HAZRAT NOOR VS DEPUTY COLLECTOR OF CUSTOMS, 2013 PTD-CUSTOMS-APPELLATE-TRIBUNAL-KARACHI 1708 (2013)

(a) Customs Act (IV of 1969)---

----Ss.32(1), 32-A, 16, 25, 25A, 80, 156(1)(9)(14), 193, 195 & 202---Customs Rules, 2001, Chapter XI, (Rr.133 to 215)---Imports and Exports (Control) Act (XXXIX of 1950), S.3(3)---Sales Tax Act (VII of 1990), S.33---Income Tax Ordinance, (XLIXof2001), S. 148---CustomsGeneralOrder 14of2005 dated6-6-2005---Valuation Directorate Letter No.1/5/2009-VIIA/ 3077, dated 31-5-2010---False statement, error, etc.---Fiscal fraud---Personal Baggage Scheme---Re-assessment of the vehicle was made on the ground that vehicle was cleared on suppressed value which resulted in short recovery of duties and taxes as the Manufacturer's Suggested Retail Price (MSRP) was more than the declared and assessed value---Validity---Vehicle had been allowed release after due consideration as per old precedent during the time of presentation of document---Till the release of vehicle, the department was at liberty to investigate and approach the relative department i.e. Director General of Valuation of its advice; in case of having any doubt or to allow swift clearance, the vehicle could have been allowed provisional release, till the department was satisfied to have come to right determination of value and vehicle had been allowed release under S.80 of the Customs Act, 1969, with due consideration---Later on, case of short recovery of duty and taxes was made out on the observation of a letter which was a communication of the minutes of meeting---Besides, the value assessed was based on the concept of Maximum Selling Retail Price (MSRP) available on the internet and websites in different parts of the world---Application of the concept was in negation to the conception of determination of Customs Value under S.25 of the Customs Act, 1969 and was alien to the scheme of things prescribed thereunder---Reliance on the same could not be made as different markets and retail outlets at different places even within the same city cater to different buying capacity of the buyers and could not be made a bench mark---Concept of Maximum Selling Retail Price (MSRP) was void---Cardinal principles were not followed and plea taken by the department for assessment on the basis of Maximum Selling Retail Price (MSRP) did not have any criteria under any warrant of law to be accepted---Guideline as provided under Customs General Order 14 of 2005 dated 6-6-2005 read with legal obligations under Ss.25 and 25(1) of the Customs Act, 1969 had not been followed stricto sensu---Order in question was patently infested with legal and factual improprieties without application of judicious mind/and was based upon assumptions, presumptions and inferences deduced wrongly beyond the terms of the show cause notice---Order was held unlawful and void and appeal was allowed.

Sheraz Shipping Company v. Collector of Custom PACCS Customs Appeal K of 2013 rel.

(b) Legal Practitioners and Bar Councils Rules, 1976---

----R.109(b)---Denial of admissibility of special power of attorney---Validity---First Appellate Authority observed that "special care would need to be taken with regard to acceptance of any special power of attorney"---In spite of taking special care about doing so, First Appellate Authority without applying its judicious mind, denied the admissibility of special power of attorney---Subject power of attorney was duly registered/attested by the competent authority in as much as properly notarized as per prescribed law---Vakalatnama submitted by the counsel was within the parameters prescribed in the Pakistan Legal Practitioner and Bar Council Rules, 1976---Rule 109(b) of the said Rules entitled the registered advocate to appear, act and plead the case before any court or Tribunal in Pakistan---Every advocate was duty bound to uphold the dignity and high standard of his profession, as a member---Advocate owned entire devotion to the interests of the client, zealous in maintenance and defense of his rights and the exertion of his utmost learning and ability, nothing be taken or withheld from him in discharge of them save by rules of law legally applied---Observation of First Appellate Authority in the order about the question of "locus standi" on part of the counsel was devoid of law based upon assumptions, perverse fanciful and irrelevant with no evidence---Wrong inference was drawn from the evidence on record which was serious violation of prescribed rules, law and statute knowingly committed by the adjudicating officer---Record clearly reflected the professional conduct of the advocate well within parameters as defined in the Legal Practitioners and Bar Council Act, 1973.

(c) Customs Act (IV of 1969)---

----Ss.32(1) & 32-A---False statement, error, etc.---Fiscal fraud---Personal Baggage Scheme---Import of vehicles under Personal Baggage Scheme---Misuse of law---Appeal was disallowed by the First Appellate Authority on the ground of misuse of law relating to the import of vehicles under Personal Baggage Scheme---Validity---If such presumption was taken to be true then it was for the Federal Board of Revenue to set up an enquiry to investigate as to how long such malpractice was going on and who were the officials hands and gloves with unscrupulous importers, causing colossal loss of revenue to exchaquer and to review policy---Such open secret was perverse to the evidence on record---First Appellate Authority had not taken into consideration the grounds of the show-cause notice and gone beyond the terms of reference of show-cause notice---Any order which was based on the grounds not mentioned in the show cause notice was a void order.

Junaid Ghaffar for Appellant.

Abdul Aziz for Respondent.

Date of hearing: 17th May, 2013.

ORDER

GHULAM AHMED, MEMBER (TECHNICAL-II).---By this order, I will dispose of Customs Appeal No.K-1345 of 2011 filed bythe appellantagainstOrder-in-Appeals Nos.5849 to 5858 of 2011dated28-9-2011, passed by the Collector of Customs; (Appeals), Karachi.

2. I Brief facts of the case as reported are that Port Muhammad Bin Qasim had conducted the post clearance audit of luxury vehicles attracting high rate of duties/taxes. During the course of investigation, it was revealed that one Mr. Hazrat Noor son of Rahmat Noor, Village Hisar Tahsil Daggar, District Buner, Pakistan, imported one unit old and used Toyota Tundra Double Cabin Pickup Bearing Chassis No. 5TBRT54197S450891 from UAE under Personal Baggage Scheme and sought release thereof under PCT heading 8704.2190 through their Clearing Agent MessrsSea King Shipping Agencies office at Suit No.603, 6th Floor, Trade Avenue, Hasrat Mohani Road, Karachi (CHAL No. 739). The value of the vehicle was assessed Pak Rs.1,029,646 under the declared PCT heading 8703.2490 attracting Customs Duty @ 60%,Sales Tax @ 16%, Income Tax @ 4% and S.E.D. @ 1%. Thereafter, Mr. Hazrat Noor son of Rahmat Noor, Village Hisar Tehsil Daggar, District Buner, Pakistan paid duties and taxes amounting to Rs.620,383 (Rs.395,888 as Customs duty, Rs.168,912 as Sales Tax, Rs.48,985 as Income Tax, Rs.6,598 as SED) and the subject vehicle was allowed released accordingly. Upon post scrutiny of import documents of the subject vehicle further transpired that the actual price for the assessment of the subject vehicle isUS$ 25,790 MSRP as confirmed from the MSRP (Manufacturer's Suggested Retail Price). After deducting 15% VAT (in the light of Valuation Directorate Letter No.1/51/2009-VIIA/3077 dated 31-5-2010) and including ocean freight, value ascertained at $ 21,921 attracting duties and taxes as per calculation given below:--

Therefore, the vehicle was cleared on suppressed value which resulted in short recovery of duties and taxes of Rs.319,355. In the light of above facts, Mr. Said Wali Shah (Importer) and owner of Customs Clearing Agent Sea King Shipping Agencies (CHAL No. 739) are called upon to show cause why action may not be then required them under sections 32(1) and 32-A of the Customs Act, 1969, the Sales Tax Act, 1990, Federal Excise Act read with Income Tax Ordinance, 2001.

3.The Deputy Collector of Customs, MCC Port Muhammad Bin Qasim Karachi, did not agree with replies of respondent and passed the Order-in-Original No. 20 of 2010 (PQ) dated 18-2-2011 reproduced as under:--

I have gone through all the record available on case file and considered written as well as verbal submissions made before me during case proceedings which clearly suggest that the valuation criteria for arriving at was ignored at the time of assessment/ release of the subject vehicle resulting short realization of leviable duty/taxes amounting to Rs.319,355, as per detailed calculation sheet attached with the order which may be considered as integral part of this order. The subject transaction could not be termed as a closed transaction as the post scrutiny of the import documents and examination of the subject record well within the period of three years clearly indicate that the short realization of legitimate duty/taxes was made due to misconstruction as provided under section 32(3) of the Customs Act, 1969. From the foregoing discussion, it is established beyond any shadow of doubt that the importer Mr. Hazrat Noor son of Rahmat Noor, Village Hisar, Tehsil Daggar, District Buner, Pakistan Passport No. AE-9995281 along with his allies has committed an offence under sections 16 and 32(3) of the Customs Act, 1969 read with section 33 of the Sales Tax Act, 1990 and section 148 of the Income Tax Ordinance, 2001 and section 3(1) of the Imports and Export (Control) Act, 1959 which is punishable under Clause 156(1)(9) and (14) of the Customs Act, 1969 read with section 3(3) of the Import and Export (Control) Act, 1950. Accordingly, Mr. Hazrat Noor son of Rahmat Noor, Village Hisar, Tehsil Daggar, District Buner, Pakistan Passport No. AE-9995281 are directed to make the short realized payment of Rs.319,355 within fifteen days of the receipt of this order failing which shall render for action under section 202 of the Customs Act, 1969 read with Chapter XI (Recovery Rules) of the Customs Rules, 2001 notified vide S.R.O. 450(I)/2001 elated 18-6-2001 as amended from time to time.

4.The appellant being aggrieved with Order-in-Original No. 20 of 2010(PQ) dated 18-2-2011 filed an appeal before the Collector of Customs, (Appeals) Karachi. The Collector of Customs (Appeals) rejected the appeal as under:--

I have thoroughly examined the entire case record and have given very careful consideration to the arguments advanced before me. For me, the first and foremost issue involved in these cases is whether the learned counsel had been duly authorized by the importers of the vehicles to file the instant appeals. However, before attempting to find answer the above-stated issue I find it appropriate to place on record the apprehensions and doubts, which are in circulation with regard to mis-use of the law relating to import of vehicles under the Personal Baggage Scheme. It is an open secret that unscrupulous investors (usually car dealers) unlawfully purchase rights of import of luxury vehicles from poor overseas Pakistanis, themselves arrange import of such vehicles from abroad and clear the said by paying duty/taxes chargeable thereon out of their dubiously accumulated funds. Therefore, special care would need to be taken with regard to acceptance of any special powers of attorney in such cases. In the instant cases; the Papers/documents presented by the learned counsel suggest that all the ten (10) importers of the disputed vehicles, hailing from areas as far flung as Rahim Yar Khan (Southern Buner (Khyber Pakhtunkhwa); Awaran (Balochistan), Mardan (Khyber Pakhtunkhwa) Mohawan Chakra Sharif (Rawalpindi) etc. had authorized one Syed Hussain Qadri, resident of Crew Kat Line House No. 0-T-2/32, Mohalla Zehri, Mithadar Karachi (CNIC 42301-7805447-1) through special powers of attorney to interact with all departments including the Collector (Appeals) on their behalf. Interestingly, the aforementioned special powers of attorney do not appear to have been registered anywhere. It needs to be stated that (the learned counsel is neither in possession of copies of the passports and CNICs of the importers of the vehicles (purported appellants of the instant cases) nor a copy of CNIC of their so-called attorney. The vakalatnamas submitted by the learned counsel do not show even the names of the person who had authorized him and even the signatures of so-called attorney appear to be fake. Anyway, I fail to understand as to why persons coming from all parts of the country (such as Rahim Yar Khan, Buner, Awaran, Mardan, Mohawan Charka Sharif etc.) would appoint a resident of Karachi as their combined attorney. Clearly, there is no nexus between the importers of the disputed vehicles and their so-called attorney. It is, therefore, obvious that even the so-called attorney had been fielded by the unscrupulous investors (car dealers) and the same had been done to defeat the purposes of law relating to the import of old and used vehicles under the Personal baggage Scheme. The learned counsel, claiming to have been engaged by the so-called attorney, also appears to have been fielded by the unscrupulous investors with a view to defeating the purposes of law: the Personal Baggage Scheme does not allow selling of the right to import vehicles and the learned counsel appears to be engaged in protecting the interests of those unscrupulous investors who are busy in fraudulent activities. I, therefore, am not prepared to accept the so-called vakalatnamas, based on so-called special powers of attorney. It is strongly recommended that a thorough enquiry may be conducted into the matter with a view to unearthing the unscrupulous investors who appear to be engaged in violating the law with impunity. The best starting point of such proceedings may well be the holder of the so called special power of attorney Syed Hussain Qadri, resident of Crew Kat Line House No. O-T-2/32, Mohalla Zehri, Mithadar-Karachi holder of CNIC 42301-7805447-1. For the reasons staled above, I reject the appeals for Jack of locus standi on the part of the learned counsel.

5.Being aggrieved and dissatisfied with the Order-in-Appeal, the appellant filed the Instant appeal before this Tribunal on the grounds as under:--

(a)That the learned Collector Appeals has failed to appreciate the facts of the case and completely misread the law on the subject as well. The appeal has not been decided on merits of the case and technicalities have prevailed the substantive cause of justice which is deprecated in law. Hence the impugned order is liable to be set aside on this ground alone.

(b)That the learned Collector Appeals has admittedly decided the case on apprehensions and doubts in his mind which are not substantiated by facts of the case. Further, law does not permit to decided judicial matters on apprehensions in mind; as such the impugned order is illegal and liable to be ignored.

(c)That the Collector Appeals has completely misread the facts of the case as well as the law on the subject of power of attorneys. The said power of attorney is not required to be registeredunder the law and hence the Collector Appeals has misdirected itself in deciding the issue in such a manner. The power of attorney is only required to be registered if it is in respect of creating a right, title or interest in an immoveable property in terms of section 17(b) of the Registration Act, 1908. Hence the findings of the Collector Appeals are not sustainable in the eyes of law.

(d)That the CNIC as well as the copy of the Passport of the Importer/passenger were already annexed with memo. of appeal, and were also presented at the time of clearance of the consignment. Therefore the Collector Appeals has completely misread the facts and law on the issue and hence the impugned order is liable to be set aside.

(e)That the Collector Appeal, without any evidence on record or report of the hand writing expert has held that the signatures are fake and has also erred in law by not accepting the Vakalatnama signed by the said Attorney of the appellant. This act of the Collector Appeals is not based on any provision of law and is based on his whim and desire and unnecessary and irrelevant comments and observations regarding the appellant and his attorney as well as the undersigned Advocate. The said finding are biased and discriminatory as well, as the same Collector Appeal in an identical case pertaining to the same transaction has ignored this objection and has allowed an appeal signed by the Consultant of the appellant who in fact did not produced any power of attorney as required under the law. Therefore the impugned order is liable to be set aside on this ground as well.

(f)That respondent has erred in passing the order-in-original as the same has been passed in terms of section 32(3) of the Customs Act, 1969, whereas the show cause notice was issued in terms of section 32(1) of the Act ibid, hence the same is not legal and sustainable in the eyes of law and liable to be set aside.

(g)That even otherwise, the base price referred to in the Show Cause Notice is for "4x2 Tundra Long Bed 4.7L V8", whereas the subject Vehicle is "2WD standard pickup, Body size 145.7", 4.7L No of Doors 2, therefore the alleged MSRP is not relevant for the Vehicles in question and hence the show cause notice and the ONO are based on irrelevant material and cannot be sustained in the eyes of Law.

(h)Thatwithoutprejudicetotheabove,it issubmittedthatthe reference in the show-causenoticemadetoaletterdated31-5-2010 issued in respect of some other cars namely Cadillac Escalade is not at all applicable on the instant cases as the same has been issued on 31-5-2010, whereas all the vehicles recovered through the subject show cause notices were assessed and cleared much prior to this date and hence cannot be applied retrospectively on past and closed transactions to the interest and detriment of the appellant. This is a well settled law that any letter or order or a Notification which impairs or disturbs the vested rights of a person, can only be applied prospectively, and conversely, a beneficial order or notification, can always be applied retrospectively. Without prejudice, it is also submitted that it is needless to mention, that the same is not in respect of the same or identical Vehicles, which at the very first instance, were already assessed and cleared on the basis of Valuation criterion in vogue at that point of time. Therefore the impugned order is not maintainable on this basis as well.

(i)That the said letter of 31-5-2010 is in fact nothing but a communication of Minutes of the Meeting of a Committee, admittedly, formed to resolve the discrepancy in Values already determined for Cadillac Escalade Vehicles and has got nothing to do with the Vehicles in question, as the said minutes, do not contain any discussion about the subject Vehicles and therefore thesaidminutesand its communication through letterdated31-5-2010 cannot be made basis for reassessment or issuance of a show cause notice in terms of section 32 of the Customs Act, 1969. It is needless to mention that the said letter of 31-5-2010 pertains to American Cars whereas the instant case pertains to Japanese cars; hence the same is not relevant or applicable in the subject case.

(j)That even otherwise, the minutes of meetings conducted by officers of Customs and Valuation, cannot have any sanctity under the law viz a viz sections 25 and 25A of the Customs Act, 1969 and cannot strike down or withdraw in general all the previously determined values without any deliberations and discussions and even without any notice to the aggrieved parties. Therefore the subject notices and order passed thereon on the basis of said letter of 31-5-2010 are liable to be set aside as being without any lawful authority.

(k)That further to the above, it is submitted that the said letter of 31-5-2010 is also in complete violation of the procedure prescribed by FBR vide its CGO 14 of 2005 and since the instructions of FBR are binding on all field officers, any order passed or action taken in violation of the said instructions is void, illegal and not sustainable in the eyes of law.

(l)That the said letter of 31-5-2010 has been issued without any lawful authority as it is neither a Valuation Advice in the subject matter, nor the same is a Valuation Ruling in terms of section 25A of the Act ibid, and hence cannot be made basis of any assessment or Re-assessment in terms of section 32 of the Customs Act, 1969.

(m)That it is also a settled law that prices quoted on the internet are neither authentic nor reliable and are always subject to discounts and revisions, and do not reflect the transactional values, hence the same cannot be relied upon in violation of the mandatory provisions of section 25 of the Customs Act, 1969 read with the Valuation Rules notified vide S.R.O. 450(I)/2001.

(n)That without prejudice to the above and the validity of the said letter dated 31-5-2010, it is further submitted that in terms of Rule 110 of S.R.O. 450(I)/2001, under the prohibited methods of valuation it is specifically mentioned that no value shall be determined on the basis of price of goods in the domestic market of the country of export, except after allowingdeduction of local taxes and profits at each level of sale in the country of exportation. Here in the instant case a lump sum of 15% has been reduced or deducted for this purpose which is without any basis or support and does exportation. Here in the instant case a lump sum of 15% has been reduced or deducted for this purpose which is without any basis or support and does not reflects the actual taxes and charges to be deducted as such these values cannot be made basis of assessment of Vehicles as none of the appellant were issued notices nor there is any specific discussion about the prices obtained and such exercise being carried out by the said Committee is altogether Coram non-judice and liable to be ignored.

(o)That it is needless to mention again that all used Vehicles are examined 100% under 1st examination system and its valuation and assessment is done by the concerned Customs staff after collecting all information from local manufacturers and agents, international magazines and internet. Hence the method is fool proof and the appellant has no role to play in such assessment procedures which are governed by express orders of the Collectors and FBR throughCGO 14 of 2005. Therefore, the appellant cannot be implicated at this belated stage when there is no allegation as to the declaration, documents and other related issues, rather the whole case is based on a subsequent exercise carried out by the Valuation department in respect of altogether another Vehicle and issue. Therefore the impugned order is not maintainable.

(p)That it is further submitted that the very issuance of show cause notice in the instant case is illegal, without jurisdiction and mala fide as the consignment in question was duly examined, assessed to duty and out of charge by the respective appropriate officers of the respondent and had attained finality and could only be reassessed once the same is Reopened in terms of section 195 of the Customs Act, 1969 for which the appropriate officer is the Collector of Customs. In the instant case the show cause notice has been issued without any such order being passed and the jurisdiction assumed by the respondent is illegal and hence the whole case made out against the appellant is corum non judice and without any jurisdiction and liable to be set aside on this ground.

(q)That the assessment order passed in the instant case is an order within the meaning of section 80 of the Customs Act, 1969 which is subject to appeal before the Collector of Customs in terms of section 193 of the Customs Act, 1969. Since admittedly no appeal has been preferred in terms of section 193 of the Act ibid, the only remedy under the law was to Re-open the same in terms of section 195 of the Customs Act, hence the impugned order is illegal and tries to invade in to a passed and closed transaction.

(r)That the appellants crave leave of this honourable Tribunal to alter, add, modify and submit any further arguments at the time of hearing.

6.I have examined the case record and given due consideration to the oral arguments advanced by the both sides. It is being observed from the operative part of the impugned order that special care would need to be taken with regard to acceptance of any special power of attorney, In spite of taking special care about doing so, Collector Appeals without applying his judicious mind, denied the admissibility of the special power of attorney. It is evident from the record that subject power of attorney was duly registered/attested by the competent authority in as much as properly notarized as per prescribed law. The Vakalatnama submitted by the learned counsel is within the parameter prescribed in the Pakistan Legal Practitioners and Bar Council Rules, 1976. Rule 109(b) of the rules entitled the registered advocate to appear, act and plead the case before any Court or Tribunal in Pakistan. It is the duty of every advocate to uphold the dignity and high standing of his profession, as a member thereof. An advocate owes entire devotion to the interests of the client, zealous in maintenance and defense of his rights and the exertion of his utmost learning and ability, nothing be taken or withheld from him in discharge of them save by rules of law legally applied. The observation of the Collector Appeal in the impugned order about the question of "Locus Standi" on part of the learned counsel is devoid from law based upon assumptions, perverse fanciful and irrelevant with no evidence. A wrong inference was drawn from the evidence on record which is serious violation of prescribed Rules, law and statute knowingly committed by the adjudicating officer. The record clearly reflects the professional conduct of the advocate well with in parameters as defined in the legal practitioners and Bar Council Act, 1973.

7.Now taking up the merits of the case, the Collector Appeal in his impugned order has as disallowed the case on the misuse of law relating to the import of vehicles under personal Baggage Scheme. If this presumption is taken to be true then it, is for the Federal Board of Revenue to set up an enquiry as since how long this malpractice is going on and who are officials hands and gloves with the unscrupulous importers in this colossal loss of revenue to exchequer and review its policy. But this open secret is presumption and perverse to the evidence on record. The learned Collector Appeal has not taken in to the consideration the grounds of the show cause notice and gone beyond the terms of reference of show cause notice. Any order which is based on the grounds not mentioned in the show cause notice is void order as per settled law and observation made by the superior fora in plethora of judgments.

8.As per available record, it transpires that the impugned vehicle has been allowed release after due consideration as per old precedent during the time of presentation of document. Till the release of the subject vehicle, the respondent were at liberty to investigate and approach the relative department i.e. Director General of Valuation for its advice. In case of having any doubt or to allow swift clearance, the vehicle could have been allowed provisional release under section 81 of the Customs Act, 1969, till the respondent was satisfied to have come to right determination of value. In the present scenario, the impugned vehicle has been allowed release under section 80 of the Act, ibid with due consideration. Later on making out a case of short recovery of duty and taxes on observations of the letter dated 31-5-2010 which is a communication of the minutes of meeting. Beside the value assessed is based on the concept of Maximum Selling Retail Price available on the internet and websites in different parts of the world. The, application of the concept is in negation to the conception of determination of Custom Value under sections 25 and 25(1) of the Customs Act, 1969 and is alien to the scheme of things prescribed thereuder. This is so because reliance on this could not be made as different markets and retail outlets at different places even with in the same city cater to different buying capacity of the buyers and therefore cannot be made a bench mark. This concept of MSRP has already been termed void in this Tribunal Order in Customs Appeal K of 2013 titled Sheraz Shipping Company v.Collector of Customs PaCCS. The cardinal principles as are prescribed were not followed and plea taken by the respondent for the assessment on thebasis of M.S.R.P does not have any criteria under anywarrantoflawto be accepted. The guide lines as provided under CGO 14 of 2005 dated 6-6-2005 read with legal obligations under sections 25 and 25(1) have not been followed Stricto Senso.

9.In view of the foregoing discussions, the impugned order is patently infested with legal and factual improprieties without application of judicious mind and is based upon assumptions, presumption and inference deduced wrongly beyond the terms of inference by the show cause notice. Hence the impugned order is held unlawful and void. This being so, the appeal is allowed as no order to cost.

10.Order passed accordingly.

CMA/99/Tax(Trib.)Order accordingly.