ABDUL JABBAR QURESHI, MEMBER JUDICIAL-I. By this judgment, we intend to dispose of Customs Appeals Nos. K-99/2021 and K-142/2021 being identical issues, filed against Order-in-Original No.511/2020-21, dated 12.11.021 passed by the Collector of Customs (Adjudication-II), Karachi.
2. It is needless to reproduce facts of each case separately. Hence, for reference the facts of Appeal No. K-99/2021 are taken into consideration for decision are that the case as reported by the reporting agency vide its contravention report No.SI/MISC/KEAP/276/2018-VII dated 09.11.2018 that Messrs Taj Afridi son of Sakhi Gul, Al-Haj Enterprises imported one unit used Toyota Land Cruiser 4.6L Armored Level B6 from UAE bearing Chassis No.URJ202-4005570, engine capacity 4608CC.
Model 2011 at declared value of US$ 30,000 in pursuance of Ministry of Interior NOC No. F.5124/2011- Security-1 dated 25.06.2011 and filed GD No.KEAP-HC-183 dated 09.07.2013 in One Customs manually for the clearance thereof. The vehicle was assessed US$ 55,977 in accordance with previous identical clearance bearing GD No.KAPR-HC-66350 dated 27.12.2011. The vehicle was released against payment of duty and taxes to the tune of Rs.1,33,90,036/-. In the impugned Show-Cause Notice it has been further alleged that recently a letter dated 24.10.2018 was received from the Honorable Federal Tax Ombudsman, seeking report from the department that how the subject vehicle with the same make and model was assessed on different values in MCCA (West) and MCCA(East). The matter was investigated in pursuance of the aforesaid letter and it transpired that the vehicle in question was earlier imported in MCC Appraisement (West) by the same importer M/s Taj Afridi son of Sakhi Gul, AI-Haj Enterprises against the same NOC by the Ministry of Interior. At that juncture of the import, the importer filed GD No.KAPR-HC-109080 dated 02.04.2013 through his authorized clearing agent Messrs International Impex, CHAL No. 986. The value declared by the importer for the under reference vehicle at that time was US$ 111,800.00 against which after assessm ent, the payable duty and taxes came out to be Rs.2,49,04,360/-. The Respondent No. 2 of the department without applying prudent mind assumed that subsequent to the assessment, the importer, prima facie, realized that the value of the vehicle i.e. US$ 111,800.00 which is purportedly the actual purchase price of the vehicle and was not supposed to be declared by them, which resulted into calculation of duty and taxes to the tune of Rs.2,49,04,360/-. Therefore, in order to save themselves from payment of duty and taxes to the tune of Rs 2,49,04,360/- they requested to re- export of the vehicle and with the active connivance of their clearing agent they ultimately succeeded in re-exporting the vehicle to the port of loading vide shipping bill No.KEXP-SB-45476 dated 05.06.2013. Soon after re-export, they re-imported the same vehicle in another Collectorate i.e. MCC Appraisement (East) and filed GD No.KEAP-HC-133 dated 09.07.2013 through the same clearing agent M/s International Impex, CHAL No.986 for the clearance thereof by declaring fresh value of the vehicle as US$ 30,000. As such the system was not efficient enough to tally the chassis number with previous record on all Pakistan basis and consequently the importer succeeded in clearing the vehicle on lower value of US$ 55,977 as per prevalent data with the active connivance of the clearing agent M/s International Impex, CHAL No.986 thereby depriving the national exchequer of its legitimate revenue to the tune of Rs.1,15,14,324/-. On the basis of above assumption it was allegedly established that in order to evade the government revenue, the importer deliberately and willfully concealed the price of the vehicle and re-exported the vehicle with an intent to re-import the same by declaring lower value and by doing so they deprived the government of its legitimate revenue to the tune of Rs. 1,15,14,324/-. The offending value of the vehicle is Rs.1,13,93,314/-. This act on the part of importer and his clearing agent is an offence of misdeclaration of value, which was committed by presenting fake/concocted documents like invoice and allied documents and the offence is therefore cognizable under sections 32(1) and 32(2), sub-clauses (a) & (e) of Section 32A(1) of the Customs Act, 1969 read with sections 3, 6, 7, 11, 33 and 34 of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2001 punishable under Clauses 14, 14A of section 156(1) ibid read with SRO 499(I)/2009 dated 13.06.2009 read with sections 33 and 34(1)C of the Sales Tax Act, 1990.
3. The record of the case has been examined carefully and rival parties have been heard. If this case importer filed appeal vide No. K-99/2021 dated 11.01.2021, whereas, the department has also filed a cross appeal against Order-in-Original No. 511 of 2020-2021 dated 12.11.2020 (Customs Appeal No. K-142/2021 dated 14.01.2021). Both the Appeals are directed against the same Order-in- Original. The Importer Appeal No. K-99/2021 reflect that importer, through got relief form the Adjudication Authority was aggrieved against the personal penalty of Rs.50,000/- imposed on him under clause 1(i) of section 156(1) of the Customs Act, 1969. Whereas the appeal filed by the department vide Order-in-Original No. 511 of 2020-21 dated 12.11.2020 is directed against the entire Order-in-Original.
4. That the Importer submitted that show-cause notice was time barred and therefore of no legal consequences. From the scrutiny of the record we have observed that the show-cause notice has been issued for the GD No.KAPR-HC-109080 dated 02.04.2013 under sections 32(1) and 32(2) of the Customs Act, 1969. The maximum time period for any recovery under Section 32 of the Customs Act, 1969, is five years whereas, the show-cause notice in the instant case is issued beyond five years, hence, of no legal effect, the details of date wise occurrence as follows:-
(i) Date of GD Filling 2-4-2013 (ii)Date of issuance show-cause notice25-6-2020 (iii)Time period between the filing of GD and issuance of show-cause notice7 years, 2 month and 26 days (Total 2641 days)
(iv) Maximum period allowed for recovery under section 32 of the Customs Act, 19695 years
(v) Whether show-cause notice is time barredYES
5. The show-cause notice also depicted section 32A (1)(a)&(e) of the Customs Act, 1969. The maximum time period for issuance of show-cause notice as mentioned in subsection (2) of section 32A of the Customs Act, 1969 within a period of 180 days from the date of detection, whereas, the show-cause notice in the instant case is' issued beyond 180 days, hence, of no legal effect, the details of date wise occurrence as follows:-
(i) Date of Contravention Report taken as date of detection in terms of subsection (2) of section 32A9-11-2018 (ii)Date of show-cause notice 25-6-2020 (iii)Time period between the filing of GD and issuance of show-cause notice.1 years 7 months 19 days (Total 594 days)
(iv) Maximum period allowed for issuance of show-cause notice under section 32A of the Customs Act, 1969 180 days
(v) Whether show-cause notice is time barredYES
6. The DR was asked to explain how a time barred show-cause notice has legal effect and why it should not be declared ultra vires. The DR could not substantiate the reason for issuance of time barred show cause notice. The counsel of the importer submitted that the Honorable Sindh High Court in case reported as 2007 PTD 117 held that once a matter become barred by time then subsequent enhancement in the period of limitation shall not have the effect of reopening the passed and closed transaction and resuscitating the matters which attained finality and had gone in the annals of history. The same principal has been laid down by the Honorable High Court in case reported as 2008 PTD 60 in which held that once limitation had started to run and hand come to an end the assess had acquired a vested right to escapement of assessment by lapse of time.
This Judgment was upheld by the Honorable Supreme Court of Pakistan which is reported as 201 7 PTD 1756. That the following further cases laws were also submitted in connection with legal unsustainability of time barred action:-
(i) 1999 SCMR 1881 Khalid Mehmood v. Collector of Customs, Customs House, Lahore.
(ii) Honorable Sindh High Court 2007 PTD 117.
(iii) 2008 PTD 60 Messrs Super Asia Muhammad Din & Sons (Pvt.) Ltd. v. Collector of Sales Tax Gujranwala.
(iv) Adamfee Jute Mills v. Province of East Pakistan PLD 1959 SC 272.
(v) Gouranga Mohan Sikdar v. Controller PLD 1970 SC 158.
(vi) Mollah Ejahar Ali v. Government of East Pakistan PLD 1970 SC 173 Muhammad Ibrahim Khan v. Secretary 1984 SCMR 1014.
7. That the contravention report and resulting show-cause notice is also time barred. The superior courts have time and again ruled that any action which is barred by time has no legal veracity.
Reliance is placed on the following case laws;
(i) "That Honorable Supreme Court of Pakistan in case of Messer Mujahid Soap and Chemical Industries (Pvt.) Ltd. v. Customs Appellate Tribunal Bench-I, Islamabad and others (2019 SCMR 1735 = 2019 PTD 1961).
(ii) Collector of Sales Tax v. Super Asia Mohammad Din and Sons [2017 SCMR 1427]
8. That keeping in view of above we are of the firm opinion that show-cause notice and resulting Order-in-Original has no legal value and liable to be set aside on this point alone.
9. That the Adjudication Officer in operative para of the Order-in-Original had decided as follows: "10. I have gone through the record of the case, heard arguments of both sides, perused the reply to the show-cause notice submitted by the Respondents as well as para-wise comments of the Collectorate and carefully examined the contents of show-cause notice. My findings are as under:
(i) The department has incorrectly used two separate customs values; one for calculation of customs duty and another value for rest of the taxes i.e. Sales Tax, Federal Excise and Income Tax.
The SRO 1121(I)/2007 dated 17.11.2007 issued under section 19 of the Customs Act, 1969 clearly prescribes the parameters for determination of customs value for the vehicles having bullet proof and other security features. It states that such vehicle (s) shall be assessed under normal ITP (meant for same make or model of vehicle without security features) supplied by original manufacturer or authorized agent and only 10 addition to ITP shall be made on account of security features for assessment of duty. Obviously, the Collectorate cannot use two different
(base) values for the purpose of levy of customs duty and other taxes. Constitution demands consistency in application of law and such a practice fundamentally violates the principle of consistency. It must be borne in mind that the customs value is the bedrock for the calculation of other taxes such as FED, sales tax and withholding tax. The Collectorate has clearly departed from the above principle by using two separate values as highlighted above in the instant case.
(ii) That if the method adopted by the Collectorate using two different customs values for calculation of custom duties and other taxes is presumed to be correct (which most definitely it is not), then the definition for calculation of taxes provided in Federal Excise Act, 2005, Sales Tax Act, 1990 and Income Tax Ordinance, 2001, are likely to become redundant for all practical purposes.
The use of two different customs values is clear violation of section 25 of the Customs Act, 1969, subsection (46d) of Section 2 of Sales Tax Act, 1990, section 12 of Federal Excise Act, 2005 and subsection (5) of section 148 of Income Tax Ordinance, 2001. I am of the firm view that use of two separate customs values, in a single case for calculation of taxes defies logic and the express provisions of law as explained above.
(iii) The second allegation pertains to the issue whether depreciation is admissible to the impugned vehicle. The respondent has argued that an exemption applicable at the time of import for said vehicle which was available to other importers cannot be denied to the respondent in terms of Article 19 of the Constitution of Pakistan which provides that all citizens are equal in the eyes of law and enjoy equal protection of the law. If similar exemption was granted to a select group of individual importers, there is no reason why such exemption should not be allowed to the respondent importer.
(iv) The third issue pertains to the allegation levelled against the Customs Agent for his alleged connivance with the respondent in re-exporting and then re-importing the said vehicle in order to pay less tax by reducing the value of the vehicle. The department has, however failed to provide any evidence whatsoever regarding implication of the Agent in the instant case.
(v) The respondent importer has pointed out that the case is hopelessly time barred in terms of relevant sections of the Customs Act, 1969. However, the plea of the Collectorate is that the GD in question was filed under One Customs which is a 'Customs Computerized System' by any definition and therefore, in terms of Section 32(5) (e) of the Customs Act, 1969 the show-cause notice was issued well within the presided time.
11. In view of above facts, I am of the considered view that the Collectorate cannot invoke two separate customs values for the purpose of levy of duty and other taxes in the instant case in terms of SRO 1121(I)/2017 dated 17.11.2017 read with relevant provisions of the Customs Act, 1969, Sales Tax Act, 1990, Federal Excise Act, 2005 and the Income Tax Ordinance, 2001 as mentioned above. The respondent importer is, therefore, not required to pay the additional demanded amount of duty and taxes mentioned in show-cause notice in the circumstances of the case.
However, a penalty of Rs.50,000/- (Rupees fifty thousand only) is imposed on the importer for failing to comply with the requirement as prescribed under the law while making declaration for import before the customs authorities under clause 1(i) of section 156(1) of the Customs Act, 1969.
The case is disposed of in above terms."
10. That above Order-in-Original, is self-conflicting as the Adjudication Authority decided the case in favour of Appellant on the basis of facts and, legal issues raised by the importer. However, he also imposed a personal Penalty of Rs.50,000/- on the importer.
11. It is observed that the Adjudication Authority imposed penalty arbitrarily and without mentioning any mens rea on part of Appellant. It is established principle of law that penalty cannot be imposed without establishing an act of the importer which knowingly violate the law and B indulge in mens rea. The reliance is placed on the following case laws;
(i) "'That Honorable Supreme Court of Pakistan in case of [M/s. Humayun Ltd. v. Federation of Pakistan PLD 1991 SC 963] that penalty can be imposed in case of willful evasion of duty and department is obliged by the law to examine reasons stated by the petitioners as why it cannot be deemed to be defaulter".
(ii) [Ministry of Finance v. Har Castle PLD 1967 SC 1] it was held that "even in case of statutory offence the presumption is that mens rea is an essential ingredient".
(i) Commissioner Income Tax v. Habib Bank (2007 PTD 901) it was held that"............. and mandatory conditions required for levy of penalty is that existence of mens rea"
12. It is also observed that the Adjudication Officer that also failed to mention any rule or legal requirement which Appellant's failed to declare at the time of Goods Declaration (GD) or violated by his conduct. Therefore the penalty imposed on the importer with mentioning any legal grounds therefor makes his act as void ab-initio being ultra-vires law.
13. The cross appeal filed by the department vide No. K142/2021 dated 14.01.2021 seeks annulment of impugned Order-in-Original entreating that "as per the contravention report it is established without, any shadow of doubt that in Order to evade the government revenue, the importer deliberately and willfully concealed the actual price of the vehicle and re-exported the vehicle with an intent to re-import the same by declaring lower value and by doing so they deprived the government form its legitimate revenue to the tune of Rs.11,514,324/-. The offending value of the vehicle is Rs.11,393,314/-. This act on the part of importer and his clearing agent is an offence of mis-declaration of value, which was committed by the importer/respondent. As such the provisions of sections 32(1), 32A(1), 32(2), 32(5) of the Customs Act, 1969 were leveled, against them. Thus, the appeal is being filed before this Honorable Customs Appellate Tribunal for considering the facts of the case and to set aside the impugned Order-in-Original No. 511 of 2020-2021 dated 12.11.2020."
14. We have consider carefully the request of the Department to assess whether it is based on any tangible facts and legal points. The main plea of the department was that provisions of SRO 1121(I)/2007 dated the 17th November 2007 may be ignored and the assessment of the impugned goods as per department's whims may be upheld. It would be advantageous to examine the provisions of SRO 1121(1)/2007 as produced below:- GOVERNMENT OF PAKISTAN MINISTRY OF FINANCE AND REVENUE (REVENUE DIVISION) *** Islamabad, 17 November, 2007 NOTIFICATION (CUSTOMS)
SRO 1121(I)/2007.---In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), the Federal Government is pleased to exempt customs-duty leviable on import of vehicles classifiable under Pakistan Customs Tariff heading 8703, meant for transportation of persons having bullet proofing and other security features, as is in excess of customs-duty leviable on the vehicles of the same make and model without security features provided that such vehicles shall be assessed under normal ITP (meant for same make or model of vehicles without security features) supplied by original manufacturer or authorized agent and only 10% addition to ITP shall be made on account of security features, for assessment of duty. [C.No.2(5)Tax-11/97/85/2007] (USMAN KHALID MIRZA)
Additional Secretary
15. It is clear from the above SRO that it has been issued by the Federal Government of Pakistan under section 19 of the Customs Act, 1969 and it provides no caveat for the department to not implement the will of Federal Government selective cases. It is pertinent to mention that statutory provisions, sub-legislations or departmental instructions issued by the Board or Federal Government are to be implemented by the department therefore we hold that request of the department for not implementing the above SRO in this case is legally misplaced and not acceptable.
16. The spirit of the constitution requires consistency in law and such a practice violates the fundamental belief of consistency. It should also be made clear that the custom value is the foundation stone for the calculation of the later values such as FED, sales tax and withholding tax. It is of utmost importance that the department may exercise great care in assessment of using a single value i.e. ITP value for assessm ent of custom duties and any other associated calculations.
That if the above method of calculation adopted by the department by using two different customs values for calculations of custom duties and other taxes is presumed to be correct (which most definitely is not), then the definitions for calculation of taxes as mention in Federal Excise Act, 2005, Sales Tax Act, 1990 mid Income Tax Ordinance, 2001, mention in each law is become redundant. The use of two different customs value is clear violation of section 25 of the Customs Act, 1969, subsection (46)(d) of Section 2 of Sales Tax Act, 1990, section 12 of Federal Excise Act, 2005 and subsection (5) of section 148 of Income Tax Ordinance, 2001.
17. We are of the firm view that it must be one single and consistent value that is followed throughout the procedure. The practice of using two customs values by the department is illegal and must be stopped. That from the record we have also witnessed that the importer has claimed on 29.12.2018 the refund of excess duty and taxes paid by him on account of incorrect calculations of the department.
18. The SRO 1121(I)/2007 dated 17.11.2007 issued under section 19 of the Customs Act, 1969 clearly mention the parameters of custom value for the vehicle having bullet proof and other security features. It state that vehicle shall be assessed under normal ITP (meant for same make or model of vehicle without security features) supplied by original manufacturer or authorized agent and only 10% addition to ITP shall be made on account of security features, for assessment of duty. If the department had used the ITP for calculation of customs duty, they had made an absolute error of judgment by using the 'declared value' for assessment of sales tax and other taxes. The department has erroneously used two customs values for the calculation of customs duty and rest of the taxes i.e., Sales Tax, Federal Excise and Income Tax. The second issue is that of depreciation of the imported vehicle. The respondent has argued in the said case that an exemption applicable at the time of import of the said vehicle which was available to other importers cannot be deprived to the respondent in terms of Article 19 of the Constitution of Pakistan which provides that all citizens are equal in the eyes of law and enjoy equal protection of the law. If a right in the form of exemption was extended to a selected group of individual importers, there is no satisfactory explanation on behalf of the department as to why it may not extend to the respondent.
Furthermore Section 32(1) and (2) of the Customs Act, 1969 that have been invoked against the respondent suffer with the same inadequacies and time barred. The relevant date as define in subsection (5) of section 32 of the Customs Act, 1969 is within five years from the date of clearance of the goods is made. The date of filling of manual goods declaration in impugned case is 02.04.2013 while the show-cause notice was issued on 25.06.2020 well after 7 years of the filing of the Goods declaration. The said show-cause notice therefore serves no legal merit and issued after the stipulated period mention in section 32(1) and (2) of the Customs Act, 1969.
19. The last issue is of the matter being time barred. The section 32(A)(2) of the Customs Act, 1969 clearly defines the date of issuance of show-cause notice as to be within the 180 days of the detection. In this case, the show-cause notice was issued after 1 year and 7 months hence time barred and no explanation has been provided for the said phenomenon by the department whatsoever.
20. The importer has rightfully contended that the matter is time barred and a show-cause notice or any inquiry in said regard is absolved of merit and judicious capacity of the department. The contention of the importer is accepted as per our deliberation in the earlier paras of this order.
21. Keeping in view of above we allowed appeal filed by the importer vide Appeal No.K-99 of 2021.
22.We find no merit in the appeal filed the apartment vide by Appeal No.K-142 of 2021 and it is rejected.
23. Both appeals are disposed of in the above to terms:
24. This judgment consists of twenty one (12) pages and each page bear our initials and office seal.