 of Customs Act, 1969 which speaks as follows: "223. Officers of Customs to follow Board's orders, etc. All officers of Customs and other persons employed in the execution of this Act shall observe and follow the orders, instructions and directions of the Board: Provided that no such orders, instructions or directions shall be given so as to interfere with the discretion of the appropriate officer of customs in the exercise of their quasi-judicial functions." d) That Section 223 of the Customs Act, 1969, warrants that instructions/SROs issued by the Federal Government / FBR have to be abide by as "Customs Authorities are under legal obligations to abide by all such Notifications and SRO..." (Reliance is placed on Moin Jamal v. Federation in CMA No. 18195/9/C.P. No.D-4214 of 2019 High Court of Sindh, Karachi). However, unfortunately the case making authority has negated the above judgment of Honourable Sindh High Court by not abiding by FBR's letter Case No. 1(6)TaxIII/2019/235527-R dated: 11.12.2020 issued by FBR which is still in the field. Thus, this is also negation of abiding by Section 223 of the Customs Act, 1969, by a field formation of FBR. e) Reliance is also placed upon the hall mark judgment of the Honourable Supreme Court of Pakistan in the case of Central Insurance Company v. CBR, 1993 SCMR 1232, while examining the authority of CBR in interpreting any law considered the provisions contained in section 8 of the Income Tax Ordinance as well, and held as follows: "It is evident from the above provisions that though the Central Board of Revenue has administrative control cover the functionaries discharging their functions under the Ordinance, but it does not figure in the hierarchy of the forums provided for adjudication of assessee's liability as to the tax. In this view of the matter, any interpretation placed by the Central Board of Revenue on statutory provisions cannot be treated as a pronouncement by a forum competent to adjudicate upon such a question judicially or quasi-judicially. We may point out that the Central Board of Revenue cannot issue any administrative direction of the nature, which may interfere with the judicial or quasi-judicial functions entrusted to the various functionaries under statute. The instructions and directions of the Central Board of Revenue are binding on the functionaries discharging their functions under the Ordinance in view of section 8 so long as they are confined to administrative matters. The interpretation of any provisions of the Ordinance can be rendered by the hierarchy of the forums provided for, under the above provisions of the Ordinance, namely, the Income Tax Officer, Appellate Assistant Commissioner, Appellate Tribunal, 'the High Court and this Court, and not by the Central Board of Revenue. In this view, of the matter, the interpretation placed by the Central Board of Revenue on the relevant provisions of the Ordinance in the Circular, can be treated as administrative interpretation and not judicial interpretation." f) With the above authoritative pronouncement of the Honourable Supreme Court, the issue stands settled that C.B.R. has no role in respect of judicial or quasi-judicial functions and is not a forum competent to adjudicate upon the matters requiring interpretation of any statute. However, the instructions and directions of the Central Board of Revenue are binding on the functionaries, discharging their functions under the Ordinance so long they are confined to the administrative matters. g)That the same principle has also been followed and laid down by the judgment of the Honourable High Court of Sindh at Karachi in the case of Commissioner of Income Tax 'v. M/s. Muslim Commercial Bank reported as 2001 PTD 720 as also held that "Central Board of Revenue is the Apex Authority in the hierarchy of Federal Tax Administration and is supposed and empowered not only to watch but to control and guide all the tax authorities under it in the execution of Income Tax Ordinance, therefore, it is not only logical but imperative that its instructions, orders and directions must have binding effect on all the officers and persons in the execution of Ordinance, except the Appellate Authorities exercising quasi-judicial functions. The, Central Board of Revenue, therefore, can issue instruction/directions from time to time for the implementation, execution and application of various provisions of law without abrogating or modifying the provisions of the statute and in order to maintain the discipline in tax administration. It must be of binding effect on all the tax authorities subordinate to the C.B.R. with the exception of Appellate Authorities performing quasi-judicial functions. This is absolutely necessary in order to mitigate the figours of law and to save the assessees from undue hardships in certain cases in the execution of various provisions of the Ordinance. As such instructions are not binding on the assessees as well Appellate Authorities, performing quasi-judicial functions, and therefore, they can take exception to any such orders, instructions / directions, but the Assessing Officers and the other tax authorities performing administrative functions cannot raise any objection to such instructions / directions, which are of binding effect on them". h) With respect to departmental practice of assessing the subject disputed item Iron and Steel Re- Rollable Scrap under HS Code 7204.4910 all over Pakistan reliance is also placed upon the hall mark judgment of the Honourable Supreme Court of Pakistan in the case of M/s. Radaka Corporation and others v. Collector of Customs and another reported as 1989 SCMR 353 wherein, it was held "interpretation that had been consistently followed by department and which had become a long standing practice, had almost acquired force of law such practice, could not be lightly departed from where departmental practice had followed a particular course in implementation of some rule whether right or wrong, it would be extremely unfair to make a departure from it after a lapse of many years and thereby disturb rights that have been settled by a long and consistent course of practice. i) The above interpretation of the recovery was always acted upon by the Department and Mr. S.K.
Rahim, Collector of Customs, in his letter described it as its "long-standing practice". Now it is settled law that where the departmental practice has followed a particular course in the implementation of some rule, whether right or wrong, it will be extremely unfair to make a departure from it after a lapse of many years and hereby disturb rights that have been settled by a long and consistent course of practice; see Nazir Ahmad v. Pakistan and others (PLD 1970 SC 453). j) This interpretation having been consistently followed by the department and it having become a long-standing practice had almost acquired the force of law. The practice could not therefore, be lightly departed from more so because on its faith the Appellants and other manufacturers of the re-rolling material had imported goods under specific licenses, granted by the Government of Pakistan for that purpose. The directive of the Central Board of Revenue in its Circular letter, dated: 21.03.1969 had the effect of making the purpose for which the goods were imported rather than the nature of goods as the basis for classification for the goods. This was not the practice when the goods were imported. Until then such imported goods came within the heading 73.03 No sufficient grounds existed for not treating the goods which were imported in these cases according to the past practice. k) Reliance is also placed upon the judgment of the Honourable Supreme Court of Pakistan in the case of Government of Pakistan v. M/s. Village Development Organization reported as 2005 SCMR 492 wherein, it was held "A facility allowed to someone and denied to one is the discrimination. l) Reliance is also placed upon the judgment of the Honourable Lahore High Court Lahore in the case of M/s. Nazir Ahmad Taj Din v. Deputy Collector of Customs, Lahore and 2 others reported as PLD 1977 Lahore 1392 wherein, it was held that Customs Authorities bound by their own precedents and not to change their mind from time to time. The Customs authorities are supposed to adhere involving the very basis of taxation in respect of particular articles. They should not have modified their own previous decision without any lawful justification whether the doctrine of precedent applies in its full vigour to administrative agencies and officers or whether a reasonable latitude should be given to these Administrative Tribunals to correct or modify their previous decision is somewhat doubtful but it is desirable that the Principal Appraiser or the Collector of Customs should not change their minds from time to time in respect of the same article by classifying it in one sub-heading and subsequently giving a radically different opinion. The Customs authorities are bound by their own precedents in the classification and administering taxing statute involving the very basis of taxation in respect of Hacksaw blades and particularly this change could not be made after the consignment was imported into Pakistan. m) With respect to correct / appropriate PCT heading reliance is also placed upon judgment of the Honourable Sindh High Court at Karachi in the case of Collector of Customs Karachi v. M/s. Power Electronic Pakistan (Pvt.) Limited, Lahore reported as 2011 PTD 2837 wherein, it was held that "a comparison of two PCT headings, which are in dispute, show that they can be misinterpreted and on the basis of such misinterpretation the goods in question can be declared under any of these PCT Headings and, therefore, we are of the opinion that it has been proved that the alleged misdeclaration was not intentional and deliberate. As far as the claim of exemption is concerned we are of the opinion that they may fall within the ambit of such exemption and it is a settled law that claim of exemption in good faith if it is dis-allowed then penal action cannot be taken for the lesser payment of taxes due to the claim of such exemption. The learned Tribunal has relied on a judgment of this Court in State Cement Corporation of Pakistan v. Collector of Customs and others (2002 MLD 180) and has reproduced the following extrat from that judgment: "The above decision, therefore, seems to be of no help to the respondents as in the instant case no mis-declaration of facts has been alleged. In fact Raja Muhammad Iqbal placed before us a copy of a bill of entry filed by the Appellant wherein, the rate of duty of 30% was declared but concessionary rate in terms of SRO No. 286 was claimed. In the circumstances, we are clearly of the opinion that no conscious misdeclaration of fact can be attributed to the appellant and no conclusion having been alleged the short payment can only be attributed to a misconstruction or error in the interpretation of the relevant notification. The provisions of section 32(3) of the Customs Act would therefore, be clearly attracted in shortfall in the duty could have only been recovered within time specified in section 32(3) of the Customs Act. n) That keeping in view of above facts and legal position it is clear that impugned Show-Cause Notice dated: 14.12.2020 mechanically translated into impugned Order-in-Original dated: 25.02.2021 issued by the learned Adjudicating Authority was based on presumptions only. It is settled principle of the law that no action can be initiated under the law mere under presumptions only.
Presumption could only be valid if these are substantiated by the evidence which is not the case.
The element of mens-rea against the Importer has not been substantiated and proved by any direct or corroborative evidence, the primary requirement for invoking the relevant provisions of law. The absence of element of mens-rea on part of the Importer is visible; hence any violation of above mentioned sections is not substantiated and denied. On basis of foregoing paras it is crystal clear that no penal action is due against the Importer. Therefore, impugned Show-Cause Notice culminated into mechanical Order-in-Original issued to the Importer is suffering from serious legal infirmities and is void ab-initio.
8. The Respondent Department has submitted para-wise comments in reply to the memo of appeal, which are reproduced as under:-
1. Regarding contents of Para 1 of Ground it is respectfully submitted that the respondent declared "Iron and Steel rerollable scrap", however, upon physical examination it was revealed that the consignment was consisting of following goods: a. Flame Cut Cuttings of Rectangular and Square Billets of Length 4.8-5 Feet in Bundles Qty 210,120 Kgs b. Flame Cut Iron and Steel Flexible Rods of Length 5 Feed in Bundles Qty 35000 Kgs.
These sort of the goods, having own characteristics of "article" cannot be termed as Re-rollable scrap as the impugned goods are neither the waste and scrap of manufacturers or mechanical working nor consisting of mill rejects and crop ends of billets as defined under para-7 of the Appendix-A of the Import Policy Order, 2020 which defines re-rollable scrap as under: "Re-rollabte scrap (7204.1010, 7204.4910): The scrap having width not exceeding 1000 mm with thickness 6 mm and above and a length not exceeding 2.5 meters, consisting of mill rejects and crop ends of ingots, billets, slabs, blooms and including cuttings of sheets and plates, pipes and bars whether in pieces or in rolled strips, cuttings of ship plates, used and pitted rails and girders, whereas in case of girders and pipes length shall be 1.5 meter."
That contents of explanatory notes mentioned under Note 8(a) to section XV are not denied.
However, respectfully the impugned goods are not the waste and scrap from the manufacture or mechanical working of iron and steel e.g. crop ends, filling and turnings. Hence, cannot be termed as scrap under aforesaid provision of the explanatory notes.
It is further submitted that the instant goods are found to be article of heading 7207.1210 and as such cannot be treated as "definitely not useable as such" because of mere flame cutting. The term flame, cutting used in the notes clearly reflects that the article should be flame cut to the extent to render these "definitely" not useable as such in any manner except as waste and scrap.
The term "definitely" used in the notes to heading 72.04 explicitly excludes the goods which are not "absolutely" and "unquestionably" used as scrap. Mere flame cut to reduce the sizes of billets in order to made an attempt of tailoring the goods to suit the definition given under the Import Policy Order which otherwise specifically requires that the re-rollable scrap means the goods consisting of mill rejects and crop end",
2. Regarding contents of Pant 2 of Ground, it is respectfully submitted that the findings which are based upon the examination report are correct and it is evidentially established that the appellant imported "semi finished iron and steel slabs" (PCT 7207.1210 and 7213.9910) under the garb of Re- rollable scrap (7204.4910). This charge is correct in light of Appendix-A to the Import Policy Order in conjunction with 7204.4910. There is no practice of releasing such products under category of re- rollable scrap and not under category of semi finished goods / steel slabs. Even otherwise, the wrong practice cannot be used as an evidence for wrong doing or mis-declaration;
3. Regarding contents of Para 3 of ground it is respectfully submitted that the answering respondent is bound to follow the instructions of the Board within letter and spirit. The respondent while clearance of subject goods always implemented the definition of "re-rollable scrap" as defined under para-7 of the Appendix-A of the Import Policy Order, 2020, The FBR vide letter C.No. 1(6)Tar-III/2019/235527-R dated 11.12.2020 directed the respondent to continue such practice and release hold consignment from port area.
4. It is reiterated that there is no practice of releasing such products under category of re-rollable scrap and not under category of semi finished goods / steel slabs. Even otherwise, the wrong practice cannot be used as an evidence for wrong doing or mis-declaration. The Honourable High Court of Sindh in the case reported as 2010 PTD 870 held that "the issue and the practice cannot override/overrule the law and the statutory requirements".
5. That in the light of submissions made above and keeping in view the facts/circumstances of the case the contents of Para 5 of the "Ground" warrants no further comments. Keeping in view the facts and circumstances of the appellant subject case the cited order / judgment is irrelevant and distinguishable, hence, cannot be applied mutatis mutandis.
6. That in the light of submissions made above and keeping in view the facts / circumstances of the case the contents of Para 6 of the "Ground" warrants no comments.
7. That in the light of submissions made above and keeping in view the facts / circumstances of the case the contents of Para 5 of the "Ground" warrants no further comments. Keeping in view the facts and circumstances of the appellant subject case the cited order / judgment is irrelevant and distinguishable, hence, cannot be applied mutatis mutandis.
Regarding contents of Para 8 of Ground, it is respectfully submitted that in case of classification of "re-rollable scrap" (M/s. Radaka Corporation v. Collector of Customs 1989 SCMR P.353) the importers claimed that the goods should be classified as waste and scrap metal of iron and steel under Item 73.03 of the P.C.T (applicable at that time for rerollable scrap). The Custom authorities had taken the stand that the imported goods cannot be treated as scrap for the purpose of P.C.T. because of the fact that they do not satisfy the condition of scraps as enumerated in the explanatory notes to the Brussels Nomenclature and should therefore be classified under 73.07, 73.11, 73.13 or any other heading depending on whether these are billet ends, old girders or old plate.
It was settled by the apex Court that interpretation that had been consistently followed by department and which had become a long standing practice, had almost acquired force of law; Such practice, could not be lightly departed from and: Where departmental practice had followed a particular course in implementation of some rule, it could be extremely unfair to make a departure from it after a lapse of many years and thereby disturb rights that have been accrued by a long and consistent course of practice. In similar circumstances being consistent practice over the period of time of assessing re-rollable scrap in terms of the S.No 7(2) of the Appendix-A of the Import Policy Order, 2020 the Customs Authority cannot all of sudden turn around and depart from such practice.
That in the light of submissions made above and keeping in view the facts / circumstances of the case the contents of Para 9 of the "Ground" warrants no comments.
10. That in the light of submissions made above and keeping in view the facts/circumstances of the case the contents of Para 10 of the "Ground-warrants no comments.
11. That in the light of submissions made above and keeping in view the facts circumstances of the case contents of Para 11 of the "Ground" warrants no comments. Keeping in view the facts and circumstance of the appellant subject case the cited order / judgment is irrelevant and distinguishable, hence, cannot be applied mutatis mutandis.
12. Regarding contents of Para 12 of Ground, it is respectfully submitted that this Honourable forum may also graciously appreciate the principle laid down by the Supreme Court of Pakistan in the case of Ms. Nazir Ahmed v. Pakistan PLD 1970 SC 453 and in the case of M/s. Radaka Corporation v. Collector of Customs, 1989 SCMR P.353, where it was held that where a departmental practice has followed a course in the implementation of the relevant rule whether right or wrong, will be extremely unfair to make a departure from it after a lapse of many years and thereby disturb rights that have been settled by a long and consistent practice. In similar circumstances being consistent practice over the period of time of assessing re-rollable scrap in terms of the S. No.7(2) of the Appendix-A of the Import Policy Order, 2020 the Customs Authority cannot all of sudden turn around and depart from such practice and detain the goods which fall under the ambit of definition provided under aforesaid provision of law.
13. That in the light of submissions made above and keeping in view the facts / circumstances of the case the contents of Para 13 of the "Ground" is incorrect, hence, denied. Keeping in view the facts and circumstances of the appellant subject case the cited order / judgment is irrelevant and distinguishable, hence, cannot be applied mutatis mutandis.
14. That the contents of Para 14 of Ground are not maintainable hence denied. It is respectfully submitted that Order passed by the Respondent No.1 is a valid, justified, speaking and lawful order.
The Respondent No.1 rightly held that the goods in question can never be termed as scrap and they are articles classifiable under their respective headings.
9. We have thoroughly examined the entire case record and given due consideration on the arguments advanced before us by both the parties. The main issue involved in this case is that whether the imported goods as per the examination report i.e. flame cut rectangular / square Billets (4.8 to 5 feet length) and (lame cut iron and steel rods (of 5 feet length) 'can be considered as Re-Rollable scrape. The case of the clearance Collectorate is that the importer mis-declared the description of the imported goods by declaring the same as "Re-Rollable Scrape" falling under PCT heading 7204.4610 instead of flame cut rectangular / square Billets (4.8 to 5 feet length) and flame cut iron and steel rods (of 5 feet length) classifiable under PCT headings 7207.1210 and 7213.9910. Respondent Collectorate is of the view that Appellant / Importer has imported "semi- finished iron and steel slabs" (PCT 7207.1210 and 7213.9910) under the garb of Re-Rollable scrap (7204.4910). Hence this case falls within the ambit sections 32(1), (2) and 79(1) and 192 of the Customs Act, 1969 read with Sections 3 and 6 of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2001 punishable under Clauses 14, 14-A, 43, 45 and 86 of Section 156(1) of the Customs Act, 1969. On the other hand the Appellant counsel is of the view that this allegation is misconstrued, mala fide being incorrect and baseless. Importer goods are admittedly re-rolling scrape falling under PCT heading 7204 which covers waste and scrap of iron and steel as defined in Chapter Note 8 (a) to Section XV. Such waste and scrap of iron and steel is of miscellaneous nature and generally takes the form of waste and scrap from the manufacture of mechanical working of iron and steel e.g. crop ends filing and turnings. That Explanatory Notes to HS (as modified in led December 2019) page XV-7204-1 categorically reflect that article of iron and steel definitely not useable as such because of cutting (shearing or flame cutting of heavy and long pieces) fall in category of waste and scrap. He is of the view that the Respondent Collectorate badly fails to consider the definition of Re-Rollable scrap in Pakistan Customs Tariff and Import Policy Order From many years it was an established practice for releasing such products under category of Re-Rollable scrap and not under category of semi-finished goods / steel slabs.
10. The definition of scrap as reflected in the Explanatory Notes is mandatory to be abiding by in light of GIR, Pakistan Rule 1, which states that WCO Explanatory to HS "shall be considered the authentic source of interpretation of HS". Therefore, for Pakistan Customs Tariff the definition of Iron scrap (or Re-Rollable scrap) emanates from the fact that scrap is any article of iron and steel which is not usable for the original purpose or design for which it was produced.
11. The Appellant further contended that impugned Order-in-Original dated 25.02.2021 issued by the learned Adjudicating Authority is categorically based on presumptions only. It is settled principle of the law that no action can be initiated under the law mere under presumptions only. Presumption could only be valid if these are substantiated by the evidence which is not available in the case nor provided by the departmental representative. The Appellant further contended that the Respondent Collectorate assertion that FBR letter's is not applicable to instant case amount to defying section 223 of Customs Act, 1969 which speaks as follows: "223. Officers of Customs to follow Board's orders, etc. All officers of Customs and other persons employed in the execution of this Act shall observe and follow the orders, instructions and directions of the Board: Provided that no such orders, instructions or directions shall be given so as to interfere with the discretion of the appropriate officer of customs in the exercise of their quasi-judicial functions"
12. The Section 223 of the Customs Act 1969, warrants that instructions / SROs issued by the Federal Government / FBR have to be abided by as "Customs Authorities are under legal pbligations to abide by all such notifications and SRO..." (Reliance is placed on Moin Jamal v. Federation in C.M.A.
No. 18195/9/C.P. No.D-4214 of 2019 High Court of Sindh, Karachi). However, unfortunately the case making authority has negated the above judgment of Honourable Sindh High Court by not abiding by FBR's letter case No.1(6)TaxIII/2019/235527-R dated: 11.12.2020 issued by FBR which is still in the field. Thus, this is also negation of abiding by Section 223 of the Customs Act, 1969, by a field formation of FBR.
13. The Appellant counsel further contended that the Honorable Supreme Court of Pakistan in the case of Central Insurance Company v. CBR, 1993 SCMR 1232, while examining the authority of C.B.R. in interpreting any law considered the provisions contained in section 8 of the Income Tax Ordinance as well, and held as follows: "It is evident from the above provisions that though the Central Board of Revenue has administrative control cover the functionaries discharging their functions under the Ordinance, but it does not figure in the hierarchy of the forum provided for adjudication of assessee's liability as to the tax. In this view of the matter, any interpretation placed by the Central Board of Revenue on statutory provisions cannot be treated as a pronouncement by a forum competent to adjudicate upon such a question judicially or quasi-judicially. We may point out that the Central Board of Revenue cannot issue any administrative direction of the nature, which may interfere with the judicial or quasi-judicial functions entrusted to the various functionaries under statute. The instructions and directions of the Central Board of Revenue are binding on the functionaries discharging their functions under the Ordinance in view of section 8 so long as they are confined to administrative metters. The interpretation of any provisions of the Ordinance can be rendered by the hierarchy of the forums provided for under the above provisions of the Ordinance, namely the Income Tax Officer, Appellate Assistant Commissioner Appellate Tribunal, the High Court and this Court, and not by the Central Board of Revenue. In this view, of the matter, the interpretation placed by the Central Board of Revenue on the relevant provisions of the Ordinance in the Circular, can be treated as administrative interpretation and not judicial interpretation."
With the above authoritative pronouncement of the Honourable Supreme Court, the issue stands settled that C.B.R. has no role in respect of judicial or quasi judicial functions and is not a forum competent to adjudicate upon the matters requiring interpretation of any statute. However, the instructions and directions of the Central Board of Revenue are binding on the functionaries, discharging their functions under the Ordinance so long they are confined to the administrative matters.
14. The same principle has also been followed and laid down by the judgment of the Honourable High Court of Sindh at Karachi in the case of Commissioner of Income Tax v. M/s. Muslim Commercial Bank reported as 2001 PTD 720 as also held that "Central Board of Revenue is the apex Authority in the hierarchy of Federal Tax Administration and is supposed and empowered not only to watch but to control and guide all the tax authorities under it in the execution of Income Tax Ordinance, therefore, it is not only logical but imperative that its instructions, orders and directions must have binding effect on all the officers and persons in the execution of Ordinance, except the Appellate Authorities exercising quasi-judicial functions. The Central Board of Revenue, therefore, can issue instruction / directions from time to time for the implementation, execution and application of various provisions of law without abrogating or modifying the provisions of the statute and in order to maintain the discipline in tax administration. It must be of binding effect on all the tax authorities subordinate to the C.B.R. with the exception of Appellate Authorities performing quasi-judicial functions. This is absolutely necessary in order to mitigate the figures of law and to save the assessees from undue hardships in certain cases in the execution of various provisions of the Ordinance. As such instructions are not binding on the assessees as well Appellate Authorities, performing quasi-judicial functions and therefore, they can take exception to any such orders, instructions / directions, but the Assessing Officers and the other tax authorities performing administrative functions cannot raise any objection to such instructions / direction, which are of binding effect on them".
With respect to departmental practice of assessing the subject disputed item Iron and Steel Re- Rollable Scrap under HS Code 7204.4910 all over Pakistan reliance is also placed upon the hall mark judgment of the Honourable Supreme Court of Pakistan in the case of M/s. Radaka Corporation and others v. Collector of Customs and another reported as 1989 SCMR 353 wherein, it was held "interpretation that had been consistently followed by department and which had become a long standing practice, had almost acquired force of law Such practice, could not be lightly departed from Where departmental practice had followed a particular course in implementation of some rule, whether right or wrong, it would be extremely unfair to make a departure from it after a lapse of many years and thereby disturb rights that have been settled by a long and consistent course of practice.
15. The above interpretation of the recovery was always acted upon by the Department and Mr. S.K.
Rahim, Collector of Customs, in his letter described it as its "long-standing practice". Now it is settled law that where the departmental practice has followed a particular course in the implementation of some rule, whether right or wrong, it will be extremely unfair to make a departure from it after a lapse of many years and hereby disturb rights that have been settled by a long and consistent course of practice: see Nazir Ahmad v. Pakistan and others (PLD 1970 SC 453).
16. This interpretation having been consistently followed by the department and it having become a long-standing practice had almost acquired the force of Law. The practice could not therefore, be lightly departed from more so because on its faith the Appellants and other manufacturers of the re-rolling material had imported goods under specific licenses granted by the Government of Pakistan for that purpose. The directive of the Central Board of Revenue in its Circular letter, dated: 21.03.1969 had the effect of making ale purpose for which the goods were imported rather than the nature of goods as the basis for classification for the goods. This was not the practice when the goods were imported. Until then such imported goods came within the heading 73.03 No. sufficient grounds existed for not treating the goods which were imported in these cases according to the past practice.
17. The reliance is also placed upon the judgment of the Honourable Supreme Court of Pakistan. in the case of Government of Pakistan v. M/s. Village Development Organization reported 2005 SCMR 492 wherein, it was held "A facility allowed to someone and denied to one is the discrimination. Relianas 200ce is also placed upon the judgment of the Honourable Lahore High Court Lahore in the case of M/s, Nazir Ahmed Taj Din v. Deputy Collector of Customs, Lahore and 2 others reported as PLD 1977 Lahore 1392 wherein, it was held that Customs Authorities bound by their own precedents and not to change their mind from time to time. The Customs authorities are supposed to adhere involving the very basis of taxation in respect of particular articles. They should not have modified their own previous decision without any lawful justification whether the doctrine of precedent applies in its full vigour to administrative agencies and officers or whether a reasonable latitude should be given to these Administrative Tribunals to correct or modify their previous decision is somewhat doubtful but it is desirable that the Principal Appraiser or the Collector of Customs should not change their minds from time to time in respect of the same article by classifying it in one sub-heading and subsequently giving a radically different opinion.
The Customs authorities are bound by their own precedents in the classification and administering taxing statute involving the very basis of taxation in respect of Hacksaw blades and particularly this change could not be made after the consignment was imported into Pakistan.
18. With respect to correct / appropriate PCT heading reliance is also placed upon judgment of the Honourable Sindh High Court at Karachi in the case of Collector of Customs Karachi v. M/s. Power Electronic Pakistan (Pvt.) Limited, Lahore reported as 2011 PTD 2837 wherein, it was held that "a comparison of two PCT headings, which are in dispute, show that they can be misinterpreted and on the basis of such misinterpretation the goods in question can be declared under any of these PCT Headings and, therefore, we are of the opinion that it has been proved that the alleged misdeclaration is not intentional and deliberate. As far as the claim of exemption is concerned we are of the opinion that they may, fall within the ambit of such exemption and it is a settled law that claim of exemption in good faith if it is dis-allowed then penal action cannot be taken for the lesser payment of taxes due to the claim of such exemption. The learned Tribunal has relied on a judgment of this Court in State Cement Corporation of Pakistan v. Collector of Customs and others (2002 MLD 180) and has reproduced the following extract from that judgment: The above decision, therefore, seems to be of no help to the respondents as in the instant case no mis-declaration of facts has been alleged. In fact Raja Muhammad Iqbal placed before us a copy of a bill of entry filed by the Appellant wherein, the rate of duty of 30% was declared but concessionary rate in terms of SRO No. 286 was claimed. In the circumstances, we are clearly of the opinion that no conscious misdeclaration of fact can be attributed to the appellant and no conclusion having been alleged the short payment can only be attributed to a misconstruction or error in the interpretation of the relevant notification. The provisions of section 32(3) of the Customs Act would therefore, be clearly attracted in shortfall in the duty could have only been recovered within time specified in section 32(3) of the Customs Act.
Keeping in view of above facts and legal position it is clear that impugned Show Cause Notice dated: 14.12.2020 mechanically translated into impugned Order-in-Original dated: 25.02.2021 issued by the learned Adjudicating Authority was based on presumptions only. It is settled Principle of the law that no action can be initiated under the law mere under presumptions only. Presumption could only be valid if these are substantiated by the evidence which is not the case. The element of mens-rea against the Importer has not been substantiated and proved by any direct or corroborative evidence, the primary requirement for invoking the relevant provisions of law. The absence of element of mens-rea on part of the Importer is visible; hence any violation of above mentioned sections is not substantiated and denied. On basis of foregoing paras it is crystal clear that no penal action is due against the Importer. Therefore, impugned Show Cause Notice culminated into mechanical Order-in-Original issued to the Importer is suffering from serious legal infirmities and is void ab-initio.
19. On the basis of foregoing discussions and minute scrutiny of available record coupled with referred case laws, we are of the considered view that the appellant did not commit any offence, which could warrant for confiscation of his imported goods which he admittedly importer as Re- Rolling Scrape. Under the circumstances discussed herein above it is believed that charge of mis- declaration as alleged by the respondent Collectorate is based on assumptions and presumptions.
It is an admitted position that the Department has failed to prove their case Appellant successfully discharge burden of proof under section 187 of the Customs Act, 1969.
20. By getting the strength from the Judgments passed by the Superior Courts and in conformity of the aforesaid observations along with my additions, the impugned Original-in-Original passed during hierarchy of the customs infested with patent legal infirmities based on adequate breach of natural justice is accordingly set aside to the extent of appellant case. Clearance Collectorate is directed to release the appellant goods being lawful Import. Clearance Collectorate is also directed to issue delay and detention certificate in favour of the Appellant. Appeal is accordingly allowed with no order as to costs.
21. Judgment passed and announced accordingly.