Raheel Kamran J. This is an old Reference Application under Section 196 of the Customs Act, 1969 ("Act") pending before this Court since 2016.
2. Following questions of law were proposed for our opinion which have been asserted to have arisen out of the judgment dated 19.01.2016 of the Customs Appellate Tribunal, Lahore Bench-II, Lahore:- 1) Whether Customs Appellate Tribunal, Lahore was justified to hold in the duty and taxes remission for export
(DTRE) Scheme that the show cause notice issued on 12.11.2014 was barred by time being issued after three years of issuance of each of purchase of invoices?
2) Whether the Customs Appellate Tribunal was justified to apply limitation of Section 32 of the Customs Act, 1969 from the date of local purchase/local supply of the goods?
3) Whether the Customs Appellate Tribun al's verdict is lawful in a case of DTRE where short levy (if any) can be raised after audit of the DTRE approval?
4) Whether Customs Appellate Tribunal was justified to apply limitation in a case where recovery was raised after an audit and after receipt of clarification from the Board on the issue of Special Federal Excise Duty?
3. Brief facts of the case are that the respondent procured locally Sugarcane Molasses under PCT Heading 1703.1000 without payment of SED ("SED") under three DTRE approvals. During the course of audit by the Directorate General of Audit, Customs and Petroleum, Lahore it was pointed out that SED at the rate of 1% was payable on locally procured Sugarcane Molasses. The respondent procured the molasses from different sugar mills without payment of SED under DTRE Scheme. According to clause (b) of sub-rule (1) of Rule 302 under the heading Duty and Tax Remission for Exports ("DTRE") notified vide SRO 450(I)/2001 dated 18.06.2001, a DTRE user is entitled to acquire local input good s without payment of customs duty, excise duty, sales tax or withholding tax in accordance with his DTRE approval. However , this exemption does not include SED on local procurements.
Further , under Serial No.24 of the Table of SRO 655(I)/2007 dated 29.06.2007 read with SRO 1065(I)/2005 dated 20.10.2005, a DTRE user has been given benefit of exemption from payment of SED only on imports under DTRE Scheme and Manufacturing Bond Scheme. The matter was referred to the Federal Board of Revenue ("FBR") for clarification whether the exemption of SED was admissible on acquisition of duty free input goods or otherwise.
The FBR, vide its letter dated 16.07.2014, clarified that the local purchase are chargeable to SED.
In the light of the Board' s aforementioned letter and circumstances of the case, the respondent was charged with the contravention of sub-section 2, 3A of Section 32 of the Customs Act, 1969 read with rule 307A of DTRE Rules issued under SRO 450(I)/2001 dated 18.06.2001 and Sections 14 and 16 of the Federal Excise Act, 2005 punishable under clauses 1,10(A) & 14 of Section 156(1) of the Customs Act, 1969 and Section 19 of Federal Excise Act, 2005, therefore, vide notice dated 12.11.2014 respondent No.1 was called upon to show cause under Section 32(2) of the Customs Act, 1969 as to why an amount of Rs.2,59,20,262/- as SED may not be recovered from it alongwith default surcharge/additional duty and penal action against it under the aforementioned provisions of law. The Collector of Customs (Adjudication), Faisalabad passed the Order-in-Original No.85/2015 dated 19.03.2015 whereby the charges leveled against respondent No.1 were held to be correct and established and it was directed to pay an amount of Rs.2,59,20,262/- as SED alongwith additional duty to be calculated at the time of payment and a penalty of Rs.50,000/- under clause 10A and 14 of Section 156(1) of the Customs Act, 1969. Being aggrieved by the said order , respondent No.1 preferred Customs Appeal No.163/ LB/2015 before the Customs Appellate Tribunal, Lahore which was accepted through the judgment impugned herein, wherein it was held that any demand created beyond three years of issuance of each of purchase invoices (under DTRE approvals Nos.
STM/1924 dated 23.01.2007, STM/2446 dated 24.03.2008 and STM/2813 dated 05.03.2009) by the appellants local suppliers is barred by time under the provisions of Section 32 of the Customs Act, 1969.
4. Learned counsel for the petitioner contends that the Customs Appellate Tribunal ignored the fact that this was a case regarding DTRE wherein audit was mandatory under rule 307E(1) after receipt of reconciliation statement from the DTRE approval holder and the question of recovery arose after such audit, therefore, the bar of limitation of three years was not applicable in this case. He maintains that non-payment of SED in this case was detected through an audit of the record by the department and the show cause notice was issued on that basis, therefore, limitation was not applicable. He adds that the show cause notice in this case was issued to respondent No.1 after clarification of the FBR on the reference made to it on the requisition of the audit department, therefore, the matter could not have been decided on the question of limitation. He lastly contends that since the SED was chargeable on the supply (local sale) of the molasses, therefore, limitation was not applicable in this case.
5. Learned counsel for respondent No.1, on the other hand, has supported the impugned judgment of the Customs Appellate Tribunal while contending that the show cause notice dated 12.11.2014 was barred by limitation for having been issued after the limitation period of three years.
6. The primary controversy in this case is whether the show cause notice dated 12.11.2014 was barred by limitation? The questions referred to us for considerations have nexus with the aforementioned primary controversy . Case of the respondent No.1 is that provisions of sub-section (3A) of Section 32 of the Customs Act, 1969 govern the law of limitation, which in this case was three years from the releva nt date i.e. when the duty ought to have been paid and accordingly the impugned notice was barred by limitation. Plea of the Appellant is that being a case of DTRE regime whereunder audit was mandatory under rule 307E(1) after receipt of reconciliation statement from the DTRE approval holder and the question of recovery arose after such audit.
7. In order to resolve the controversy and answer the questions raised for consideration of this Court, it would be appropriate to reproduce the relevant provisions of law i.e. rules 305, 307D & 307E of the Customs Rules 2001 and Section 32 of the Customs Act, 1969:-
305. Utilization of input goods.- The input goods acquired under this sub-chapter shall be utilized in the manufacture and export of out put goods within twelve months from the date of approval of DTRE application: Provided that the said period may be extended by the Board in cases of exceptional circumstances and in case of extension such fresh securities as mentioned in rule 300 covering the extension period shall be obtained.
307D. Reconciliation Statement.- Within sixty days of the expiry of utiliza tion period allowed under this sub- chapter , or earlier after export, a DTRE user shall file to the Regulatory Collector a reconciliation statement in the form as set out in appendix III .
307E. DTRE audit.- (1) The liability of a DTRE user to pay duty and taxes under a security instrument furnished by him under this sub-chapter shall not be discharged unless post exportation audit is carried out and completed satisfactorily within a period of [three] months after period specified in rule 305 or after filing of reconciliation statement under rule 307D, whichever is earlier .
(2) Audit under this sub-chapter shall be combined or consolidated audit for DTRE and other taxable activities, if any, and shall cover all the duties and taxes for which the security instrument has been furnished.
(3). In case of commercial exporter holding DTRE approval for same-state-goods, the Regulatory Collector may discharge the security instrument if such exporter , on the basis of purchase and export documents in his possession, proves that goods acquired by him against such approval have been exported in full.
(4) Where as a result of post exportation audit, there arises any discrepancy , irregularity or any violation of the provisions of this sub-chapter or any law applicable in this behalf by the DTRE user, the same shall be reported to the adjudication officer of competent jurisdiction.
32 Untrue statement, error , etc. -- (1) If any person, in connection with any matter of customs,--
(a) 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 , or
(c) submits any false statement or document electronically through automated clearance system regarding any matter of Customs, Knowing or having reasons to believe that such document or statement is false in any material particular , he shall be guilty of an offence under this section.
(2) Where, by reason of any such document or statement as aforesaid or by reason of some collusion, any duty, taxes or charge has not been levied or has been short-levied or has been erroneously refunded, the person liable to pay any amount on that account shall be served with a notice within five years of the relevant date, requiring him to show cause why he should not pay the amount specified in the notice.
(3) Where, by reason of any inadvertence, error or misconstruction, any duty, taxes or charge has not been levied or has been short levied or has been erroneously refunded, the person liable to pay any amount on that account shall be served with a notice within three years of the relevant date requiring him to show cause why he should not pay the amount specified in the notice: Provided that if the recoverable amount in a case is less than twenty thousand rupees, the Customs authorities shall not initiate the aforesaid action: Provided further that the aforesaid action shall also not be initiated in case full amount of short paid duty, taxes or other charges are paid voluntarily prior to initiation of audit inquiry or investigation.
(3A) Notwithstanding anything contained in sub-section (3), where any duty, taxes or charge has not been levied or has been short-levied or has been erroneously refunded and this is discovered as a result of an audit or examination of an importer 's or exporter 's accounts or by any means other than an examination of the documents provided by the importer or exporter at the time the goods were imported or exported, the person liable to pay any amount on that account shall be served with a notice within [five years] of the relevant date requiring him to show cause why he should not pay the amount specified in the notice: Provided that if the recoverable amount in a case is less than twenty thousand rupees, the customs authorities shall not initiate the aforesaid action.
(4). ....
(5) For the purposes of this section, the expression "relevant date" means--
(a) in any case where duty is not levied, the date on which an order for the clearance of goods is made;
(b) in a case where duty is provisionally assessed under section 81, the date of adjustment of duty after its final assessment;
(c) in a case where duty has been erroneously refunded, the date of its refund;
(d) in any other case, the date of payment of duty or charge;
(e) in case of clearance of goods through the Customs Computerized System on self assessment or electronic assessment, the date of detection."
8. It is noticeable from perusal of rule 307E that the said rule essentially relates to the discharge of a security instrument furnished by a DTRE user against his liability to pay duty and taxes and not proceedings post discharge of the security instrument, which is the case here.
Even otherwise, the post exportation audit specified under the said rule has been required to be carried out and completed within the time period specified therein i.e. earlier of the two namely within three months after the period specified in rule 305 or after filing of reconciliation statement under rule 307D. It is unchallenged finding of the Customs Appellate Tribunal in paragraph No.15 of the impugned judgment that against DTRE approvals dated 23.01.2007, 24.03.2008 and 05.03.2009, respondent No.1 consumed the entire waived merchandise in exports without breaching any of the conditions specified therein and being satisfied the Regulatory Collectorate discharged security furnished by it wher eas proceedings in the instant case were triggered subsequently as a consequence of FBR Ruling No.3(1)ST -L&P/2012 dated 16.07.2014 on basis of which an audit was conducted by the DG Audit Customs & Petroleum Lahore. Therefore, post export audit proceedings in this case are manifestly beyond the period of limitation specified in rule 307E ibid. Lastly , although sub-rule (4) of rule 307E of the Customs Rules, 2001 provides for adjudication by the officer of competent jurisdiction wherein the post export audit if there arises any discrepancy , irregularity or violation of the provisions of the rules or any law applicable in this behalf by the DTRE user, however , the period of limitation for the exercise of such adjudication is not governed by any provision in the aforementioned rule, meaning thereby that the limitation in such cases was to be governed by the relevant statutory provisions.
9. The show cause notice dated 12.11.2014 in this case was issued by the Collector while invoking the provisions of sub-section (2), (3A) of Section 32 of the Customs Act, 1969 read with rule 307E. From perusal of the provisions of Section 32 ibid reproduced above, it is manifest that sub-section (2) thereof applies only in cases where notice is issued for payment of any duty, taxes or charge not levied or short-levied or erroneously refunded on account of filing deceptive, false and fake declaration, notice, certificate, document or by reason of some collusion. Reliance is placed on judgment of the apex Court in the case of Collector of Customs (Preventive) Karachi v. Pakistan State Oil (2011 SCMR 1270). In the instant case, no such allegation has been levelled and established, therefore, the instant case is not covered within the ambit of Section 32(2) of the Customs Act, 1969. Such view is supported by the factual matrix recorded in Paragraph No.15 of the impugned judgment by the Customs Appellate Tribunal, being the final fact finding forum provided by law , in the following terms: "The present proceedings were triggered as a consequence of FBR Ruling No.3(1)ST -L&P/2012 dated 16.07.2014 on basis of which an audit was conduc ted by the DG Audit Customs & Petrol eum Lahore, wherefrom it was established that the appellant had been accorded inadmissible remissions of SFED. Needless to emphasize that it is not the case of the respondent that SFED was surreptitiously remitted by the Regulatory Collector through a dishonest agreement with the appellant; Nor is this a case where through a willful mis-statement as to the quantity or description of goods or through concealment of facts on the part of the appellan t the nonpayment of SFED has been occasioned ; This Tribunal is of the considered view that instant case involves a unilateral inadvertent error/mistake of law on the part of the Regulatory Collectorate and would fall within purview of sub-section (3) of Section 32 of the Customs Act, 1969."
(Emphasis supplied by the Court)
10. The other provision invoked by the Collector in the show cause notice dated 12.11.2014 in this case was sub- section (3A) of Section 32 of the Customs Act, 1969. From perusal of Section 32(3A), it is abundantly clear that the said provision is applicable in cases where it is discovered as a result of an audit or examination of an importer 's or exporter 's accounts or by any means other than an examination of the documents provided by the importer or exporter at the time the goods were impo rted or exported that any duty, taxes or charge has not been levied or has been short-levied or has been erroneo usly refunded. For commencing with the expression "Notwithstanding anything contained in sub-section (3)", the provision of sub-section (3A) overrides sub-section (3) of Section 32 of the Customs Act, 1969 meaning thereby that in cases where the former is applicable, the latter shall not curtail, restrict or limit application thereof.
11. Undisputedly , proceedings in the insta nt case were commenced as a consequence of FBR Ruling No.3(1)ST - L&P/2012 dated 16.07.2014 on the basis of which an audit was conducted by the DG Audit Customs & Petroleum Lahore, wherefrom it was established that the appellant had been accorded inadmissible remissions of SED.
Against that background, application of sub-section (3A) of Section 32 of the Customs Act, 1969 has not been disputed by respondent No.1 in this case, however , it has been contested that the period of limitation under the said provision commenced on the date when the SED was allegedly payable and not the date of audit, which period of limitation had expired in this case when the impugned demand was raised.
12. The period of limitation prescribed for a notice of recovery under sub-section (3A) of Section 32 of the Customs Act, 1969 was three years of the relevant date, which was amended to extend it to five years of the relevant date through the Finance Act, 2011 (XVI of 2011). The expression "relevant date", as used in the aforementioned provision, has been defined in sub-section (5) of Section 32 of the Customs Act, 1969. It is settled law that definition clause or a section in a statute is generally meant to declare what certain words or expression used in that statue shall mean. Reliance in this regard is placed on the cases of Syed Mukhtar Hussain Shah v. Mst.
Saba Imtiaz and others (PLD 2011 SC 260) and Commissioner of Sales Tax, Gujrat v. Messrs Union Medical Agency (AIR 1981 SC 1). The Customs Appellate Tribunal has held that in the facts and circumstances of the case none of the eventualities stipulated in sub-clauses (a), (b), (c) & (e) were attracted in the instant case inasmuch as neither it was a case of import duties and taxes not levied or short levied in consequence of an assessment order nor was this a case of provisional assessm ent or erroneous refunds nor did respondent No.1 opt for or availed self- assessment or clearances of imported goods, therefore, the instant case fell within the ambit of residuary clause (d) of Section 32(5) ibid according to which the "relevant date" would be "the date of payment of duty or charge." The above findings are unexceptionable. We also agree with the findings of the Customs Appellate Tribunal that the expression "date of payment of duty" occurring in clause (d) is the date on which payment of duty ought to have been made, otherwise the said provision would be rendered meaningless, redundant or superfluous and such construction is impermissible in law. Reliance in this regard is placed on judgments of the august Supreme Court of Pakistan in the cases of Messrs Pakistan Television Corporation Limited v. Commissioner Inland Revenue (Legal), LTU, Islamabad and others (2017 PTC 1372), Collector of Sales Tax and Central Excise (Enforcement) v. Messrs Mega Tech (Pvt.) Limited (2005 PTD 1933 ) and Messrs Master Foam (Pvt.) Limited v. Government of Pakistan (2005 PTD 1537 ). Accordingly , it has been rightly held by the Customs Appellate Tribunal that in the instant case, the relev ant date i.e. date of payment of duty, would be no later than the date on which goods were locally purchased by respondent No.1 under the DTRE approval Nos.STM/1924 dated 23.01.2007, STM/2446 dated 24.03.2008 and STM/2813 dated 05.03.2009 and that any demand created beyond the period of limitation commencing the relevant date is barred by time and unenforceable under the law .
13. For the foregoing reasons, there is no force in the contention of learned counse l for the petitioner that the bar of limitation of three years was not applicable in this case on the ground that the question of recovery of SED only arose after the audit which was mandatory under Rule 307E(1) of the Customs Rules, 2001. It is reiterated in this regard that adjudication of liability and limitation for recovery of the same is provided by the relevant statutory regime and the same is not governed by Rule 307E ibid, therefore, the same canno t be enlarged in disregard of the provisions of Section 32 of the Customs Act, 1969. Additionally , the clarification issued by the FBR vide letter dated 16.07.2014 on the issue of SED does not regulate the period of limitation for demand of the said duty. Inasmuch as Section 32(3A) of the Customs Act, 1969 contemplates proceedings, inter alia, on the basis of discovery as a result of audit, and the limitation prescribed therein stipulates relevant date for the purpose of recovery to be the date of payment of duty or charge instead of any date after the audit, therefore, plea of the petitioner that the limitation of three years was not applicable in this case is misconceived in law. Needless to observe that to enjoy the protection of law and to be treated in accordance with law is inalienable right of respondent No.1 guaranteed by Article 4 of the Constitution of the Islamic Republic of Pakistan, 1973 and there is no inherent power vested in the Executive to take any action against the said respondent save in accordance with law .
14. In view of the above, the questions raised before us for consideration, as listed in paragraph No.2 hereinabove, are answered in negative, against the petitioner and in favour of respondent No.1 and this reference application under Section 196 of the Customs Act, 1969 is disposed of accordingly .
15. The of fice shall send a copy of this judgment under seal of the Court to the Customs Appellate Tribunal.