JAHANZAIB WAHLAH, MEMBER JUDI CIAL-III .---This judgment will disposes of aforem entioned (35) Customs Appeals filed by the appellants agains t Order-in-Original Nos.1281644 dated 31.01.2019, Order-In-Original No.1281646 dated 31.01.2019 Order-In-Original No.1281642 dated 31.01.2019, Order-In-Original No.1371859 dated 09.05.2019, Order-In-Original No.1371907 dated 09.05.2019, Order-In-Original No.1371904 dated 09.05.2019, Order-In-Original No.1371871 dated" 09.05.2019, Order-In-Original No.1371864 dated 09.05.2019, Order-In-Original No.1371919 dated 09.05.2019, Order-In-Original No.1371912 dated 09.05.2019, Order-In- Original No.1371872 dated 09.05.2019, Order-In-Original No.1371935 dated 09.05.2019, Order-In-Original No.1371883 dated 09.05.2019, Order-In-Original No.1371877 dated 09.05.2019, Order-In-Original No.1371868 dated 09.05.2019, Order-In-Original No.1371917 dated 09.05.2019, Order-In-Original No.1371938 dated 09.05.2019, Order-In-Original No.1373774 dated 14.05.2019, Order-In-Original No.1373742 dated 14.05.2019, Order-In-Original No.1373832 dated 14.05.2019, Order-In-Original No.1373736 dated 14.05.2019, Order-In- Original No.1373756 dated 14.05.201 9,Order-In-Original No.1373759, dated 14.05.2019, Order-In-Original No.1373868 dated 14.05.2019, Order-In-Original No.1373835 dated 14.05.2019, Order-In-Original No.1373840 dated 14.05.2019, Order-In-Original No.1373761 dated 14.05.2019, Order-In-Original No.1373755 dated 14.05.2019, Order-In-Original No.1373844 dated 14.05,2019, Order-In-Original No.1373769 dated 14.05.2019, Order-In-Original No.1373752 dated 14.05.2019, Order-In-Original No.1376619 dated 21.05.2019, Order-In- Original No.1376623 dated 21.05.2019 and Order-In-Original No.1376621 dated 21.05.2019 passed by the Additional Collector of Customs (Adjudication-I), Karachi. These 35 appeals involved identical issues of law and facts. In view of aforementioned position , the same were heard together and are being decided simultaneously through this common order in the light of judgment of the Hon'ble High Court of Sindh in Special Customs Reference Application No.157/2008 (S.M.Naqi son of Syed Muhammad Hussain, Karachi v. Collector of Customs (Adjudication-1) and others, Karachi ).
2. Since all the appeals have similar facts and grounds hence there is no need to discuss all the appeals. Brief facts of the Customs Appeal No.K.346/2019 as reported by the Directorate of Post Clearance Audit (Customs), Karachi received an information that certain importers are importing polyester lace from India and availing inadmissible benefit of SRO 1274(1)/2006 dated 29.12.2006 by misdeclaring its classification. The scrutiny of past clearance data of the instant goods were started and the instant GO was selected for Audit. The audit of the instant GD revealed 'that the importer M/s. H.S. Enterprises Imported Garment Accessories (Assorted Design Multicolor Lace) from India and got the same cleared under PCT heading 8504.2900 and availed benefit of SRO 1274(1)/2006 dated 29.112006. However , the contents of examination report and images uploaded clearly reflect that the goods are made of polyester which is a manmade fiber and the goods are correctly classifiable under PCT heading 5804.2100 chargeable to Customs Duty 20% and where benefit of SRO 1274(1)/2006 dated 29.12.2009 is not admissible. An Audit Observation was accordingly issued to the importer for alleged evasion of duty and taxes through mis-declaration of classification and availing inadmissible exemption under SRO 1274(1)/2006 dated 29.12.2006 and causing a loss of revenue amounting to Rs.12,26,581/-.
3. The importer responded electronically and manually through representative. Admittedly , goods have been declared as Garment Accessories; Assorted Design Multicolor Lace and the consignment was cleared after due process of detailed checking / physical examination in terms of section 80 of the Customs Act, 1969. In presence of Section 29 read with Section 80(3) of the Customs Act, 1969, merely on the basis of photo-images the specification of the raw material used in the manufac turing or to say description cannot be changed, therefore on this sole ground the said "observation" is liable to be withdrawn. Secondly , it is pertinent to mention here that the consignment "Laces" were mechanically made laces, where assorted types of yarns / fibers were used. According to the Explanatory Notes there are number of assorted types of yarns and fibers. The Section Note 2(A) of Section XI of the Explanatory Notes in the case of mixed textile material, the yarn/fiber which is* pre-dominant by weight shall prevail for classification. The Chapter Note 2(A), further states that "When no one textile material predominates by weight is covered by the heading which occurs last in numerical order among those which equally merit consideration. Even otherwise the PCT Heading 5804.2900 is the applicable PCT Heading for the imported "Laces". The Laces are normally traded on the basis of their design and colour scheme. The definition of "LACE" given in sub-heading notes 0-58.04 in the Explanatory Notes speaks as under "Lace is an ornamental or decorative openwork fabric in which design elements (more or less Intricate) formed by the Inter twisting of threads are joined either by meshes, usually of regular size and shape, forming an apparent openwork ground fabric, or by ornamental links (brides) which themselves given pattern effects. The design eleme nts and background of mesh or brides are usually produced simultaneously but sometimes the design elements are made separately and assembled afterwards". Thus, the said definition of Explanatory Notes clearly speaks that "Laces" are usually manufactured with assorted yarn / fibers. As stated above all the consignments were released after physical examination by the Customs Examination staff and the examination report is not only confirming the declared description but also categorically stated that Assessment Group may check all aspects including PCT Heading. The Assessing Group, after checking all documents, including SAFT A Certificate, and the examination report / images, has confirmed the declared PCT Heading of 5804.2900. It may also be noted that the Indian Government / Customs authorities have also issued the SAFT A Certificate after detailed examina tion / checking of the exporter's declaration and confirmed the PCT Heading 5804.2900. All the consignments have been released after due verification of the SAFT A Certificates. In past couple of times, same sort of objections of PCT classification was raised but after thorough scrutiny and Lab testing the PCT of 5804.2900 has been confirmed in respect of two GD No.KAPW -HC-13351 1 -08-01-2017 and KAPE-HC-39058-25-08-2017, the content s of which clearly speaks that in the case of "Laces" made of mixed yarn / fibers, the Note 2(A ) of sub-heading 58.04's Explanatory Notes, shall apply and according to the said Explanatory Notes even in the presence of some portion of "Polyester" the PCT Heading of 5804.2900, instead of 5804.2100, shall be the applicable PCT Heading. The observation of the PCT Heading 5804.2100 on the ground of "Images" is nothing but a case based on surmises and presumptions.
4.. As per contravention reported that the perusal of the reply submitted by the importer clearly reflects that the importer has failed to defend the objects raised in the audit observation regarding composition of the imported lace made of polyester which is a manmade fiber and its classification under appropriate PCT Heading i.e. 5804.2100.
Instead of addressing the objections raised on the constituent material whereby the ascertained PCT qualifies classification on the basis of its production of polyester and other yarns/fibers used in the manufacturing of lace, the importer relies on the completion of assessment after examination of the consignment and scrutiny of documents including SAFT A certificate.
5. Show-cause notices issued and matter s were adjudicated. The learned adjudicat ing officer passed the impugned order on 30.01.2019 as under: "I have gone through record of the case. The instant case revolves around the PCT classification of the Laces imported from India. The Laces made of man-made fibres / yarns are classifiable under PCT Heading 5804.2100 and the Laces made of other than man-made fibres / yarns are classifiable under 5804.2900. Though the standard rates of duty / taxes of both PCT headings is same, however , by virtue of SRO 1274(1)/2006 dated 29-12-2006, which is for imports from the SAARC countries, the duty reduced to concessionary rate of 5% as against the standard rate of 20%. The Directorate of PCA alleged that according to the examination report and images the imported Laces are made of man-mad e fibres instead of declared Assorted Design Multicolour Laces thus, correctly classifiable under PCT Heading 5804.2100 instead of 5804.2900, hence, the benefit of SRO 1274(1)/2006 has been incorrectly obtained by the importer . The crux of the above-mentioned reply to SCN, on behalf of the importer is that the constituent material of the imported Laces cannot be ascertained just on the basis of naked-eye inspection unless the samples are thoroughly not inspected / checked and such checking may also includes Laboratory test, when need arises. In support of the argument the representative (AR) of the importer has cited evidential GDs, i.e. (i) KPPI-HC-24340-28-09-2018, (ii) KPPI-HC-25837-05-10- 2018, (iii) KPPI-HC-37449-21-1 1- 2018, (iv) KAPE-HC-39058-25-08-2017 and (v) KAPW -HC-13351I-05-01- 2017, whereby despite the examination report of Polyester Fancy Laces, at review stage the Laces were got tested from the Customs Laboratory , who confirmed that the Laces are made of mixed yarns, including cotton, metalized, etc. The record of the aforesaid GDs shows that after receipt of lab report, confirming that the imported Laces are / were made of Mixed yarns, including cotton, metalize, etc., the assessment was made under the declared PCT Heading of 5804.2900. The AR has also submitted a copy of Order -in-Appeal No. 1478 to 1480/2018 dated: 18-09-2018, whereby the learned Collector (Appeals), in the similar three cases of GD No. (i)KAPE-HC-184193-20-04-2018, (ii) KAPE-HC-183872- 20-04-2018 and (iii) KAPE-HC-189489-28 -04-2018, has given the findings that without a lab test report and / or the thorough examination of the samples by the Assessing Officer , the PCT Heading of Laces made of mixed materials including cotton, metalized, etc., are correctly classifiable under PCT Heading 5804.2900 and this practice of assessment is quite regularly following by the Collectorates, particularly MCC Port Qasim. Further keeping in view the fact that the SAFT A Certificate, as required by the Customs authorities while allowing exemption in terms of SRO 1274(1)/2006, has been issued by the Customs / Government authorities of India after thorough checking and the said SAFT A Certificate also confirming the declared PCT Heading of 5804.29 00. 'The SAFT A Certificate has been invariably verified through web-site channel by the Collectorates, thus, the findings of SAFT A Certificate could not be discarded merely on post clearance observation based on the mere images. In view of the above, I agree with the learned Collector (Appeals ) findings in the aforesaid Order -in-Appe al and I also of the firm opinion that mere naked eye inspection by the examination staff, cannot determine the PCT Heading of the laces made of different design / made of different material / yarns, thus, in the presence of SAFT A Certificate the current practice of assessment of Laces of mixed yarn, the Audit Observation / Contravention report of the Directorate of PCA is not substantiated, hence the Show-Cause Notice is hereby vacated"
But on the Very next day i.e. 31.01.2019 surprisingly issued another Order -In-Original vide No.1281644 by amending the contents of first Order -In-Original in the following manner: "***** Corrigendum The under signed is conferred the power under Section 206 of the Customs Act, 1.969, the following amended in this order . Scrutiny of the case and specially examination report duly accepter' by the respondent after assessment of the goods which clearly confirmed that goods are "Garment Accessories (Assorted Design Multicolor which are correctly classifiable-under HS Code 5804.2100 attracting Customs Duty c 20% instead of declared PCT 5804.2900 attracting Customs Duty @ 5% under PTA regime. Hence cited the case is not a identical to under reference case in cited case the goods were tested from the Customs Laboratory The case was decided by the Collector Appeal in the light of test report whereas in this case neither sample is available nor any test report in this regard in the system. This paragraph was not incorpo rated in the 010 due to typing mistake and pasting of 010 in the system. Therefore, the charges levelled in the show-cause notice stand established. Messrs HS Enterprises are directed to pay Rs.1505023/- against the leviable duty and taxes into the Government Treasury . Since, the offending goods in this case have already been released, therefore the same cannot be confiscated at this stage. A penalty of Rs.200000/- (Rupee Two Hundred Thousands Only) is imposed on the importer in terms of clause 14 of Section 156 of the Customs Act, 1969. The Directorate / Collectorate may proceed to recover the default surcharges strictly is accordance with law ."
6. The appellants being aggrieved by the subsequent impugned orders filed instant appeals before the Tribunal on the grounds that the Section 206 of the Act which is envisages as "Correction of clerical errors, etc. Clerical or arithmetical errors in any decision or order passed by the Federal Government, the Board or any officer of customs under this Act, or errors arising therein from accidental slip or omission may, at any time, be corrected by the Federal Government, the Board or such officer of customs or his successor in office, as the case may be" indeed only empowers the respective officer to correct any "clerical or arithmetical error", whereas in the instant case the Respondent No.1 the Additional Collector (Adjudication-I) reversed the conclusion and findings of the original Adjudication Order and added a fresh new para into operation part under the garb of section 06 of the Act as "clerical omission". Therefore, as per the principle set by the Hon'ble High Court of Sindh and this --Hon'ble Appellate Court in cases cited as 2016 PTD A 1096 and 2015 PTD 1469 , respectively , the action of the Respondent No.1 does not fall under umbrella of bona fide error for the issuance of the "Corrigendum" of Section 206 of the Customs Act, 1969. Thus, the second impugned-Order-in-Original is illegal, without lawful authority and jurisdiction.- It is pertinent to mention here that the Respondent No. 1 in exercising the powers of an Adjudicating Officer under Section 179 of the Customs Act, 1969, becomes "Functus Officio" once he / she passes any order , therefore, cannot change verdict / conclusion of his / her own order . The second Order-in-Original is contrary to the principle of "Functus Officio" established by the Superior Courts in the cases cited as 2018 SCMR 359 and 2018 CLC 1505 Islamabad. Thus, the impugned Order-in-Original is nullity in the eyes of law. Without prejudice the above even otherwise in terms of Section 195 of the Act, the "Collector" or "Board" are only empowered to re-open the proceedings of their sub-ordinate if there is any "illegality" or "impropriety". Whereas, in the instant case the "Additional Collector" at his own reopen an open and shut case of Adjudication. Further even otherwise as per law settled by the Hon'ble High Court in the case of Paramount International's case (2015 PTD 1469 ), an Adjudication Authority of section 179 of the Act is not sub-ordinate to any officer of Custom or Board, thus, the Adjudicated cannot be re-opened under Section 195 of the Act. The legislature has given statutory remedy under sections 194 and 194-A of the Customs Act 1969, to the officers of Customs to appeal against the unsatisfactory orders before the Hon'ble Customs Appellate Tribunal. Therefore, exercising arbitrary powers to change the conclusions and findings of the Order is patently illegal as per the statutory and constitutional principles. On 30.01.2019, a favourable Order-in-Origina l No .1281039-30012019, was issued then on 31.01.2019, the said order was reversed with added some of Rs .200 ,000/- vide the impugned Order-in-Original. Surely , the buildup of circumstances shows that the Respondent No.1 was made subject to immense administrative pressure, which consequently led to the change in the lawfully issued Adjudication Order . Thus, the impugned order is void in the eyes of law as passed under duress. In the last paragraph of the first Order-in-Original No.1281039- 30012019, the Respondent No.1 showed the affirmative view to the Collector of Customs (Appeal) Order-in-Appeal Nos.1478 to 1480/2018, wherein the respective appeals were allowed because of the fact that MCC - Appraisement (East) failed to conduct the laboratory test. However; in the subsequent impugned Order-in-Original, the Respondent No.1 arbitrarily changed the factual and legal determination of the Collector of Customs (Appeals) above-mentioned Order -in-Appeal by stating that the Collector of Customs (Appeals), just to distinguish the facts of the instant matter . Therefore, the impugned Order-in-Original is nothing but an arbitrary act of the Respondent No.1, hence, illegal and void. The first Order-in-Original No.1281039-30012019, exonerated the Appellant from the allegations of evasion of duties and taxes by vacating the Show-Cause Notice No.C-1 163953-06092018 dated: 04-01-2019, by giving lawful findings and reasoning. However , the next day a new and different Order-in-Original was issued in the same aforesaid Show Cause Notice without any notice to the Appellant, therefore, making the second Order-in- Original illegal as to the Rights of the Appellant enshrined under Articles 4, 10-A and 13 of the Constitution of Pakistan, 1973. Without prejudice to the above, it is pertinent to mention here that the imported consignments of "Laces: were mechanically made laces, where assorted types of yarns fiber were used and according to the Explanatory Notes there are number of assorted types yarn and fibers. Accordi ng to the Section Note 2(A) of Section XI of the Explanatory Note in the case of mixed textile material the yarns / fiber which is pre-dominant by weight hall prevail for classification. The Chapter Note 2(A) further states, "When no one textile material predominates by weight is covered by heading which occurs last in numerical order among those which equally merit consideration:" Therefore, even otherwise the PCT Heading 5804.2900 is the applicable PCT Heading for imported "Laces". Moreover , the Laces are normally traded on the basis of their design and colour scheme. The definition of "Lace" given in sub-heading notes of 58.04 in the Explanatory Notes speaks as under "Lace is an ornamental of decorative openwork fabric in which design elements (more or less intricate) formed by the interwisting of threads are joined either by meshes -- usually of regular size and shape, forming an apparent openwork ground fabric, or by ornamen tal links (brides) which themselves given pattern effects. The design elements and background of mesh or brides are usually produced simultaneously but sometimes the design elements are made separately and assembled afterwards." Thus, the said definition of Explanatory Notes clearly speaks that "Laces" are usually manufactured with assorted yarn / fibers, which includes "Synthetic" as well as "natural", "metallic" and etc. A similar contravention was filed by the Collectorate of Port Qasim with the Collector of Customs (Adjudication-I), however , the learned Adjudicating Authority who after listening to the similar arguments vacated the allegations vide Order-in-Original No.780/2018-19. Therefore, keeping in view the facts / circumstances of the case and legal aspects indeed the Respondent No.1 initially decided the case rightly , however , prima facie due to the administrative pressure the Respondent No.1 was forced to change the stance on the fabricated plea of "clerical error", which nowhere in the original order dated 30.01.2019. The actions of the Respondent are in violation of rights of the appellant enshrined under Articles 4, 10A, 18 and 37 of the Constitution of Pakistan, 1973. The learned counsel for the appellant prayed that the impugned Order-in-Original No.1281644- 31012019 has been issued without lawful authority hence liable to be set aside. It was case of amendment or correction through section 206 of the Act and re-opening within the meaning of Section 195 of the Act.
7. No cross objections were filed by the respondents despite directions during hearings. Mr. Arif Maqbool, Assistant Director/DR appeared and straight away argued the case. The learned DR forcibly contended that the importers have cleared the goods under the PCT heading 5804.2900 by availing benefit of SRO 1274(1)/2006 dated 29.12.2006. He further contended that as per examination report and images uploaded clearly reflects that the goods are made of Polyester and manmade fiber, therefore, correctly classifiable under PCT heading 5804.2100 chargeable to Customs Duty @ 20% and benefit of above SRO is not admissible and the Audit observation has correctly been issued for evasion of duty and taxes through mis-declaration of classification.
8. I have gone through record of the case. The instant appeals revolve around the PCT classification of the "Laces" imported from India. The "Laces" made of "man-made fibre / yarns", are classifiable under PCT Heading 5804.2100 and the "Laces" made of other than man-made fibres / yarns are classifiable under 5804.2900. Though the standard rates of duty / taxes of both PCT headings is same, however , by virtue of SRO 1274(1)/2006 dated 29.12.2006 which is for imports from the SAARC countries, therefore, the duty is reduced to concessionary rate of 5% as against the standard rate of 20%. The Directorate of PCA alleged that according to the examination report and images the imported "Laces" are looks to be made of "man-made fibres" instead of declared "Assorted Design Multicolour Laces" thus, correctly classifiable under PCT Heading 5804.2100 instead of 5804.2900, hence the benefit of SRO 1274(1)/2006 was not available and same incorrectly obtained by the appellants from the Customs.
The crux of the ground of appeal are that the constituent material of the imported "Laces" cannot be ascertained just on the basis of naked-eye inspection of the images unless the samples are thoroughly inspected/checked and such checking may also includes Laboratory test when need arises. In support of the argument, the representative
(AR) of the importer has cited evidential GDs, i.e. (i) KPPI-HC-24340-28-09-2018, (ii) KPPI-HC-25837-05-10- 2018,
(iii) KPPI-HC-37449-21-1 1-2018, (iv) KAPE-HC-39058-25-08- 2017 and (v) KAPW -HC-13351 1-05-01-2017, whereby despite the examination report mentioning "Polyester the words, however , at "review" stage, in terms of Rule 441 of the Customs Rules, 2001, the "Laces" were got tested from the Customs Laboratory , who confirmed that the "Laces" are made of mixed yarns, including cotton, metalized, etc. The record of the aforesaid GDs, submitted by the appellants confirms that after receipt of lab report, the Assessing Officers satisfied that the imported "Laces" are / were made of "Mixed" yarns, including cotton, metalize, polyester , etc., and the assessment was made under the declared PCT Heading of 5804.2900. The appellants have also submitted a copy of Order-in- Appeals Nos.1478 to 1480/2018 dated 18.09.2018 whereby the learned Collector of Customs (Appeals) in similar three cases bearing GD Nos.(i) KAPE-HC-184193-20-04-2018, (ii) KAPE-HC-183872-20-04-2018 and (iii) KAPE- HC-189489-28-04-2018, has given the findings that without a lab test report and / or the thorough examination of the samples by the Assessing Officer, the PCT Heading of "Laces", made of "mixed materials", including cotton, metalized, polyester , etc., thus, according to the un-deniable evidences such "Laces", made of assorted mixed material, are correctly classifiable under PCT Heading 5804.2900 and this practice of assessment is quite regularly followed by the Collectorates. The Directo rate of PCA's Audit Observation were based on mere presumptions. The D.R has no rebuttal to this fact and infact admitted that the department has not filed any appeal against the orders passed in favour of the appellants and also not able to satisfy this court on the point of issuance of 2nd Order-In- Original on the very next day by which all the findings recorded earlier by the learned Collector were totally reversed by way of a corregendum.
9. The SAFT A Certificate as required by the Customs authorities while allowing concession / exemption in terms of SRO 1274(1)/2006 were issued by the Customs / Government Authorities of India after thorough checking and the said SAFT A Certificate was also confirmi ng the declared PCT Heading of 5804.2900. The SAFT A. Certificate has been invariably verified through web-site channel by the Collectorates thus, the confirmation / findings of the SAFT A Certificate cannot be discarded merely on presumptions based on the images see at a belated stage / long period after clearance of the goods. The facts / circumstances of the case are also proving that the Respondent Adjudicating Officer has not applied the judicial mind. In the case bearing Customs Appeals Nos.K-346, 347 and 348/2019, by accepting the merits of the case, initially the show-cause notices were vacated, however , just after one day, the new Orders-in-Originals, were issued with the additions of a paragraph by stating that the Orders-in- Originals have been amended under Section 206 of the Customs Act, 1969, and changed the whole Orders at her own. The Section 206 provides the correction of clerical or arithmetical errors in any decision or order passed by the (Federal Government), the Board or any officer of Customs under Customs Act, 1969 or errors arising therein from accidental slip or omission. In the present case the learned Collector while exercising the powers under the above Section has totally reversed the findings on law and facts 'earlier recorded by her which made the impugned Order-In-Original self contradictory and against the law as there is no provision available in the Customs Act, 1969 which empowers any officer of the Customs to review or modify his own order without adopting the course of re- opening / re-adjudication of cases as provided under Section 195 of the Customs Act, 1969.
10. In view of the above, I agree with the findings of the Collector (Appeals)'s in the aforesaid Order-in-Appeal as well as the findings of the Collector (Adjudication-I), passed in Order-in-Original No.780/2018-2019 dated 11.02.2019 and i am also of the firm opinion that mere through naked eye inspection of the photo images after clearance of the goods cannot be made basis to determine the PCT Heading of the "Laces", which were admittedly made of different design / made of different material / yarns thus, in the presence of SAFT A Certificate and the assessments finalized by the appropriate assessing officers under Section 80 of the Customs Act, 1969 and also keeping in view the practice of assessment of "Laces" of mixed yarn, I do not find any substance in the "Audit Observation / Contravention report of the Directorate of PCA, which are hereby based on presumption after clearance of the goods. Resultantly , all these appeals are allowed to the extent of setting aside the amended Order-In-Originals subsequently passed being uncalled for and unwarranted by law having been passed in an arbitrary and capricious manner . The Order-Id-Original passed at the first instance are upheld.
11.. Judgment passed and announced accordingly .