SYED ARSHAD ALI, J. This Custom Reference has been filed under Section 196 of the Customs Act, 1969 ("Act") to call in question the judgment of the worthy Custom Appellate Tribunal Bench-I, Islamabad ("Tribunal") dated 19.09.2016.
2. Facts in brief of the case are that M/s. Waheed Hamid Bros Ltd, an Afghan Importer, was importing a consignment of certain miscellaneous goods for transit to Afghanistan. Upon receipt of information the staff of NLC Amangarh physically examined the consignment loaded in container No. BMOU4126494 which led to recovery of contraband goods i.e. foreign origin 400 cartons/ 4790 bottles of liquor of different brands. The containers were, therefore, seized for violation of the provisions of sections 2(s), 16, 32 and 129 of the Customs Act, 1969 read with section 3(1) of the Imports and Exports Control Act, 1950 and Pak Afghan Transit Trade Agreement, 1965. A case was registered against the importer and his accomplice. Additional Collector Customs after completion of legal formalities passed an order for confiscation of goods vide Order-in-Original No.240/2011 recorded on 22.09.2011.
3. Feeling dissatisfied with the order the respondent assailed the order before the Collector Customs (Appeals) Peshawar, who affirmed the order of the Additional Collector Customs vide Order-in-Appeal dated 14.02.2012. The respondent, feeling aggrieved, with the order in original dated 14.02.2012 questioned its legality before the worthy Customs Appellate Tribunal, Peshawar Bench ("Tribunal"). The worthy Tribunal passed an order for confiscation of liquor and restoration of the transit goods to the appellant vide judgment dated 21.12.2013. The relevant excerpt from the judgment order is reproduced here for ready reference: "having considered the matter from all the angles in the light of material available on record we are of the opinion that confiscation of transit goods mentioned against serial Nos. 4 to 9 in the recovery memo dated 04.12.2010 issued in this case has been unwarranted by law. We therefore, order that the said transit goods be restored to the appellant unconditionally for dispatch in transit to Afghanistan under custom escort. The appeal is modified to this extent. As regards 400 cartons containing 4790 bottles of foreign liquor the orders of outright confiscation thereof passed by the forums below are upheld".
4. The respondent entered into second round of litigation when he applied for release of his goods in view of the order of the Tribunal. It was revealed to him that the goods were already auctioned on 30.03.2012 against sale proceeds of Rs.26,000,00/-, however, an amount of Rs.450,157/- was refunded to him by the concerned officer. The respondent questioned the order in appeal before the Customs Appellate Tribunal Bench-I, Islamabad and prayed for release of entire auction proceeds. The worthy Tribunal vide his judgment dated 19.09.2016 issued directions for return of whole sale proceeds. Relevant Para of the judgment reads as under: "6. This is not first instance where the order for return of seized goods or their Sale Proceeds were made but in the case reported in 2014 P7D 281 titled Bakhtiar v. D.C Customs and others passed in a Division Bench of Peshawar High Court, similar order was passed, whereby the petitioner were held entitled for whole Sale Proceeds. Similarly Refund Order C. No. 04/PR-E/Veh/10/1898 dated 05.07.2010 passed by the Custom Authority Peshawar support the contentions of appellant wherein order for return of whole Sale Proceeds of seized vehicle was made and paid. Reliance can also be placed on case of Raz Muhammad Inspector General Frontier Corps Baluchistan Quetta (1999 MLD 1434) wherein owner of goods was held entitled to take back the goods instead of taking amount thereof after order of confiscation was set aside by Appellate Authority.
7. In view of what has been observed above, the orders passed by lower forums are set aside and the appellant is held entitled to the whole sale proceeds of Rs.26,00,000/- as reflected in record of auction and admitted by respondents."
5. The Collector of Customs/petitioner raised the following questions of law in the present Custom Reference, which read as under: A) Whether the learned Appellate Tribunal has not fallen into error by entitling respondent for the whole sale proceeds?
B) Whether the learned Tribunal has taken into consideration the provision of Section 169 read with Section 201 of the Customs Act, 1969, while allowing the entire sale proceeds, to respondent No.1?
C) Whether the learned Tribunal is justified to hold entitled respondent No.1 for the entire sale proceeds including duties and taxes, paid by the successful bidder (purchaser) of the auctioned goods?
D) Whether the reserved price appraised by the Customs Technical Staff of the auctioned goods which includes leviable duty and taxes, collected from the purchaser of auction goods, can be given to respondent No.1 when the status of the goods were non-duty paid and meant for export to Afghanistan being the transit goods?
E) Whether section 201 of the Customs Act, 1969 does not describe the method of payment of sale proceeds after deduction of Customs-duty, other taxes and dues payable to the Federal Government in respect of such goods?
F) Whether the learned Tribunal has exercised it jurisdiction in accordance to law? And Whether the Tribunal was vested with the jurisdiction to entertain the appeal of respondent No.1?
6. Arguments heard and record perused.
7. In the present case, not only under the clear mandate of Section 129 of the Customs Act, 1969 the transit of goods across A Pakistan to a foreign territory when reaches to Pakistan is not subject to the incidence of taxation but the worthy Tribunal in its final judgment has held that seized goods were not liable to confiscation and it was ordered that it should be restored to the respondent without payment of taxes and duties for its onward transportation to Afghanistan. The issue arose when the owner of the goods i.e. respondent when applied for recovery of the goods it transpired to him that the said goods were sold by the petitioner-department in terms of Section 169 read with Section 201 of the Customs Act, 1969 and the respondent would be only entitled to the sale proceeds after deduction the leviable taxes. Accordingly, an amount of Rs. 450,157/- was refunded to the respondent against a total auction amount of Rs. 26,00,000/-. Thus, the essential question for interpretation before this Court is Sections 169 and 201 of the Customs Act, 1969. The relevant provisions are reproduced as under:- [169. Things seized how dealt with.- (1) All things seized on the ground that they are liable to confiscation under this Act shall, without unnecessary delay be delivered into the care of the officer of customs authorized to receive the same.
(2) If there be no such officer at hand, such things shall be carried to and deposited at the customs-house nearest to the place of seizure.
(3) If there be no custom-house within a convenient distance, such Things shall be deposited at the nearest place appointed by the Collector of Customs for the deposit of things so seized [(4) When anything liable to confiscation under this Act is seized by the appropriate officer under section 168, the Collector of Customs, or any other of customs authorized by him in this behalf may notwithstanding the fact that adjudication of the case under section 179, or an appeal under [section 193 or 194Aj or a proceeding in any court, is pending, cause the thing to be sold in accordance with the provisions of section 201 and have the proceeds kept in deposit pending adjudication of the case or as the case may be, disposal of the appeal or the final judgment by the court: [Provided that where the seized goods liable to confiscation are produced during any inquiry or trial before the court of Special Judge Customs and if such goods are subject to speedy or natural decay, the court may on an application after recording evidence, as it thinks necessary, order the goods to be sold or otherwise dispose of in terms of this section.
Provided further that if the property is a dangerous drug, intoxicant, intoxicating liquor or any other narcotic or psychotropic substance seized or taken into custody, the Court may, either on an application or of its own motion and under its supervision and control, obtain and prepare such number of samples of the property as it may deem fit for safe custody and production before it or any other court and cause destruction of the remaining portion of the property under a certificate issued by it in that behalf: Provided also that such samples shall be deemed to be whole of the property in an inquiry or proceedings in relation to such offence before any authority or court.]
(5) If on such adjudication or, as the case may be, in such appeal or proceeding in Court, the thing so sold is found not to have been liable to such confiscation, the entire sale proceeds, after necessary deduction of duties, taxes or dues as provided in section 201, shall be handed over to the owner.]
201. Procedure for sale of goods and application of sale proceeds.-(1) Where any goods, other than confiscated goods, are to be sold under any provision of this Act, they shall be sold after due notice to the owner [or his agent or custodian of the goods] by public auction or by tender or by private offer or, with the consent of the owner [or his agent or custodian of the goods] in writing, in any other manner.
[(IA) The goods may be sold under subsection (1) through electronic means, as prescribed by the Board under the rules.]
(2) The sale proceeds shall be applied to the following purposes in their respective order, namely:-
(a) first to pay the expenses of the sale;
(b) then to pay the freight or other charges, if any, payable in respect of the goods, if notice of such charges has been given to the person holding the goods in custody;
(c) then to pay the customs-duty, other taxes and dues payable to the [Federal Government] in respect of such goods;
(d) then to pay the charges due to the person holding such goods in custody.
(3) The balance, if any, shall be paid to the owner of the goods, provided he applies for it within six months of the sale of the goods or shows sufficient cause for not doing so.
Provided that, in case wherein goods declaration has been filed, the share of importer in sale proceeds shall not exceed the declared value of the goods.
8. According to subsection (2) of Section 201 of the Act, if any goods other than confiscated goods are sold through public auction then the sale proceeds shall be applied firstly by paying the expenses of sale, freight, other charges and the customs duty, other taxes and dues payable to the Federal Government in respect of the goods. It is the contention of the petitioner-department that from the auction proceed first the duties and taxes should be deducted and thereafter the remaining amount would be payable to the owner of the goods.
9. A fiscal statute normally contains two provisions; charging provisions which imposes the charge to tax and machinery provisions which provide the machinery for quantification of tax and the levy and collection of tax so imposed. Charging provisions are construed strictly while machinery provisions of the Statute are not generally subject to a rigorous construction. Commissioner of Wealth Tax v. Sharvan Kumar Swarp & Sons (1995 ECR 425 SC).
Distinction between chargeability and recovery provision in a taxing statute was very well explained by Lord Dunedin in the following manner:- "My Lords, I shall now permit myself a general observation. Once that it is fixed that there is liability, it is antecedently highly improbable that the statute should not go on to make that liability effective. A statute is designed to be workable, and the interpretation thereof by a Court should be to secure that object, unless crucial omission or clear direction makes that end unattainable. Now, there are three stages in the imposition of a tax: there is the declaration of liability that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex hypothesis, has already been fixed. But assessment particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay." (CIVIL APPEALS NO.1521 TO 1526 OF 2018. The Commissioner Inland Revenue, Legal Division, Regional Tax Office, Multan v. The Commissioner Inland).
It was observed in W. H. Cockerline & Company v. The Commissioner of Inland Revenue (16) TC 1 at 19, Lord Hanworth quoted with approval a following passage from the judgment of Sargent, L.J.: The liability is imposed by the charging Section, namely, Section 38 the words of which are clear.
The subsequent provisions as to assessment and so on are machinery only. They enable the liability to be quantified and when quantified to be enforced against the subject, but the liability is definitely and finally created by the charging section and all the materials for ascertaining it are available immediately.
In Halsbury's Law of England (Fourth Edn. Vol. 23, Para 29), referring to the machinery provisions it is stated that: "It is important to distinguish between charging provisions, which impose the charge to tax, and machinery provisions, which provide the machinery for the quantification of the charge and the levying and collection of the tax in respect of the charge so imposed. Machinery provisions do not impose a charge or extend or restrict a charge elsewhere clearly imposed "
S.M. Zaffar in first edition of Understanding Statutes, Canons of Construction observed that: "In a taxing statute, as in other statutes, there should be no departure from the general rule that words used in a statute must first be given their ordinary and natural meaning. It is only when such an ordinary meaning does not make sense that resort can be made to discovering other appropriate meanings.
The principle upon which this view rests is that a tax cannot be imposed without the use of clear and express language. To hold otherwise would allow the courts to impose taxation, and that would clearly constitute an encroachment upon the power of the legislature. More than that taxation is a process which interferes with the personal and property rights of the people, although it is a necessary interference. But because it does take from the people a portion of their property, seems to be a valid reason for construing tax laws in favour of the tax payer".
10. As stated above, admittedly, the goods in questions were neither subject to the incidence of taxation nor it was liable to confiscation. Subsection 2(c) of Section 201 of the Act in very clear words envisages that the goods if sold under any provision of the Act, the sale proceeds would be then subject to certain statutory deduction. One of the said deduction is the payment of customs- duty and other taxes payable to the Federal Government. The words payable to Federal Government occurring in subsection 2(c) of Section 201 of the Act are of a great importance which obviously means that the said amount of taxes has been subject to the incidence of taxation under the charging section of the relevant fiscal statutes i.e. Income Tax Ordinance, 2001, the Sales Tax Act, 1990 and Customs Act, 1969, therefore, in our humble view, the provision of Section 201 (2) (c) of the Act would be applicable to the amount of sale proceeds only when under a charging provision of a statute any taxes or duties are payable to the Federal Government. Similarly, subsection (5) of Section 169 of the Act only refers to the deduction of taxes as provided under Section 201 of the Act whereas, as stated above, Section 201(2)(c) of the Act applies Only when tax is charged and payable to the Federal Government under any fiscal statute against any goods which were sold during the adjudication proceedings.
11. In view of the above, we have reached at the conclusion that since the goods seized from the respondent which were released by the competent forum i.e. Tribunal, the order of the worthy Tribunal had attained finality holding therein that the goods seized were not liable to confiscation nor any taxes and duties were payable on it, therefore, the order of the worthy Tribunal directing for recovery of the entire sale proceeds is in accordance with law.
12. Resultantly, the instant Custom Reference is dismissed and the questions of law are answered in Negative. Copy of this judgment be sent to the worthy Tribunal in terms of Section 196 (5) of the Act.