ABDUL BASIT CHAUDHRY, MEMBER TECHNICAL-I. By this judgment, we intend to dispose of Customs Appeal No.K-767/2023 dated 19.04.2023 filed against Order-in-Original No.99/2022-2023 dated 22.02.2023 passed by learned Collector of Customs (Adjudication-II), Karachi.
2. Brief facts of the case are that a credible information was received to the effect that importers M/s IBKB (Private) Limited (NTN # 7959967) with active collusion of their clearing agent M/s. Sealink Shipping Forwarding (CHAL # 1181), are involved in mis-declaration of PCT heading. In pursuance of the information, the consignment under clearance vide Goods Declaration (GD) bearing No. KAPE- HC-77379 dated 18.11.2022 was blocked after being assigned to gate out. In order to check the veracity of the information, the said consignment was then put to scrutiny and the Directorate's Staff conducted examination along with authorized representative of importer and surveyor Examination Area, SAPT on 29.11.2022. After drawal of the representative samples from the consignment, the goods were re-stuffed in the container No.TRHU6616604 and re-sealed with Seal No.PE2263278, under cover of Musheernama-Cum-Inventory prepared on the spot. In order to confirm actual description, the samples were sent to the Customs House Laboratory, Karachi, vide C. No. 122-Appg-I/DCl/IBKB Pv/2022 dated 01.12.2022. The Customs Laboratory vide Test Report No. CE/R/435/22 dated 05.12.2022 reported that the samples are found to consist of Choline Chloride fixed on Corn Cob (Carrier). Contents of the TR are reproduced as under: "Report: The sample on test is found to consist of Choline Chloride fixed on Corn Cob (Carrier). It is in the form of light brown color granular husky powder.
Percentage purity could not be ascertained at the level of our laboratory due to non-availability of relevant instrument."
Note 1(a) to chapter 29 limits headings of this chapter only to separate chemically defined organic pounds. The instant goods consist of Choline Chloride fixed on Corn Cob, thus, it is no longer a separate chemically defined compound as envisaged under note 1(a) ibid sub-heading 2309 covers preparations of a kind used in animal feeds. In view of the TR, it is confirmed that imported goods are correctly classifiable under HS code 2309.9000 attracting Customs Duty @ 10% and Income Tax @ 5.5%) instead of declared/assessed HS code 2923.1000 attracting Customs Duty @ 0% and Income Tax @ 2%). The short levied amount against blocked GD is calculated to be Rs.1,322,152/-, which is recoverable from importer.
3. In view of above, the goods cleared vide Goods Declaration bearing No. KAPE-HC-77379 dated 18.11.2022 through mis-declaration of classification, thereby evading duty and taxes amounting to Rs.1,322,152/- being liable for confiscation has been seized under Section 168 of the Customs Act, 1969 after fulfilling necessary formalities under Section 171 ibid. The seized goods stuffed in the container have been given under superdari to the custodian Terminal Operator M/s. SAPT East Wharf, Karachi. In order to quantify the amount of evaded duty/taxes against the past clearance, data of M/s. IBKB (private) Limited, (NTN # 7959967) was scrutinized online through WeBOC which revealed that the said importer during the period February 2022 to October 2022 adopting same modus operandi got cleared 05 consignments of same goods from Collectorate of Customs, Appraisement (East), Karachi, evading duty/taxes the amount of Rs.6,136,674/- recoverable from the importer. Total recoverable amount vis-a-vis seized and contraveiling goods is worked out to the tune of Rs.7,458,826/-.
4. Adjudicating proceedings culminated into passing of Order-in-Original No.99/2022-2023 dated 22.02.2023 passed by learned Collector of Customs Adjudication-II), Karachi as under:-
12. I have gone through the contents of the contravention report, show-cause notice, reply to the show-cause notice, parawise comments, relevant documents and verbal arguments put forward by both sides. It has been alleged by the case making agency that the respondent(s) mis- declared classification of the contravening goods. The details of the case have already discussed above. a) The crux of the case is that the respondent importer mis-declared Classification of the Goods.
Choline Chloride was classified under HS Code 2923.1000, as the department classified under HS Code 2309.9000. b) The Customs House Laboratory, Karachi vide Test Report No. CE/R/435/22 dated 05.12 2022 reported that the samples are found to consist of Choline Chloride fixed on Corn Cob (Carrier).
Contents of the TR are reproduced as under: Report: The sample on test is found to consist of Chorine Chloride fixed on Corn Cob (Carrier). It is in the form of light brown color granular husky powder. Percentage purity could not be ascertained at the level of our laboratory due to non availability of relevant instrument." c) In view of the Test Report the instant goods consist of Choline Chloride fixed on Corn Cob, thus it is no longer a separate chemically defined compound as envisaged under note 1(a) ibid. Sub- heading 2309 covers preparations of a kind used in animal feeds. The Test report confirmed that imported goods are correctly classifiable under HS code 2309.9000 attracting Customs Duty 10% and income Tax 5.5%) instead of declared HS code 2923.1000 attracting Customs Duty @ 0% and income Tax @ 2%). The short levied amount against blocked Goods Declaration (M) is calculated to be Rs.1,322,152/-, recoverable from the importer. d) The learned counsel of the respondent quoted from explanatory notes of the heading 2309.
However, Proviso b of the para C of the explanatory notes of heading 2309, in no way excludes the imported goods from this heading. Choline chloride does not fall in the parameters of the active ingredient in this case. e) The imported item is a salt of choline fixed on a corn cob carrier and is not elsewhere specified in this form. It is added here that the imported "CHOLINE CHLORIDE 70 PCT CORN COB FEED GRADE" is not classifiable under chapter 29, thus does not fall in this exclusion. f) The respondent importer previously imported a consignment of the "CHOLINE CHLORIDE 70 PCT CORN COB FEED GRADE" and declared it under correct PCT i.e. 2309.9000, and availed the benefit of Sales tax. It clearly manifests the mala fide intention of the importer to declare the imported item under reduced rate of duty to avoid the payment of leviable duty and taxes and cause revenue loss to the Government Exchequer. g) The arguments advanced by the learned counsel of the respondent do not carry weight in the presence of documentary evidence and after reading the relevant Chapter Notes.
13. In view of the above discussion, the charges levelled in the show-cause notice stand established. Accordingly the offending goods are confiscated under clauses 14 and 43 of Section 156(1) of the Customs Act, 1969 for violation of provisions of sections 32(1), 32(2), 79 and 80.
However, an option is given to the importer to redeem the goods under Section 181 of Customs Act, 1969 on payment of a fine equal to 20% of the value of offending goods to the tune of Rs.1,608,604/- (20% of ascertained value of impugned goods Rs.8,043,019/-) subject to the condition than the same are otherwise importable as per Import Policy Order in-vogue as prescribed under SRO 499(I)/2009 dated 13th June 2009, in addition to leviable duty and taxes thereon. A penalty of Rs.300,000/- (Rupee Three Hundred Thousands Only) is also imposed to the importer Messrs IBKB (Private) Limited (NIN # 7959967), Haveli Ch. Muhammad Ibrahim Near Jalal Pura Village Kotha, Rakh Jodho Dher Post Office Raiwind, Lahore in terms of clause 14 of section 156(1) of the Customs Act, 1969 for violation of section 32 of the Customs Act, 1969.
5. Appellant being aggrieved with the aforesaid impugned order passed by the Adjudication Officer filed the instant appeal before this Tribunal and has assailed the impugned order inter alia on the following grounds:- A. That the impugned order dated 21.02.2023 passed by learned forum below is against the law and facts of the case.
B. That the Impugned order suffers from misreading and non-reading of the material facts on record as well as relevant statutory provisions on the subject and as such it is not sustainable in the eyes of law.
C. That the learned Collector Customs (Adjudication-II) erred in law by not considering that the Show-Cause Notice and the impugned order-in-original No.99/2022-2023 dated 21.02.2023 were rendered illegal and void from the very outset as the actions of the respondent department/Directorate General of Intelligence and Investigation-Customs, Karachi, were not within the area of their respective jurisdiction. That as per Notification No. SRO 486(I)/2007 dated 09.06.2007, the jurisdiction of the officers of the Directorate General Intelligence and Investigation has been restricted only to the provisions of the Customs Act, 1969, provided therein; whereas in the instant case, they have not been authorized to exercise the powers and discharge the duties of officers of customs under the provisions of the Customs Act, 1969, in offenses under Sections 32 (1) and (2), 79 and 80 of the Customs Act, 1969. The Revenue Board has only authorized the officers of the Directorate General to invoke the relevant provisions of the Customs Act, 1969, and rules made thereunder if so warranted, within the area of their respective jurisdiction. However, the actions of the Directorate Central of Intelligence and Investigation-Customs, Karachi, are a clear cut violation of the relevant provisions and surpass the powers and jurisdiction conferred upon it, with the Respondent wrongfully acting beyond the powers prescribed for it under the law and committed illegalities by going beyond the ambit of the powers granted to them.
D. That the offences made out against the Appellants do not fall under the instant case are jurisdiction of this Directorate. The legal issues agitated in the beyond the powers and exercise of authority by the Department as provided by Customs Act, 1969, and the legal framework i.e., relevant provisions of the Customs Act, 1969 and notifications/orders/clarifications issued re- under. The exercise of powers of an officer of Directorate of Intelligence and Investigation-FBR is subject to such notifications and in the instant matter, the impugned goods were intercepted, seized and the case made out outside the limits of Directorate of Intelligence and Investigation- FBR, Lahore.
E. That the Officers of the Directorate of Intelligence also acted without power and jurisdiction by conducting Assessm ent of the allegedly short-levied duty and taxes, determination of Customs duties collected, differential and recoverable amount of taxes etc. as is evident from the contents of contravention report and show-cause notice. Officers of Directorate of Intelligence and Investigation Customs, in pursuance of Notification SRO No.486(I)/2007 dated 09.06.2007, have not been empowered to intercept goods due to non-application or wrong application of a PCT Heading as it is not within their domain and jurisdiction. It is an established principle of law that the conducting of such assessm ent, or carrying out such type of exercise, is not permitted under the law by any authority or alleged department of Federal Board of Revenue, as it results in encroachment of powers and jurisdiction of another, despite having no lawful authority and jurisdiction. No Authority/Body is allowed to act beyond its jurisdiction and all acts or deeds beyond scope of jurisdiction are null and void in the eyes of law. Such practices cannot be validated under any circumstances and must be crushed in the initial stages of the case proceedings to maintain the integrity and sanctity of different sovereign organs of the Federal Board of Revenue. That the Respondent usurped powers not vested in it by the law, rendering the show-cause notice and the impugned Order-in-Original without jurisdiction, null and void ab-initio. In this regard, reliance is placed upon the case of Messrs Meerab Enterprises v. The Federation of Pakistan 2021 P7D 1764, as well as the judgment in the matter of Messrs DJN Corporation, Karachi v. The Directorate General of Intelligence and Investigation FBR, Karachi 2021 PTD (Trib.) 418.
F. That resultantly, the case made out against the Appellants in Seizure-Cum-Contravention Report C. No. 263-Appg-I/DCl/IBKB (Pvt.) Limited/Cont/2022/is beyond the scope of the exercise of authority by the Respondent, and the seizure, along with the subsequent proceedings, are all outside the scope and jurisdiction of lawful activity, and as a result are void ab initio, unlawful and liable to be dismissed in totality without any further deliberation. Hence, this appeal.
G. That the learned Collector Customs (Adjudication-II) erred in law by not accounting for the substantial violations of the law and procedural irregularities committed by the Respondent that render this case illegal and void ab initio from the very get go. That the goods of the Appellants were not brought into the country from any route other than the defined port as specified by the law, after completion of all legal formalities. Therefore, the consignment of appellants could neither be detained under S.186, Customs Act, 1969, as it was beyond the definition of smuggled goods and could not have been detained, and nor were the appropriate officer of Directorate General of Intelligence and Investigation empowered to seize the consignment under S.168 of Customs Act, 1969. That section 2(s) had to be mandatorily invoked in the contravention report for invoking power of seizure under S.168(1) of Customs Act, 1969, but that is not the case in the instant matter, and the Respondent acted illegally, without any vested powers, so that all subsequent proceedings must be ousted as illegal and void ab initio. Hence, this appeal.
H. That the impugned Order-in-Original No. 99 of 2022-2023 dated 21.02.2023 wrongfully held that the impugned consignment of Choline Chloride fixed on Corn Cob is classifiable under HS Code 2309.9000 attracting Customs Duty Q 10% and Income Tax a 5.5% instead of the declared HS code 2923.1000 attracting Customs Duty @ 0% and Income Tax @ 2%, and that the impugned goods cleared vide Goods Declaration baring No. KAPE-HC-77379 dated 18.11.2022 through misdeclaration of Classification on the basis of the mala fide of the Appellants.
That the Appellants had submitted elaborate explanations before the Learned forum below for the correct classification of the consignment under PCT Heading 2923.1000,- citing scientific justification, and establishing good faith in their conduct. However, all such submissions were left unaddressed and ignored by the Learned Collector of Customs (Adjudication-II) to pass an unspeaking order, without due deliberation of the facts and submissions of the case, and ought to be dismissed in the best interest of justice.
I. That the impugned product Choline chloride 70% is widely traded internationally under the heading of 2923.1000. Various consignments of multiple vendors have been cleared under the same heading. Consignments cleared under Heading 2923 upon studying the customs documents pertaining to Chapter 29 makes it clear that choline chloride and its carrier (stabilizing agent) can legally be imported under this heading. That the Appellants never tried to misrepresent the product and the test conducted by the customs authorities was totally in agreement with the data provided before the learned forum below. All previous consignments imported by the Appellants were also cleared following thorough process of assessment and appeasement and not a single consignment was cleared through the green channel.
J. That the learned Collector Customs (Adjudication-I) erred in law by stating that the charges levelled in the Show-Cause Notice stand established. That the Directorate General of Intelligence and Investigation-Customs acted without jurisdiction and wrongly assessed a baffling amount of duty and taxes allegedly evaded by the Appellants. That the inclusion of previously cleared consignments that have long been duly cleared, consumed, and sold to end customers are being included in the charges against the Appellants. That the allegations against the appellants on all such consignments are time barred and obstructed by the statute of limitations that prevents the respondent from harassing the Appellants' at a much belated stage. Therefore, including the previous consignment is not the jurisdiction of the Directorate as these are closed and past transactions, and ought not be invoked to further add to the ordeal of the Appellants.
K. That the learned Collector Customs (Adjudication-II) entertained the Department's claims by holding that their actions were within the legal limit prescribed within the law wherein it was not, and the learned Collector Customs (Adjudication-II) decided the matter without ascertaining the factual position and considering the relevant legal provisions. Therefore, the impugned Order-in- Original 99 of 2022-2023 suffers from factual controversy to the above extent.
L. That the impugned order is illegal, arbitrary, based upon misreading, non-reading, and is without jurisdiction; thus, it is liable to be set aside.
M. That the learned Collector Customs (Adjudication-II) has committed serious illegalities while not considering the law fully applicable to the facts and circumstances of the said case.
N. That the, learned Collector Customs (Adjudication-II) has failed to appreciate the facts and law of the case in its true perspective and have drawn wrong conclusion due to which gross miscarriage of justice has taken place in this case.
6. Respondent exercised his right of rebuttal and filed parawise comments on grounds of which appeal are reproduced as under;-
1. That contents of Para I are denied. The impugned order has been passed in accordance with law.
2. That contents of para 2 are incorrect hence dined. The impugned has been passed after going through the entire case record, evidential material and affording opportunity of hearing to both sides. The order is just, proper and in accordance with law.
3. That contents of paras 3 to 6 are misleading, misconception and misinterpretation of law. The appellants have questioned the very act and jurisdiction of the officers of Respondent to intercept the goods inside the port area once out of customs charge and assigned to gate out stage and institution of contravention cases on account of mis-declaration. The appellants have also raised unwarranted issues by way of misinterpreting law. In order to remove legal misconception of the appellants and to discard the position taken by them it is hereby clarified that; i. By virtue of SRO 486(I)/2007 dated 09.06.2007 (Annex-A), Charter of Function (Annex-B), CGO 5 of 2017 dated 04.07.2017 (Annex-C) and Board's clarification vide letter No.2(2)L&P/2004 dated 11.12.2018 (Annex-D), the officers of Directorate General have been authorized to exercise the powers and discharge the duties of the officers of customs under the Customs Act, 1969 and to invoke all the relevant provisions of the Act and Rules made there under if so warranted within the area of their respective jurisdiction. Under referred SRO complete legal mechanism has been provided for the officers to perform the duties of officers of Customs in and outside the port areas declared under Sections 9 and 10 of the Customs Act, 1969. During the performance of their duties as explained above, in case, if any goods are found liable for confiscation, than the provisions of Sections 168 and 161 of the Customs Act, 1969, become operative. On completion of investigation, reports invoking the relevant provisions of Act and rules made there under are forwarded to Adjudication Collectorate and Court of Special Judge (Customs and Taxation), having jurisdiction to take cognizance under sections 179 and 185-A of the Customs Act, 1969, respectively. Since, the appellants are involved in the alleged mis-declaration of PCT heading within the mischief of the provisions of Section 32(1) & (2) of the Customs Act, 1969, punishable under clause (14) of section 156(1) ibid, therefore, the Respondent has initiated action competently and strictly in accordance with law. ii. That in terms of SRO 486(I)/2007 dated 09.06.2007, the officers of Directorate General have also been authorized to exercise the powers under sections 197, 198 and 199 of the Customs Act, 1969, which exclusively deal with the goods meant for importation or exportation and lying inside the port area. iii. In terms of Section 79(1) of the Customs Act, 1969, in case clearance through Customs Computerized System (Weboc) is sought, declarants are statutorily bound to correctly file declaration in line with commercial invoice, packing list and bill of lading etc to assess, calculate and pay duty and taxes as per law in force. Deliberate avoidance of giving correct declaration/submission of fake and manipulated documents amounts to mis-declaration and cognizable offence under Section 32(1) of the Customs Act, 1969. The Respondent has not made re- assessm ent in terms of Section 80 of the Customs Act, 1969. It is recapitulated that the consignment was seized on account of misdeclaration and misuse of manufacturer status for violation of the provisions of Section 32(1), punishable tinder clause (14) of subsection (1) of Section 136 of the Customs. Act, 1969. Besides, during investigation another identical consignment cleared earlier adopting same modus operandi was unearthed. iv. That this is a case of mis-declaration of PCT classification. Straight forward language used under the provisions of Section 32 is very simple and clear which does not require any scholarly interpretation. In terms of subsection (2) of Section 32, by reason of any document, which includes "declaration" or by reason of some "collusion" any duty or charge has not been levied or short levied, the person liable to pay any amount on that account can be served with a show-cause notice within five years from the relevant date which is defined under subsection (5) of referred section. The short levied amount in the matter in hand is the result of incorrect declaration filed by the appellant; therefore, the action has been initiated in accordance with law. In case the contention of the appellant if presumed to be correct interpretation of law, merely on the ground that the consignments which had been out of customs charge after assessment under Section 80 of the Act cannot be blocked/intercepted than the entire scheme of Section 32 of the Act would become redundant and super fluent.
It is once against reiterated that the appellant in the entire memo of appeal has not attempted to dislodge the case made out by the respondent and charges levelled on account of mis- declaration. On this sole ground the appeal is liable to be dismissed. That reliance of the appellant on varius case law involving distinguishable facts, grounds and points of law is misplaced. vi. That action against the appellant has been taken on account of his involvement in the offence of misdeclaring aimed at evading taxes leviable thereon. In consideration of the facts and circumstances of the case question of violation of the provisions of Articles 4, 10A, 18, 24 and 25 of the Constitution of Pakistan 1973, does not arise at all in the matter.
4. That contents of paras 7 are mis-conception and mis-interpretation of law. There is no illegality violation of law and procedural irregularities on the past of respondents as falsely alleged by the appellant. The consignment liable to confiscation was seized under Section 168 of the Customs Act, 1969. The interpretation of Section 168 of the Customs Act, 1969, as given by the appellant is misconceived and cannot be allowed to hold field. Plain reading of Section 168 of the Customs Act, 1969, clearly shows that it covers entire Customs Act, 1969. Any class of goods liable to confiscation under the Customs Act, can be seized under the referred Section 168 of the Act. ibid. The Respondents have acted in accordance with law.
5. That contents of para 8 are misleading and contrary to facts and law. The appellant while appearing before the learned Adjudicating officer has twisted and mis-represented the excerpts from explanatory notes of the heading 2309. The appellant raised irrelevant points in respect of the imported product and rather related to preparations consisting of an active substance (products of anti-biotic manufacturing process obtained by simply drawing the mass). Proviso b of the para C of the Explanatory Notes of heading 2309 in no way excludes the imported goods from this heading. Choline Chloride does not falls in the parameters in the active ingredients in this case. The appellants in league with each others have mis-declared the PCT heading.
6. That contents of para 9 are misleading and incorrect. Detailed comments have already been offered with Substantial reasoning duly supported with chapter notes, evidences and chemical analysis report.
7. That contents of para 10 are not maintainable hence denied. The Previously imported and cleared consignments adopting same modus operandi of mis-declaration were subjected to adjudication within the four corners of law. The plea of Appellants regarding time barred action is altogether mis-conceived. In terms of subsection (2) of section 32 of the Customs Act, 1969, show- cause notice can be issued within five years of relevant date for the recovery of evaded duty and taxes and warranted penal action.
8. That contents of para 11 are denied. It may not be out of context to mention here that the appellant with the connivance of his clearing agent has caused injury to the national exchequer.
The Appellant No.2 (herein) being clearing agent has deliberately failed to discharge his duties as Provided under sections 208 and 209 of the Customs Act, 1969 read with Chapter X of Customs Rules, 2001 notified vide SRO 450(I)/2001 dated 18.06.2001. The impugned order has been passed within four corners of law.
9. That contents of para 12 are misleading, misconceived and misinterpretation of law. The appellants have committed offence of misdeclaration of classification of goods which is incontrovertibly authenticated vide Test Report No. CE/R/435/2022 dated 05.12.2022, issued by Customs House Laboratory Karachi, which confirmed that the product is correctly classifiable under HS Code 2309.9000 attracting Customs Duty 10% and Income Tax @ 5.5% instead of declared HS Code 2923.1000 attracting Customs Duty @ 0% and Income Tax @ 2%, The case has been adjudicated vide impugned order in accordance with law.
7. Arguments heard and record perused. The appellant has contested the jurisdiction of the case making agency/respondent with respect to section 32 of the Customs Act, 1969 and cited judgments of the superior courts. The Honourable Supreme Court of Pakistan in Civil Petitions Nos.
896-L and 897-L of 2020 has held that "We enquired from the learned counsel for the petitioner whether the Collector of Customs has preferred a petition/appeal against the impugned judgment and the learned counsel was not able to answer the query. After the Tribunal had decided the matter against Collector of Customs it was for the Collector to assail the same. With regard to the Directorate the Tribunal had simply slated that it has not been granted powers under section 32 of the Act, which is confirmed by Notification 486(I)/2007 dated 9 June 2007 (pages 98 and 99 of the paper book) ("the Notification). To such extent, the impugned decision of the two forums cannot be faulted. It was correctly held that the Directorate was granted seizing powers under the Notification, but was not granted section 32 powers. Therefore, the Directorate is not an aggrieved party. If the Collector Customs has preferred a petition or an appeal is pending which impugns the same judgment the same will be considered on its own merits. Therefore, without making any observation with regard to merits of the case, leave to appeal is declined and, consequently, these petitions are dismissed". In respectful compliance to the above, we hold that the 'actions taken by the respondent in the instant case are beyond jurisdiction, therefore, void ab initio.
8. We are also constrained to hold that no laboratory test for the previous 05 consignment that were imported during February 2022 to October 2022, was got conducted. Hence, the contravention has been made against these 05 consignments without ally evidence and on mere presumptions.
The law does not acknowledge any presumption, therefore, the same in hereby set aside. As regards GD No. KAPG-HC-77379 dated 18-11-2022, for which lab test was got conducted, it would have been appropriate to forward its information to the respective Collectorate having jurisdiction to take necessary action as per law.
9. In view of the above observations/findings, the impugned Order-in-Original is hereby set aside and the instant appeal is allowed.
10. Judgment passed and announced accordingly.