JAHANZAIB WAHLAH, MEMBER JUDICIAL-III .----Through this order , I intend to dispose off Appeal No.K- 199/2018 directed against the Order-in-Appeal No.783/2017 dated 11.12.2017 passed by Collector of Customs, Appeals, Karachi.
2. Brief facts of the case as reported by the appellant are that after conduction of audit under section 26(2) of the Customs Act, 1969 (Act), it transpired that the respondent No.1 imported 02 consignments of Wet Salted Cowhide and Ganoids KTM Craft P vide GD No.KCSI-HC-3431 dated 6-1-2012 and KCSI-HC-83668-2362012 by availing benefit of zero rating of sales tax and income tax under SRO 1125(1)/201 1 dated 31.12.201 1 in the capacity of commercial importer at that point of time, when the said benefit was available to only manufacturer of the goods of 5 sector of the aforesaid SRO. Therefore, zero rating of sales tax and income tax was not available to him as the status available on the website of the FBR shows that he was registered in the capacity of importer/exporter and retailer not manufacturer . Hence, respondent No.1 short paid/evaded an amount of Rs.162,167/- which is tantamount to violation of sections 32(1)( 2) and 3A of the Act Section of Sales Tax Act, 1990 (STA) and 148 of the Income Tax Ordinance, 2001 (ITO) punishable under clauses (1), (9) and (14) of Section 156(1) of the Act , Section 33(5) and Section 7A of the STA , Chapter X of the Sales Tax Special Procedure Rules, 2007 (Special Procedure for payment of sales tax by the importer) and under the relevant provision of ITO. On the strength of which the said observation contravention was framed and forwarded to the Deputy Collector of Customs, Adjudication-II, Karachi issued show-cause notice dated 01.04.2016, which was not replied despite pasting on the notice board in terms of section 215 of the Act. resultant, the Deputy Collector of Customs, Adjudication-II passed an ex-parte order dated 18.07.2016, through which he held the charges as levelled in the show-cause notice as established and order the respondent No.1 to pay short paid amount of Rs.162,167/- along with impose d penalty of Rs.30,000/-. The respondent No.1 being aggrieved preferred an appeal before respondent No.2, who allowed the same vide order dated 1 1.1..2017 while holding in para 6 reading as: "I have examined the case record and the arguments of both the sides and have given careful consideration to the facts of the case. The plain reading of SR0.1 125(I)/201 1 dated 31.12.201 1 suggest that benefit of reduced rates of sales tax shall be allowed to the person registered as manufacturer , importer etc., who are doing business in five zero rated sectors. Admittedly the appellant is registered as manufacturer importer and exporter as per his sates tax registration and is, thus, entitled for the benefit of notification. The order-in-original is accordingly , set aside and the appeal is successful."
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. No cross objections under subsection (4) of Section 194A of the Act has been filed by the respondent No.1 i.e. within the stipulated period of 30 days, however on the date of hearing the consultant of the respondent No.1 argued the case threadbare and averred that the order passed by respondent No.2 is correct in fact and law and ought to be maintained and the appeal be dismissed as of no substance and legal ef fect.
4. Rival parties heard and case record perused. Prior to dilating upon other factual and legal aspect of the case, it is noted that the devised procedure of conduction of audit under Section 26(2) of the Act is available in the provision of Section 26A, verbatim of which is reproduced here-in-under 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 ally 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 or 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,-
(c) The person who imported, or exported or transported or stored or held under customs bond, or file the goods declaration, drawback or refund claim,
(d) Any of ficer, employee or agent of any person described in clause (a); and
(e) Any person having possession custody 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, which are officials of Directorate General of PCA/appellant for conducting audit of the record of the importer under Section 26(2) is in the manner prescribed by the Board in Rules. Since, no rules to this date are framed /issued by the Board despite insertion of Section 26A in 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 Officials of Directorate of Post Clearance Audit or appellant 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 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. 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 appellant has 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 ins per the expression of clause (b) of .subsection (2) of Section 26A of the Act. The first ground taken by the respondent No.1 during the course of hearing is that the appellant has not either issued any notice or served summon to/upon him 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. Since, no notice is 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 copy of the same would had been available with him in the case file. The query was replied in negative, which flabbergasted me and another query was put to him that how the audit was conducted, without asking for the accounts and record of the import, the answer was on the basis of GD's available in the data reservoir maintained by PRAL under Section 155G and Rule 110 of the Act/Rules, upon this the representative of appellant was asked 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 upon presentation of those after receiving notice/summon to do so 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 A 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 EA 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 conflict 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-Fait 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 preceding, order 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. Upon perusal of Section 228 of the ITO , it has been observed by me that the appellant has not been appointed/designated as Officer of Inland Revenue by the legislature, instead under the aforesaid Section, the Directorate General of Internal Audit has been formed and their officers are empowered to conduct audit of a tax payer/importer relating to the income tax whereas, for overseeing the collection of withholding Tax, Directorate General of Withholding Taxes has been established under Section 230A of the ITO, meaning thereby that the appellant is not at all appointed /designated as Officer of Inland Revenue. Resultant neither Directorate General of PCA nor appellant are empowered to exercise the powers of an Officer of Inland Revenue under Section 207 for conducting audit under Section 177 of the ITO. Rendering the entire act of audit in the matter of Income Tax by the appellant without powers/jurisdiction and as such coram non judice. My opinion stands vindicated from the latest reported judgment (2014 PTD 1733 ) Waseem Ahmed and others v. FOP and another , where it has been held in clear terms that "unless the officer of (DGI&I)-FBR are not appointed and an officer of Inland Revenue, powers under the different subsection of the Sales Tax Act, 1990 can not be delegated through any SRO with that the Hon'ble High Court of Sindh declared Notification No. 775(1)/201 1 ultra vires to the Sales Tax Act, 1990".
6. The appellant indeed has been appointed as Officer of Inland Revenue under Section 30DD of the STA and has delegated powers upon him through SRO 42(1)/2010 dated 23.01.2010 under different Sections of the STA incorporated in column (4) of SRO, subject to exercise of those under the designation of authorities given in column (3), which are (i) Chief Commissioner/Commissioner Inland Revenue (ii) Additional Commissioner of Inland Revenue (ii) Deputy Commissioner Inland Revenue and (iv) Assistant Commissione r Inland Revenue and not in the capacity or designation of (i) Director General/Director --PCA (ii) Additional Director--PCA (iii) Deputy Director-- PCA and (iv) Assistant Director--PCA. In the instant case the entire communication including the audit observations and contravention reports were prepared and served in the capacity of Assistant Director of PCA, which is non existent in column No.(3) of SRO 42(I)/2010 dated 23.01.2010 , rendering the same without power/jurisdiction. Hence ab-initio void and coram non judice. Therefore, entire proceeding right from Audit, audit observations, contravention reports are of no legal effect. Any super structure built thereon no matter how strong it may be have to crumble down as held by Superior Judicial Fora in umpteenth reported judgment PLD 1971 SC 197 Chittaranjan Cotton Mills Ltd. v. Staff Union, Raunaq Ali's PLD 1973 SC 236, SBLR 2002 Karachi 5 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 & 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 , Nashehra and others v . Sarfraz Khan and others.
7. It is now well settled legal principal of law that the consignment which has undergone the process of passing assessment/clearance order under the provision of Section 80 and Rule 438 of the Act/Rules is deems to be a passed and closed transaction and cannot be disturbed by any authority , either by appellant/subordinates. The proper course of action for reopening the said order is to file an appeal before the Collector of Customs, Appeals under the provision of Section 193 of the Act by the appellant or his subordinates, powers for which are deposed through SRO 500(1)/2009 dated 13.06.2009. Upon receipt of the appeal so filed, it is mandated for the Collector of Customs, Appeal to go through the facts and grounds incorporated therein. If he think fit that in the case under adjudication correct duty and taxes have not been either levied or short paid on the basis of found goods, is empowered to issue a notice under Section 32 of the Act as enunciated in 3rd proviso of Section 193A to the respondent No.1 and after receipt of reply to the said notice the Collector of Custo ms has to decide the appeal in the light of the issued show-cause notice and reply . In the instant case no appeals have been filed by the appellant despite mandated under law, instead appellant and Deputy Collector of Custom s, Adjudication-II assumed the powers under Section 195 of the Act and reopened valid assessment/clearance orders passed under the provision of sections 80, 83 and Rules 438 and 442 of the Act/Rules which they are not empowered to reopen valid assessment order passed by the authority defined in Section 2(a) of the Act, in exercise of powers vested upon them through SRO 371(I)/2002 dated 15.06.2002. Both acted without power/jurisd iction, hence their action deems to be without any lawful authority and as such ab-initio, null and void as held by Superior Judicial Foras in umpteenth reported judgment e.g. 2014 PTD 1256 Messrs Paramount International (Pvt.) Ltd. v. FOP and others, wherein their lordship of High Court opined that "department or an Officer of Customs, if aggrieved, by any decision or order passed by an officer of customs below the rank of additional collector could prefer an appeal before the Collector (Appeal) --- 1st order -in-original passed in the subject matter was an appealable order for both the parties, therefore option to reopen and order pass under the adjudication hierarchy was not available to the Collector . Even the Collector of Customs Adjudication could not oversee or exercis e any right of re-opening of any order v'hich has been passed by an officer lower in rank but acting as an adjudicating authority . Impugned order was set-aside and Constitution Petition was allowed" The CPLA No.105-K of 2014 filed by Collector of Customs and others against the order of the High Court has been dismissed by the Hon'ble Supreme Court of Pakistan while refusing leave to appeal. Whereas, the High Court of Balochistan in 2019 PTD 1712 titled as Collector of Customs, MCC, Quetta v. Al-Habib Enterprises and Engineering and others, while dismissing the SCRA of the department held that "after assessment of leviable duty and taxes under section 80 of Customs Act, 1969 and payment thereof and after clearing the vehicle under Section 83 Customs Act, 1969, the available remedy of filing appeal under section 193 of the Customs Act, 1969 was not availed by the concerned officials of the Collectorate of Customs, Additional Collector of Customs, (Adjudication) had no jurisdiction under the provision of Customs Act, 1969 to issue show-cause notice and to pass order -in-original. No question of law having arisen out of the impugned of the judgment passed by Appellate Tribunal warranting interference by High Court under section 196, Customs Act, 1969. Reference was dismissed in circumstances."
8. Since, no appeals against the assessment orders of the GDs have been filed either by the appellant or Deputy Collector of the Group, within 30 days i.e. by 06.01.2012 and 23.06.2012 of the dates of assessment/clearance orders dated 05.02.2012 and 22.07.2012 or even to this date. Meaning thereby that the passed assessment/clearance orders attained finality and became closed and past transac tion and cannot be disturbed or reopened by any authority or court as held in reported judgment 1989 MLD 4310 Messrs World Trade Corporation v. Central Board of Revenue that "if the order has attained finality through limitation. A fortiori; the Central Board of Revenue could not open up an order that had attained finality under the Sea Customs Act, 1878, and against which suo motu revision lay under the Act" and4 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 of revis ional proceedings, which in the present 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 hold the field for the simple reason that two contrary order could not exists at the same time". In the light of the settled law the assessment orders attain finality by virtue of expiry of stipulated period expressed in subsection (2) and as such hold field and no subsequent order on these are allowed to be piled upon being without lawful authority/jurisdiction. Notwithstanding, if the said act is performed i.e. deems to be double jeopardy not perm itted under Article 13 of the Constitution of Islamic Republic of. Pakistan and the law laid down by , the Superior Judicial Fora.
9. The claimed benefit of Sales Tax under SRO 1125(1)/201 1 dated 31.12.201 1 by the respondent No.1 in the GDs were found correct and the Deputy Collector of Customs of the Group of MCC of Appraisement-East/his subordinates passed the assessment/clearance orders under sections 80 and 83 and Rules 438 and 442 of the Act/Rules, who are let off scot-free despite standing on the same pedestal. The treatment given to the respondent No.1 by the appellant and the Deputy Collector of Customs, Adjudication-II, is without any doubt partial and differential. 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 Islam ic Republic of Pakistan. The Hon'ble 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 circumstanc es 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."
10. The Deputy Collector of Customs, Adjudication-II, invoked in the show-cause notice sections 32(1) and (2) of the Act, without perusing their expression, which read as: Section 32 False statement, error , etc. ----If any person, in connection with any matter of customs. ---- makes or signs or causes to be made or signed, or delivers or causes to be delivered to an officer of customs any declaration, notice, certificate or other document whatsoever , or
(b) makes any statement in answer to any question put to him by an officer of customs which he is required by or under this Act to answer , Knowing or having reason to believe that such document or statement is false in any material particular , he shall be guilty of an offence under this section. (Emphasis Supplied)
It is evident from the expression, that the untrue and false statement attracting the mischief of these provisions have to be made by the importer/exporter and by the clearing agent or by any person submitting document with the customs in connection with any matter of customs "Knowing or having reason to believe ". The provision of. Section 32 contemplate, the existence of a personal "knowledge " Believe being a conviction of the mind arising not from actual perception or knowledge but by way of inference of evidence received or information derived from others. It falls short of any absolute certainty because the accused in accounting for his possession may be able to show that the ground upon which is based are unsubstantial. Fazal Kader Chowdri v. Crown PLD 1952 FC 19, whereas, the term "reason to believe", has to classified at a "higher pedestal, then mere suspicion and allegation, but not equivalent to prove evidence. Even the strongest suspicion cannot transform in "reason to believe". The criteria laid down (to differentiate between mere suspicion and reason to believe) has to be, that some tangible evidence is available against the accused, which if left un-rebutted, may leave to the inference of guilt." Reliance is placed on reported judgment 2011 PTD (Trib.) 2220. No mis-declaration in material particular have been made by respondent No.1 as evident from the declarations and endorsements of the same by the Customs officials. Therefore no contravention as alleged is apparent within the contemplation of either section 32(1) or (2) resultant, the present case stand ousted from these section and falls under the provision of section 32(3), which speaks about error, omission and misconstruction, powers to adjudicate the cases falling under said section rest with the Principal Appraiser , in terms of entry No. 3(ii) of SRO 371(1)/2002 dated 15.06.2002. To the contrary , Deputy Collector of Adjudication-II, issued the show-cause notice, while usurping the powers of Principal Appraiser , which is not permitted under law that the powers vested upon an authority has to be used by him only and by none else.
Reference is made to 2017 PTD 196 Collector of Sales Tax v. Messrs Khurshid Spinning Mills Ltd. and another , wherein it has been held that "A forum cannot take cognizance of a matter beyond to jurisdiction prescribed in the law, inherent defects cannot be cured to defeat the provisions of statute or enactment effecting the jurisdiction of a forum, when a forum/Court suffer from want of inherent jurisdiction, no act of consent or acquiescence in the proceeding can vest such forum/Court with such jurisdiction, objection qua jurisdiction is a basic lacuna on assumption of jurisdict ion as it goes to the very roots of the matter and renders the entire proceeding coram non judice, there can be no exception to the principle to the order pass or an act done by the Court or a Tribunal, incompetent to entertain proceeding, is without jurisdiction . This vital lapse renders the show- cause notice and Order-in-original suffer from want of powers/jurisdiction . Hence, ab initio null and void and as such coram non judice.
11. 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.
12. Judgment passed and announced accordingly .