SHAKEEL AHMED ABBASSI, MEMBER JUDICIAL-III.----By this judgment, intend to dispose of the instant appeal filed by the Appellant, against Order-in-Original 406-411/2019 dated 31.1.2.2019 passed by Collector"of Customs (Adjudication-II) Karachi.
1. Brief facts of the case on record that the Directorate General of Intelligence and Investigation- FBR, Regional Office, Karachi received credible information that the commodity Styrene Butadiene Rubber SBR Grade 1502 is being imported and cleared by some unscrupulous importers, by unduly claiming benefit of exemption of Sales Tax against S. No. 100 of Table to SRO 1125(I)/2011 dated 31.12.2011 while the afore-said S. No. covers only SBR in latex form having usage in export-oriented textile, carpet. Surgical and sports industry, SBR 1502 which is normally imported in form of lumps/solid blocks etc, has no usage in export-oriented sector, hence not admissible to exemption.
2. And whereas relevant import data of the commodity for the period July, 2016 was retrieved from PRAL system by the case making agency and .scrutiny of the data revealed that majority of the consignments of SBR 1502 imported by tyres manufacturing or like industries were being cleared on payment of sales tax without any claim of SRO 1125(I)/2011. Further scrutiny of data has revealed that during the aforesaid period the commodity SBR 1502 was cleared by 33 importers through inadmissible claim of SRO 1125(I)/2011. The consignments were cleared through Model Customs Collectorate of Appraisement (East/West), Custom House Karachi. The Collectorate wise position and recnverable amount is worked out as follows.
CollectorateNumber of importTotal No. of Consignment / GDsTotal import Value (Rs.) Total Evaded Amount (Rs.)
MCC Appraisement (East)30 60 298,110,102 61,234,634 MCC Appraisement (West)10 15 90,000,834 18,255,130 Total 388,110,936 79,489,764
3. And whereas as regards the consignments cleared through Model Custom Collectorate of Appraisement (East) Custom House Karachi separate contravention report is being sent to the concerned competent adjudication authority. Scrutiny of import data of SBR 1502 revealed that total number of (15) consignments of aforesaid commodity imported by
(10) various importers including M/s. Maya Corporation (NTN#119516-5) Lahore were cleared against benefit of SRO 1125(I)/2011 dated 31.12.2011. Evasion of taxes and other allied taxes which are recover from the instant importer have been worked out to Rs.3211842/- thus M/s. Maya Corporation (NTN#1199516:-5).Lahore by importing and clearing the under reference consignment of SBR 1502 in collusion with the clearing agents M/s Commodity Service. Agency (CHAL # 352), 16 Mehboob Chamber Adamjee Dawood Road Jodia Bazaar Karachi through inadmissible claim of benefit of SRO 1125(I)/2011 dated 31.12.2011 have committed an offence of mis-declaration aimed at evasion of taxes in violation of Sections 32(1), 32(2), 32(5) and 79 of the Customs Act, 1969.read with Sections 3, 6 and 7 of the Sales Tax Act, 1990 further read with Section 148 of Income Tax Ordinance, 2001 , punishable under clauses, (1), (10) and (14) of Section 156(I) of the Customs Act, 1969 read with Sections 33 and 34 of the Sales Tax Act, 1990.
4. Accordingly a show-cause notice was served upon the appellant and after due process and affording opportunities of defense the impugned Order-in-Original 406-411/2019 dated 31.12.2019 was passed. Operative part of this Order-in-Original is reproduce as under: "I have examined merits of the case, heard the parties at length and studied the written comments furnished by both of them which have been reproduced as such in the foregoing part of this order. The main issue involved which led to institution of this case against the respondent importer(s) is that the Directorate of Intelligence and Investigation is of the view that benefit of exemption of Sales Tax against serial number 100 of the Table of SRO 1125(I)/2011 dated 31.12.2011 is available only on import of Styrene Butadiene Rubber 1502(SBR) in Latex form and not on Styrene Butadiene Rubber SBR Grade 1502 which was imported and cleared by the respondents.
Moreover, it was argued by the Directorate that SBR Grade 1502 which is normally imported in form of lumps/solid blocks, etc, has no usage in export-oriented sector, hence not admissible for exemption.
The main plea of the respondent importer is that exemption from payment of sales tax under SRO 1125(I)/2011 dated 31-12-2011 is available to both SBR 1502 classifiable under HS Code 4002.1900 and SBR in latex form classifiable under' HS Code 4002.1100. The counsel of the respondent has insisted and rightly so that SBR in latex form are not all classifiable under PCT 40021900 as it is specifically classified under PCT 4002.1100 and that the exemption from payment of sales tax enjoyed by them on import of SBR 1502 was rightly claimed and extended by the clearance Collectorate as SRO 1125(I)/2011 dated 31-12-2011 specifically grants exemption under PCT 4002.1900. In support of their argument, the respondent importer(s) have cited the instances of several consignments of SBR Grade 1502 released by the clearance Collectorate in the past.by extending the benefit of exemption from payment of sales tax under SRO 1125 (I)/2011. The counsel appearing on behalf of the respondent importer(s) also contended that the Tyre Manufacturers were entitled to input adjustment of sales tax paid on their import of SBR 1502 and therefore, exemption under the aforesaid SRO by the Tyre Manufacturers could be explained in that particular context.
Moreover, the honorable Customs Appellate Tribunal, Bench-III Karachi has quite recently of cases involving identical issue/matter in favour of the importers. The operative part of the said order(s) of the Tribunal (Customs Appeal No. K-1468/2018 to K-1472/2018 and K-1482 ) is reproduced below: "The learned Adjudicating Officer in the instant case has not been able to appreciate the fact that Styrene Butadiene Rubbers (SBR) are classified under PCT 4002.1000. In case Styrene Butadiene Rubber is in latex form then it is classified under heading 4002.1100 and all those Styrene Butadiene Rubber which are not in latex form are classified under PCT heading 4002.1900. The exemption available at serial number 99 of the Table-I of SRO 1125(I)/2001 dated 31.12-2011 is to All Rubber in Latex Form pa 4002.1100). At serial number 100 exemption has been granted to Styrene Butadiene Rubber (SBR) 1502 latex form while indicating the PCT as 4002.1900, whereas Styrene Butadiene Rubber (SBR) in latex form are not classified under this hedding. Infect, exemption already stood granted to SBR Rubbers in Latex Form at serial number 99 of the said SRO. That being so, there was no need to grant exemption to the same item under a different serial number (Le 100). In case the contention of case making agency is accepted it will make serial number - 100 of the SRO redundant as latex rubber will get benefit under serial number 99 and no SBR rubber in latex form can be classified under heading 4002.1900. In law no redundancy could be attributed to the legislature. In such situation the law of Harmonious Interpretation applies i.e., "a provision of the statute should not be Interpreted or construed in isolation but as a whole, so as to remove any Inconsistency or repugnancy" along with Rule of Beneficial construction to benefit the taxpayer. Moreover, the field/clearing Collectorates have been extending exemption to Styrene Butadiene Rubber (SBR) (In non latex form) of PCT 4002.1900, freely." It is also added here that earlier the Honourable Appellant Tribunal also decided the similar/identical nature case in Customs Appeal No. K-996/2018 in favor of the importers.
In view of the above, I am convinced that the respondent importer(s) were entitled to exemption from payment of sales tax on import of SBR 1502 classifiable under PCT 4002.1900 in terms of serial number 100 of SRO 112503/2011 dated 31-12-2011. The charges levelled in the show-cause notice are therefore not established against the respondent importer(s) and clearing Agent(s)."
5. Being aggrieved with this Order-in-Original, the appellant filed this appeal on following facts and grounds
(i) That the impugned order-in-original passed by learned Collector of Customs (Adjudication-II), Karachi, is not sustainable in law the same has been passed without appreciating the facts on record and law applicable thereto on mutatis mutandis in violation of the orders of superior appellate forum. That while concluding the impugned order the learned collector of customs (Adjudication-II) has failed to appreciate that, the respondents declared the under-reference goods to be styrene butadiene Rubber SBR grade 1502 and cleared the same by unduly claiming benefit of exemption of sale tax against S. No. 100 of Table to SRO-1125(I)/2011, dated 31.12.2011, while the afore-said S. No. covers only SBR in latex form having usage in export-oriented textile, carpet, surgical and sport industry. SBR 1502 which is normally imported in form of lumps/solid blocks, etc., has no usage in export-oriented sector, hence not admissible to exemption. That while concluding the impugned order the learned Collector of Customs (Adjudication-II), has failed to appreciate that, the respondents tried to defraud the Government revenue by misusing the benefit of SRO- 1125(I)/2011, dated 31.12.2011. There is no declaration in GD that the goods are in Latex form.
(ii) That while concluding the impugned order the Learned Collector of Customs (Adjudication-II), has failed to appreciate that, the respondents did not declare the goods SBR 1502 Latex in Goods Declarations and benefit is only available to latex only. That while concluding the impugned order the Learned Collector of Customs (Adjudication-II), has failed to appreciate that as per literature (Annex-E) SBR 1502 and SBR 1502 Latex are two different chemicals having different CAS No. SBR 1502 represents Rubber and is used in the manufacture of hard rubber products like tyres and the tyre industry is paying the sales tax. That while concluding the impugned order the Learned Collector of Customs (Adjudication-II), has failed to appreciate that, as per import data all. consignments of SBR 1502 were being cleared by tyre industry after paying of sales tax.
6. The Respondent/Importer filed parawise comments in reply to memo of appeal which are reproduce as under i. There are stereotype cases were made by case making agency against 33 (thirty Three) traders therein alleging that traders imported and cleared consignments of Styrene Butadiene Rubber
(SBR) GRADE 1502 availing undue exemption of sales tax under SRO 1125(1)/2011 which is specified at serial No.100. That the Out of 30 traders 90% orders passed by Collector, of Customs Adjudication and Customs appellate Tribunal in favor of importers also in vide Appeal No. K-1449/2018 along with 4 others honorable customs appellate tribunal passed in favor of importer. "Recently Honorable Customs Appellate Tribunal passed orders in favor of trader Ms. Rubber Chem (NTN No. 1153358-7) 85.B, S.I.E. Mujhaid Road Sialkot in Appeal No. K-1517/2018. ii. That appellant Department filed this appeal on the bases assumptions and similar grounds without direct evidence in their hand only for harass importer and misleading this honorable appellate tribunal and thus come up with unclean hands is not eligible to get any equitable relief.
That the 2022 PTD 144 therein honorable customs appellate tribunal clearly mentioned that sales taxes cannot recover by customs authority after goods clear out of customs charge whereas sale taxes recovery is the power of Officer of Inland Revenue operative para reproduce as under "I have also noticed with great concern that the respondent No.3 in the show-cause notice have invoked Sections 3, 6, 7, 33 and 34 of the STA and 148 of the ITO without realizing that Section 3 while indeed being a' charging section cannot be invoked by anyone other than an Officer of Inland Revenue whereas Section 6 contains machinery provision laying down the procedure for collection of Sales Tax as like custom duty at the import stage by the customs authorities hence cannot be used to charge anyone including the appellant for an offence under the said section with the exception of official of Clearance Collectorate, upon whom charge under the said section can be invoked. Section 7 speaks about the determination of tax liability at the time of filing of sales tax return cum payment challan under Section 26 of STA, this is also a machinery section. Section 33 contains penal clauses synonymous to section 156(1) of the Act and section 34 speaks about imposition of default surcharge, to be paid by the tax payer upon confirmation of the charges levelled in the show-cause notice issued by the officer of the Inland Revenue under the respective Section of the STA. Section 148 of the ITO is also a section containing machinery provision akin to Section 6 of the STA, empowering custom authorities to collect levied income tax alike custom duty on the imported goods. "Provision which provides a mechanism/mode of collection are not to be construed as charging provisions even through Inapt interpretation as it could neither abridge nor expand the scope of a charging section in an Act/Ordinance". Reference is made to the decision of Hon'ble Supreme Court of Pakistan in 2019 SCMR 282 Pakistan Television Corporation, Ltd. v. Commissioner Inland Revenue (Legal), LTU, Islamabad and others. Resultant, the aforesaid deliberated sections are independent and cannot be used to invoke a charge. Since, these sections are irrelevant/erroneous in the matter of customs, no show-cause notice can be issued by a custom officer under these section, render the issued show-cause notice and passed order-in-original palpably illegal and as such void and ab-initio as held in the following reported judgments: Asst. Collector v. Khyber Elec. Lamps 2003 PTD 1275, D.G. Khan Cement v. Collector of Customs 2005 PTD 480, Caltex v. Collector 2003 PTD 1593, Union Playing Card Company v. Collector of Customs 2002 MLD 130, Atlas Tyres v. Addl.
Collector 2002 MLD 180, State Cement v. Collector PTCL 2001 CL. 558. Kashmir Sugar v. Collector 1992 SCMR 1898, Rose Color v. Chairman, CBR and 2013 PTD 813 Sanvar International v. Addl.
Collector of Customs" iii. The main allegation is relevant import data of the commodity for the period July, 2016 to date was retrieved from PRAT. system. Scrutiny of the data revealed that majority of the consignments of SBR 1502 imported by Tyres manufacturing or like industries were being cleared on payment of sales tax without any claim of SRO-1125(I)/2011.The directorate has not worked on the that above noted industries claims input adjustments of sales tax at the time of their final liabilities of sales tax.
At the end they get enjoy more sales tax exemptions than the exemptions are available at import stage. That the issue in question as to whether the imported goods which is "Synthetic Rubber SBR 1502" is entitled for exemption of SRQ 1125 (I)/2011 dated 31.12.2011 is purely a question of law. It is submitted that in practice the Collectorate of Customs has released billions and billions of rupees of identical/similar goods and the. benefit of SRO 1125 ibid was allowed to the similar goods since the past twenty five years. It is wonder as to how the Collectorate of Customs could deviate the long established departmental practice of the Customs Stations being followed all over the Islamic Republic of Pakistan and has denied the exemption of SRO 125/2011. ibid. iv. That secondly the show-cause notice was issued invoking Section of the Customs Act, 1969, which is without jurisdiction, inasmuch as not in accordance with the legislative provisions of Section 32 of the Customs Act, 1969. It is further submitted that the directorate of intelligence is not empower to audit respondent' previous cleared consignment under Customs Act, 1969. It is the provision of Section 32 shall only and only be invoked where there is any evasion or found untrue statement having reasons to believe that such statement is false in the matter of "customs". In this case the issue in question relates to the exemption of sales tax and not customs duty. Therefore by no process of reasoning Section 32 could be invoked in the matter which relates to purely the exemption of sales tax. There are plethora of judgments decided by the Honorable Supreme Court of Pakistan and High Court of Sindh that Section 32 shall only be invoked where the importer has intended to evaded the customs duty and not sales tax or income tax due to reason customs authorities can recover sales tax and income tax but cannot ,issue show-cause notice for recovery of the. said two taxes being comes in the jurisdiction of IRS. v. That the allegation contained in the show-cause notice the department is of the view that the goods in question are not eligible for exemption of SRO 1125(I)/2011. without any documentary evidence or basis or any lab test report. It is wonder as to how the goods are not eligible under serial 100 of SRO 1125 (I)/2011 whereas as per serial 100 of SRO 1125 ibid the impugned goods are specifically mentioned as "Synthetic rubber SBR 1502 latex". In terms of Order 101(B) of CGO 12/2002 the Federal Board of Revenue has made parameters that in such cases where there is no change of rate of duty on change of PCT Headings the question of taking cognizance of mis-declaration of description, value and PCT heading will not arise. In this case the customs duty on impugned goods 3% + 1% additional duty which does not change otherwise, if Goods forbid the description or PCT heading is proposed to be revised or changed. That the declaration of physical description of the goods in the impugned Goods Declarations as "Synthetic Rubber SBR 1502" have been confirmed by the appropriate officer of the customs in his examination report that what has been imported have actually arrived in territorial waters of Pakistan. vi. That it has been alleged that trader are in connivance with the officer of customs to evade the customs duty and hence Section 32(2) has been invoked. That the trader deny the charges and would like to submit that the show-cause notice does not give details of the relevant officer of customs with whom trader were connived with to evade the custom duty and taxes. The burden of proof under section 117 of evidence Act 1918 is on the prosecution side as to prove the name of person with its relevant details. There is no such documentary evidence proved by the appellant/department nor any evidence brought forwarded as to whom the Respondent trader is connived with. Therefore the allegation in terms of Section 32(2) of the Customs Act, 1969 is liable to be struck down and vacated. That without prejudice to the above stated position it is a well settled law that incorrect claims as to PCT or SRO numbers are not mis-declaration, if made without reasons to believe that they are false. It is submitted that claiming the exemption of SROs or claiming the PCT Headings are purely and purely a question of law therefore the penal clause under Section 32 cannot be at all invoked where there is no such mens-rea on part of the Importer. . vii. In this case there is no charge of mis-declaration of physical goods but only the allegation against claiming wrong PCT Heading which is in fact a purely question of law. Reliance is placed in large number of cases decided by the superior courts, details of which are as under:-
(i) Monnoo Industries Ltd. v. Government of Pakistan Pet. D-199 of 1984
(ii) Collector v. Central India Board Product 1987 (29) ELT 259.
(iii) Collector of C.E.v. Chemiphar Drugs 1989 (40) ELT 276 (SC)
(iv) Hindustan Electro Graphite's v. U.O.I 1990 (50)
(v) Central. Cotton Mills Ltd. v. Collector 1992 CLC 841.
(vi) Metro Tyres Ltd. v. Collector 1994 (74) ELT 964.
(vii) Ballarpur Industries Ltd. v. Collector U.O.I. 1994 (74) ELT(del)
(viii) Northern, Plastics Ltd. v. Collector 1998 (101) ELT 549 (SC)" viii. That even on merits of the case, it is submitted that the Tariff heading in the Pakistan Customs Tariff of Styrene " butadiene rubber has been classified under heading 40.02 as `Styrene butadiene rubber (SBR); Carboxylated Styrene butadiene rubber (XSBR): 4002.1100-Latex 4002.1900-Other. It is crystal clear from above submissions that it is styrene butadiene rubber latex is covered under heading 4002.1100 and styrene butadiene rubber (other than latex) is classifiable under heading 4002.1900. It may be brought in your kind notice that benefit of zero rated sales tax is being allowed to 'Styrene butadiene rubber SBR-1502 under SRO 1125(I)/2011 and earlier such change in practice is not allowed vide para 74 of CGO 12/2002. The change is required to be notified which will be applied prospectively from the date the change is notified. There are number of judgments of the Superior Courts on the issue.
7. The counsel for the parties heard at length. On perusal of the record as well as the arguments advanced by counsel for respondent/imported, it is gathered that the main issue involved which led to institution of this case against the respondent importer(s) is that the Directorate of Intelligence and Investigation is of the view that benefit of exemption of Sales Tax against serial number 100 of the Table of SRO 1125(I)/2011 dated 31.12.2011 is available only on import of Styrene Butadiene Rubber 1502(SBR) in Latex form and not on Styrene Butadiene Rubber SBR Grade 1502 which was imported and cleared by the respondents. Moreover, it was argued by the Directorate that SBR Grade 1502 which is normally imported in form lumps/solid blocks, etc, has no usage in export-oriented sector, hence not admissible for exemption.
8. Conversely, the main plea of the respondent importer is that exemption from payment of sales tax under SRO 1125(1)/2011 dated 31-12-2011 is available to both SBR 1502 classifiable under HS Code 4002.1900 and SBR in latex form classifiable under HS Code 4002.1100. The counsel for the respondent, has insisted and rightly so that SBR in latex form are not all classifiable under- PCT 4002.1900 as it is specifically classified under PCT 41)02.1100 and that the exemption from payment of sales tax enjoyed by them on import of SBR 1502 was rightly claimed and extended by the clearance Collectorate as SRO 1125(I)/2011 dated 31-12-2011 special grants exemption under PCT 4002.1900. In support of their argument, the respondent importer(s) have cited the instances of several consignments of SBR Grade 1502 released by the clearance Collectorate in the past by extending the benefit of exemption from payment of sales tax under SRO 1125 (I)/2011. In support of his contention he has referred to an order of this Tribunal which is in favour of importer in identical issue/matter vide Customs Appeals Nos.K-1468/2018/932 and others dated 26-07-2019.
9. By getting the strength from what has been available on record and observed herein above particularly the interpretation of law in the light of prescribed law and to follow the ratio decidendi in the judgments of superior courts along with the additional observations made thereon, rule of consistency is applied and the instant appeal being devoid of merit and without any substance is hereby dismissed. ONO passed by the adjudicating authority is upheld.
10. Appeal stands disposed of in above terms with no order as to cost.