SARWAR INTERNATIONAL through Proprietor VS ADDITIONAL COLLECTOR OF CUSTOMS, MCC PREVENTIVE, AFU JIAP Karachi, 2013 PTD-KARACHI-HIGH-COURT-SINDH 813 (2012)

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

----S.196---Question of law raised before Appellate Tribunal, but not decided---Jurisdiction of High Court---Scope---High Court could take such question to be arising from order of Tribunal particularly if same related to matter in controversy giving rise to a question of law---Principles.

Messrs Ahmad Karachi Halva Merchants and Ahmad Food Products v. The Commissioner of Income Tax South Zone, Karachi 1982 SCMR 489 rel.

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

----S.32---Misdeclaration of goods, charge of---Clearance of goods in year 2003 under PCT Heading 8471.8030 attracting 0% customs duty and sales tax---Issuance of show-cause notice in year, 2008 alleging against importer wilful attempt to evade leviable duty and taxes on basis of subsequent scrutiny of bill of entry revealing correct classification of goods under PCT heading 8525.2090---Validity---Due to absence of allegation of fraud, collusion or deliberate misdeclaration in such notice, provisions of S.32(3) of Customs Act, 1969 could be invoked and not subsections (1) and (2) thereof---Such notice had been issued after expiry of about four years, thus, provision of S.32(3) of Customs Act, 1969 could not be invoked beyond period of three years---Such notice for being time barred was, held, to be void.

Union Sport Playing Cards Company v. Collector of Customs and another 2002 MLD 130 and Collector of Customs (Preventive), Karachi v. Pakistan State Oil Karachi 2011 SCMR 1279 ref.

Zaheer-ul-Hassan Minhas for Applicant.

Ms. Dil Khurram Shaheen for Respondents.

Dilawer Hussain, Standing Counsel.

Date of hearing: 30th November, 2012.

JUDGMENT

AQEEL AHMED ABBASI, J.---Through this common judgment, we intend to dispose of the above two Special Customs Reference Applications in which following common questions of law have been framed, which according to learned counsel for the applicant, arise from the impugned judgment dated 6-6-2011 passed by the Customs Appellate Tribunal, Karachi in Customs Appeal No.K-416 of 2009 and Custom Appeal No. K-417 of 2009:--

(A)Whether in the facts and circumstances of the case, the show cause notice issued by the respondent is time barred and whether on the basis of a time barred show cause notice, the subsequent proceeding can be commenced or continued?

(B)Whether in the facts and circumstances of the case, a show cause notice purportedly issued under section 32(2) of the Customs Act, 1969 is a valid notice particularlywhenthereisnoallegationof misdeclaration, connivance, false statement, collusion offraud?

(C)Whether in the facts and circumstances of the case, the show cause notice which speaks only about inadvertent application of PCT heading could be termed to be a notice under section 32(2) of the Customs Act, 1969?

(D)Whether in the circumstances of the case the impugned order could be termed as lawful?

2.Brief facts as recorded by the Customs Appellate Tribunal in the impugned judgment are that the applicant imported consignments of "CDMA Wireless Terminal Telephone Sets" during the year 2003 and secured clearance thereof under PCT heading 8471.8030 attracting 0% Customs duty and sales tax, under claim of exemption in items of PCT heading 9934. Subsequently, scrutiny of the said bills of entry revealed that the goods were correctly classifiable under PCT heading 8525.2090, attracting customs duty @ 25% and sales tax @ 15% respectively. Case of wilful attempt to evade the leviable duty and taxes, and violation of the provisions of section 32(1) and (2) of Customs Act, 1969 and sections 3, 6, 7 and 26 of the Sales Tax, 1990 was made out against the importer and applicant. The amount of revenue loss was worked out to be Rs.80526260. The applicant and the clearing agent were accordingly charged under the relevant provisions of law.

3.Based on the reported facts of the case the applicant was issued show cause notice which culminated into passing of order-in-original dated 21-7-2008 whereby he was directed to pay evaded duty/taxes amounting to Rs.80.52 million (Customs duty Rs.43410389 sales tax Rs.32557793 income tax Rs.4558078), along with penalty of Rs.500000 and surcharge. The applicant feeling aggrieved and dissatisfied with the said order, filed appeal before the Collector (Appeals) Karachi, who vide Order-in-Appeal No.1784 of 2009 dated 22-5-2009 dismissed the appeal for being devoid of any merits, whereafter an appeal was filed by the applicants before the Customs Appellate Tribunal with a prayer to set aside the orders of the lower forums. However, the Customs Appellate Tribunal vide impugned judgment dated 6-6-2011 in Customs Appeals Nos.416 and 417 of 2009 has dismissed both the appeals. Applicants feeling aggrieved by both the impugned judgments has filed instant reference applications and have formulated above questions, which according to learned counsel, are questions of law and arise from the impugned judgments passed by the Customs Appellate Tribunal.

4.Learned counsel for the applicant has submitted that a substantial question regarding limitation of the show cause notice issued by the respondent in the instant matter was raised before the learned Customs Appellate Tribunal, which has not been dealt with in the impugned judgment nor any finding has been recorded in this regard. Learned counsel has readout the show cause notice dated 7-2-2008 issued by the respondents, which is available at page 115 annexure "D" of the file, and submitted that the said show cause notice was issued in respect of 16 consignments, which were imported by the applicant during the year 2003 under PTC heading 8471.8030, whereas last consignment was imported on 26-4-2003. Learned counsel for the applicant has submitted that though, reference to provision of section 32(1) and (2) of the Customs Act, 1969 has been made in the impugned show cause notice, however, there is no allegation against the applicant regarding any fraud, collusion or deliberate mis-declaration of PCT heading in the show cause notice. On the contrary, per learned counsel, it has been stated in para 2 of the show cause notice issued by the respondent that the PCT heading 8471.8030 read with 9934 declared by the applicant was correctly classifiable under PCT heading 8525.2090, and no allegation whatsoever of any deliberate mis-declaration, collusion or fraud was raised by the respondent in the impugned show cause notice. Per learned counsel, there is markable distinction between the provisions of subsections (1), (2) and subsection (3) of section 32 of the Customs Act, 1969. Per learned counsel, provisions of subsection (1) of the Customs Act, 1969, visualized a situation where any person, in connection with any matters of customs, makes or signs or delivers any declaration, notice, certificate or other document, which as per his knowledge is false, then he shall be guilty of an offence of mis-declaration. Similarly, provisions of subsection (2) of the Customs Act, 1969 visualized that, where, by reason of any such document or statement as aforesaid or by reason of some collusion, any duty or charge has not been levied or has been erroneously refunded, the person shall be served with the notice within five years of the relevant date requiring him to show cause as to why he should not pay the amount specified in the notice.

5.On the other hand, per learned counsel for the applicant, where, by reason of any inadvertence, error or mis-construction, any duty or charge has not been levied or has been short levied or has been levied, the person shall be liable to pay the said amount after issuance of notice within three years of the relevant date. It has been contended by the learned counsel that the case of the applicant at best, could fall, and would be taken cognizance by the respondents within the provisions of subsection (3), instead of provisions of subsections (1) and (2) of the Customs Act, 1969, as there is no allegation of fraud, collusion or deliberate act of misdeclaration, against the applicant in the impugned show cause. Per learned counsel, though the case of the applicant is equally sound on the merits as well, however, he will argue the matter strictly on the legal plain and on the point of limitation involved in the instant matter. Learned counsel for the applicant has also readout the provision of PCT headings 8471.8030, 8525.2090, 85.17 and 85.25 and has submitted that the applicant had declared the correct PCT heading as the applicant has imported all the components relating to information technology as shown in the brochure of the imported goods as available at page 183, whereas telephone was one of the components of such consignment. Learned counsel for the applicant in support of his contention has placed reliance in a judgment of Division Bench of this Court in the case of Union Sport Playing Cards Company v. Collector of Customs and another 2002 MLD 130 and Collector of Customs (Preventive), Karachi v. Pakistan State Oil Karachi 2011 SCMR 1279. After having examined difference between the provisions of subsections (2) and (3) of section 32 of the Customs Act, 1969 it has been held in the above judgments that the limitation of five years will be attracted only in such cases when there is allegation of fraud, collusion and deliberate act of mis-declaration, involving mens-rea, is attracted in the facts and circumstances of the case. Whereas, per learned counsel for the respondent, in the case of error or inadvertence in classification or application of PCT heading on the basis of some difference of opinion, the limitation of three years has been provided by the legislature for the alleged amount of duty and taxes. It has been concluded that under the facts and circumstances of the case, all the forums below have seriously erred in law and fact while invoking provisions of subsections (1) and (2) of the Customs Act, 1969, which were not attracted in the facts and circumstances of this case, hence the order passed in this regard including the judgment of the Customs Appellate Tribunal are liable to be set aside and the questions proposed through the instant reference are required to be decided in favour of the applicant and against the respondents.

6.Conversely, Ms. Dil Khurram Shaheen, learned counsel for the respondent has supported the impugned judgment passed by the Customs Appellate Tribunal and submitted that the goods imported by the applicant were not correctly classifiable under PCT heading 8471.8030. On the contrary, the same were liable to be classified under PCT heading 8525.2090.Ithasbeenfurthercontendedthatthedutyandtaxescanbe collected even after expiry of time period provided under the Statute. Per learned counsel, though the case of the applicant falls within subsection (2) of section 32 of the Customs Act, 1969, however, recovery of the dues in respect of duty and taxes can be made at any point of time irrespective of the limitation provided under the Statute for issuance of show cause notice or to pass order-in-original. In support of her contention, learned counsel for the respondent has placed on record copy of order dated 29-8-2012 passed in Civil Petition No.673-K of 2009 and submits that the Hon'ble Supreme Court has held that the recovery of duty and taxes can be made even after expiry of period of limitation as provided under the Statute. While concluding her arguments, learned counsel for the respondent has submitted that the impugned judgment of the Customs Appellate Tribunal does not suffer from any error or illegality, therefore, the reference application of the applicant shall be dismissed.

7.We have heard both the learned counsel, perused the record and have also examined the case-law relied upon by the learned counsel for both the parties. From perusal of the impugned judgment passed by the Customs Appellate Tribunal, we have noted that the applicant has specifically argued on the ground of limitation in terms of provisions of subsections (2) and (3) of the Customs Act, 1969, however, it appears that no discussion has been made by the Customs Appellate Tribunal on this legal ground nor any findings has been recorded by the Customs Appellate Tribunal on this point. We may observe that the ground raised before the Customs Appellate Tribunal regarding application of provisions of subsections (2) or subsection (3) of section 32 of Customs Act, 1969 and application of limitation period provided by the legislature was a legal question, which goes to the very root of the proceedings undertaken by the respondent, which aspect appears to have escaped the attention of the Customs Appellate Tribunal. We may observe that where a question of law has been raised before the appellate tribunal, but not decided, can be taken as a question arising from the order of appellate tribunal, particularly if it relates to the controversy involved in the matter which gives rise to a question of law. Reference in this regard can be made to the case of Messrs Ahmad Karachi Halva Merchants Ahmad Food Products v. The Commissioner of Income Tax, South Zone, Karachi reported as 1982 SCMR 489.

8.Perusal of the contents of show cause-notice issued by the respondent to the applicant shows that there is no allegation regarding deliberate act of mis-declaration, fraud or collusion has been levelled against the applicant. On the contrary, it has been stated in the show cause notice that the consignments of the applicant were correctly classifiable under PCT heading 8525.2090 instead of PCT heading 8471.8030 read with 9934 as declared by the applicant. During the course of argument, learned counsel for the applicant also referred to various letters written by the applicant to the Collector of Customs, wherein after having given the detail of the infrastructure equipments for building CDMA Wireless Local Loop Network under a contract with PCTL sought confirmation regarding classification and applicable rates of duty and taxes on subject consignments. Such letters were responded by one Deputy Collector of Customs, Appraisement Group-VI, vide his letter dated 8-8-2001, addressed to the Chief Executive of the applicant, wherein it was stated that subject Wireless Access System mainly comprises of networking equipment consisting of radio-modems, routers, personal computers, adopter units and controllers etc. Such equipment is classified under PCT heading 9908.0080. This correspondence reflects that the applicant did not intend to mis-declare the subject consignment under a wrong PCT heading, whereas, import of such equipments under thePCT heading, declared by the applicant on the GDs was never disputed by the custom department. The respondent neither alleged nor brought on record anything which may suggest that the applicant has knowingly, with an intention to evade duty and taxes, has furnished inaccurate particulars or has committed any act of mis-declaration, fraud or collusion.

9.We are of the view that the learned counsel for the applicant has rightly placed reliance in the case of Union Sport Playing Cards Company v. Collector of Customs and another reported as 2002 MLD 130, wherein a Division Bench of this Court while examining the provisions of subsection (2) and subsection (3) of section 32 of the Customs Act, 1969 has resolved identical controversy in the following terms:--

Here the discussion is only for the purpose of ascertaining the period of limitation and determining whether the show-cause notice falls under subsection (3), subsection (2) or subsection (1) of section 32 of the Customs Act, 1969. The facts discussed elaborately clearly establish that neither there is any case of false statement or misdeclaration or filing of false certificate or any other documents on the part of appellant nor the department has alleged any collusion by reason of any document or statement referred to in subsection (1) of section 32 and consequently, the show-cause notice could be issued by the respondent No.1, under subsection (3) of section 32 of the Customs Act, within a period of six months from the relevant date which is defined in subsection (5)(a) of section 32, to be the date on which the order for clearance of the goods is made. The show-cause notice has admittedly been issued after six months of the relevant date and consequently it was barred by time. We are, fortified in our views by an earlier judgment of this Court in the case of PIA v. CBR, 1990 CLC 868, in which his lordship Mr. Justice Saeeduzzaman Siddiqui, J, (as his lordship then was) held that when there is no allegation made by the Customs Department against the petitioner about any fraud, misrepresentation or false declaration at the time of obtaining of clearance without payment of customs duty or sales-tax, it was a case of error or inadvertence on the part of customs authorities and, therefore, the show-cause notice issued after expiry of period prescribed in section 32(3) of the Customs Act, was beyond time, void and of no legal effect and all orders passed subsequently in pursuance thereto were without lawful authority.

Consequent to above discussion, it is held that in the facts and circumstance of the case, the show-cause notice issued by the respondent No.1, falls within subsection (3) of section 32 of the Customs Act, 1969. The notice has been admittedly issued after period of six months of the relevant date i.e. clearance of the said vehicle and as such the show-cause notice is barred by limitation. The said notice is held to be void and all subsequent proceedings in pursuance thereto are also held to be void, unlawful and without any legal authority."

10.Reliance placed by the learned counsel for the respondent on un-reported judgment of the Hon'ble Supreme Court bearing Civil Petition No.673-K of 2009 in the case of Messrs Paramount Spinning Mills Ltd. v. The Customs, Sales Tax and Central Excise Appellate Tribunal and another is misconceived as the facts of the instant case are entirely distinguishable from the facts of the above referred judgment. In the referred judgment, the controversy was related to the recovery of outstanding dues and there was no application of the provisions of section 32 of the Customs Act, 1969. On the contrary, the Hon'ble Supreme Court concurred with the findings as recorded by the learned Judge of High Court whereby it was held that under the circumstances even the show cause notice or the order-in-originalwas notneededtocollecttheseduesandsimpledemandnoticewouldhavesufficed.Consequently,itwasheldthattheactionrelatingtothe recovery of outstanding dues was not charged by period of limitation.

11.In view of hereinabove facts and circumstances of this case, we are of the opinion that since no allegation of fraud, collusion or deliberate misdeclaration was raised in the show cause notice, the case of the applicant was not covered under the provisions of subsections (1) and (2) of the Customs Act, 1969, whereas at best, the provisions of subsection (3) of section 32 of the Customs Act, 1969, could have been invoked. However, since admittedly, the show-cause notice has been issued after a lapse of about four years i.e. beyond the period of limitation of three years as provided under subsection (3) of section 32 of the Customs Act, the said provisions could not be invoked in the case of present applicant. We are of the view that the show cause notice issued by the respondent in the instant case falls within subsection (3) of section 32 of the Customs Act, 1969. The notice has been issued after a period of more than four years and as such the show cause notice is barred by limitation. The said notice is held to be void and of subsequent proceedings in pursuance thereto are also held to be void and without any legal authority. Accordingly, the proposed question (A) is answered in affirmative, whereas the proposed questions (B), (C) and (D) are answered in negative, all in favour of the applicant and against the respondents.

12.Accordingly, both the Reference Applications are allowed in the above terms and the Registrar of this Court is directed to send a copy of this judgment under the seal of the court to the Customs Appellate Tribunal, Karachi, who shall pass orders to dispose of the cases in conformity to the decision of this Court.

SAK/S-9/KOrder accordingly.