KHALID ISHAQ, J. This Customs Reference Application filed under Section 196 of the Customs Act, 1969 (the "Customs Act") seeks opinion of this Court on the following questions of law: i. Whether the learned Customs Appellate Tribunal erred in law by allowing the release and re- export of the impugned goods including 1040 smuggled mobile phones (Samsung/I-phone), drones and a PlayStation in a commercial quantity value of Rs.140.33 million, brought into the country by concealing, without declaration, to exploit the Green Channel Facility, thereby committed the offence of smuggling which is in clear violation of the Baggage Rules, 2006, Sections 2(s) & 139 of the Customs Act, 1969, and the Import Policy Order, 2020. ii. Whether the learned Appellate Tribunal erred in law by allowing the re-export of smuggled goods, especially when there are no provisions for such re-export?
2. The facts which led to the filing of the instant Customs Reference Application and germane to decide the same are that on 05.03.2023, the Respondent Nos. 1 & 2 were passing the international arrival hall of Allama Iqbal International Airport (Airport), allegedly through green channel, when they were intercepted by the customs officials and on scrutiny it occurred that the said respondents had travelled through Etihad Airline flight No.EY-241 from Abu Dhabi to Lahore; on suspicion of abnormal weight of the Trolley and hand carry baggage of respondent Nos.1 & 2, they were allegedly asked whether they have any banned goods/items or any other items in their luggage which are liable to customs duty and taxes, reportedly they responded in negative, however, upon search, they were found to be in possession of 1040 foreign origin new/used mobile phones of Samsung, iPhone & One Plus having assorted models, 10 foreign origin drones, one set of PlayStation etc. (Goods); it is the case of Customs department that the respondents were unable to provide any documentary evidence pertaining to legal import, lawful possession or payment of duties and taxes leviable against the apprehended Goods. It was alleged that since the Goods found in the baggage of the respondents were banned items in terms of SRO 1512(I)/2022 dated 26.07.2022 (SRO 1512) read with SRO 545(I)/2022 dated 22.04.2022 (Import Policy Order) and Baggage Rules, 2006, therefore, the same were seized under Section 168 of the Customs Act and were consequently liable to be confiscated in terms of Section 2(s) read with Sections 16, 139, 156(1) item 70(i)(column 1 & 2) of the Customs Act.
3. Apart from registration of FIR bearing No.05/2023 dated 23.02.2023, the case was referred to Additional Collector Customs (Adjudication) for proceeding under Section 179 of the Customs Act.
Accordingly, a show cause notice dated 27.03.2023 (SCN) was issued to the respondents in terms of the provisions contained in the Customs Act, which was replied to by the respondents, however, an Order-in-Original No. 64/2023 was passed on 20.04.2023 (ONO) against the respondents. The respondents filed an appeal under Section 194-A of the Customs Act before the Customs Appellate Tribunal, Lahore ("Tribunal"), which appeal was allowed vide judgment dated 04.08.2023 to the effect that ONO was modified and case was remanded with certain observations. In post-remand proceedings, the Additional Collector Customs passed order dated 17.10.2023, modifying the ONO to the effect that mobile phones were ordered to be released subject to provision of PTA's NOC and payment of applicable duties and taxes alongwith imposition of fine equivalent to 10% of the amount of duties and taxes, the PlayStation and MT packing boxes of One Plus were ordered to be released against payment of redemption fine equivalent to 20% of the value thereof in addition to leviable duty and taxes, whereas, the drones were also released subject to NOC from the Ministry of Defence and against payment of redemption fine equivalent to 20% and payment of leviable duty and taxes.
4. Being dissatisfied, the respondents impugned the order dated 17.10.2023 by filing appeal No.667 of 2023 under Section 194-A of the Customs Act before the Tribunal. The appeal was decided vide judgment dated 04.01.2024 (Impugned Judgment). Hence this Customs Reference Application.
5. Arguments heard. Record perused.
6. Perusal of the Impugned Judgment reveals that the entire edifice thereof rests upon the provisions contained in Section 142 of the Act as well as letter No.1(19)/2012-Imp-II(Vol-1) dated 14.05.2018, which letter postulates that the Customs Collectorate/Authorities are empowered to allow re-export of the banned items, if so permissible under the Import Policy Order. The Tribunal proceeded to pass the Impugned Judgment on the premise that since the customs authorities had the power to allow re-export of banned or restricted item(s) imported in contravention of Import Policy Order and Section 142 of the Customs Act enables the return of detained articles for re-export, therefore, it was observed by the Learned Tribunal that "in the interest of natural justice and equity, the appeal is accepted and the impugned Order-in-Original No.64/2023 dated 20.04.2023 is set-aside and ordered in the manner that the foreign origin new/used mobile phones of Samsung, I-Phone, One Plus of assorted models, 10 foreign origin drones, 1 set of play station which are not useable in Pakistan is allowed to re-export under section 142 of the Customs Act, 1969."
7. While passing the Impugned Judgment, the Learned Tribunal has failed to appreciate that the exercise of jurisdiction and authority in terms of Section 142 of the Customs Act is dependent upon a mandatory pre-condition of a true declaration by the passengers/respondents, if so made, in terms of Section 139 of the Customs Act. This provision requires the owner of a baggage to declare the contents of the baggage to the proper Officer of the Customs Department; it is only when a truthful declaration is made under Section 139 of the Customs Act that one can claim a right to be considered for invoking benefits under Section 142 of the Customs Act, the Baggage Rules, 2006 and the letter dated 14.05.2018. Needless to observe that even in a case of truthful declaration in terms of Section 139 of the Customs Act, the option to re-export the goods abroad cannot be claimed as a matter of right. The plain reading of Section 139 makes it abundantly clear that in the matter of declarations, there is no onus cast upon the Department to accost individual passengers for taking declarations, particularly after introduction of the channel system, which system is to the effect that a passenger passing through green channel leads to an ineluctable declaration on the part of the passenger concerned that he has no dutiable goods accompanying him to be declared. Similarly, the object of Section 142 of the Customs Act, which is a relatively new provision and was introduced by the legislature to give a facility to the passenger(s) for temporarily leaving the baggage with the Customs Department for the purpose of being returned to him on his leaving Pakistan. Another object of Section 142 may be to exclude any articles from the purview of Sections 156 and 168, if a declaration is made under Section 139 of the Customs Act. It is inconceivable that there would be any refund or right to re-export will be forthcoming, if indeed, there is a mis- declaration or no declaration at all on the part of a passenger, with a view to evade payment of duty Clause(s) of Section 2 of the Customs Act refer to goods specified therein and other goods notified by the Federal Government as smuggled goods. It is admitted position that SRO 1512, prohibiting mobile phones was in place on the fateful day of 05.03.2023, therefore, the Goods squarely fell in the category of items, which items, if brought in the country, would amount to smuggling and will thus trigger the case of invocation of offences, penalties and confiscation. Since the Goods apparently fall under the definition of smuggled goods in terms of Section 2(s) read with Section 16 of the Customs Act and SRO 1512, therefore, before the Tribunal could have embarked upon to invoke Section 142 of the Customs Act, it was incumbent upon the Tribunal to render a factual determination to the effect of implication of invocation of clause(s) of Section 2 read with Section 156(1) of the Customs Act. Since the declaration, as envisaged under Section 139 is a sine qua non for invocation of Section 142, as Section 139 creates an obligation upon every passenger to make declaration of the contents of his baggage and to answer questions with respect to baggage and articles carried by him. The failure to do so or the failure to produce baggage or any such article(s) for examination is liable to penalties and confiscation as provided by item (70) of Section 156(1).
The Tribunal was also required to determine whether the mandatory declaration in terms of Section 139 of the Customs Act was made by the respondents. The question that as to whether a declaration under Section 139 of the Customs Act was made by the respondents or an opportunity to such a declaration was provided by the customs officials at the time of apprehending the respondents, are purely factual questions, which have not been determined by the learned Tribunal. It is trite that highest authority for factual determination in a tax/customs duty matters is the Tribunal,[1] and as evident, the factual question of true declaration under Section 139 of the Act has not at all been adverted to by the learned Tribunal, which led to erroneous interpretation of Section 142 of the Customs Act. Thus, the findings of the learned Tribunal while relying upon Section 142 of the Act are not sustainable in the eye of law.
8. For what has been discussed above, we are of the opinion that the learned Tribunal has erred in law while passing the Impugned Judgment which fails to render any findings qua the factual determination elaborated above. Resultantly, the question mentioned above are answered in affirmative. Consequently, this Customs Reference Application is allowed in the terms that the Impugned Judgment is set aside and the matter is remanded to the learned Tribunal for decision afresh in the light of observations made above.
9. Office shall send a copy of this Judgment under Section 196(5) under the seal of the Court to the Appellate Tribunal.
1. "Commissioner Inland Revenue v. Messrs RYK Mills" (2023 SCMR 1856), "National Logistics Cell., Government of Pakistan, HQ NLC, Karachi v. The Collector of Customs, Model Customs Collectorate, Port Muhammad Bin Qasim, Karachi and others" (2023 SCMR 1325), "Commissioner of Inland Revenue, Lahore v. Messrs Sargodha Spinning Mills (Pvt.) Ltd.
Faisalabad and others" (2022 SCMR 1082), "Messrs T & N Pakistan Private Limited v. The Collector Customs and others" (2022 SCMR 1119) and "Commissioner Inland Revenue Zone-I, LTU v. MCB Bank Limited" (2021 PTD 1367).