Messrs KAMRAN INDUSTRIES vs THE COLLECTOR OF CUSTOMS (EXPORTS) 11TH

' DR. GHOUS MUHAMMAD, J.---The petitioner a partnership concern in this case established an assembly unit of electronic items in the Export Processing Zones, Karachi (hereafter: EPZ) subsequent to a sanction letter No,INV-12-094 dated 10-2-1992. It is averred by the petitioner in the memo. Of petition that the assembly unit in the EPZ had been installed by it upon the Government's undertaking that the goods imported into the EPZ would be exempt from customs duties and sales tax at the import stage, while the normal import restrictions enforced in Pakistan shall be inapplicable to the EPZ. Subsequently, the petitioner imported spare parts of cassette players purchased in a random job lot sale from one. M/s. Pearl Industrial Company, Hong Kong vide pro forma invoice dated 4-9-1992 certified by the exporter. The contents of the invoice were repeated in the certificate of import issued by the EPZ dated 7-10-1992, while the petitioner filed a bill of entry for clearance of the goods reiterating the contents of the invoice and claimed exemption on customs duties and sales tax at import stage.

2. It is an admitted position that the clearance of the goods was stopped by the Customs Authorities, while the Collector of Customs (Exports) issued a show-cause notice in November 1992 threatening to impose a penalty under section 32 read with Clause 14 of section 156(1) of the Customs Act, 1969 on the following grounds:--

(i) that the invoiced value at US $ 10,000 was under-declared and the normal/correct price of the entire consignment was at US$ 103,144; ' the invoice as well as the bill of entry revealed a declaration of spare parts of cassette players including lot of screw, pulley, rod, brackets, motors, locks, spring belts as well as incomplete mechanisms. It was stated in the show-cause notice that since the mechanisms were complete this was essentially a misdescription; ' the petitioner lacked the necessary infrastructure to assemble the imported components.

3. The petitioner vide letter dated 26-11-1992 repelled the abovereferred show-cause notice essentially raising the following arguments:--

(i) Under SRO. No,881(I)/80, dated 23-8-1980, the Federal Government had exempted the whole of customs duties and sales tax at import stage on all the goods without any exception, imported into and exported from the EPZ. Accordingly, any misdeclaration, under declaration and non- declaration was of no consequence as the same was not likely to benefit the petitioner; ' it was not the case of the Customs Department that the quantity of the spare parts imported was wrongly declared. Furthermore, the individual items/pieces were uneven and 'could not form a certain number of completed sets of cassette players; ' that the petitioner had the requisite infrastructure to assemble the component parts which did not require a very big structure or factory. The petitioner could well assemble the imported components through screw drivers and pliers.

4. The Collector Exports rejected the contention of the petitioner and imposed a penalty of Rs,100,000 under section 32 read with clause 14 of section 156(1) of the Customs Act, on grounds of under-valuation as also misdescription. The reason given for under-valuation was the same as in the show-cause notice, that the imported items were grossly undervalued and their real value was US$ 103, 144 instead of US$ 10,000 declared. As regards misdescription of goods the petitioner contended before the Collector that since the motors in the imported items were missing the same constituted incomplete mechanisms and it was wrong to construe the same as complete mechanisms. The Collector Exports, however, gave a finding that mechanisms are complete even if they are without motors or if the motors are separately packed. It is pertinent to note that no reason or adverse finding was given regarding the lack of infrastructure in the order by the Collector.

5. Aggrieved against the order of the Collector the petitioner filed an appeal before the Member (Judicial), C.B.R. Who vide his order dated 3-41993 dismissed the contention of the petitioner in a cavalier fashion, while only giving a finding that mechanisms are complete even if the same are without motors and accordingly the impugned action was justified.

6. The petitioner in view of dismissal of the appeal received recovery notices dated 8-41993 and 25-4-1993 requiring payment of Rs,100,000 within fifteen days first, and then seven days, failing which coercive actions under section 202 of the Customs Act were threatened.

7. The petitioner feeling aggrieved against the orders of the Collector and the Member (Judicial) as also the recovery proceedings did not file the revision under section 196 of the Customs Act but impugned the said orders and proceedings under Article 199 of the Constitution in the instant Constitutional petition.

8. We have heard the arguments of Mr. Muhammad Farogh Naseem, the learned counsel for the petitioner and Mr. Syed Tariq Ali, the learned Standing Counsel for the Government and Customs Authorities.

9. Mr. Muhammad Fargogh Naseem, the learned counsel for the petitioner has vehemently and extensively raised multifarious and multidimensional arguments. His first contention is that since the petitioners were admittedly exempt from customs duties and sales tax under SRO.No,881(I)/80, dated 23-8-1980 there could possibly be no motive to evade tax. Any misdeclaration, under- declaration and non-declaration would be absolutely of no consequence, while any action to scrutinize the value or description of the invoice would be completely irrelevant. Mr. Farogh Naseem submitted that the petitioner could possibly gain no advantage from the alleged under-valuation or mis-description in the invoice. Accordingly, no penalty could be imposed. In support of this contention he has placed reliance upon:

(a) Additional Commissioner of Income Tax, Madras II v. Murgugan Timber Depot, reported in (1978)

113 ITR 99 decided by the Madras High Court;

(b) Malpani Chemical Works v. State of Bihar (1986) 61 STC 193 also reported in S.V. Aiyer's Digest of Sales Tax Cases 1986-90, Volume II, 1992 Edition, at pp. 1311 and 1312, decided by the Patna High Court;

(c) Public Prosecutor v. D. Khader Khan (1938-50) 1 STC 142 decided by the Madras High Court;

(d) Gwalior Investment Co. (Pvt.) Ltd. v. State of Maharashtra, (1986) 62 STC 263 (also reported in S. V. Aiyer's Digest of Sales Tax Cases 1986-90, Vol. II, 1992 Edition, at pp. 1317-18), decided by the Bombay High Court.

' The first case i,e, Addl. Commissioner of Income Tax, Madras v. Murgan Timber Depot, touched upon the import of section 271(1) of the Indian Income Tax Act, 1961 which provides for penalty, inter alia, in respect of concealment and furnishing of inaccurate particulars. In that case the Court was of the view that a penalty was essentially a deterrent to prevent tax evasion and when there could possibly be no likelihood of the assessee being assessed to tax no penalty could be levied. Mr. Farogh Naseem attempted to draw the parallel between the allegations of the Customs Department of under valuation and misdescription with the contents of section 271(1) of the Indian Income Tax Act which provides for a penal action against concealment and furnishing of inaccurate particulars. According to the learned counsel, the dicta of the case was applicable on all four corners to the case of the petitioners. In the second case Malpani Chemical Works v. State of Bihar the Patna High Court was of the view that where the petitioner enjoyed an exemption, the sales tax authority had no jurisdiction to impose a penalty for non-payment of tax for the period during which the exemption was in subsistence. In that case the Court struck down the show- cause notice issued by the sales tax authority to levy penalty for non-payment of tax. In the third case Public Prosecutor v. D. Khader Khan, the Madras High Court held that the burden was upon the prosecution to affirmatively establish that the assessee/accused was liable to pay the general sales tax under the Madras General Sales Tax Act, 1939 before any penal action could be taken against him for non-payment. Mr. Farogh Naseem has invited our indulgence to interpret this judgment for the proposition that in all cases of penalties touching upon violation of fiscal laws, the tax departments/prosecution should first establish the existence of chargeability to tax before any penal action could be resorted to. He has contended that since admittedly the petitioner is exempt from tax, the prosecutor/respondents in the instant petition cannot possibly discharge the prerequisite burden of establishing the chargeability of tax on the petitioner/assessee. Accordingly, no penalty is leviable. In the fourth case referred by Mr. Farogh Naseem, Gwalior Investment Co.

(EM.) Ltd. v. State of Maharashtra, the Bombay High. Court held that penalty under section 36(2)(c) of the Bombay Act could only be levied after the main assessment had been completed and tax determined thereunder. Mr. Farogh Naseem has vehemently contended that since in the present case there was no question of finalizing the main assessment, the petitioner being exempt from tax, there was no justification to have levied the impugned penalty.

10. The second argument raised by Mr. Farogh Naseem is that the Customs Authorities exceeded their jurisdiction to look into the question of valuation, description and misdescription of goods imported into the E.P.Z. Since the imports in issue entail no tax. In this regard he has placed reliance upon:---

(a) Rules 3(4) and 3(7) of the Customs Export Processing Zone Rules, 1981 (hereafter: CEPZR, 1981)

(b) L.T. & G.M. Ltd. v. The Collector of Customs reported in PLD 1988 Lah. 563;

(c) M.G. Abrol, Additional Collector of Customs and. Another v. Shanti Lal, Chota Lal & Co. And another, 1984 ECR 503 SC, also reported in ECR C Cus 458 SC, being ECR compilation of SC judgments including Privy Council decisions in Customs Cases 1932-1970, Volume 1 at p. 458, decided by the Indian Supreme Court;

(d) Union of India v. Tarachand Gupta and Bros. Reported in ECR XC 539 SC, also reported in ECR *C Cus 779 SC, being ECR compilation of SC Judgments including Privy Council decisions in Customs Cases, 1971 - February 1989, Volume II at p.

779.

' The Central Board of Revenue vide SRO No, 249(I)/81, dated 25-3-1981 framed the CEPZR, 1981 with a view to regulate and control the import and export of goods into and from the EPZ. In this regard, rule 3 which is of relevance is being reproduced as under:--- "3. Import of goods into the Zones.---(1) Subject to sub-rules (7) and (8), any goods can be imported into the Zones from abroad or from the Tariff Area.

(2) A separate bill of entry in respect of goods imported for a Zone alongwith other documents showing details of the goods as required under the Act and the Rules made thereunder shall be presented to the customs authorities for assessment and clearance.

(3) Goods imported into a Zone shall be assessed in accordance with the existing procedure.

(4) The exemption granted under Board's Notification No, SRO (I)/80, dated the 23rd August, 1980 shall be applicable to machinery, equipment, materials to be used solely within the limits of a Zone and goods imported into the Zone for warehousing purposes.

(5) An investor or his licensed clearing agent duly approved and authorised by the Authority shall carry out necessary formalities regarding Customs clearance.

(6) All goods so cleared shall be secured and forwarded to the Zone under Customs supervision, a pass shall be sent with the goods specifying the name of the importer and the clearing agent if, any, number of vehicle, description and quantity of goods with the marks and numbers and contents thereof and, on receipt of the goods in the Zone, the officer of Customs allowing the goods to enter the Zone shall retain the pass.

(7) Admission of goods imported for a Zone shall not be refused except when the goods are liable to restrictions or prohibitions imposed on the grounds of public morality or order, public security, public hygiene or health or for veterinary or phytopathological considerations, or relating to the protection of patents, trade marks or copy-rights.

(8) Hazardous goods may be allowed to be admitted to a Zone only when an area specially designed for its storage is made available within the Zone.

(9) Goods admitted to a Zone may remain there for such period as may be prescribed by the Authority."

' Mr. Farogh Naseem while referring to sub-rule (4) of Rule 3 as above has contended that the petitioner qualified for exemption irrespective of whether it used the imported items for manufacture or for warehousing. While further placing reliance upon sub-rule (7) of rule 3 he contended that the Customs Authorities had the sole jurisdiction to look into the question as to whether the imported items fell into the prohibitory category of goods falling foul on grounds of public morality/order, public security, public hygience, public health or whether the imported goods were prohibited due to veterinary or phytopathological considerations or related to protection of rights in intellectual or industrial property. The contention of the learned counsel for the petitioner is that till such time the exemption from tax was intact the customs authorities under these rules could only at best refuse clearance of goods on grounds of their falling under the prohibited category. On no other ground the clearance of the goods could be stopped. In the case of L.T. And G.M. Ltd. v. Collector of Customs (referred above) Rustam S. Sidhwa, J. (as he then was) held that the question of valuation and calculation of duty under the Customs Act did not arise where the goods were not dutiable. The relevant finding is reproduced as under:--- "10. Section 18 of the Customs Act does not state how and in what manner the value of the goods imported is to be assessed and at what point of time the chargeability or leviability of the duty arises. What it only says is that the customs duties and regulatory duties, at rates prescribed in the Act, are to be levied on inter alia goods imported into or exported from Pakistan. Under the Customs Act, chargeability is under section 18, valuation of goods is under section 25 and rate at which the duty is to be assessed is under section 30. These different events may occur at different epochs cif time. But unless the goods are chargeable to duty and the taxable event occurs under section 18 the question of valuation of goodsunder section 25 and calculation of duty payable any particular rate under section 30 does not arise."

(At p.572 the underlining is ours for the sake of emphasis).

' In the second case cited by Mr. Farogh Naseem i,e, M.G. Abrol, Additional Collector of Customs and another v. Shanti Lal, Chota Lal & Co., goods were exported under a licence issued by the Export Trade Control Authorities of India. The Customs Authorities imposed penalties on the ground that the goods did not correspond to the terms of the licence issued. It was held by the Indian Supreme Court that the Customs Authorities had no jurisdiction to look into the description and misdescription of goods, while it only had the jurisdiction to examine as to whether the goods fell under the prohibited category. Accordingly, the penalty imposed by the Customs Authorities was completely without jurisdiction. In this regard our attention is in particular invited to paragraphs 13 and 14 of the judgment delivered by Subba Rao, J. Mr. Farogh Naseem has attempted to draw a parallel between the Indian decision and the present case to state the proposition that the Customs Authorities had no jurisdiction beyond the question to examine as to whether the goods brought into the EPZ fell under the prohibited category. A similar view was taken by a subsequent Indian Supreme Court in Union of India v. Tarachand Gupta and Bros. (referred above). In that case the assessee imported motorcycle parts under a licence issued under the Indian Import and Export Control Order. The Customs Authorities, however, held that the items imported were complete motorcycles in knocked down condition. The Indian Supreme Court found the actions of the Customs Authorities to be bereft of jurisdiction, while it held that the Authorities could only ascertain as to whether the goods were imported in terms of the licence and could not go into the question of whether the goods were in a completely built shape or a knocked down condition. Mr. Farogh Naseem has argued that in view of those decisions the Customs Authorities could only scrutinize the consignments in issue in light of the CEPZR, 1981 and not otherwise, while under the said rules they could only go into the question of examining and scrutinizing as to whether the goods fell under the prohibited category.

11. The next contention raised by Mr. Farogh Naseem is that allegation of under-valuation cannot warrant a penalty under section 32 of the Customs Act inasmuch as that allegations of under- valuation cannot amount to a deviation in "material particular" which is a procondition for action under section 32. In this respect he has placed reliance upon:--

(a) M/s. Eastern Rice Syndicate v. CBR reported in PLD 1959 SC (Pak.) 364;

(b) M/s. Latif Bros. v. Deputy Collector Customs, Lahore reported in 1992 SCMR 1083;

(c) Rib Tapes (India) Pvt. Ltd. And another v Union of India and others, 1986 (8) ECR 731 SC also reported as ECR *C Cus 1185 SC, being ECR compilation of Supreme Court judgments including Privy Council decision in Customs cases, Volume II, 1971 to February 1989, at p.

1185.

' In the first decision, M/s. Eastern Rice Syndicate v. C.B.R., a Full Bench of the Supreme Court of Pakistan dilated upon section 39 of the Sea Customs Act, 1978 which is the comparable provision to the present section 32 of the Customs Act, 1969. Writing for the Court in that case, Cornelius, J.

Expressed the opinion that allegations of mere under-valuation by the Customs Authorities would not be enough to bring home prosecution under section 39 of the Sea Customs Act. In this regard it is pertinent to reproduce the relevant findings of the learned Judge which are as under:-- "There need be no doubt whatsoever that the word 'untrue' carries the sense of falsity to the knowledge of the person concerned. Thus, upon a point of mere valuation, if a declaration is made by such a person which on inquiry the customs authorities find to be too low, that will not be by itself sufficient to prove that the declaration was false to the knowledge of the maker..'(At p.368).

' As regards the valuation of the imported items and fixation of the normal price, Cornelius, J. Was of the view that the Customs Authorities should establish under-valuation by furnishing positive and direct proof of the prevalent price in the country of origin/export at the time of import, failing which the factum of the assessee making an "untrue" statement cannot be established. Once again the relevant observations are reproduced as follows:- "If it is claimed by the authorities that he has made a mis-statement of price in his invoice that cannot, in our opinion, be established otherwise than by furnishing proof of the prevailing commercial price in the country of origin at the time of import. Without first making an attempt to furnish such evidence, it is impossible to see how the making of an untrue statement, within the meaning of section 39, and the consequent mischief of item (9-B) in section 167 can be imputed to anyone." (See p.373) '

' Mr. Farogh Naseem submitted that the decision of the Supreme Court in Easter Rice Syndicate v.

C.B.R. Referred above was relied upon by a subsequent Full Bench of the Supreme Court in M/s. Latif Brothers v. Deputy Collector, Customs (referred above). In the latter case the Supreme 'Court while adjudicating upon the import of sections 25, 30, 32 and 156 of the Customs Act categorically held that the criterion for determining the value of goods under section 25 would be the prevalent commercial price in the country of origin at the time of import. The Court was of the view that in case the Customs Authorities resorted to valuation, they had to produce a price list of similar goods of country of origin, while the onus was entirely upon the Department to establish that the importer had made a mis-statement by mustering evidence of parallel imports from the country of origin to belie the declared value. The Court categorically held that in case such burden was not discharged the importer could not be held guilty under section 32 read with section 156 of the Customs Act. In that case since the Customs Authorities failed to discharge the heavy onus of proof the orders of the Department/Authorities were set aside and the declared value was directed to be accepted. In the third case relied upon by Mr. Farogh Naseem Rib Tapes (India) Pvt. Ltd. And another v Union of India and others (referred above) the Indian Supreme Court while adjudicating upon section 111(m) of the Indian Customs Act, 1962 (which is the comparable provision in India to our section 32 of the Customs Act, 1969) categorically held that misdeclaration of value of imported goods did not constitute a misdescription in "material particular" in view whereof no penalty was leviable for under-valuation in the invoice price.

12. The next contention raised by Mr. Farogh Naseem touches upon violation of principles of natural justice and it is a three-fold argument which is as under:--

(i) in terms of Customs General Order No,25 of 1973 dated 1-3-1973 the show-cause notice issued by the Collector under section 32 ought to have specifically contained the precise basis for the finding of under-declaration and misdescription and the authorities ought to have confronted the petitioner with copies of evidence in parallel/identical cases; ' In view of non-observance of the CGO which tantamounts to instrucations and guidelines issued by the CBR, violation of sections 195, 219 and 223 of the Customs Act is apparent and accordingly the impugned action has to be struck down in the exercise of Constitutional jurisdiction; ' since the departmental authorities have not been able to confront the petitioner with any of the evidence and none of the same was even attached with the counter-affidavit even before the Court it has to be presumed that the matter was a case of no evidence and the findings of the Customs Authorities were based upon conjectures and surmises.

13. The next argument raised by Mr. Farogh Naseem is that the impugned show-cause notice seemingly issued under section 32(1) does not meet the mandatory and essential requirements of that section. While placing reliance upon Ibrahim Textile Mills Ltd. v. Federation of Pakistan reported in PLD 1989 Lah. 47 the learned counsel has contended that under section 32(1) it was necessary to show that the person who made or filed the declaration or furnished the document in question was specifically cognizant of or had knowledge or comprehension of the fact that whatever declaration or statement he had made or the documents he had filed were incorrect or untrue in some material particular. In the absence of such precise allegations in the notice that the statements, declaration/documents were false in some material particular to the knowledge or belief of the petitioner the notices were vague and did not comply with the requirements of section 32 and hence had to be struck down as without jurisdiction, void ab initio and of no legal effect.

14. Mr. Farogh Naseem, the learned counsel for the petitioner, has further contended that the proceedings under section 32 are penal/criminal in nature and accordingly require the respondents to establish a mens rea on part of the petitioners. The learned counsel has argued that neither the show-cause notice under section 32 nor the order of the Collector or even the appellate order of the Member (Judicial) have not at all given any finding that the petitioner possessed knowledge or belief or through a fraudulent, mala fide intent attempted to wilfully enter into a default of the provisions of the statute. On this premise the learned counsel has extensively placed reliance upon:--

(a) Quetta Textile Mills Ltd. v Government of Pakistan reported in 1990 ALD 582;

(b) Dawn & Co. v. C.I.T., Kerala reported in (1973) 87 ITR 71;

(c) Additional C.I.T. v. Chatur Singh Taragi reported in (1980 PTD 91);

(d) M/s. Humayun Ltd. v. Pakistan reported in 1985 CLC 304;

(e) M/s. Murree Brewery v. Naseem reported in 1995 PTD 91;

(f) Syed Akhtar All v. C.I.T. Hyderabad 1994 PTD 675.

' In the first case i,e, Quetta Textile Mills v. Government of Pakistan, a Division Bench of this Court has categorically held that section 32 of the Customs Act is in the nature of a penal provision and as such while construing it the rules applicable for interpreting a penal act shall be applicable to it. In the second case i,e, Dawn & Co. v. C.I.T. Kerala, the Kerala High Court while adjudicating upon section 271 of the Indian Income Tax Act, which provides for a penal action in case of concealment and furnishing of inaccurate particulars, held that the requirement of mens rea was an essential condition for imposition of penalty. In the third case i,e, Additional C.I.T. v.. Chatur Singh Taragi, the Allahabad High Court while also deciding the import of the provisions of section 271 of the Indian Income Tax Act, 1961 came to the conclusion that in the absence of finding of wilful neglect on part of the assessee no penalty was leviable. In the fourth case of M/s. Humayan Limited v. Pakistan a Division Bench of this Court while adjudicating upon the penal provisions contained in section 3 of the Central Excises and Salt Act, 1944 and Rules 96-W, 210 and 226 of the Central Excise Rules was of the view that since no case of wilful evasion of payment of excise duty was made out no penalty was imposable. The Court went on to hold that the penal clauses required the respondents to establish mens rea on part of the petitioners which it had failed to do. (See paragraphs 18 and 19 at p.310 of that case). In the fifth case of M/s. Murree Brewery v. Naseem, the Lahore High Court adjudicated upon the construction of section 34 of the Sales Tax Act, 1990 which provides for imposition of additional tax in case of failure to pay the basic tax within time. While scrutinizing the term "failure to pay" the Court was of the view that such expression means that the liability to pay the additional sales tax is not a necessary consequence or corollary of non-payment of the basic sales tax. The Court held that the additional sales tax could only be levied if the default was deliberate for which proper reasons had to be recorded first. In the sixth case, Syed Akhtar Ali v.

C.I.T., Hyderabad, a Division Bench of this Court while scrutinizing the provisions of section 111 of the Income Tax Ordinance, 1979, which provides for a penal action in case of concealment and furnishing of inaccurate particulars, held that no penalty was leviable unless fraud or gross or wilful neglect on part of the assessee is established. Another related submission made by Farogh Naseem is that since the proceedings under section 32 are criminal/penal in nature, independent and cogent evidence with a higher standard of proof ought to have been led by the respondents before imposing the impugned penalty. In this regard he has placed reliance upon:--

(a) C.I.T., Lahore v. Kamran Steel Re-rolling Mills, reported in 1989 PTD 521;

(b) C.I.T. Tamil Nadu-III v. Gorandas Moolchand (1979) 116 ITR 893;

(c) Usman Abdul Karim Bawani v. Collector Customs, Chittagong, reported in PLD 1962 Dacca 162;

(d) the Collector-General, Excise and Land Customs, Chittagong v. Imdad All 1969 SCMR 708; ' In the first case i,e, C.I.T. Lahore v. Kamran Steel Re-rolling Mills, a Division Bench of the Lahore High Court was of the view that penalty proceedings have to be established independently on the basis of cogent evidence as required in criminal proceedings. The Court went on to hold that for imposition of penalty it is not sufficient that the assessee's explanation is not satisfactory or is even false while an evidence independent of assessee's explanation should be on record before penalty could be imposed. In that case the Court held that the Income Tax Officer had not brought on record nor indicated anything in his order to warrant his finding regarding the alleged false declaration of his income and thus the imposition of penalty could not be based only on the assessee's own alleged failure to establish that he had been performing the task of re-rolling for others. The Court in that case came to the conclusion that the Income Tax Officer had to discharge a higher standard of proof by at least pinpointing the names of those parties through whom the alleged verification against the assessee had been made. In the second case of C.I.T., Tamil Nadu- III v. Gordandas Moolchand a similar approach was taken and it was held that penalty proceedings have to be established through independent and positive evidence. In the third case, Usman Abdul Karim Bawani v. Collector of Customs, Chittagong, which touched upon the provisions of the Sea Customs Act, 1878, a Division Bench of the Dacca High Court categorically held that the assessm ent of normal price under section 30 of that Act (which is comparable to section 25 of the present Customs Act) cannot be the foundation of any penal action. Mr. Farogh Naseem has argued that from the judgment it is implicit that independent, cogent and positive evidence had to be led before any penal action could be taken against the respondents under section 32 read with section 156 of the Customs Act. In the fourth case i,e, Collector of Central Excise and Land Customs v. Imdad Ali, a Full Bench of the Supreme Court, while interpreting once again the provisions of section 39 of the Sea Customs Act, 1878, was of the view that the onus of proof was on the Customs Authorities to show that any declaration was untrue while weakness of evidence produced by the assessee could not establish the truth of allegations of the Customs Department.

15. Mr. Farogh Naseem has gone on to contend that the quantum of penalty imposed at Rs,100,000 is arbitrary, without any basis and has been fixed without stating any reasons. In this regard he has placed reliance upon Braja Lal Bank v. State of Tripura, reported in (1990) 70 STC 283 also appearing in Aiyer's Digest of Sales Tax Cases, 1992, Volume II at pp. 1284 and 1285.

16. As regards the findings of the original and appellate authorities that items of import even if without motors would constitute a complete machanism, the learned counsel for the petitioner has contended that this finding is mala fide, perverse, incorrect and flies in the face of common sense.

The learned counsel has contended that a mechanism cannot be complete unless it is in a running condition which necessitates that a motor is fixed therein in absence whereof the mechanisms are incomplete as correctly declared in the pro forma invoice as also in the bill of entry. In support of this he has placed before us extracts from the following dictionaries which are being reproduced:-- "Mechanism: Appliance, contrivance, expedient, facility (instrumentality), forum (medium), instrument (tool), medium, play.

' Appliance: device (mechanism), expedient, facility (instrumentality), instrument (tool)."

(as per Legal Thesauru's, Complete and Unabridged by William C. Burton, published by Macmillan New York).

"Mechanism: the construction of a machine; the arrangement and action by which result is produced; a philosophy that regards the phenomenon of life as explainable by mechanical forces: the means adopted uncosciously toward a sub-conscious end (psych.)"

(as per Chamber's Twentieth Century Dictionary, New Edition, 1983): "device:(i) N.C. a device is an object that has been made or built for a particular purpose, e.g. For recording or measuring something. The device can be used to preserve seeds and grain and prevent damage from insects and moisture... There are already electronic devices for detecting explosives..."

(as per BBC English Dictionary published by Harper (Collins): "mechanism...(i)(a): a piece of machinery; a structure of working parts functioning together to produce an effect (the value mechanism to operate the value when it is in the engine block Joseph Heitner)..."

(as per Webster's Third New International Dictionary of the English Language unbridged, a Merriam Webster Reg. US Pat. Off. Edited by Phillip Babcock Gove Ph.D. And the Merriam Webster Editorial Staff, published by London G. Bell and Sons, Ltd.)

"Mechanism...(i) the structure and mutual adoptation of parts, in a machine or anything comparable to a machine"

(The Shorter Oxford English Dictionary on Historical Principles prepared by William Little, H. Fowler, G.J. Colsan, revised and edited by C.T. Onions, third edition, published by Oxford Clarendon Press).

17. The last contention raised by Mr. Farogh Naseem is that since section 32 is a penal provision a strict construction ought to have been given thereto and doubt, if any, had to be resolved in favour of petitioner. Also where two views were possible no penalty was imposable. In this regard he has placed reliance upon:--

(a) Anees Ahmed v. Government of Pakistan PLD 1979 Kar. 709;

(b) Commissioner of Sales Tax, M.P. v. Gwaliar Oil Mills, (1986) 62 STC 299 also appearing in S.V.

Aiyer's Digest of Sales Tax Cases (1966-1990), Volume II, 1992, at pp. 1269 and 1270;

(c) Commercial Taxes Officer v. Board of Revenue, (1987) 65 STC 440, also appearing in S.V. Aiyer's Digest of Sales Tax Cases (1966--1990), Volume II, 1992 at pp. 1301 and 1302;

18. Mr. S. Tariq Ali, the learned Standing Counsel representing the Government as also the Customs Authorities has essentially raised seven objections in reply to the contentions of Mr. Farogh Naseem. The submissions made by the learned counsel for the respondents are summarised as under:--

(i) the petition is not maintainable as the petitioner has failed to exhaust all alternate remedies.

Section 196 of the Customs Act has provided for a revisional remedy which has not been availed; ' the C.B.R. And its officers are the final authorities in fiscal matters and no interference can be made by the High Court in the exercise of its Constitutional jurisdiction. Also since no revisional remedy has been exhausted the appellate order of the Member (Judicial) attained finality. In this regard, the learned counsel for the respondents has placed reliance upon Big. Malt Foods Ltd. v.

Deputy Collector of Customs, reported in 1994 SCR 537. In this case a Division Bench of the Supreme Court had held that the Customs Authorities were empowered to determine the head or entry under the tariff schedule under which any particular commodity would fall and unless their construction was perverse the Court would not be competent to interfere. The Supreme Court in that case went on to hold that where there were two constructions which an entry could reasonably bear and one of them, for good reason, was adopted by the Customs, Court would have no jurisdiction to interfere merely because another entry more favourable to the subject appeared to the Court as equally applicable; ' the petitioner was not entitled to any exemption under any SRO from any Customs duties or sales tax and in any event the burden was on the petitioner to show that it was entitled to any exemption as claimed. In this regard the learned counsel for the respondents has placed reliance upon M/s. Central Cotton Mills Ltd. v. Collector of Central Excise and Land Customs reported in 1992 CLC 841 where a Division Bench of this Court has held that where a party claimed exemption of preferential treatment onus lay upon the party to show that it had fulfilled the conditions upon which the exemption and preferential treatment had been granted. In this respect the learned counsel for the respondents had further stated that the petitioner had lacked the infrastructures to assemble the imported items and accordingly no exemption could be allowed to them;

(iv) the learned counsel for the respondents contended that according to section 187 of the Customs Act, 1969 the entire burden to disprove the allegations on the petitioner was upon the petitioner which he had failed to discharge. Also such burden was not on the Customs Department in view of the statutory provision and accordingly the case-law cited by Mr. Farogh Naseem was inapplicable;

(v) another contention raised by the learned counsel for the respondents is that under rules 3(2) and 3(3) CEPZR, 1981 the Customs Authorities have been given the jurisdiction for assessment and clearance while it has been expressly stated that goods imported to the EPZ are to be assessed in accordance with the existing procedure. According to the learned counsel the terms "assessed" and "existing procedure" necessarily imply that the Customs Authorities possess the jurisdiction to scrutinize the valuation of the imported items and see whether the goods conform to a particular description. According to the learned counsel these rules are to be strictly interpreted;

(vi) Mr. S. Tariq All has further contended that there was a clear misdescription on the invoice inasmuch as that the goods were in knocked down condition and nowhere in the invoice or bill of entry this has been stated so; ' the learned Standing Counsel has argued that the question whether goods were in knocked down condition, complete condition, contained complete or incomplete mechanism was a disputed question of fact which could not be interfered in the exercise of Constitutional jurisdiction.

19. We have carefully perused the pleadings of the parties, scrutinized the law on the subject advanced by either side and otherwise and given the issues raised a serious thought. In our opinion it would be both convenient and pertinent to first deal with the preliminary objections as to maintainability of this Constitutional petition as raised by Mr. S. Tariq Ali. No doubt the Customs Act, 1969 through its section 196 provides for a revisional remedy which has admittedly not been availed by the petitioner. Mr. Farogh Naseem in reply to this preliminary objection had once again relied upon copious case-law for the propositions:-

(i) that availability of a revisional remedy is no bar to the maintainability of Constitutional petition; ' that where the impugned orders are completely berefts of jurisdiction and patently perverse and illegal it is not essential to avail alternate remedies; ' where the alternate remedy is not efficacious or speedy the petitioner may directly approach the Honourable Court under Article 199 of the Constitution;

(iv) in the matters pertaining to interpretation of fiscal rights and instruments the rule pertaining to exhausting of alternate remedies does not apply;

(v) in case a petition is entertained the same cannot be dismissed on grounds of being non- maintainable where the statutory time limit to avail the alternate remedy has expired.

20. The contentions raised by M. Farogh Naseem seem to be correct. In Pakistan Express Cooperative Bank Ltd. v. Registrar Cooperative Societies Lahore Region Lahore, PLD 1967 Lah. 991, Mst. Hussain Bibi v. Muhammad Din and 3 others, 1976 SCMR 395 and S. Mageshwani v. A.C.I.T. And another 1995 PTD Note 27 at p. 35, the superior Courts have categorically held that merely because the petitioner fails to avail the revisional remedy would not bar maintainability of the petition. The rule is applicable to the present case considering that section 196 of the Customs Act, 1969 does not provide the revision forum as of right and confers a discretion upon the Federal Government to entertain the revision by the use of the word "may". No doubt this discretion has to be exercised by the Federal Government in accordance with the principles of law and in case the Federal Government abuses the said discretion the same could be impugned in a Constitutional petition.

Notwithstanding the same we feel that a revision which is not a matter of right cannot be equated with right of appeal and accordingly in this case failure of the petitioner to invoke the revisional jurisdiction cannot by itself disentitle it from filing the instant Constitutional petition. This is more so in view of the recovery drive instituted by the respondents. Alternatively, Mr. Farogh Naseem has cited decisions for the proposition that where the impugned action is completely without jurisdiction and patently illegal it is not essential to avail the alternate remedy. In this regard he has placed reliance upon Gulistan Textile Mills Ltd. v. Federation of Pakistan, 1994 PTD 581, Sheikh Akhtar All v. Federation of Pakistan, 1995 PTD 268, and Edulji Dinshaw Ltd. v. Income Tax Officer, 1990 PTD 155 (SC). We feel that in order to ascertain as to whether the impugned action by the Customs Authorities was completely without jurisdiction it would be essential first to examine the case on merits. It has also been argued by the learned counsel for the petitioner that in matters pertaining to interpretation of fiscal rights and instruments the rule pertaining to alternate remedy is not applicable. The contention raised also appears to be correct in view of the decisions cited at the Bar which are The Burma Oil Co. (Pak. Trading) Ltd., Chittagong v. The Trustees of the Port of Chittagong, PLD 1962 SC 113, M/s. Usmania Glass Sheet Factory Ltd., Chittagong v. Sales Tax Officer, Chittagong, PLD 1971 SC 205, Republic Motors Ltd. v. Income Tax Officer, 1990 PTD 889, Pakistan Metal Industries v. Assistant Collector, Central Excise and Land Customs, Karachi, 1990 CLC 1002 and the Facto Cement Ltd. v. Collector of Customs, 1994 MLD 1136. From the facts of the case and the documents attached to the memo. Of the petition it is quite clear that the respondents had issued two letters dated 8-4-1993 and 25-4-1993 seeking recovery of the impugned penalty failing which threatening coercive action. It has been contended by the counsel for the petitioner that the time limit given of firstly 15 days and then 7 days was not enough for the petitioner to file the revision and get the same entertained by the revisional authority. It was contended by the learned counsel that revision petitions filed before the C.B.R. Remain undecided for months and some times it takes 1-2 year or even more to get any decision from them. Accordingly, it was submitted that the revisional remedy was neither speedy nor efficacious. In this respect the learned counsel has relied upon Cement Agencies Ltd. v. Income Tax Officer and others, PLD 1965 Kar. 393 where Waheeduddin Ahmed, J. Had held that the relief available under the Income-tax Act, 1922 was not invokable with as much facility and convenience as by recourse to writ jurisdiction of the High Court; and M/s. Usmania Glass Sheet Factory v. Sales Tax Officer PLD 1966 Dacca 523 where writing for the Court Abduallah, J. Was of the view that fiscal authorities whether original, appellate or revisional belong to the same set-up and appeals to such forums are inadequate to redress or prevent the wrong done which is in excess of jurisdiction. We feel that the facts and circumstances of this case would not justify us to dismiss the petition only on grounds of maintainability.

Considering that in view of the recovery drive the alternate revisional remedy was hardly efficacious. Also at this stage, once the petition has already been admitted if we were to non-suit the petitioner only on grounds of maintainability the petitioner would be left without any remedy since the 30 day statutory period for filing the revision petition under section 196 of the Customs Act has long expired. If there is any authority needed on this point it is the case of National Tractor Co. v. Income Tax Officer (1983) 143 ITR 95 where the High Court of Punjab and Haryana had held that the Courts would not be justified in dismissing a petition which had once been entertained, solely on ground of maintainability, particularly when the remedy of appeal had become time-barred.

We accordingly hold that the petition is maintainable also because it appears to be a point of first impression which has to be decided as to whether the Customs Authorities have any jurisdiction to question into the valuation and scruitinize the description of the goods imported into the EPZ.

21. The next objection raised by Mr. S. Tariq All that the order of the Member (Judicial) has attained finality and the C.B.R. And its officers are the only authorities to decide matters pertaining to fiscal laws is wholly misconceived. The very fact that the impugned actions have been challenged in this petition confirms that the impugned orders have not attained finality. Also the contention that the C.B.R. And its officers are the final adjudicators in fiscal matters surprises us. The law reports are replete with decisions and judgments of superior Courts where actions of the C.B.R. And its officers have been checked and reversed in the exercise of Constitutional jurisdiction. Furthermore, an argument on this line would be completely opposed to the spirit of provisions of Article 199 and the concept of writ jurisdiction. It is settled law that in cases of wrongful exercise of statutory power, excess of jurisdiction, illegal exercise of discretion and abuse of power, procedure and process of Court, the superior Courts have the judicial power to intervene. Any interpretation on the lines invited by the learned Standing Counsel would amount to restricting, limiting and ousting the jurisdiction of this Court. Even in the judgment relied upon by the Standing Counsel i,e, Big. Mak Foods Ltd. v. Deputy Collector of Customs, the Supreme Court had categorically stated that a perverse construction placed by the Customs Authorities would warrant interference by the Courts.

This contention of the learned Standing Counsel is rejected as devoid of any merit or force.

22. The next contention of the learned standing counsel is that the petitioner is not entitled to the exemption from Customs Duties and Sales Tax and in any event it had failed to discharge the onus of proof to establish that it was entitled to such an exemption, especially keeping in view the fact that the requisite infrastructure for the purposes of assembling the imported items is not maintained by the petitioner. Once again the contention is completely devoid of merits. It is in fact an admitted position that the petitioner is entitled to the exemption claimed by it. At paragraph 4 of the memo. Of petition the petitioner has categorically stated the fact that it enjoyed the exemption which has not been denied in the corresponding contents of the counter-affidavit. Also all along during the course of hearings in the departmental hierarchy it has never been the case of the department that the petitioner is not entitled to the exemption. In reply to the show-cause notice under section 32 the petitioner at para. 1 of its letter dated 26-11-1992 had stated that it enjoyed the exemption under SRO 881(1)/80 dated 23-8-1980. The Collector in his impugned order has not contested this position. In fact at the end of para. 12 of this order he has observed:-- "If goods are not liable to import duty it cannot be presumed that these are not liable to laws regulating import, documentation, valuation, etc."

' This stand of the Collector all the more confirms that he has not disputed the fact that the petitioner is entitled to the exemption. Also no adverse finding in this regard has been entered into by the Member Judicial. In fact had it at all been the case of the department that the petitioner was not entitled to the exemption they would have imposed customs duties and sales tax upon the petitioner's consignment. When all along the department has taken a particular stand it cannot be allowed to suddenly shift its position and raise a fresh point which all the more does not arise from the records and pleadings of the case keeping in view the fact that the factum of availability of exemption has not been denied or disputed by the respondents. As regards the objection of lack of infrastructure with the petitioner to assemble the imported items into complete cassette players, Mr. Farogh Naseem has invited our attention to the fact that although in the show-cause notice under section 32 this objection was raised but once the petitioner explained in the reply to the show-cause notice that it could well undertake the task of assembly only by using screw. Drivers, pliers, on a table and the same did not require any extensive or complicated infrastructure or factory the Collector in his order did not enter into any adverse finding on this count nor the appellant's order contained any such adverse finding. The contention of the learned counsel for the petitioner is correct. Additionally we asked Mr. Tariq All to inform the Court as to on what basis such a finding was given that the petitioner lacked the said infrastructure. In the show-cause notice under section 32 the Collector mentioned that it had been reported that such an infrastructure was lacking. We asked the learned Standing Counsel to apprise us as to what was the source of the report and whether the same was confronted to the petitioner. The learned Standing Counsel was unable to reply to this in view whereof we are of the view that no adverse inference can be drawn against the petitioner. Also in terms of the SRO 881(1)/80 dated 23-8-80 and the C.E.P.Z.R., 1981 existence of an extensive infrastructure/factory or an assembly plant is not a precondition to avail the exemption. In fact Rule 3(4) of the E.P.Z.R., 1981 confirms that the goods imported into the EPZ should only be used or warehoused within the limits of the Zone. The same does not spell out the condition that in order to avail the exemption the task of manufacturing or assembly has to be undertaken. In any event we feel that the facility of assembly claimed by the petitioner i,e, screw drivers pliers, nuts bolts, and tables which have not been denied by the respondents are adequate to assemble the differed parts imported into complete cassette players. The case relied upon by the counsel for the respondents of Central Cotten v. C.B.R. Is thus absolutely irrelevant and has no bearing upon the facts and circumstances of the case.

23. The next objection raised by the learned counsel for the respondents is that under section 187 of the Customs Act, the burden of proof was on the petitioner rather than upon the Customs Authorities to categorically disprove the allegations of misdeclaration and under-declaration levelled by the Customs Authorities. In this respect Mr. S. Tariq All has contended that the rulings relied upon by the petitioner counsel become inapplicable as the law has itself clearly cast the burden upon the petitioner. In order to appreciate this objection it is pertinent to scrutinize the provisions of section 187 which reads as follows:-- "187. Burden of proof as to lawful authority,etc--When any person is alleged to have committed an offence under this Act and any question arises whether he did any act or was in possession of anything with lawful authority or under a permit, licence or other document prescribed by or under any law for the time being in force the burden of proving that he had such authority, permit, licence or other document shall lie on him."

It appears to us that section 187 covers two situations which we state as follows:

(a) when a person is charged with an offence under the Customs Act, the burden of proof is cast upon him to show that he had the lawful authority to commit that act;

(b) when a person is found in possession of any goods the burden of proof is cast upon him to show that he was holding such goods under some lawful authority, permission or licence, etc. ' Situation (b) is not in issue in the present case, however, we feel that it provides for an eventuality where a person is found to be in possession of certain goods which fall under a prohibited category or which in an unlawful manner find place in the possession or custody of the accused. In such case the burden is upon the accused to show that he falls under some exemption or exception to hold such goods. This type of eventuality as envisaged and stated in situation (b) above is essentially a statement of the general principle of the law of evidence contained in Article 121 of the Qanun-e-Shahadat that whosoever claims to all under a preferential or exempt or excepted category must show that he fulfils that conditions to fall within that category. This obviously should not be confused with the fectum of possession for which no presumption or burden of proof has been spelt out, in view whereof the possession itself has to be proved independently by the prosecution beyond all reasonable doubt.

24. It is situation (a) as stated above in para. 23 which is directly in issue in this case i,e, whether the burden of proof solely lies upon the petitioner to disprove allegations of misdeclaration and misdescription levelled by the Customs Authorities and whether the Customs Authorities are under no obligation to lead evidence and discharge any onus of proof. This part of section 187 of the Customs Act perhaps appears to be contrary to the general principle of the law of evidence contained in Article 117 of the Qanun-eShahadat that whosoever alleges existence of a particular fact must prove the same. There is little doubt that a special law or a particular statute can provide for a distinct regime of rules of evidence than contained in general law. In fact the law goes on as far as providing that the laws of evidence can be altered even by mutual consent and contract.

See S.M. Anwar Sethi v. South British Insurance Company Ltd., PLD 1975 Karachi 458). However, on a closer scrutiny of the provisions of section 187 and the case-law settled by our Courts on the subject it appears that in such a situation it is only the evidential and tactical burden of proof which is cast upon the accused while the legal burden to bring home the allegations remains with the prosecution. Before we dilate upon the concept of the two types of burdens of proof and explain the terms "tactical", "evidential" and "legal" burdens of proof we shall first discuss the case decided by the High Court of Sindh in Barkat All v. The State PLD 1973 Karachi 659. In this case the controversy revolved round section 177A of the erstwhile Sea Customs Act, 1878 which catered for a similar situation as has arisen in the present case i,e, the same provided the burden of proof upon the accused to disprove the case of the prosecution that his intentions were not to defraud the exchequer or evade any prohibition or restriction under the Act. Writing for Court Tufail All Abdul Rehman, CI was of the opinion that the said presumption of burden of proof could not be drawn until the explanation of the accused was first taken into consideration. According to the learned Judge the "normal principle" was applicable i,e, that the accused was entitled to a benefit of doubt where he offered a reasonable explanation which was either acceptable or raised a doubt. In such cases the burden then shifted upon the prosecution to establish the case. In this regard the pertinent observations are reproduced hereunder: "....Despite S. 177A of the Sea Customs Act if upon the end of the evidence the Court is of the opinion that there is a doubt as to the guilt of the accused the benefit of that doubt must be given to him and he must be acquitted." (At p. 671).

25. Both classical and contemporary treatises on the law of evidence (Cross on "Evidence" 1967 3rd Edition, London, Butterworth, "A Practical Approach to Evidence" by Peter Murphy, 1988, 3rd Edition, London, Blackstons Press Ltd., and "The Modern Law of Evidence" by Adrian Keane 1985, Ist Edition, Oxford, Professional Books Ltd. Talk in terms of two burdens of proof i,e,, the "legal" or "persuasive" burden and the "evidential" or "tactical" burden. The legal burden is defined as "the burden of proof or the probative burden and the ultimate burden" (see Keane at p. 46). The same has also been defined as "the burden of persuading the tribunal or fact, to the required standard of proof and on the whole of the evidence, of the truth or sufficient probability of every essential fact in issue". (See Murphy at p. 78). On the other hand the "evidential" or "tactical" burden has been defined as "the quantum of evidence which would "establish a prima facie case". (See Murphy at p.79). The legal burden is accordingly in our view the ultimate and final burden whereas the evidential burden requires only establishmant of a prima facie case. According to the learned authors in every case there is a distinction between these two burdens. On a general principle both these burdens are cast upon the asserter of a proposition whereas in some cases the incidence of these two types of burdens may not coincide. According to Keane the determination of where the burden falls would depend upon substantive law as well as common sense-(See pp.49 and 50). The mode of operation of the rules of evidence would be that the party upon whom the evidential burden is cast shall have to establish through prima facie evidence that he has an arguable case. In such an event it would then be obligatory upon the person bearing the legal burden to bring on record such material which would ultimately bring home his case. In circumstances where both the evidential and legal burdens are cast upon the same party the entire burden of proof shall be on that particular party and the distinction between legal and evidential burdens would not serve a fructuous purpose. However, it is in such cases where the incidence of the legal and evidential burdens are distinct i,e, the legal burden is placed on one party whereas the evidential burden lies on another, that the party on whom the evidential burden is placed has to satisfy the same by establishing a prima facie case. In such an eventuality the burden would shift to the other party who shall have to bring forth the ultimate evidence to make out a case i,e, he would have to satisfy or discharge the legal burden. The concept of shifting of burdens of proof is not alien to even our jurisprudence. The shifting of burdens of proof have been discussed and approved in Mst. Safia Begum v. Mst. Malkani and another, (PLD 1965 Lahore 576), Akber All v. Ehsan Elahi (PLD 1980 Lahore 145) Government of Pakistan v. Moulvi Ahmed Saeed 1983 CLC 414), Muhammad Sarwar v. Fatal Rehman (1982 CLC 1286) and Sarder Ghulam Nabi Khan v. Azad Government of State of Jammu and Kashmir (1984 CLC 325). In all these cases and in other cases that we have seen, although the fact of shifting of burdens of proof has been acknowledged, however, the reason as to why such a legal fiction takes place has not been discussed. We feel that it is due to operation of the principles of incidence of burdens of proof vis-a-vis "legal" and "evidential" burdens as discussed above that the process of shifting of burdens become possible. We have already cited the opinion of Adrian Keane and we hold that in order to determine as to which party bears the legal or evidential burden would depend on the terms of the statute, the case-law on the subject as also common sense and equity. In this case we are of the view that in the situation in issue i,e, (a) as discussed in para. 23 above, section 187 casts upon the petitioner-accused only the obligation to make out a prima fade case as it is only the evidential burden which is borne upon it. Once the petitioners were to satisfy this evidential burden, the legal burden to bring home the ultimate cases lifted upon the customs authorities. The question is now essentially to determine as to whether the petitioner was able to discharge the evidential burden. Evidential burden essentially requires making out a prima facie case which is arguable and at least raises a doubt in the mind of the Court. The very fact that this petition has been admitted to regular hearing confirms that the petitioners had made out a prima facie case in view whereof we hold that it has discharged the evidential burden. In any event the facts and circumstances of such case are such and the explanation offered by the petitioner are of such a quality which at least raises a doubt in favour of the petitioner. The contention of the learned Standing Counsel that no duty was cast upon the Customs Authorities to bring home any evidence in support of its case is incorrect. We are of the view that heavy onus, being the ultimate legal burden, shifted upon the Customs Authorities to come up with independent and cogent evidence against the petitioner which they have failed to discharge In fact, even in the cases relied upon by Mr. Farogh Naseem i,e, Eastern Rice Syndicate v. C.B.R. (PLD 1959 SC (Pak.) 364). The Collector, Central Excise and Land Customs, Chittagong v. Imdad All (1969 SCMR 708) and M/s. Latif Bros. v. Deputy Collector Customs, Lahore (1992 SCMR 1083), the Supreme Court has clearly held that the ultimate burden of proof lay upon the Customs Authorities which cannot be said to have been discharged merely on account of weakness in the evidence of the importer. The first two cases i,e, Eastern Rice Syndicate and Imdad All were adjudications upon section 39 of the earstwhile Sea Customs Act (which is comparable to the present section 32 of the Customs Act, 1969). In both those cases we cannot hold that the Courts were oblivious to the provisions of section 193G of the Sea Customs Act which is almost identically worded to the present section 187 of the Customs Act. The said section 193G of the Sea Customs Act, 1878, is being reproduced for convenience: "193G. Burden of proof in certain cases.--Where any person is tried for an offence under this Act and any question arises whether he did any act or was in possession of anything with lawful authority or under a permit, licence or other document prescribed by or under any law for the time being in force, the burden of proving that he had such authority, permit, licence or other document shall lie on him."

' Even in the recent decision of Latif Brothers which touched upon section 32 of the Customs Act, 1969, the Court followed the earlier decision of Eastern Rice Syndicate. For that case also we do not feel that the honourable Supreme Court closed its eyes to the provisions of section 187 of the Customs Act. We accordingly hold that the contention of Mr. S. Tariq All inviting us to hold these Supreme Court judgments as per incuriam is misplaced. These decisions are respectfully very sound and accordingly bind us under Article 189 of the Constitution. Before parting with the discussion on section 187 of the Customs Act we are of the view that in case the interpretation on the lines invited by the learned Standing Counsel were to be adopted i,e, that for every offence for which the accused is charged under the Customs Act he shall have to disprove the allegations of the Customs Authorities in entirety without any obligation upon the Customs Department to adduce evidence, it would amount to affording unfettered, naked and arbitrary discretion to the authorities who may at their sweet will make out false cases against importers without the need of proving the sanctity of their actions. Such cannot be the intention of Parliament while the Courts are under an obligation to place such construction on statutes which would be beneficial to the widest extent and which would make the legislation operate fairly, justly and equitably and not unreasonably (see Mst. Zainab v. Kamal Khan (PLD 1990 SC 1051). This Court is also of the view that a construction is to be placed upon statutes which would minimize the discretion vested upon the executive authorities. As absolute power corrupts an interpretation fettering the discretion of the executive authority would be more in line with the principles of equity and justice. The issue regarding the applicability of section 187 is to be looked from another angle i,e, in case we were to hold that due to section 187 the entire burden to disprove the entire case rest upon the accused alone, the executive authorities would be let loose and given a wide, naked and arbitrary discretion to operate without any guidelines which would then leave section 187 susceptible to a Constitutional challenge upon its vires on this score alone. By the interpretation as proposed above any redundancy or illegality would also be avoided.

26. The next contention raised by Mr. S. Tariq All is that the Customs Authorities have the power to assess the consignments imported into the E.P.Z. According to the existing procedure as per Rules 3(2) and 3(3) of the C.E.P.Z.R., 1981 Allied to this objection is the contention raised by Mr. Farogh Naseem that till such time the complete exemption is intact under SRO.881(I)/80 dated 23-8-1980, the Customs Authorities have no jurisdiction to look into the question of under-declaration and misdeclaration of the consignments imported into the E.P.Z. And since the duties on such consignments are not payable there can be no warrant for imposition of penalty as any misdeclaration or under-declaraton cannot possibly result in tax evasion. We feel it would be pertinent to dispose of the arguments of both sides on this point together which go to the root of the case.

27. SRO No,881(I)/80 dated Islamabad 23-8-1980 is reproduced as under: "In the exercise of powers conferred by section 19 of the Customs Act, 1969 (IV of 1969) and section 7 of the Sales Tax Act, 1951 (III of 1951), the Federal Government, subject to such conditions, limitations and restrictions as the Central Board of Revenue may impose from time to time, is pleased to exempt from the whole of Customs duties and sales tax leviable on all the goods imported into and exported from the Export Processing Zone established under the Export Processing Zone Authority, Ordinance, 1980 (IV of 1980)."

Rule 3(2) of the C.E.P.Z.R., 1981 provides for submission of a separate bill of entry in respect of goods imported into the E.P.Z. Alongwith other documentation to the Customs Authorities for assessment and clearance, while Rule 3(3) of the C,E.P.Z.R. Provides that the imported goods into the E.P.Z. Are to be assessed in accordance with the existing procedure. Mr.Farogh Naseem in reply to this objection raised by Mr. S. Tariq All submitted that the terms "assess" and "assessment" are by no means restricted to valuation and calculations of tax, customs duties. According to the learned counsel the import of the said terms would depend upon the facts and circumstances of the case and the law in question and can include the exercise of calculation of tax, valuation, conduct of assessm ent proceedings or any other process that would fit the prevalent circumstances. In this respect he has placed reliance upon M/s. Karimi & Co. v. The K.M.C. (PLD 1968 Karachi 79), Sayyed Saeed Muhammad v. The QMC (PLD 1970 Quetta 1), Sir Rejendarnath Mukerjee v. C.I.T., Bengal, (1934) 2 ITR 71 at p.77 (PC), C.I.T., Bombay v. Khemchand Ramdas, (1938) 6 ITR 414 (PCP, Qamer Bishvanath Singh v. C.I.T. (1942) 10 ITR 322 (All.), Seth Badridas Daga and another v. C.I.T. (1949) 17 ITR 209 at p.211 (P.C.), C.I.T., West Bengal v Balkrishna Malhotra (1971) 81 ITR 759 (SC). The learned counsel has contended that Rule 3(1) of the C.E.P.Z.R., 1981 makes Rule 3(7) a non obstante clause by use of the words "subject to sub-rules (7) and (8)...." Accordingly sub-rules (2) and (3) as relied upon the Standing Counsel are to be lead as subservient to sub-rule (7) which clearly spells out that the Customs Authorities only possess the jurisdiction to look into the fact as to whether the imported items fall into any prohibitory category. The learned counsel for the petitioner submitted that the terms "assessed" and "assessment" used in sub-rules (2) and (3) only identify this process on part of the Customs Authorities to appraise as to whether the goods fall under the prohibitory category. The interpretation offered by the learned counsel for the petitioner seems to be correct.

As pointed out sub-rule (1) of Rule 3 clearly subjects sub-rules (2) and (3) to sub-rule (7).

Accordingly, sub-rules (2) and (3) have to be interpreted subject to the provisions of sub-rule (7).

Sub-rule (3) talks in terms of assessme nt in accordance with the existing procedure which we feel can only mean scrutiny by the Customs Authorities strictly in terms of sub-rule (7) i,e,, to check whether the goods fall under the prohibitory category. The terms "assess" and "assessment" cannot be given a pedantic, narrow or exhaustive connotation and have to be construed according to the facts and circumstances and the operative laws (in this case C.E.P.Z.R., 1981 alongwith other operative and relevant SROs and instruments). Till such time SRO.881(I)/80, dated 23-8-1980 which provides for the exemption is intact the existing procedure of assessment and clearance shall not entitle the Customs Authorities to undertake the task of valuation and calculation of duties as correctly held in LT & GM Ltd. v. Collector of Customs PLD 1988 Lahore 563). Accordingly, the Customs Authorities acted completely without jurisdiction to proceed with the process of examining the value and description of the goods. In arriving at the above conclusion we have also resorted to the cannons of construction that a statute/ instrument/document is to be read as a whole (State Bank of Pakistan v. The Director, Military Lands and Cantonment, Rawalpindi PLD 1990 SC 827) and an attempt has to be made by the Courts to rust reconcile various clauses for a rational meaning (Muhammad Azam Muhammad Fazil & Co. v. NA. Industries, Karachi PLD 1977 Karachi 21), while avoiding redundancy to any part thereof (Afzal Stores v. Sindh Labour Court No,5 PLD 1977 Karachi 756). An interpretation offered by the learned Standing Counsel would also clearly create a conflict between sub-rules (2) and (3) of Rule 3 and sub-rule (7) read with sub-rule (1) of Rule 3. The conflict being that under sub-rules (2) and (3) of Rule 3 the Customs Authorities can look into the question of valuation, calculation of duty and misdescription, while under sub-rule (7) of Rule 7 the Authorities can only examine the question whether the goods fall under the prohibitory category. In such a situation we would have no option but to hold sub-rules (2) and (3) to be repugnant and ultra vlres since it settled law that where two sections of a statute are found to be repugnant, the subsequent one prevails (see Sahabzada Sharafuddin v. Town Committee, Pindi Gheb 1984 CLC 1517). We intend to avoid such an eventuality because the apparent conflict is reconcilable by holding that the subsequent sub-rule (7) of rule 3 modifies, amends, interprets and explains the earlier sub-rules (2) and (3) of Rule 3 especially in view of the fact that sub-rule (1) of rule 3 makes all other sub-rules subordinate to sub-rules (7) and (8). Accordingly, we hold that till such time the exemption under SRO.881(I)/80, dated 23-8-1980 is intact or a like facility is brought about the Customs Authorities have no jurisdiction to look into the question of under-valuation, calculation of duties and misdescription of goods imported into the E.P.Z. The impugned actions of the Customs Authorities in this case are declared to be completely bereft of jurisdiction. This interpretation would also be in line with the pronouncement of a Division Bench of this Court in Oskui Traders v. Collector of Customs (1991 CLC 24) where one of my brother Judges, Wajihuddin Ahmed, J. Had expressed the view that the Customs Act and Rules framed thereunder are not excluded from application to the E.P.Z., however, their application was restricted. The restriction pertained to exemptions allowed and exclusion expressly made (See pp.29 and 30, paras. 8 and 9).

In that case the matter touched upon the question as to the extent of jurisdiction possessed by the E.P.Z. Authority to disallow re-export of goods from the E.P.Z. The facts of that case were completely different from the present one and the issue decided by us as aforesaid was neither decided nor was in question in that case. Our view as aforesaid should not be misconstrued for the proposition that Customs Act and Rules made thereunder are excluded from operation in the E.P.Z. But following Oskui Traders v. Collector of Customs as stated above we have held that the application of the Customs Act and its rules are restricted to the extent that till such time the exemption SRO or any of its like provisions holds the field the Customs Authorities have no jurisdiction to scrutinize the questions of under-valuation, calculation of duties and misdescription of goods imported into the E.P.Z. However, the Customs Authorities shall have the jurisdiction to refuse clearance of goods until a bill of entry is filed under sub-rule (2) of Rule 3 and if the goods fall under the prohibitory category under sub-rule (7) of Rule 3. This process in our view shall constitute the procedure of assessm ent and clearance according to the existing procedure as envisaged in sub-rules (2) and

(3) of Rule 3. On the question of Customs Authorities proceeding with the process of valuation of goods imported into the E.P.Z. We feel it pertinent to point out that the petitioner has attached a minutes of meeting, dated 30-4-1989 of a high powered committee under the Chairmanship of the Deputy Chairman, Planning Commission, and the President, Chamber of Investors and Scretaries from the Ministries of Commerce, Industries, Planning and Development Division and Members from the Central Board of Revenue, which had taken a decision that the practice of valuation conducted by the Customs Authorities pertaining to goods imported and exported into and from the E.P.Z. Is to be terminated. We pointed out to the learned counsel for the petitioner that such a document cannot create a legal right upon the petitioner to bring an action in Court, which the learned counsel conceded and stated that the said minutes have been attached by way of apprising the Court with the background facts.

28. Although the issue decided thus far as above is adequate to dispose of and allow the instant Constitutional petition, however, we feel that all the issues raised by the respective sides ought to be decided by Courts to give the appellate forums the benefit of the opinion of that Court on those issues. In case all issues are not decided by a Court, the appellate forums find themselves in a dilemma to either remand back the case to the Court which had not decided all the issues or decide the remaining issues without having the opportunity to examine the opinion of the lower Court on the undecided issues. In case the Appellate Courts decide to reverse the findings of the lower Courts on some counts and remand the case back to the lower Court to give its findings on the rest of the undecided issues, considerable delay occasions and causes detriment to the judicial process, escalates the expenditures incurred by the litigant and occasions a waste of time of the Courts and public money. Such a practice is to be avoided unless there are other convincing reasons to do so. Accordingly, we intend to give a finding on all the issues raised by the learned counsel from both sides.

29. As already underscored in the preceding paragraph No,26, allied to the objection raised by Mr. S. Tariq All decided above was the argument formulated by Mr. Farogh Naseem that the Customs Authorities were not justified to levy penalty under section 32(1) when admittedly there was no motive on part of the petitioner to evade tax due to the exemption in the field. He has cited copious case-law on the point which has already been referred. In order to examine the merits of this argument it is pertinent to scrutinize the provisions of section 32(1) which are reproduced as under: "32. Statement. Error etc.--(1) If any person, in connection with any matter of customs--

(a) makes or signs or causes to be made orsigned or delivers or causes to be delivered to an officer -of customs any declaration, notice, certificate or other document whatsoever, or

(b) makes any statement in answer to any question put to him by an officer of customs which he is required by or under this Act to answer,knowing or having reason to believe that such document or statement is false in any material particular, he shall be guilty of an offence under this section."

Assuming that the petitioner has undervalued and misdeclared as alleged by the respondents, the issue to be decided is whether an action of imposing a monetary penalty can be taken when admittedly the petitioner is exempt from tax and its alleged action of under-declaration and misdescription shall be of no consequence to either side. It is settled in the case of Quetta Textile Mills (1990 ALD 582) (cited above) that section 32 of the Customs Act, 1969 is penal/criminal in nature. Like all other penal provisions we have to determine the requirements of the section.

Broadly speaking, penal/criminal provisions are divided into the provisions prescribing the "actus reus" i,e, the act in question and the "mens rea" i,e, the requisite mental element. It is not essential for a penal provision to contain both such ingredients as the provisions which omit the mens rea are called strict liability offences. There is little doubt that the words "unture" and "knowledge and having reason to believe" appearing in section 32 clearly point out that the same does not create a strict liability offence. Such has also been the interpretation accorded to the comparable W provision of section 39 of the Sea Customs Act, 1878 to section 32 of the present Act (see Pakistan v.

Hardcastle Waud (Pakistan) Ltd., PLD 1967 SC 1). The mens rea provided for in the section 32(1) is the existence of "knowledge" or "reason to believe" on part of the accused that the declaration is false in a "material particular". The essential question is to determine as to whether in such a case there is to be a nexus between the mens rea under section 32(1) and tax evasion. The term "reason to believe" as appearing in section 32(1) has been defined under section 26 of the Pakistan Penal Code to mean "..Sufficient cause to believe .. And not otherwise". According to Dr. Sir Hari Singh Court's "Penal law in India", 1987, Vol. 1, published by Law Publishers, Allahabad, at p. 242 what would constitute a "sufficient cause" shall depend upon the facts and circumstances of the case, while "knowledge" is slightly on a higher plane than "reason to believe". In the instant case the petitioner has categorically taken the stand before us which it had taken before the department that any misdeclaration or under-declaration was of no fiscal consequence. Such is also the admitted position which is not disputed by Mr. S.Tariq Ali. We are of the view that where a person submits a declaration in the context of customs clearance, and there can possibly be no fiscal consequence contingent upon his declaration and that contingency of no fiscal consequence is either undeniable or regarding which the accused has demonstrated his knowledge or reason to belief that he thought that no tax was leviable, by no figment of imagination could it be said that the said person had any knowledge or reason to believe that his declaration/statement was false or untrue in any material particular. In this context the contention of Mr. Farogh Naseem that no penalty under section 2(1) is leviable for any alleged undervaluation and misdescription where there can be no motive to evade tax and where such declaration would carry no fiscal consequence is correct. Any other interpretation would also give rise to an absurd situation where although no tax would be leviable on the main basic assessment but there could possibly be. Imposition of a penalty. In any event the cases cited by Mr. Farogh Naseem i,e,, Eastern Rice Syndicate, Latif Brothers. And the Indian Supreme Court judgment of Rib Tapes (India) Pvt. Ltd. Are quite relevant to the point that mere allegations of under-valuation without any concrete and positive evidence produced by the Customs Authorities cannot warrant a finding of falsity to the declaration in "material particular" in the context of section 32(1) of the Customs Act, 1969 and its comparable provisions. The Customs Department in this regard have also violated section 223 of the Customs Act and the CGO No,25/73, dated 1-3-1973 issued by the C.B.R. Which has mandated the Customs Authorities to reveal in the show-cause notices the precise basis for alleging under-valuation and confront the importer with copies of evidence and data forming the basis of the allegation. This exercise has not been undertaken which has left the impugned actions to be illegal.

30. In relation to the findings afforded by the Collector and the Member (Judicial) that the imported electronic items even if without motors constitute a "complete mechanism" are not correct. The dictionary references relied upon by Mr. Farogh Naseem clearly show that such a finding is perverse. The term "complete mechanism" necessarily conveys the meaning that the mechanism is in a running shape and in case motors are not fitted in the mechanism there is little doubt that they constitute "incomplete mechanisms". Accordingly, even from the angle of description we feel that there is no misdescribed item in the invoice. Mr. Tariq Ali's objection that there was patent misdescription as the goods were in a knocked down condition and the same has not been categorically stated in the invoice is also not correct. The invoice as stated in para. 2 above included the description, lot of screw, pulley, rods, brackets, motors, locks, spring belts and incomplete mechanisms, which clearly shows that the goods were not in an assembled condition and were necessarily in a knocked down shape. It is the substance and not the form which has to be construed while scrutinizing the terms of invoice. Also the Customs Department has itself accepted that the goods were imported in an uneven quantity which could not be assembled into a certain number of sets of cassette players. Also on this score the decision of the Indian Supreme Court cited by Mr.Farogh Naseem i,e, Union of India v. Tarachand Gupta and Bros. Appears relevant where it was held that the Customs Authorities had no jurisdiction to object as to whether the imported motorcycle parts were in an assembled form or in a knocked down condition. The Customs Authorities in that case could only see whether the imports had been effected according to the terms of the licence. In the instant Constitutional petition we feel that the Customs Authorities only have the jurisdiction to scrutinize as to whether the imports have been effected strictly in consonance with the CEPZR, 1981. According to Rule 3(4) of the CEPZR, if the imported goods were to enjoy an exemption they ought to be used solely within the limits of the EPZ which use is also extended to warehousing and storing purposes. This is all that the Customs Authorities can inquire apart from the fact as to whether the goods fall into a prohibitory category as provided under rule 3(7) of the CEPZR, 1981. It is not the case of the department that the imported goods were used outside the EPZ. Accordingly, we feel that the Customs Department have no jurisdiction to question as to whether the goods were imported in a knocked down condition or in a semi or completely built shape.

31. Another point raised by Mr. Farogh Naseem, while relying upon the decision of Ibrahim Textile Mills Ltd., PLD 1989 Lah. 47, is that the show-cause notice under section 32(1) did not specifically contain the allegations that the falsity resulted due to the knowledge and belief of the petitioner and the falsity itself was a deviation in material particular. Mr. S.Tariq Ali, learned counsel for the respondents has although admitted that no such finding was recorded in the show-cause notice but the said issue had become irrelevant as subsequently orders have been passed by the Collector and the Appellate Authority. Once again we find the contention of the learned Standing Counsel to be devoid of merit as it is settled law that where the initial order or notice is void all subsequent proceedings, orders or superstructure built on it are also void. If there are Authorities needed for this proposition we cite Yousuf All v. Muhammad Aslam Zia, PLD 1958 SC (Pak.) 104, Mansab Ali v. Amir PLD 1971 SC 124, Syed Nazar Hussain Shah v. I.-G. Police, Punjab PLD 1977 Lah. 924 and more recently Sheikh Gulzar All & Co. v. Special Judge, Special Court of Banking 1991 SCMR 590.

Even the findings of "falsity" in "material particular" and "knowledge" and "belief' on part of the petitioner have not been given in the orders of the Collector and the Member (Judicial). Even if such findings had been given by the Collector in his order it would be of no avail considering that it is once again settled law that if adverse findings are given on issues and materials or opinions and stand points are expressed which do not form part of the show-cause notice the entire exercise militates against the concept of natural justice and is void. This is so specially in view of the recent stance taken by the Supreme Court in Anisa Rehman v. P.I.A. 1994 SCMR 2234, where breach of natural justice has been equated with breach of law. We accordingly hold that the very show- cause notice under section 32 alongwith all subsequent proceedings and orders are void, ab initio and of no legal effect.

32. Finally, we now intend to dispose of the argument advanced by Mr. Farogh Naseem that penalty proceedings are criminal in nature requiring a higher standard of proof and can only be tainted with legality if independent and cogent evidence is led. Once again this proposition is trite law and there can be no cavil with it. The evidence relied upon by the department to frame the main assessm ent can by itself not justify penal proceedings unless the said evidence is positive, cogent and leaves no iota of doubt that the accused assessee is guilty. This is more so in view of the fact that the standard of proof required in penal proceedings is criminal in nature which requires a proof beyond all reasonable doubt. In the instant case such an evidence endowed with probative value to establish the guilt of the petitioner beyond all reasonable doubt has hardly been led. Mr. S. Tariq All on a question by us in this respect has not been able to point out to any such evidence..In this regard he has only stated that this will be a disputed question of fact which the High Court cannot go into in a Constitutional petition. The reply is equally unsatisfactory considering that now it is settled law, as correctly pointed out by Mr. Farogh Naseem that where the findings of lower Authorities are perverse, based upon no evidence, arbitrary, fanciful, based upon irrelevant and inadmissible evidence or where a wrong inference is drawn from the evidence on record or where there is a violation of any rule of law or statute which forms the subject-matter of challenge, the High Court can interfere with such findings in a Constitutional petition under Article 199 (see Ulbricht Pakistan Ltd. v. Dy. Collector, 1991 PTD 551).

33. In the result we allow this petition and hold the impugned actions to be completely without jurisdiction, illegal, void, ab initio and of no legal effect on various counts as detailed above, while there shall be no order as to costs.

34. In consequence of our allowing the instant petition we direct the Nazir of this Court to release, return and discharge the Bank Guarantee submitted by the petitioner.