ABDUL JABBAR QURESHI, MEMBER JUDICIAL-I. By this judgment, we intend to dispose of three Customs Appeal bearing Nos. 3865/2021, K-7080/2021 and K-7081/2021 and also Intervener Applications Nos.. 168/2021 and 169/2021 filed against Order-In-Original No. 644/2020-21 dated 31.12.2020 passed by the Collector of Customs (Adjudication-II), Custom House, Karachi. These appeals have identical issue of law and facts, therefore, being heard, dealt with and disposed of simultaneously though this common order in the light of the judgment of the Honorable High Court of Sindh in Customs Reference No. 157 of 2008, S.M. Naqi son of Syed Muhammad Hussain, Karachi v. Collector of Customs (Adj-I) and others.
2. It is needless to reproduce facts of each case separately. Hence, for reference the facts of Appeal No. K-3865/2021 are taken into consideration for decision are that Brief facts that the a credible information that certain unscrupulpus importer/investor are attempting to misuse the facility of Export Processing Zone through mis-declaration and misuse of the WeBOC system for clearance of Indian origin banned goods and high value as well as higher duty items under the garb of Second Hand Clothing. The imported goods stuffed in three containers bearing Nos. CLHU-8134097, HLXU- 6168230 and GLDU-7050302 covered under. Bills of Lading No. RAHJEA/KHI/296 dated 03.04.2020, RAH/JEA(KHI/298 dated 10.04.2020 and MAX/DXB/1987/1920 dated 12.04.2020 respectively; said to contain Second Hand Clothing were suspected and kept under observation. The aforesaid containers arrived at Karachi Port in the name of M/s. Coastex (Pvt.) Ltd. Plot No. 3, Sector D-VI, Phase-II, EPZ, Karachi. In order to fulfil the requirement for issuance of NOC from the Export Processing Zone Authority (EPZA), an online application through Unique User ID of above investor of KEPZ, was filed and required NOC was issued accordingly. In view of above position, examinations of the above goods were arranged at the port after detention of the aforesaid containers in the Karachi Port premises. In the meantime, a letter was received from Messrs Coastex (Pvt.) Ltd. EPZ, Karachi, whereby they informed that their ID has been misused for NOC from EPZA and they have no concern with the above goods. Messrs Cargo Jobs a Custom House Agent (CHAL 665) also disowned the containers. Consequently, joint examination of the same was conducted on 15 and 16 May, 2020 at PICT (East Wharf), Karachi which resulted in detention/seizure of goods mentioned in the Annexures I, II and III against each container after concluding the physical examination of the aforesaid containers, the recovered goods were re-stuffed in each container and all three containers were resealed with post examination seals. Accordingly, all the goods in the three containers were seized under Section 168 of the Customs Act, 1969. After issuance of Notices under Section 171 ibid, the said containers were given in the custody of M/s PICT, being the custodians of goods. Had the Customs authorities not detected the above case and the timely action not taken in this regard, the Government would have suffered a loss of revenue to the tune of Rs.
36,500,927/-. It can safely be concluded from the above facts and circumstances that unscrupulous elements with the connivance and abetment of M/s. Coastex (Pvt.) Ltd., EPZ, Karachi, M/s. Cargo Jobs a Custom House Agent (CHAL 665) and other are involved in the seam of depriving the national exchequer from its legitimate revenue to the tune of Rs. 36 million (approx).
Thus, they have violated the provisions sections 2(s) 16, 32(1), 32(2), 32(A), 155-1 178 of the Customs Act; 1969, Sections 3, 6 and 33 of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2001 punishable under Clauses (8), (14), (14A) and (101) of Section 156(1) of the Customs Act, 1969 as well Clause (11) of Section 33 of the Sales Tax, 1990 and Section 148 of the Income Tax Ordinance, 2001, further read with IPO, 2016, EPZ Rules contained in SRO 450(1)/2001 dated 18.06.2001 and other allied laws. The total offending value has been worked out to Rs. 46,536,0651-.
Accordingly, M/s. Coastex (Pvt.) Ltd., KEPZ Landhi Industrial Area, Karachi (Hassan Askari) along with their clearing agent, M/s. Cargo Jobs (CHAL 655), Karachi and others i.e., (a) Mustafa Makkani son of Asif Hussain Makkani, Manager of M/s. Coastex (Pvt.). Ltd., EPZ, Karachi, (b) Ahmed Malik son of Muhammad Ain-ul-Huda, Director of M/s. AXL Container Line (Pvt.) Ltd., Address:(i) House No. A-619, Block-12, F.B Area, Karachi, (ii) office # 603, Kawish Crown Plaza, Shahrah-e-Faisal, Karachi, (c) Abu Zakir son of Abu Nasir CEO of M/s. Faiz Cargo (Pvt.) Ltd., Address: (i) 1st Floor, Plot No. 29D1, Flat No. 2, Block-6, PECHS, Shahrah-e-Faisal, Karachi, (ii) 1/4 A, 3 Floor, Block-6, PECHS, Shahrah-e-Faisal, Karachi, (d) Saqib Jabbar son of unknown (CNIC # 42501-4131391-2), F-163, Malir Labour Aquare, Landhi Industrial Area, Karachi and (e) Muhammad Faraz-ud-Din son of Muhammad Alauddin, CNIC No. 42201-5965164-9, B-100/10, Malir Kokharapar No. 04, Karachi were called upon to show- cause under provisions of Section 2(s) 16, 32(1), 32(2), 32(A), 155-I and 178 of the Customs Act, 1969 Sections 3 and 6 of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2001 further read with Import Policy Order, 2016, BPZ Rules contained in SRO 450(1)/2001 dated 18.06.2001 as to why the evaded amount of duty and taxes to the tune of to Rs.36,500,927/in addition to other liabilities along with default surcharge may not be recovered from them and why penal action under clauses (8), (9), (14), (14A) and (101) of Section 156(1) of the Customs Act, 1969 as well clause
(11) of Section 33 of the Sales Tax Act, 1969 and Section 148 of the Income Tax Ordinance, 2001, further read with Import Policy Order, 2016, EPZ Rules contained in SRO 450(1)/2001 dated 18.06.2001 and other allied laws should not be taken against them. The time period for issuance of show- cause notice in the instant case was further extended in exercise of powers conferred upon undersigned under Section 168(2) of the Customs Act, 1969, Show-Cause Notice was issued on 22.07.2020. The Collector Adjudication decided the case vide Order-in-Original No. 644 of 2020- 2021).
I have gone through the facts of the case and also perused the comments submitted by the respondents which have been reproduced in full in the preceding part of the instant order, Let me first state the incontrovertible facts pertaining" to the case. Firstly, in order to fulfil the requirement for issuance of No Objection Certificate (NOC) from the Export Processing Zone Authority (EPZA), an online application through Unique User ID of above investor of KEPZ, that is M/s. Coastex (Pvt.)
Ltd., was filed and required NOC was issued accordingly. Secondly, it is also on record that representative of the clearing agent, M/s. Cargo Jobs (CHAL 655) visited the offices of the shipping lines for delivery of goods as attested by the officials of concerned shipping lines during the course of hearing of the instant case. Thirdly, on the basis of examination. of the consignment it became obvious that a concerted attempt was being made to import and get release of banned Indian Origin, high value and high duty items under the garb of Second Hand Clothing.
The most revealing aspect of the whole episode is that both the investor as well as the clearing agent reported the matter requesting for holding of containers after several days when their cover had been blown, so to speak and the matter come into knowledge of all relevant persons/agencies.
It is obvious from above facts that both importer as well as the clearing agent tried to distance themselves after learning that the impugned consignment has been intercepted by the Customs Authorities. Some valid questions raised during the hearing the case have not been answered satisfactorily by the respondent importer including the question who paid for import, of such expensive goods and who stood to gain if the goods had been released as per declaration. In view of above and the evidence available on record, I am convinced that the charges levelled in the show-cause notice against the importer and the clearing agent(s) are established. The offending / contravening goods as mentioned as above are accordingly out rightly confiscated under clauses (8), (9), (14), (14A) and (101) of Section 156(1) of the Customs Act, 1969 for violation of Sections 2(s) 16, 32(1), 32(2), 32(A), 155-1 and 178 ibid. A penalty of Rs. 300,000,000/-(Rupees Thirty Million Only) is also imposed on the importer, M/s. Coastex (Pvt.) Ltd., KEPZ Landhi Industrial Area, Karachi (Hassan Askari Hussain being owner) in terms of clauses (8), (9), (14), (14A) and (101) of Section 1 56(1) of the Customs Act, 1969. Moreover, a penalty of Rs. 1,000,000/- (Rupee One Million Only) is imposed on the clearing agent, M/s. Cargo Jobs (CHAL 665), 803-4, Trade Tower, Abdullah Haroon Road, Saddar, Karachi under clauses 14 and 14A of Section 156(1) of the Customs Act, 1969.
A penalty of Rs. 50,000/- (Rupee Fifty Thousands Only) Each is imposed on (1) Mustafa Makkani son of Asif Hussain Makkani, Manager, M/s. Coastex (Pvt.) Ltd., EPZ Karachi, (2) Saqib Jabbar son of unknown (CNIC # 42501-4131391-2), F-163, Malir Labour Aquare, Landhi Industrial Area, Karachi (3)
Abu Zakir son of Abu Nasir CEO of M/s. Faiz Cargo (Pvt.) Ltd., Address (i) 1st Floor, Plot No. 29D1, Flat No. 2, Block-6, PECHS, Shahrah-e-Faisal, Karachi and (ii) 1/4 A, 3 Floor, Block-6, FECES, Shahrah-e- Faisal, Karachi, (4) Ahmed Malik son of Muhammad Ain-ul-Huda Director M/s. AXL Container Line (Pvt.) Ltd., Address (i) House No. A-619, Block-12, FB Area, Karachi and Office # 603, Kawish Crown Plaza, Shahrah-e-Faisal, Karachi and (5) Muhammad Faraz-ud-Din son of Muhammad Alauddin, CNIC # 42201-5965164-9, B-100/10, Malir Kokharapar No. 04. Karachi in terms of clause 1(i) of Section 156(1) of the Customs Act, 1969.
3. Being aggrieved and dissatisfied by the impugned Order-in-Original passed by the Collector of Customs (Adjudication-II), Karachi, the Appellants preferred this appeal on the facts of the vase and grounds of appeal mentioned in the memorandum, of appeal which are available on record along with counter affidavit and parawise reply to the appeal, Intervener Applications under Order I, Rule 10 read with section 151 of the code of Civil Procedure, 1908 were filed on behalf of the shipper above named. Further more counter affidavits to the intervener applications under Order I, Rule 10 read with Section 151 of the Code of Civil Procedure, 1908.
4. The Respondent Department supported the order passed by the forum below and re-iterated the Departmental para-wise comments submitted through Deputy Collector (EPZ) of Customs MCC (PMBQ), Karachi, mentioned in the memorandum of appeal which are available on record, copy supplied to the Counsel for the Appellant to go through the same.
5. The following contentions of Appellant M/s. Coastex (Pvt.) (Ltd.) are establishing that penalty imposed on M/s. Coastex (Pvt.) Ltd. or its employee is unjustifiable: A). The company profile shows that the company imports used textile clothing, used shoes and other articles mainly from USA, Canada and Australia. There used clothes are then recycled by the company and are exported around the world meaning thereby the company contributes in earning foreign remittance for the country.
B). As soon as the appellant company apprised of the fact that the conspiracy is being hatched against the Appellant, the Appellant company through its manager promptly disowned the consignment. The appellant company vide email on 04.05.2020 at 2.35 p.m also re-confirmed that the subject consignments are not the shipment of the company.
C). It is crucial to note here and bona fide of the Appellant is manifest from the fact that the Appellant disowned the shipment well before issuance of NOC/EPZ gate pass of the subject shipment on 04.05.2020 at 20.02.23.
D). The Appellant Company also simultaneously informed the Deputy Collector of Customs, Export processing Zone, Karachi, Principal Appraiser as well as General Manger (Facilitation) Export Processing Zone, Karachi vide letters dated 05.05.2020 at 11.05.2020 that user ID/Password of the Appellant Company has been compromised by some unscrupulous elements involved in the fraudulent import of the above three consignments. Which have no nexus with company and that NOC/EPZ Gate pass has also been fraudulently issued without any information to the' appellant company. It was further requested that NOC may only be issued against personal appearance and that NOC's of the above consignments be cancelled.
E). That pursuant to such developments in the instant case, proceedings were initiated by the Deputy Collector (EPEZ),vide letter dated 11.05.2020 whereby Deputy Collector Examination (PICT), MCC Appraisement (East), Customs House, Karachi, was requested that the subject containers (as mentioned above) be detained and joint examination may be conducted by staff of both MCC- Export (PMBQ) and MCC-Appraisement (East). Accordingly, the above-mentioned consignments were jointly examined by the department which resulted into the recovery of various items such as Artificial Jewellery, Painting makers, copper tube cutch block and other miscellaneous items against declared description of used second hand clothing which were recorded by the department against Annexures-I, II and III. However, the company through its owner/Director, Mr. Hassan Askari Hussain also issued letter dated 11.06.2020 to the Deputy Collector, Karachi Export Processing Zone, Karachi, and strongly condemned such unlawful act and ensured full co- operation to unearth actual culprits involved in the scam.
F). That it may also be mentioned that the company also approached the Incharge FRAL, Customs House, Karachi, with the request to check IP Address ID: TR-0-8100089 since the User ID/ Password of the company has been misused to procure fake NOC for the above consignments. All the above-mentioned facts/developments confirm that the Appellant Company played a very proactive role and help the Respondent Department to initiate Steps so that the instant consignments were not released in the name of the Appellant Company. In these circumstances imposition of penalty of Rs. Thirty Millions is not only unjustified but also against all canons of law, hence the same is remitted, likewise the Penalty of Rs. 50,000/ imposed on the manager of the Appellant company is also remitted.
6. We have gone through the record of the case as well as verbal and written submissions of the Appellant's and intervener Advocates including the DR on behalf of the Respondents. The learned Advocate of the Appellants and intervener argued that all goods imported into or exported from Export Processing Zones established under the Export Processing Zone Authority Ordinance, 1980 fall under PCT heading 9917 and are exempt from all duty and taxes Therefore, the Show-Cause Notice, asking for payment of duty and taxes on the goods admittedly found at the time of examination is totally illegal. For this they relied on a decision reported in PLD 1996 Kar. 68 "Kamran Industries v. The Collector of Customs (Exports), Karachi and 4 others. He also referred to rule 226 of the Customs Rules, 2001. This rule allows import of any goods into Export Processing Zones except goods liable to restrictions or prohibitions imposed on the grounds of public morality, or relating to the protection of patent, trade mark or copy rights or health hazardous as specified in rules 226(7) and 226(8) ibid.
7. The Departmental Representative contended that undeclared goods were found from the imported consignment at the time of examination, hence, the Appellant is guilty of mis-declaring the contents, therefore, these goods are chargeable to duty and taxes.
8. In the Show-Cause Notice following provisions of various Acts and Rules have been invoked:- S.No. Acts/Rules Provisions Violated Penal Provisions 1.The Customs Act, 1969.Sections 2, 16, 32(1), 32(2) and 32AClauses (8), (9), (14), (14A), and (101) of Section 156(1)
2.SRO 499(I)/2009 dated: 13.06.2009. -- - 3.Export Processing Zones Ordinance, 1980.Subsection (1) of section 11-- 4.Export Processing Zones Authority License Agreement.Clauses 19 and 39-- 5.Export Processing Zones Rules notified vide SRO 1058(1)/1981 dated: 23.09.1981--Rule 9A
9. Out of above alleged contraventions Customs Authorities are not empowered to take cognizance under the Export Processing Zones Ordinance, 1980, Export Processing Zones Authority License Agreement and Export Processing Zones Rules (SRO 1058(I)/T981 dated: 23.09.1981). Only Export Processing Zones Authority (EPZA) have the jurisdiction under these statues to take cognizance for the violations allegedly committed. Customs Authorities i.e. the respondents only have the jurisdiction to take actions, under the Customs Act, 1969 and SRO 499(1)/2009 dated: 13.06.2009.
10. For the ease of reference, section 32(1), 32(2) and 32-A of the Customs Act, 1969 are reproduced below:- "32. False statement, error, etc.- ( ) if any pc son, 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 or Customs.
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.
(2) Where, by reason of any such document or statement as aforesaid or by reason of some collusion, any duty and 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 be should not pay the amount specified in the notice.
32A. Fiscal fraud.---(1) if any person, in connection with any matter related to customs-Causes to submit documents including those filed electronically, which are concocted, altered, mutilated, forged, tempered or counterfeit to a functionary or customs;
(a) declares in the [goods declaration] electronically filed customs declaration, the name and address of any exporter or importer which is physically non-existent at the given address;
(b) declares in the [goods declaration] electronically filed customs declaration, an untrue information regarding [payment of duties and taxes through self-assessment] description, quantity, quality, origin and value of goods;
(d) alters, mutilates or suppresses any finding of the customs functionary on any document or in the computerized record; or
(e) attempts, abets or connives in any action mentioned in clauses (a), (b), [(c),] and (d) above, "he shall be guilty of an offence under this section.
(2) Where, by any reason as referred to in subsection (1) as aforesaid, any duty or tax charged or fee or fine and penalty levied under any provision of law has not been levied or has been short levied or has been refunded, the person liable to pay any amount on that account shall be served with a notice within a period of 180 days of the date of detection of such custom duty and tax fraud, requiring him to show-cause as to why he should not pay the amount specified in the notice along with any other amount imposed as fine or penalty under the provisions of this Act.
(3) The appropriate Adjudicating Officer, after considering the written or verbal representation of such person, may determine the amount of duty or tax chargeable or fee payable by such person which shall in no case exceed the amount specified in the notice and such person shall pay the amount so determined besides the fine or penalty or both.
11. Reading of Section 32 of the Customs Act, 1969, indicates that it is only attracted when alleged misdeclaration or mis-statement is made for obtaining illegal gain by evasion of payment of Customs Duty and other taxes or for causing loss of revenue. This view has been confirmed by the Honourable Supreme Court of Pakistan in the case of Collector of Customs (Exports) v. R.A Hosiery Works reported as 2007 SCMR 1881 while relying on:-
(i) Kamran Industries v. The Collector of Customs (Exports), Karachi and 4 others PLD 1996 Kat 68;
(ii) Messrs Al-Hamel Edible Oil Limited and others v. Collector of Customs and others 2003 PTD 552;
(iii) Pakistan v. Hardcastle PLD 1967 SC 101;
(iv) Sikandar and Brothers v. Government of Pakistan PLD 1986 Kar. 3783;
(v) Finest Corporation v. Collector of Customs PLD 1990 Kar. 338 rel.
12. The Honourable Supreme Court had in this case rejected the petition for leave to appeal in following terms:- "From the above discussion, there can be no room for doubt that the provisions of section 32(1) of the Customs Act, 1969 will be attracted only when a misdeclaration or misstatement is made with a view to obtain illegal gain by evasion of payment of customs duty and other taxes or by causing loss to Government Revenues. The misdeclaration alleged to have been in this case was neither for evasion of payment of customs Fluty or other taxes/charges nor occasioned any financial loss to the "Government.
In view of the above facts and reasons this petition for leave to appeal is found to be without any merit and is dismissed. Leave to Appeal refused."
13. Similar is the case of the applicability of Section 32A of the Customs Act, 1969, because there is no question of levy of Duty and Taxes on goods destined for Export Processing Zones. This PCT Classification exempts goods imported into Export Processing Zones from Customs Duty and Taxes.
That all goods meant for Export Processing Zones are exempt from all duty and taxes. Therefore, when all goods destined for Export Processing Zones are exempt from Customs Duty and Taxes there arises no question of invoking Sections 32(1), 32(2) and 32-A of the Customs Act, 1969.
14. The main allegation as stated in the impugned Show-Cause Notice dated 22.07.2020, is that certain unscrupulous importer / investors are attempting to mis-use the facility of Export Processing Zone through mis-declaration and mis-use of WeBOC System for clearance of Indian origin banned goods of high value goods and high duty items under the garb of Second Hand Clothing.
15. The Export Processing Zones were established under the Export Processing Zones Ordinance, 1980. In order to regulate and control the exports and imports of goods into and from the Export Processing Zones 'Customs Export Processing Zones Rules, 1981" were notified through SRO 249(1)/1981 dated: 25.03.1981, provisions of sub-chapter -- 3 of Customs Rules, 2001, also govern the import and export from Export Processing Zones (EPZs). Rule 3 of former Rules, and Rule 226 of later Rules provide that any goods can be imported into the Export Processing Zones from abroad or from the Tariff area except goods which are liable to restrictions or prohibitions imposed on the rounds of public morality or order, public security hygiene or health or for veterinary or phyto- pathologist considerations, or relating to the protection of patents, trade marks or copy rights (as laid down in Rules 3(7) and 3(8) of former Rules and Rules 226(7) and 226(8) of later Rules).
16. In the light of above referred explicit provisions of law and regulatory framework the answer to first issue is in affirmative. The case making agency has not alleged that the impugned Second Hand Clothing stuffed in (3) Three container is subject to any restrictions or prohibition imposed in terms of Rule 3(7) or 3(8) of the Customs Export Processing Zones Rules, 1981 or Rules 226(7) or 226(8) of Customs Rules, 2001.
17. Now coming to the second question of leviability of duty and taxes. The learned counsel for the Appellant and intervener pointed out that goods so imported into the Export Processing Zones established under the Export Processing Zones Authority Ordinance, 1980 (IV of 1980), are exempt from Customs Duty and Sales Tax under Pakistan Customs Tariff heading 9917 (subject to such conditions, limitations and restrictions as Federal Government may impose). The case making agency has not pointed out any provision of law under which goods imported in the Export Processing Zones established under the Export Processing Zones Authority Ordinance, 1980 (IV of 1980), can be subjected to duty and taxes. The allegation levelled in the Show-Cause Notice that admittedly found at the time of examination mis-declaration of description of goods found to be Artificial Jewellery, Painting Markers, Copper Tube, Cosmetics, Cutch block, Metallic Yarn etc. which was otherwise liable to duty and taxes under the guise of "Used Second Hand Clothing" is liable to duty and taxes is devoid of merit. The learned adjudicating officer in the impugned Order-in- Original has accepted that all goods meant for the Export Processing Zones are exempt from all duty and taxes. However, the learned adjudicating officer has further observed that all goods cannot be imported by every investor, for this he relied upon the system of licensing for a particular manufacturer/trader. While observing above, the adjudicating officer did not appreciate the legal position that Trade License to run any specific business in the Export Processing Zone is issued by the Export Processing Zones Authority under "Export Processing Zones Rules, 1981" and not under the Customs Act, 1969, or any rules framed under the Customs Act, 1969. The cognizance of violation of license issued by the Export Processing Zones Authority is to be taken by the Authority under the relevant rules and not by the Customs Authority under the Customs Act, 1969.
18. The goods imported for the purpose of Export Processing Zones are removed from the Port Area to the Export Processing Zones after affixing special seal on containers before removal of goods.
Customs Escort is also deployed with these Containers. After release by customs, goods remain within the Customs bonded area of Export Processing Zone and can only be removed after permission from Customs as provided under the relevant rules.
19. The learned advocate of the Appellants has relied upon a similar case of M/s. Kamran Industries v. The Collector of Customs (Exports), Karachi, and 4 others reported as PLD 1996 Kar.
68. In this case, an investor of Export Processing Zone was penalized by the Customs Authorities for mis-description of down that Customs Authorities have no jurisdiction to scrutinize the question of calculation of Duty and Taxes and mis-description of goods imported in the Export Processing Zone. The Honourable Division Bench of the Sindh High Court has been pleased to observe that: "Our view as aforesaid should not be misconstrued for the proposition that Customs Act and Rules made thereunder are excluded from operation in the E.P.Z. but following Oskui Traders v. Collector of Customs as stated above we have held that the application of the Customs Act and its rules are restricted to the extent that till such time the exemption SRO or any of its like provisions holds the filed the Customs Authorities have no jurisdiction to scrutinize the questions of under valuation, calculation of duties and mis-description of goods imported into the E.P.Z. However, the Customs authorities shall have the jurisdiction to refuse clearance of goods until a bill of entry is filed under sub-rule (2) of Rule 3 and if the goods fall under the prohibitory category under sub-rule (7) of Rule 3." The ratio of this case is directly applicable in the instant case.
20. Accordingly, it is observed that Customs Authorities .had no jurisdiction in the instant case to invoke Sections 32(1), 32(2), 32-A because the Goods Declaration (Bill of Entry) was to be filed as required under sub-rule (2) of Rule 3 of the Customs Export Processing Zones Rules, 1981, and goods found at the time of examination do not fall in prohibitory category under sub-rule (7) of Rule 2.
21. That the learned counsel for the intervener namely shipper and also being appellant on behalf of the shipper mainly argued that immediately after the arrival of imported goods the Respondent department was requested for re-export the same as frustrated cargo and allow the shipment back to the consignor. However, the same has been confiscated by the Adjudicating Officer without any legal backing. The main argument of the learned counsel was the contravention of any law of land will happen only when the customs authorities are approached for the clearance of goods which are otherwise not permissible. In the instant case no Goods Declaration was filed and request was made to allow re-export of the impugned goods back to the consignor under Section 20 of the Import Policy Order. He also produced several authorities in support of his case. During the arguments the counsel for the Appellant retreated the contentions made in the instant Appeals and intervener applications he has relied upon Section 20 of Import Policy Order and specifically relied upon Notification No. SRO 902(1)/2020 dated: 25.09.2020. The relevant paragraph of Section 20(b) and (d) of Import Policy Order, 2020 which are being reproduced as under:-
(b) All goods of banned list imported in commercial quantity shall not be released in any circumstances. Such goods shall be re-exported at importers or shipping lines costs:
(d) Goods rejected or denied import shall be allowed to be re-consigned or returned to the foreign exporters subject to the laws and regulations pertaining to the trade of contraband goods.
22. Keeping in view the respective contention of the parties and after perusal of relevant sections of Customs Act, 1969. Notifications on the subject. A plethora of case laws including M/s. Al Hamad Edible Oil (P) and others v. Collector of Customs reported as 2003 PTD 552 (Karachi High Court), M/s. PT Synergy Oil Nusantara, Karachi v. M/s. Evergreen Marine .Corporation (Taiwan) and others reported as 2015 PTD 279, M/s. A.R Hosiery Works, Karachi v. Collector of Customs (Exports), Karachi reported as 2004 PTD 2977 M/s. Ports Ways Custom House Agent v. Collector of Customs reported as 2002 YLR 265 (Lahore), M/s. Moon International and others v. Collector of Customs (Appraisement) reported PTCL 2001 CL. 133, M/s. Mandviwalla Entertainment (Pvt.)
Ltd. v. Commissioner of Income Tax, Karachi reported as (sic) PTCL CL 229, M/s. Al Ibsen Electronics v. Federation of Pakistan reported as 2014 PTD 1833.
23. That the Bench has perused Section 138 of the Customs Act, 1969 wherein it was situated that where any goods are brought into a Customs station by reason of inadvertence, misdirection or un-traceability of the consignee the consignment can be treated as 'Frustrated Cargo'. For the application of this section, any of the factor(s) mentioned in the said section are sine qua non, indispensable, vital, essential and absolutely necessary conditions.
24. The first point to note is that for goods to be lawfully brought into this country whether for use or consumption with Pakistan, they must be brought into a Customs Station. When Section 138 of Customs Act, 1969, is examined it allows re-export in three situations; (i) inadvertence; (ii) misdirection; (iii) un-traceability of consignee. The section applies if the goods are brought into a Customs Station "by reason of any of the above referred situations. When Section 138 of the Customs Act, 1969, is applied to the facts and circumstances of the case, it is clear that the consignee has well understood meaning and one that is linked to Bills of Lading issued when goods are shipped from one port to another. Section 138 provides that the power under the section is to be exercised "subject to rules" the relevant rules (86 to 89) have been incorporated above.
25. In the present case, the intervener on behalf of the shipper has claimed commission of error by mistake as mentioned in the Reply as well as in the Certificate attached which remained un- rebutted by the Respondent. It is relevant to mention the Customs Rules, 2001 dealing with re- export of frustrated cargo. It has been mentioned in Rule 86 that "Frustrated cargo will be such goods as are brought into a Custom station by reason of inadvertence or misdirection or where the consignee is untraceable or has dishonoured his commitments and the consignor wishes to have it re-shipped to him".
26. As rule 86 of the Customs Rules, 2001 makes clear that the goods may be re-exported if the consignee dishonoured the commitment to accept the consignment and the goods may be allowed to be re-exported. Moreover, rule 86 clearly provides that the frustrated cargo shall be such goods as are brought into a Customs Station by reason of inadvertence or misdirection or where the consignee is untraceable or has dishonoured his commitment and the consignor wishes to have it re-shipped to him.
27. Similarly, Rule 88 of the Customs Rules, 2001 makes clearly the Collector of Customs is to satisfy himself that the goods are frustrated cargo with reference to the relevant import manifest and other documents. Thus the import manifest or IGM is an important document for determining whether a case has been made out for the exercise of powers under Section 138 of the Customs Act, 1969.
28. If we look at the definition of "inadvertence", it has been defined in the Black Law Dictionary as Heedlessness, lack of attention; want of care; carelessness, failure of a person to pay careful and prudent attention to the progress of a negotiation or a proceeding in court by which his right may be affected. Apparently, the present case fully qualifies to be treated as 'frustrated cargo' keeping in view all the allied circumstances attached with the instant case.
29. Conceptually, re-export means export of foreign goods which already imported to the country from a foreign country. However, if any goods already imported into a country and the same goods are again exported to either the same country, such movement of goods is called 'Re-export', (http//howtoexportimport.com)
30. In this regard we have to revert back to the procedure for dealing with frustrated cargo as provided under Section 138 of the Customs Act, 1969 read with Chapter VII of Customs Rules, 2001, deals with the Frustrated Cargo the relevant part of which reflects the qualification of frustrated cargo as the Rules 86 to 89 of Customs Rules, 2001. The Section 138 of the Customs Act, 1969, coupled with Customs Rules, 2001, as reproduced above provide conditions for treating of goods as "Frustrated Cargo". The case record and the proceedings held during adjudication amply support the stand of the appellant. The "Frustrated Cargo" has been defined as "any shipment of supplied and /or equipment which while en-route to destination is stopped prior to I receipt and for which further disposition instructions must be obtianed". Generally frustrated cargo is that cargo which is disowned by the consignee on account of difference from the contracted desired specification; models, standard, numbers of values. As such cargo is disowned by the consignee: the title of such goods is not shifted to J consignee and remains in favour of supplier. If the supplier, who is still rightful owner of imported goods is legally authorized to take back his goods. However, the learned Respondent ignored the definition of frustrated cargo provisions of Import Policy Order, and past practice, therefore, his contention is void, unlawful and legally untenable. The profile of the Appellant/importer, the context of the case, the application filed under Section 138 of the Customs Act, 1969, and Import Policy Order leads to the conclusion that the case falls within the definition of frustrated cargo.
31. It has further been observed that the plea of re-export can be adjudged on the ground that, if the import itself is not contrary to any law and the supplier still holds the title of the goods, he can ask for re-export of the goods to any party in any country, this view has been observed by the Supreme Court of India in Case Union of India v. Sampath Raj Dugar [1992b(58)ELT 163 V (SC)].
The revised Kyoto Convention (RKC) to which Pakistan is signatory also allows re-export of goods if consignee deadlines to accept that WTO in M/s. ARA Detergents & Chemical EZE v/s. Collector of Customs (Enforcement) & others Agreement of Trade Facilitation, agreed in Ministerial Conference, ninth Session, Bali (3-6 December 2013) vide Para-8 reflect as follows:- "Where goods presented for import are rejected by the competent authority of a Member on account of their failure to meet prescribed sanitary of phytosanitary regulations or technical regulations, the Member shall subject to and consistent with its laws and regulations, allow the importer to re-consign or to return the reject goods to the exporter or another person designated by the exporter".
32. Therefore, in line with Customs Law International Trade Practice, Court Rulings, the impugned consignment may be allowed re-export to the consignee.
33. It has been held in the case law reported in 2003 PTD 552 (Karachi High Court) that is an established principle of interpretation that every provision of law must be construed in harmony with other provisions of law so as to avoid any conflict. We need to peruse Section 32 of the Customs Act, 1969 which deals with untrue statement error etc. including false declaration, notice, certificate or other document, statement in answer to any question and or submission of any false statement or document electronically.
34. There is a wide range of statement(s), declaration(s) and certificate(s) which are untrue and incorrect statements attract penal consequences under the Customs Act, 1969. In order to understand the scope of Section 32 in its true perspective we need to peruse Section 32(2) of the Customs Act, 1969 as well which stipulate that where., by reason of any such document or statement as aforesaid has caused non-payment, short-payment or erroneous release of refund of taxes and duties and bring about revenue loss on the National Exchequer. It was held by the Honourable Justice S. Ahmed Sarwana in the case of 2003 PTD 552 all relevant page 558 "A bare reading of Section 32 clearly indicates that it related to a situation where a person makes any statement or files any document which is false in any material particular by reason of which any duty or charge is not levied or short levied or is refunded. In such event, the Customs Authority is empowered to issue to the person concerned a notice to show-cause why he should not pay the loss of revenue suffered by the Department and after giving him a hearing beside any other action under law. Order payment of the same, if a cast is made out. The entire provision revolves around the central point of loss of revenue suffered by the Custom Department on account of conduct of any person".
35. We are convinced that submissions made by the learned counsel for the intervener on behalf of the shipper is justified. The impugned goods in question covered vide following (3) Three containers namely (i) CLHU8134097 Bill of Lading No.RAH/JEA/KHI/296 dated: 03.04.2020 and (ii)
HLXU6168230 Bill of Lading No. RAH/JEA/KHI/298 dated: 10.04.2020 and (iii) GLDU7050302 covered vide Bill of Lading No. MAX'DXB/1987/1920 dated: 12.04.2020 on behalf of shipper M/s. Abdul Aziz Hashim General Trading LLC, Dubai UAE and M/s. Prime Overseas Trading LLC, Dubai UAE and finally being handed over by the above named shippers to M/s. Sky Hunter Shipping LLC having registered office at P.O Box No. 115831, Dubai-United Arab Emirates a Dubai based company which is on record deemed to be regarded frustrated cargo in terms of Section 138 of the Customs Act, 1969 read with Rules 86 to 89 of Customs Rules, 2001.
36. Being custodian of law, the courts are required to maintain the norms of justice and equity. By doing so, and in respected agreement with aforementioned findings and ratio decendi observed by the Apex Courts and our own additional observations including the reasons quoted above the impugned order-in-original to the extent of present appellants and intervener along with actions initiated thereon by the respondents are declared null and void and, hereby set aside. The subject impugned goods are allowed re-export as frustrated cargo in terms of Section 138 of the Customs Act, 1969 read with Rules 86 to 89 of Customs Rules, 2001. The contentions of the appellant i.e. M/s. Coastex (Pvt.) Ltd as given in para 5 above have been examined and we hold that the user ID of the said unit has been misused. In these circumstances imposition of penalty of Rs. Thirty Millions is not only unjustified but also against all canons of law, hence the same is remitted, likewise the Penalty of Rs.50,000/ imposed the manager of the Appellant company is also remitted.
37. We, therefore, set aside the impugned Order-in-Original, accept the appeals along with intervener applications in above terms. A Delay and Detention Certificate shall also, be issued under Section 14-A(2) of the Customs Act, 1969 to mitigate and reduce further port demurrage and container detention charges accumulating on daily basis for no fault of the shipper.
38. Appeals are accordingly allowed along with intervener applications with no order as to costs.