ABDUL JABBAR QURESHI, MEMBER JUDICIAL-I.---By this judgment, I intend to dispose of Customs Appeal bearing No.K-7591/2021 (Old No.K-23/2016) directed against Order-in-Original No.132/2015- 16 dated 28.12.2015 passed by learned Collector of Customs (Adjudication-II), Karachi.
2. Brief facts of the case are that the Directorate General of Intelligence and Investigation-FBR, Regional Office, Karachi reported vide Contravention Report C.No.Appg-352-E/DCl/Tech/2011 / Part/PaCCS/1507 dated 23.04.2011 that the Federal Excise Duty as leviable on import of Lubricating Oils of PCT headings 2710.1951 and 2710.1952 was being short-levied / evaded by many importers on goods - cleared through Customs Computerized Clearance System of MCC (PaCCS). In order to check veracity of the information, the relevant import data of MCC (PaCCS) was scrutinized by the Regional Office. It was revealed that huge amount of Federal Excise Duty has been evaded / short- levied on import of under reference commodity in utter violation of SRO 671/(I)/2006, dated 29.06.2006, whereby the minimum price of lubricating oils of PCT headings 2710.1951 and 2710.1952 has been fixed by the Board @ US$ 2 per liter for the purpose of assessment of Federal Excise Duty at import stage. In majority of the cases, Federal Excise Duty appears to have been paid @ 10% on self-assessed retail prices much lower than the minimum price fixed by the Board. Scrutiny of relevant import data of the Collectorate for the period October 2008 to March 2011 has revealed that besides other importers, Messrs Sohail Azhar (NTN-0664612-3), H.No.216, ST.5, Cavelery Ground St No.5, Lahore Cantt. have imported and cleared 86 consignments of Lubricating Oils which were cleared through Customs Computerized Clearance System of MCC (PaCCS) on self-assessed retail prices in violation of SRO 671(1)/2006 dated 29.06.2006, whereby the minimum price for assessm ent of FED on lubricating oils of PCT headings 2710.1951 and 2710.1952, at import stage has been fixed by the Board @ US $ 2 per liter. The deliberate omission / non-implementation of afore- said statutory notification resulted in evasion / short-levy of Rs.45,76,573/- as Federal Excise Duty which is recoverable from the importers along with Default Surcharge. In view of above facts, Messrs Sohail Azhar (NTN-0664612-3), H.No.216, ST.5, Cavelery ground, St No.5, Lahore Cantt, with their Clearing Agent namely Messrs Shahid Iqbal (CHAL-1209), Room No.6, Floor No.8, Sharjah Trade Centre, Shahrah-e-Liaquat, New Challi, Karachi by clearing the under reference consignments on self-assessed retail prices instead of applicable minimum exciseable value @ US $ 2 per liter through non-implementation of SRO 671(1)/2006 and thereby evading an amount of Rs.45,76,573/- as Federal Excise Duty have committed the offence of misdeclaration in terms of Sections 32(1) and
(2) and 32(A) of the Customs Act, 1969, read with Sections 3(2) and 12(5) of the Federal Excise Act, 2005, punishable under clauses (14) and (14-A) of Section 156(1) of the Customs Act, 1969 and Sections 8 and 19(2) (a) of the Federal Excise Act, 2005.
3. A show-cause notice was issued and case was forwarded to Adjudication Authority for adjudication. The Learned Collector of Customs (Adjudication-II), Karachi accordingly passed an Order-in-Original No.132/2015-16 dated 28.12.2015 as under:- "I have gone through the facts of the case, and the arguments put forth by the department. It has been observed that the respondent have imported and cleared 86 consignments of Lubricating Oil (1,972,515 Kgs/liters). The same were cleared through Customs Computerized Clearance System of MCC (PaCCS) on self-assessed retail prices in violation of S.R. 0.671(1)12006, dated 29.06.2006. The minimum price for assessment of FED on lubricating oils of PCT headings 2710.1951 and 2710.1952 at import stage has been fixed by the Board @ US$ IBS S 2/-per litre, however, the importer has failed to discharge his liability in line with the value fixed vide SRO 671(1)/2006 dated 29.06.2006, which resulted in short payment of Rs.45.76,573/-. As per provision of Section 79 of the Customs Act, 1969 the respondent were required to file a true declaration of goods and assess and pay their liability of duty, taxes and other charges correctly, which they failed.
In the light of the afore-stated facts the charges levelled in the show-cause notice stand established. In exercise of the powers conferred upon me the under Sections 32(1) and (2) and 32(A) of the Customs Act, 1969 the respondent namely M/s. Sohail Azhar (NTN0664612-3), H.No.216, ST.5, Cavelery Ground, St. No. Lahore Cantt, are directed to deposit the duty/taxes amounting to Rs.45,76,573/- (along with Default Surcharge to be calculated at the time deposit) into the government treasury. A penalty of Rs.5300,000/- (Rupee Five Thou/red Thousand Old is also imposed on the respondent namely Sohail Amar (NTN-0664612-3), H.No.216, St. 5, Cavelery Ground, St No.5, Lahore Cantt. in terms of clause 14 of Section 156(1) of the Customs Act, 1969 for non adherence to the provision of SRO. 671 (1)12006 dated 29.06.2006. Similarly the clearing agent in the instant case namely M/s. Shahid Iqbal (CHAL-1209), Room No.6, Floor No.8, Sharjah Trade Centre, Shahrah-e-Liaquat, New Challi, Karachi also failed to discharge their responsibility to file a true and correct declaration for their principal in the presence of SRO 671(1)/2006 dated 29.06.2006 which had clearly fixed the minimum price of Lubricating Oils of PCT Heading 2710.1951 and 2710.1952 for assessment of Federal Excise Duty at import stage. Therefore, a penalty of Rs.
100,000/- (Rupee One Hundred Thousands Only) is also imposed on the clearing agent M/s. Shahid Iqbal (CHAL-1209). Room No.6, Floor No.6, Floor No. 8, Sharjah Trade Centre, Shahrah-e- Liaquat, New Challi, Karachi under clause (14) of Section 156(1) of the Customs Act, 1969. Moreover, there seems to be a serious lapse on the part of assessing officials who failed to take into account the minimum price of Lubricating Oil as fixed under SRO 671(1)12006 dated 29.06.2006 and assessed the Goods Declaration on the declared price which is sheer negligence. Therefore, department is directed to investigate this issue and initiate the disciplinary proceedings against the official found negligent in applying the correct minimum price as per SRO 671(1)/2006 dated 29.06.2006."
4. Being aggrieved and dissatisfied with the aforesaid impugned order passed by the Adjudicating Authority. The appellant has filed the instant appeal before this Tribunal and has assailed the impugned order inter alia on the following grounds:-- A. That the impugned order has been passed without following the principal of natural justice as the same has been passed ex-parte and in total negation of the maxim "Audi Alteram Partem"
(that is, nobody should be condemned unheard). Therefore, the impugned ex-parte order-in- original is bad in the eyes of laws and is liable to be set aside. The hearing notices dated 12.11.2015, 25.11.2015 and 10.12.2015 was never received by the appellant, even respondent No.2 has not sent the impugned order-in-original dated 28.12.2015 directly to the appellant till date, therefore, the impugned ex-parte order-in-original is liable to be set aside. Respondent No.2 issued hearing notices dated 12.11.2015, 25.11.2015 and 10.12.2015 after three years of the remand order dated 03-09- 2012 passed by this Hon'ble Court. Therefore, the impugned ex-parte order-in-original dated 28.12.2015 is liable to be set aside being barred by time.
B. That notwithstanding anything above that under section 179(3) of the Customs Act, 1969, it was mandatory for the adjudicating authority to decide the matter within a period of One Hundred and Twenty (120) days from the date of Issuance of show-cause notice. However, in the present case the impugned ex-parte order-in-original has been decided after more than three years from the date of issuance of show-cause notice as well as from the date of remand order i.e. 03.09.2012 and therefore is time barred, for this reason alone the order is liable to be set aside. It is relevant to mention here that no extension whatsoever was ever obtained from competent authority and if obtained the same is not brought on record.
C. That it is an establish principle of law that where a power was conferred to do an act in a particular or way, that power was to be exercised in that manner or way alone and it necessarily would exclude doing of the act in any other manner than that which had been prescribed.
Therefore, if Section 179(3) of the Customs Act, 1969, directs that adjudication process has to be completed within stipulated period, then it has to be completed accordingly. If it has been completed in any other way than the prescribed manner then legally it is not sustainable. Reliance is placed on the Judgment of Honourable Supreme Court of Pakistan 2008 SCMR 240.
D. That the impugned ex-parte order-in-original passed on the basis of impugned show-cause notice which is illegal as the same was issued by respondent No.3 who has no jurisdiction to issue the same. Moreover, respondent No.3 can only demand the Federal Excise duty at import stage but the instant case department alleged in the show-cause notice that the appellant have short paid and therefore, the case falls outside the jurisdiction of the Custom Department, hence the impugned ex-parte order-in-original as well as impugned show-cause notice are liable to be declared illegal, null and void and ultra wires in turn set aside.
E. That the impugned ex-parte order passed by respondent No.2 on the basis of allegation made by respondent No.4 that the appellant violated the SRO 671(1)12006 dated 29.06.2006 and consignments were self-assessed, whereas the assessment made by the Customs Staff. Moreover according to news item dated 15.06.2011, the officers of Customs (PaCCS) have not entered the correct SRO in PaCCS system and they assessed the subject consignments on retail prices. This ground alone the entire proceedings initiated on the basis of impugned show-cause notice is liable to be set aside.
F. That while deciding the impugned ex-parte order-in-original respondent No.2 did not consider that the assessm ent is to be made by the Customs staff and not by the appellant and appellant declared the price as well as quantity according to the import documents and duly paid the duty and taxes as demanded by the concern assessing officer, therefore, the appellant had not short paid or got the assessm ent at a lower value and passed the impugned ex-parte order-in-original dated 28.12.2015 is liable to be set aside.
G. That if for the sake of arguments if the appellant paid short duty and taxes in that case according to section 11 of Federal Excise Act, 2005, (earlier section 3-D) Customs department cannot demand payment of Federal Excise Duty, the incident of which has already been passed on to the consumer. Appellant had already sold the imported goods and has passed on the incident of tax to the end consumer. Further Federal Excise in an indirect tax and appellant has already sold the imported consignments and have recovered the said duty (paid at the time of import) from the end user. As the fault lies on the part of custom staff and not on appellant, therefore, without considering the legal aspect of the case, respondent No.2 passed the impugned ex-parte order-in- original which is liable to be set aside.
H. That in a similar case, the Hon'ble Customs, Federal Excise and Sale Tax Appellate Tribunal, Lahore vide order dated 05-06-2008 (titled M/s. Hi Tec v. Collector of Sales Tax and others) held that "If under Section 3D of the Central Excise Act, 1944 excess duty erroneously recovered was to be deposited in the Government Treasury, if the incidence of tax by that time had passed on to consumers on the same analogy and deficiency could not be recovered from the assesses".
I. That according to section 8 of Federal Excise Act, 2005 "if the person fails to pay the duty within the prescribed time, he shall, in addition to the duty payable under section 3, be liable to pay default surcharge at rate of one percent per month for the first six months and at the rate of one and half percent per month thereafter'. In present case appellant has paid all the duty and taxes within time and as per demand made by the custom staff (PaCCS), therefore, section 8 is not applicable hence the impugned show-cause notice as well as impugned ex-parte order-in- original are liable to be set aside.
J. That the impugned ex-parte order is not based on legal footings negates statutory provisions and is product of blind compliance of contravention Report of office of Director (I&I). It is not an independent decision of the Respondent, rather it has been authored under strong influence of contravention report of DG (I&I), thus making it not an independent decision and nullity in eyes of law.
K. That impugned ex-pane order does not take into account the actual provision of SRO 671(1)/2006 dated 29.06.2006 which depicts as follows:- a. The SRO 671(1)/2006 dated 29.06.2006 states that "In exercise of the powers conferred by subsection (5) of section 12 of Federal Excise Act, 2005, the Central Board of Revenue is pleased to fix the minimum price of lubricating oil in packs (PCT Heading 2710.1951 and 2710.1952) at US$ per liter for purpose of assessm ent of excise duty at import stage". b. The SRO draws its powers from subsection (5) of section 12 of Federal Excise Act, 2005. c. Whereas section 12 of Central Excise Act, 2005 vide subsection (3) depicts that "where any goods are chargeable to duty at the import stage, duty shall be assessed and paid on the value determined in accordance with section 25 of the Customs Act, 1969 (IV of 1969), including custom duties leviable thereon'. d. The above subsection (3) does not provide any mechanism for assessment of duty/fixation of duty except depending on value assessed by customs under section 25 of Customs Act, 1969 and not under any SRO. e. The fixation of value under SRO 671(1)/2006 is in conflict with statutory provisions -of subsection
(3) of section 12 of Federal Excise Act, 2005 and it is settled law enunciated in many verdicts of superior court that if there is any conflict between the SRO (notification) and the statute, the later will prevail. Therefore, the provisions of SRO 671(I)/2006 are infructuous and. ineffective in presence of clear statutory dictates of subsection (3) of section 12 of Federal Excise Act, 2005. f. The above view point is further elaborated from subsection (5) of section 12 of Federal Excise Act, 2005 which expressly states that "provided that where price, at which the goods or class of goods are sold, is higher than price fixed by the Board, the duty shall unless otherwise directed by the Board, be levied and collected at such higher price". g. The provisions of section 12, subsection (3) and subsection (5) make it crystal clear that in the impugned case the Federal Excise Duty can't be collected at the price of US$ 2.00 per liter, at import stage of lubricants.
L. That a very important aspect of the case is whether the learned authorities of office of DG (1&1) the authors of contravention report have any powers to invoke provisions of section 32(1)(2) or 32(A) or not. The original SRO 654(1)/2005 which delegates power to office of DG (1&1) or the revised version in shape of SRO 486(1)12007 do not give any powers to any officer of office of DG
(MI) to invoke provisions of section 32;1)(2) or section 32(A) of Customs Act, 1969. Therefore the Contravention Report C.No.Appg-352A/DCl/Tech/2011 / Partl/PaCCS/ 1507 dated 23.04.2011 have no legal basis to invoke sections 32(1)(2), 32(A) and 156(1)(14) as all the matters of FED at import stage has to be dealt in manner the imports are dealt under provisions of Customs Act, 1969. Therefore Respondent No.4 has no jurisdiction to invoke provisions of sections 32(1)(2) and 32(A) of Customs Act, 1969 or section 156(1)(14) ibid. Hence the contravention report issued by office of DG (1&1)-FBR, Karachi and the impugned ex-parte Order-in-Original authored by adjudication authority have no legal sanctity anti void in law.
M. That the Honorable Court in a case [Shahzad Ahmed Corporation v. Federation of Pakistan, 2005 PTD 23] has categorically held that office DG (1&.1) (Respondent No.3) is not competent to initiate any action under section 32 of Customs Act, 1969. In case of [Mazhar Iqbal v. Collector of Customs Preventive, 2004, PTD 2994] also holds that DG (1&1) have no jurisdiction in respect of consignments for which a bill of entry is in the field. Any proceedings in disregard to above case laws will be invalid.
N. That the impugned ex-parte order does not substantiates the levy of Federal Excise Duty of lubricants at import stage and is in conflict of statutory provisions of subsections (3) and (5) of section 12 of Federal Excise Act, 2005, therefore orders of levy of default tax for Federal Excise Duty has no legal value. Therefore all the charges for violation of section 32 of Customs Act, 1969 and perceived violation of provisions of Federal Excise Act, 2005 are not maintainable. Therefore, the impugned ex-parte order in original is liable to be set aside.
0. That under section 15 of the Federal Excise Act, 2005, the Federal Government was to declare vide notification in the official gazette that any or all of the provision of the Customs Act, 1969, would be applicable with regard to like matter in respect of duties levied by sections 3 and 8.
P. That under subsection (2) of section 14 of the Federal Excise Act, 2005, the officer of Inland Revenue empowered in this behalf, shall after consideration the objections of the person served with a notice to show-cause under subsection (1), determine the amount of duty payable by him and such person shall pay the amount so determined along with default surcharge and penalty as specified by such officer under the provisions of this Act". Therefore, respondent No.3 has no jurisdiction to issue show-cause notice for recovery of short levy amount of Federal Excise Duty.
Thus, the impugned ex-parte Order-in-Original is without lawful authority as recovery of Federal Excise Duty is domain of Inland Revenue Officers (IRS) and not of customs. Therefore impugned ex- parte Order-in-Original has no legal force and liable to set aside on this point.
Q. That the superior courts have decided the issue in various cases where the state institution responsible for implementation of procedures 6 comply with the statutory provisions fails in discharging their duties. The courts/tribunal has shifted the truth from fiction practiced and preached by FBR's field formations on this issue. In case of Messrs Naimay International v. Collector of Customs (Appeals)], the Customs Appellate Tribunal in Appeal No. Cus 397/PB of 2009 dated 02.04.2011 decided that incorrect calculations of Central Excise Duty on basis of inbuilt module of one customs on basis of incorporated formula would not hold responsible anybody else for the omission resulting short realization of duty/taxes except the department itself who was responsible for the shortcoming of inbuilt formula of calculation of Central Excise Duty.
R. That the instant case exactly depicts the same position where the Appellant furnished all the details in declaration of GD including the quantity in liters, weight, value, per unit price, and duty structure. But the inbuilt formula in PaCCS was not capable to deliver therefore the Appellant is not involved in any misdeclaration hence no action under section 32 of Customs Act, 1969 and sections 3(2) and 12(5) of Federal Excise Act, 2005.
S. That the charge of deliberate omission/non-implementation of statutory provision has no legs to stand on. Infect it was fault of system and not of Appellant and system was designed and run by the customs and not by the Appellant.
T. That when there is any conflict between the statute and notification the later shall prevail.
Statutory interpretation is the process by which courts interpret and apply legislation. The superior courts interpret how legislation should apply in a particular case as the words being imperfect symbols of communication sometime fail to communicate the real intent. The superior courts have also given explicit verdict that statutory provisions always prevail over the delegated legislation. In the instant case the statutory provisions of Federal Excise Act, 2005, vide subsection (3) of section 12 thereof is in conflict with SRO 671(1)/2006, therefore the statutory provisions will reign supreme.
U. That another issue in this case relate to UoM in this regard it is pointed out that the recommendation of the Customs Co-operation Council, dated 01.07.2006 and Annexure thereto (copy of enclosed for ready reference as Annex "A") are for international statistics purpose and facilitating the transmission of data by means of EDI. The FBR has, through its CGO No.7/2006, dated 26.06.2006, made the recommended unit of quantity, as units of measurement a part of First Schedule to the Customs Act, 1969, for the purposes of the assessment of the taxes though para 5 of Annexure to the recommendation states "the recommended standard units of quantity do not form a part of the Harmonized System Nomenclature". It is submitted that any amendment, addition deletion of the Customs Act, 1969, or its Schedules cannot be made other than through Finance Act. Thus, the inclusion of the said unit of measurements in the First Schedule to the Act is illegal, without lawful authority and having no force of law. On the contrary, as a fact, none of other contracting parties/countries has made the subject unit of quantity part of their tariff for assessm ent of taxes purpose. either through their legislations or otherwise. Unfortunately rather against the law, the said units of Measurements are destroying very spirit and scope of section 25 of the Act and Article VII of GATT are being violated grossly, some of the instances are listed below.
V. That the Federal Excise Wing of FBR issued SRO 671(5)12006 dated 29.06.2006 and used "liter" as unit of measurement for fixing minimum price for lubricating oil whereas Customs Wing of FBR assessing taxes on the basis of UoM mentioned in CGO 7/2006. The use of different unit of measurement by two wings of FBR created confusion among trade as well as in the field formation of FBR.
W. That the Directorate General of Intelligence and Investigation FBR has no authority to audit or access the Customs Computerized System. The powers of Directorate General of Intelligence and Investigation are mentioned in SRO 486(1)/2007 dated 09-06-2007 wherein they have not given any power under Sections 155 A to 155 R. Therefore the contravention report as well as the Show- Cause Notice based upon the said contravention report is liable to be set aside on this ground alone. Under Section 155 L of the Customs Act, 1969 the appropriate Officer of Customs for the purpose of audit and examination of Customs Computerized System is the Directorate General of Valuation vide SRO 495(1)/2007 dated 09.06-2007.
X. That present case is a post importation case and under para 44 of CGO 12 of 2002 read with SRO 495(1)/2007 dated 09-06-2007 it is the Valuation Department who could initiate action for recovery of the government dues. Reliance is placed upon 2006 PTD 2237.
Y. Notwithstanding the above, it is submitted that the appellant declared the price of Lubricating oils, which are also mentioned on the Items details invoices, therefore, appellant has not evaded /short-levied any duty and had paid all the duty and taxes as demanded by the custom staff at the time of clearance of the consignments.
5. No cross objections were file as required under subsection (4) of Section 194A of Customs, 1969.
Respondents only filed parawise comments, which are hereby taken on record for assistance of Court.
6. I have examined the record of the case and heard rival parties. As per record of the case initial Order-in-Original.54/2011 was issued on 05.04.2012, which was challenged before Collector of Customs (Appeals) and Order-in-Appeal under section 193 of the Customs Act, 1969 was issue vide Nos.5948 to 5958/2012 dated 05.04.2012. However that Order-in-Appeal was challenged in Appeal No.K-272/2012 dated 16.05.2012 filed under section 194A of the Customs Act, 1969. The Customs Appellate Tribunal heard the Appeal in DB and case was remanded back to the adjudication officer on 04.10.2012 asking the Adjudication Officer to pass a speaking order afresh by independently stating the facts of the case. The expression "Remand" has specific legal connotation. The Honorable Sindh High Court in case Nazzaz Ali v. Member Judicial, 1993 MLD 1333 depict that: "The Dictionary meaning of word 'remand' is to send back a case to the same Court out of which it came for purpose o A having some action on it there"
7. Therefore, as the case was remanded back to the Adjudication Officer, the legal proceeding would start as per provisions of section 179 of the Customs Act, 1969 which provide for issuance of Order-In-Original within 120 days of issuance of show-cause notice. As in this case show-cause notice was already in the field therefore the period of deciding the case would naturally start on the date of issuance of Customs Appellate Tribunal Order No.K-223/2012 dated 04.10.2012 whereas the Adjudication Officer issued the Order-in-Original after 3 years 2 month and 24 days after the remand of the case instead of 120 days specified in section 179 of the Customs Act, 1969. The issue of limitation period prescribed under section 179(3) of the Customs Act, 1969 has been dealt in (2021 PTD 501) Collector of Customs v. lsrar and others, and DB of Honorable Islamabad High Court has held that; "The fact that the Order-in-Original was issued beyond the mandatory adjudication period prescribed under section 179(3) is not disputed. We therefore find that the Order-in-Original to be of no legal effect on this score as well"
8. That recourse of Honorable Supreme Court in case the Collector Gujranwala v. M/s. Super Asia (2017 SCMR 1427 = 2017 PTD 1756) held that time lines prescribed under subsection (3) of section 179 of the Custom ACE, 1969 are mandatory and not directory.
9. In view of above the appeal succeeds on this account without touching the merit of the case in synchronization with respectfully following the above mentioned ratio. The appeal is disposed of in the above terms.
10. Judgment passed and announced accordingly.
1. This order consists of eight (08) pages and each page bears my initials and office seal. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.