KAKA TRADERS, KARACHI VS DIRECTORATE GENERAL OF INTELLIGENCE, 2013 PTD-CUSTOMS-APPELLATE-TRIBUNAL-KARACHI 2258 (2013)

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

----Ss.32(1), (2) & 156(1)---Sales Tax Act (VII of 1990), Ss.7A(2), 33, 34 & 36---Income Tax Ordinance (XLIX of 2001), Ss.148, 161(2) & 162---Show-cause notice---Recovery of evaded amount of sales tax and short-levied withholding tax on imports---Scope---Contention was Customs authorities were not designated as an officer of inland revenue, as such they were notempoweredtoinvestigateanymatterin respect of Sales Tax and Income Tax---Show-cause notice and penalty order passed by customs officers, therefore, was in excess of jurisdiction---Validity---Customs authorities were empowered to make recovery of the escaped amount of sales tax and withholding income tax on imports.

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

----Ss.32(1), 2, 32-A, 207, 208, 209 & 194-A---Appeal before Appellate Tribunal---Misdeclaration---Evasion of tax and duties---Show-cause notice---Personal penalty on Clearing Agent without invoking the penal provision in the show-cause notice---Scope---Importer was served with a show-cause notice for evading minimum value addition tax by disposing of the impugned goods in the same state without putting them into further process of manufacturing---Customs official while passing order of recovery against importer also imposed personal penalty on Clearing Agent for not fulfilling its responsibilities under law---Contention of the appellant (Clearing Agent) was that in absence of any mala fide on the part of Clearing Agent the impugned penaltycould not be imposed and opinion framed by the adjudicating officer was without any evidence---Validity---Clearing Agent had filed the goodsdeclarationanddischargedhisresponsibilitycorrectly---Actof connivance as charged in the show-cause notice had not been specified---Neither specific charge of connivance as to the role of Clearing Agent had been mentioned nor the relevant provisions of Ss.207, 208 & 209 of the Customs Act, 1969 had been invoked---Invoking penal provisions of law without mentioning the same in show-cause notice was void---Appeal was allowed.

Collector Central Excise and Land Customs and others v. Rahmdin 1987 SCMR 1840; D.G. Khan Cement Co., Ltd., Lahore v. Collector of Customs, Sales Tax and Central Excise Multan 2003 PTD 1797 and Messrs Kamran Industries v. Collector of Customs PLD 1996 Kar. 68 rel.

2010 PTD (Trib.) 1636; 2009 PTD 1112; 2010 PTD 465; PLD 1971 SC 184; 1992 ALD/449; 2004 PTD 624; PLD 1976 SC 514; PLD 2001 SC 514; 2002 PTD 2457; PLD 1971 SC 61; PLD 1973 SC 236; E.A. Avans's case PLD 1964 SC 536; 2001 SCMR 838; 2003 SCMR 1505; Director General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129; 2009 PTD 1507; PLD 1996 Kar. 68; 2006 PTD 978; 2002 PTD 976; 2002 SCMR 312; 2005 PTD 492; 2010 SCMR 431; 1990 SCMR 1072; 1990 SCMR 1059; 1975 SCMR 352; PLD 1995 SC 396; 1998 SCMR 1404; PLD 1997 SC 5829; PLD 1997 SC 334; 1997 SCMR 1874; 2005 YLR 1019; 2007 PTD 2500; 2004 PTD 1973; 2005 YLR 1719; 2003 PTD 777; 2003 PTD (Trib.) 2369; 2002 MLD 357; 1983 CLC 2882; 2005 PTD 2519; 2005 PTD 1189; 2003 PTD 2369; PLD 1995 SC 272; PLD 1970 SC 158; PLD 1970 SC 173; 1984 SCMR 1014 and 2012 PTD (Trib.) 619 ref.

Nadeem Nirza for Appellant.

Saud Khan (I.O.) for Respondents.

Date of hearing: 23rd July, 2013.

ORDER

GHULAM AHMED, MEMBER (TECHNICAL-II).---By this order, we will dispose off Customs Appeal No.K-617/2012 filed by the appellant against Order-in-Original No.119/2012(A) dated 16-11-2012, passed by the Additional Collector-IV MCC Appraisement Customs House Karachi.

2.Brief facts of the case as reported by the Directorate General Intelligence and investigation, FBR Regional Office Karachi, are that Manzoor Nabi Qureshi (NTN 1357057) of MessrsMares International, 215, 2nd Floor Panorama Center, Karachi had imported 25 consignments of Miscellaneous taxable goods/ ready to sale food/spices items including shelled almonds, small Cardamom, Cloves, Inshell/Ground Nut, Amla andBlack Pepper etc. (Detail of the items and GD Nos.asmentionedin the statement attached with show-cause notice), through their Clearing Agents Messrs Ahsan International Corporation (CHAL No. 189) KarachiMessrsA Qayyum and Sons (CHAL No.1036), Karachi and MessrsKaka Traders (CHAL No.929), Karachi, meant for disposal in the local market in the same state other than raw material, without payment of minimum value addition tax. The goods so imported were subsequently sold out in the local Market by the importer to the retailers and other unregistered persons which resulted into the evasion of minimum value addition sales tax and resultant short payment of withholding tax in violation of Sales Tax Special Procedure Rules, 2007 notified vide S.R.O. 480(I)/2007 read with S.R.O. 525(I)/2008 dated11-6-2008 in connivance with the aforementioned clearing agents. According to the contravention report submitted by the Directorate General Intelligence and Investigation FBR Regional Office Karachi, the unit was found non existent at the registered address House No. M-1/2 Pak Modern Colony Manghopir Road SITE Karachi. The owner of premises informed that Messrs Mares International had vacated the premises almost three years ago and before vacating the premises the company never dealt in spices/food items but dealt in textile/hosiery meaning thereby that the under reference items imported by said importers which were got cleared without payment of minimum value addition tax were supplied to local/up country markets in same state and the subject 25 consignments released from the MCC (Appraisement) whereon the evaded amount of value addition tax and short levied withholding tax has been worked out as Rs.39,09,202 which is recoverable from importers under the relevant provisions of the Sales Tax Act, 1990 and the Income Tax Ordinance, 2001, further read with the relevant rules made there-under besides penal action warranted against them under the law. The importer in connivance of their aforementioned clearing agents, by clearing the under reference goods without payment of leviable minimum value addition tax @ 2% & 3% and withholding tax @ 5% evading thereby government's legitimate levies amounting to Rs.39,09,202 have, thus committed an offence of mis-declaration and fiscal fraud in terms of sections 32(1) and (2) 32A, 79 and 80 of the Customs Act, 1969 read with sections 6 and 7 A (2) of the Sales Tax Act, 1990 further read with Rules 58-A and 58-B of Sales Tax Special Procedure Rules, 2007 vide S.R.O. 480(I)/2007 as amended vide S.R.O. 525(I)/2008 dated 11-6-2008 read with sections 148 and 161(2) of the Income Tax Ordinance, 2001 punishable under clauses 14 and 14A of section 156(1) of the Customs Act, 1969 read with sections 33, 34 and 36 of the Sales Tax Act, 1990 and 148 of the Income Tax Ordinance, 2001.

3.The Additional Collector-IV of Customs, Karachi, disagreed with the replies of show-cause notice therefore, passed an Order-in-Original No. 119/2012(A) dated 16-11-2012, reproduced as under:--

"After going through the case record and the verbal submissions of some of the parties have come to the conclusion that the offence of rills-declaration stand established. Importer has failed to come up with solid grounds supported by the evidential record showing the manufacturing process, if any, carried out by him on the imported goods and their disposal in the manufactured form. The importer produced no such record rather relied the technicality of the issue which also is not in their favour. I therefore order the recovery of the evaded amount of minimum value addition sales tax and short paid withholding tax to the tune of Rs.39,09,202 from the Importers. A personal penalty of Rs.50,000 is also imposed upon the proprietor of the company namely Mansoor Nabi Qureshi. I also impose personal penalty of Rs.50,000 each on the Clearing agents namely MessrsAhsan International Corporation CHAL No. 189 Karachi, Messrs A Qayyum & Sons (CHAL No.1036) Karachi and Messrs Kaka Traders (CHAL No.929) Karachi, as they have failed to fulfill their responsibilities under the law and instead facilitated the importer to carry out their misdeed for long time in causing the colossal loss to the government exchequer."

4.Being aggrieved and dissatisfied with the Order-in-Original, the appellant filed the instant appeal before this Tribunal on the grounds as under:--

(a)That the respondent No. 1 (here-in-after DGI&I-FBR) are not designated as an "Officer of Inland Revenue" under the provision of section 30 of the Sales Tax Act, 1990 and section 207 of the Income Tax Ordinance, 2001. As such they are not empowered to investigate any matter in respect of Sales Tax and Income Tax under the Provision of section 36 of the Sales Tax Act, 1990 and section 162 of the Income Tax Ordinance, 2001, rendering there act of preparation of contravention report as without power/jurisdiction, hence "coram non judice".

(b)That similarly respondent No.2 (here-in-after Additional Collector of Customs), is also not designated an "Officer of Inland Revenue" under clause (c) of subsection (iii) of section 25 of the Sales Tax Act, 1990 and section 120 of the Income Tax Ordinance, 2001 and as such he is not empowered to adjudicate the cases of short recovery tax falling under the provision of section 36 of the Sales Tax Act, 1990 and Income Tax falling under section 162(1) of Income Tax Ordinance, 2001. Hence, by issuing the instant show-cause notice he usurped the powers of "Officer of Inland Revenue" rendering the show-cause notice without power/jurisdiction, hence void and ab initio by virtue of coram non judice.

(c)The show-cause notices and orders-in-original were issued and assed in excess of jurisdiction, the respondent No. 2. For adjudication, the power has to be exercised by the authority under section 179 of the Customs Act, 1969 in the cases involving "confiscation of goods, or recovery of duty and taxes not levied, short levied or erroneously refunded imposition of penalty or any other contravention under this Act or the Rules made thereunder". The amount involved in the subject case is Rs.3,909,202.00, which is more than Rs.3,000,000.00, which falls under the powers of Collector of Customs. To the contrary, the respondent No. 2 issued the show-cause notices and passed orders-in-original while usurping the powers of his Superior which is not permitted under law. Rendering both suffers from lack of powers/jurisdiction, hence, ab inito null and void and coram non judice as held in Sales Tax Appeal No. 444/03, S.T.A. No.465/07, 2010 PTD (Trib.) 1636, 2009 PTD 1112, 2010 PTD 465, PLD 1971 SC 184, 1992 ALD 449, 2004 PTD 624, PLD 1976 Supreme Court 514 and PLD 2001 Supreme Court 514.

(d)That it is settled proposition of law that a thing should be done as it is required to be done or not at all as held by Superior Court of Pakistan in umpteenth reported judgments. The Hon'ble High Court of Sindh held in 2002 PTD 2457 that "the thing should be done as they are required to be done, or not at all". Whereas, the Apex Court held in judgment PLD 1971 Supreme Court 61 "neglect of plane requirement of an absolute statutory enactment prescribing how something is to be done, would invalidate thing being done in some other manner". In PLD 1973 Supreme Court 236 "it is now well established that where an inferior Tribunal or Court has acted wholly without jurisdiction or taken any action "beyond the sphere allotted to the Tribunal by law and therefore outside the area within which to law recognizes a privilege to err" then such action amounts to a "usurpation of power warranted by law" and as such an act is a nullity that is to say the result of a purported exercise of authority which has no legal effect whatsoever" in such a case, it is well established that a Superior Court is not bound to give effect to it." The said ratio was maintained, in the case of E.A Avans reported as PLD 1964 SC 536 "where it has been unambiguously and categorically held that if the doing of a thing is made lawful in a manner then doing of that thing in conflict with the manner prescribed will be unlawful." The Hon'ble Apex Court in 2001 SCMR 838 and 2003 SCMR 1505 held that "while considering the impact of violation or non-observance of the method prescribed by law for doing an act in a particular manner or mode, such provision of law is to be followed in letter and spirit and achieving or attaining the objective of performing or doing of a thing in a manner other than provided by law would not be permitted. The same observation has been made by the Hon'ble Supreme Court of Pakistan in the Civil Petition filed by Director General of Intelligence and Investigation and others v. MessrsAl-Faiz Industries (Pvt.) Ltd. and others reported as 2006 SCMR 129 "if the law had prescribed method for doing of a thing in a particular manner such provision of law is to be followed in letter and spirit and achieving or attaining the objective of performing or doing of a thing in a manner other than provided by law would not be permitted.". The super structure built on such foundation no matter how strong it is has to fall. Refer to PLD 1996 Karachi 68, which laid down that "where the initial order or notice was void all subsequent proceedings, orders or super structure built on it were also void. In reported judgment 2006 PTD 978R it is held that "the entire proceeding initiated by the adjudicating authority and further super structure thereon including the order passed by the learned Tribunal are without jurisdiction void and in-operative." The Apex Court in PLD 1971 Supreme Court, held that "order of a Tribunal found to be without jurisdiction---all successive orders based upon it illegal and liable to be quashed". In the light of law laid down, the contravention report prepared by the respondent No.1 and show-cause notice/Order-in-Original issued/passed by respondent No. 2 are ab-initio, illegal and void and needs to be struck down as of no legal effect.

(e)That irrespective of the referred in above gross illegality, it is appropriate for the appellant to state that the declaration whatsoever transmitted through the GD's to MCC of Appraisement under section 79(1) of the Customs Act, 1969 by the appellant for the clearance of the goods imported by MessrsMares International, Karachi were based on the L/C, invoices, packing list and B/L and that has not been found incorrect in any material particular as evident from the GD's and endorsed examination report, Instead the crux of matter is that the importer obtained the clearance of the goods on the basis of his status as "manufacturer" and the said status was allowed to him by the FBR and the effect of the same was fed accordingly in the database by the FBR against its NTN & STRN. Appellant just entered the NTN number in the system and rest of the data was picked by the system itself. Nothing can be attributed to appellantinthisregard he has to rely upon the statusfedinthe system and the system itself honoured that and so the officers of customs passing assessment/clearance order under sections 80 and 83 of the Customs Act, 1969, No question of appellant connivance or collusion is apparent in the light of referred facts.

(f)That it is also imperative for the appellant to state that it is ridiculous on the part of respondents Nos. 1 and 2 in regards to formed opinion that the appellant "connived and colluded" with the importer MessrsMares International, Karachi on the basis of available data on the GD's. When the custom officials who completed the assessment order under section 80 of the Customs Act, 1969 and pass order of clearance under section 83 ibid, while relying upon the available data of the importer in the data base of the system, they are let escort free, despite standing on the same pedestal. The said of the respondent amounts to giving a partial and differential treatment to the appellant. A person placed at the same pedestal cannot be treated differently as it would constitute a negation of Articles 4 and 25 of Constitution of Islamic Republic of Pakistan. The Honourable High Court of Sindh in its reported judgment 2002 PTD 976 held that "vacating the show-cause notice in one case and taking action against another person in similar situation, is amount to discrimination which is hit by Article 25". In reported judgment 2002 SCMR 312 and 2009 PTD 1507 the Hon'ble Superior Courts have observed that "there exists no power to target incidence of tax in such a way that similarly placed person be dealt not only with this similarly, but discriminatingly". Whereas, in reported judgment 2005 PTD 492 the Hon'ble Supreme Court held that "A facility allowed to some one and denied to other is discrimination". The Apex Court further held in reported judgment 2010 SCMR 431 that:

"Doctrine of equality, as contained in Art. 25 of the Constitution, enshrine golden rules of Islam and states that every citizen, no matter how high so ever, must be accorded equal treatment with similarly situated persons---State may classify persons and objects for the purpose of legislation and make laws applicable only to persons or objects within a class---In fact all legislations involve some kind of classification whereby some people acquire rights or suffer disabilities whereas others donot---What however, is prohibited under principle of reasonable classification, is legislation favouring some within a class and unduly burdening others---Basic rule for exercise of such discretion and reasonable classification is that all persons placed in similar circumstances must be treated alike and reasonable classification must be based on reasonable grounds in given set of circumstances but the same in any case must not offend spirit of Art. 25 of the Constitution."

(g)The treatment given to the appellant against the principle enshrined in Articles 4 and 25 of the Constitution of Pakistan violates the settled law laiddownbytheSuperiorCourtsintheir judgments reported as 1990 SCMR 1072, 1990 SCMR 1059, 1975 SCMR 352, PLD 1995 SC 396, 1998 SCMR 1404, PLD 1997SC 5829, PLD 1997 SC 334 and 1997 SCMR 1874.

(h)The order passed by the respondent No. 2 shows that it is not a proper order without application of judicial mind and provision of the Act. Instead it is non speaking order and did not conform to the mandated requirement of S.24-A of the General Clauses Act, 1897 and this stood validated from the grounds of the appellant incorporated in para. 2 of the order. Wherein, the grounds of the appellant were incorporated for extending the order but no rebuttal on those including on the relied upon decision/judgments of the Superior Judicial Fora was given and not the substantial reasons for discarding those. This shows that the order passed was not on judicious consideration instead on personal and biased opinion, rendering it illegal void and arbitrary and a result of misuse of authority vested in him. No room was available for such illegal, void and arbitrary orders in any system of law. If any authority Court or Tribunal gave a finding of fact which was not based on material available on record was illegal arbitrary by virtue of not discussing and considering the material available on record it became perverse and a perverse finding of fact which is violative of the established principle of appreciation of evidence on record rendering these not sustainable in law. The principle that every judicial or quasi-judicial finding should be based on reasons containing the justification for the finding in the order itself is an established principle of dispensation of justice. The Adjudication/Appellate orders are being violation of basic principle of the good governance and mandatory requirement of Section 24A of the General Clauses Act, is not only illegal and void but also not sustainable under law. The said position is also fortified by the judgments of Superior Courts reported as 2005 YLR 1019, 2007 PTD 2500, 2004 PTD 1973, 2005 YLR 1719, 2003 PTD 777, 2003 PTD (Trib) 2369, 2002 MLD 357, 1983 CLC 2882, 2005 PTD 2519, 2005 PTD 1189, 2003 PTD 2369 and PLD 1995 SC (Pak) 272, PLD 1970 SC 158, PLD 1970 SC 173, 1984 SCMR 1014 and 2012 PTD (Trib) 619.

6.We have examined the case record and heard the both sides. The consultant for the appellant craved for setting aside of the impugned order on the following grounds:--

(i)That show-cause notice and Order-in-Original have been issued and passed in excess of jurisdiction as the custom officers are not declared recovery officers in terms of section 36 of the Sales Tax Act, 1990 and section 162 of the Income Tax Ordinance, 2001, in as much as the pecuniary limit of the adjudicating officer has been 3 million under section 179 of the Customs Act, 1969 whereas the value of the present case amounts to Rs.3.90 million which is the jurisdiction of the Collector. A number of cases citation have been referred to in support of this argument.

(ii)In absence of any mala fide on part of his client being a clearing agent, a partial and differential treatment has been meted out against him. His client has submitted the documents furnished by the principal and has been cleared by the assessing officer under Section 80 of the Act, ibid. Hence without establishing any nexus between the role of clearing agent and the importer, the opinion framed by the adjudicating officer that the appellant "Connived and Colluded" with the importer Messrs Marcs International Karachi is biased and without any evidence. Hence it is hit by Articles 4 and 25 of the Constitution of Islamic Republic of Pakistan, 1973.

7.During the hearing proceedings it was further pointed out and argued by the consultant that show-cause notice doesn't mention any proviso and clause related to the Customs Agent that is sections 107 and 108 of the Customs Act, 1969 read with Chapter-VIII of Customs Rules, 2001.

8.As to the first issue, the Tribunal has more than one occasion observed that the custom authorities are empowered to make recovery of the escaped amount of sales tax and with holding Income Tax on Imports under the both statutes. Reliance is placed upon this Tribunal orders in Custom Appeal No.K-741 of 2010, and Custom Appeal No.K-685 of 2010.

9.Further as transpired, it is a primarily a case made out against the importer for misuse of benefit of S.R.O. 480(I)/2007 dated 9-6-2007 and S.R.O. 525(I)/2008 dated 11-6-2008 for evading minimum value addition tax i.e. sales tax and with holding tax, by disposing of the impugned goods in the same state without putting them into further process of manufacture as required under the both notifications supra. The appellant has filed the GD under section 79(1) of the Customs Act, 1969 and discharged his responsibility correctly. The act of connivance as charged in the show-cause notice has not been specified. Evidently, neither specific charge of connivance as to the role of appellant has been mentioned nor the provisions of sections 207, 208, and 209 of Customs Act, 1969 read with chapter of the Customs House Agent Rules, 2001 notified under S.R.O. 450(I)/2001 dated 18-6-2001 have been invoked. It is settled law that where provisions in orders have been invoked without their mention in the show-cause notice, such orders are held void of law. In case of Collector Central Excise and Land Customs and others v. Rahmdin reported as 1987 SCMR 1840, the Apex Court has held that:--

" .... Order of adjudication being ultimately based on a ground which was not mentioned in the show-cause notice was palpably illegal on the face of it."

7.The Honourable High Court of Lahore in case of D.G Khan Cement Co, Ltd. Lahore v. Collector of Customs, Sales Tax and Central Excise Multan reported as 2003 PTD 1797 has observed as follows:--

"Authority issuing a show-cause notice would have to make out a case in the show-cause notice itself as to under which provision of act, the case followed have to incorporate the grounds and reasons in the show-cause notice very clearly and explicitly so that it could be ascertained that show-cause notice falls under section 36(1) or 36(2) of the Sales Tax Act, 1990. Failure on the part of authority issuing show-cause notice in this behalf would render the same invalid and illegal."

8.In case of Messrs Kamran Industries v. Collector of Customs reported as PLD 1996 Karachi 68 has held that:--

"Where show-cause notice is defective all subsequent proceedings will be void including the appellate orders. Therefore, show-cause notices should not be issued mechanically, but should exhibit a proper application of mind by the issuing authority."

9.In addition to above the nexus of the appellant with the importer in terms of sections 32(1), 32(2) and 32A has not been shown or established with evidence in as much as invoking the three different penal provisions of law simultaneously in itself reflects the mechanically worded approach as each provision has different implications of law and circumstances.

10.In view of the aforesaid discussion, the appeal is allowed as no order to cost.

11.Order passed accordingly.

JJK/150/Tax(Trib.)Appeal allowed..