ADDITIONAL COLLECTOR OF CUSTOMS VS MUHAMMAD HUSSAIN, 2016 PTD-KARACHI-HIGH-COURT-SINDH 2748 (2016)

Customs Act (IV of 1969)---

----Ss. 194-A(3) & 196---Baggage Rules, 2006, R. 17---Notification No.S.R.O.499(I)/2009, dated 13-6-2009---Reference---Commercial import---Fine and penalty, remission of---Violation of Baggage Rules, 2006---Appellate Tribunal remitted in full imposition of fine and penalty on commercial imports made by importer in violation of Baggage Rules, 2006---Validity---Consignment imported under Baggage Rules, 2006, in commercial quantity was liable to be released on payment of duty and taxes on payment of fine at rate of 20% in terms of Notification No.S.R.O. 499(I)/2009, dated 13-6-2009, whereas in absence of mens rea imposition of penalty was not justified---Importer was liable to make payment of duty and tax and redemption fine at the rate of 20% in terms of Notification No.S.R.O. 499(I)/2009, dated 13-6-2009, whereas remitting the entire fine and penalty by Appellate Tribunal was contrary to legal position emerged in such matters---Reference was disposed of accordingly.

Ghulam Haider Sheikh for Appellant.

Ms. Dilkhurram Shaheen for Respondent.

ORDER

AQEEL AHMED ABBASI, J.---Through above special custom reference applications, filed by the applicant department against a common impugned Order dated 08.11.2010 passed by the Customs, Excise and Sales Tax Appellate Tribunal Bench-II, Karachi, in Customs Appeals Nos.K-538/2010 and K-539/2010, in the case of both the respondents, initially the applicant department had proposed ten questions, however, during the course of arguments, by consent of both the learned counsel for the parties, following question has been formulated, which arises from the impugned order passed by the Appellate Tribunal, whereas, the decision on such questions, will decide the subject controversy in substance:--

"Whether on the facts and circumstances of the case, the Customs, Excise and Sales Tax Appellate Tribunal Bench-II, Karachi, was justified to remit in full imposition of fine and penalty on the commercial imports made by the respondents in violation of Rule 17 of Baggage Rules, 2006 by invoking the provisions of S.R.O. No.574(I)2005 dated 06.6.2005 read with S.R.O. No.499(I)/2009 dated 13.6.2009, while holding that since the Show Cause Notice issued was defective and deficient, therefore, such imposition of fine and penalty is also equally illegal."

2.Learned counsel for applicant has contended that the Customs Appellate Tribunal was not justified to delete the amount of fine and penalty, which was imposed upon the respondents, who, according to learned counsel, in violation of the Baggage Rules, 2006, imported commercial quantity of subject articles, which fact has not been disputed by the respondents. Per learned counsel, in terms of Rule 17 and Notification i.e. S.R.O. No.666(I)/2006 dated 28.6.2006, the goods brought in commercial quantity can only be allowed release on payment of the duty and taxes at the statutory rates and the redemption fine equal to 30% of the value of goods in terms of Notification S.R.O. No.574(I)/2005 dated 06.6.2005, however, the Customs Appellate Tribunal on extraneous considerations and pointing out deficiencies in the show cause notice issued by the applicant department has been pleased to remit the entire amount of fine and penalty. Per learned counsel, though, the respondents deliberately imported commercial quantity of the subject goods in violation of Baggage Rules, 2006, however, in view of hereinabove provisions of Rule 17, the imposition of fine, if not the penalty, was legally justified, however, the amount of fine has also been remitted along with penalty through impugned order passed by the Customs Appellate Tribunal. It has been prayed that the question as framed herein, above is a legal question arising from impugned order passed by the appellate tribunal, and the same may be answered in Negative in favour of the applicant and against the respondent.

3.While confronted with the such submissions made by the learned counsel for applicant, the learned counsel for respondent has candidly not disputed the facts as narrated in the Memo of both the references or the submissions of the learned counsel for applicant to the effect that the respondents imported subject items which were in commercial quantity, however, submits that since there were certain defects and deficiencies in the Show Cause Notice issued by the applicant department as held by the Customs Appellate Tribunal in the instant cases, therefore, the Customs Appellate Tribunal was justified to delete all such demand towards fine and penalty as the entire proceedings were ab-inito void and illegal.

4.We have heard the learned counsel for the parties, perused the impugned order passed by the Customs Appellate Tribunal, Orders of the two authorities below as well as the relevant SRO on the subject controversy with their assistance. Admittedly, the respondent imported the subject items as per Baggage Rules, 2006 in terms of S.R.O. 666(I)/2006 dated 28.6.2006, which appears to be in commercial quantity, therefore, it cannot be treated as a normal import by a commercial importer, particularly, when such imports have been made under the Baggage Rules, 2006 by the respondents, since the respondents themselves have imported such goods in terms of Customs Baggage Rules, 2016, therefore, the relevant Rule would apply for the release of such consignments, whereas, in terms of Rule 17, the legal course has been provided for the release of such consignment, if imported in commercial quantity. It will be advantageous to reproduce the relevant provisions of Customs Baggage Rules, 2016, which reads as follows:

"17. Treatment of goods brought in commercial quantity.

The goods brought in commercial quantity shall be allowed release only on payment of duty and taxes at the statutory rates and the redemption fine equal to thirty per cent of the value of goods in term of Notification No.S.R.O. 574(I)/2005 dated the 6th June, 2005."

It will be equally advantageous to reproduce the S.R.Os. 574(I)/2005 dated 06.6.2005 and 499(I)/2009 dated 13.6.2009, as referred to hereinabove:--

"(i)Notification No.S.R.O. 574(I)/2005, dated 6th June, 2005

In exercise of the powers conferred by section 181 of the Customs Act, 1969 (IV of 1969), and in supersession of the Notification S.R.O. No.374(I)/2002 dated the 15th June, 2002, the Central Board of Revenue is pleased to order that:

(a)No option shall be given to pay fine in lieu of confiscation in respect of the following goods or classes of goods, namely:

(i)smuggled goods falling under clause (s) of section 2 of the Customs Act, 1969 (IV of 1969); or

(ii)conveyance including packages and containers found carrying offending goods of section 2(s) of the Customs Act, 1969; or

(iii)goods imported in violation of section 15 of the Customs Act, 1969 (IV of 1969); or

(iv)banned items, goods of Israel origin and goods of India origin other than those importable from India in the Import Trade and Procedure Order; or

(v)job lot and stock lot goods; or

(vi)restricted and other items which are subject to procedural requirements under Import Trade and Procedure Order unless such condition and procedural requirements are fulfilled; or

(vii)vehicles imported in violation of Import Trade and Procedure Order and in violation of Import of Vehicles Rules under the Personal Baggage, Transfer of Residence and Gift Scheme; or

(viii) commodities which are not importable in used or second hand condition under the Import Trade and Procedure Order.

(b)Subject to the provisions of clause (1), where an option is given to pay fine in lieu of confiscation, the quantum of fine in lieu of confiscation in respect of offences specified in column (2) of the Table below shall not be at a rate less than that specified in column (3) of the Table below and shall be over and above the Customs Duties and other taxes and penalties imposed under the relevant law:--

TABLE

(ii)S.R.O. 499(I)/2009

In exercise of the powers conferred by section 181 of the Customs Act, 1969 (IV of 1969), and in supersession of its Notification No.S.R.O. 487(I)/2007 dated 9th June, 2007, the Federal Board of Revenue is pleased to direct that no option shall be given to pay fine in lieu of confiscation in respect of the following goods or classes of goods, namely:

(a)smuggled goods falling under clause (s) of section 2 of the Customs Act, 1969 (IV of 1969);

(b)lawfully registered conveyance including packages and containers found carrying smuggled goods in false cavities or being used exclusively or wholly for transportation of offending goods under clause (s) of section 2 of the Customs Act, 1969 (IV of 1969); or

(c)goods imported in violation of section 15 of the Customs Act, 1969 (IV of 1969);

(d)banned items, goods of Israeli original and goods of Indian origin other than those importable from India in accordance with the Import Policy Order, for the time being in force; or

(e)job lot and stock lot goods;

(f)restricted and other items which are subject to procedural requirements under Import Policy Order, for the time being in force unless such condition and procedural requirements are fulfilled; or

(g)commodities which are not importable in used or second-hand condition under the Import Policy Order, for the time being in force:

Provided that in respect of the following goods or classes of goods where an option is given to pay fine in lieu of confiscation, the quantum of fine in lieu of confiscation in respect of offences specified in column (2) of the Table below shall be at a rate specified in column (3) of that Table and shall be over and above the customs-duties and other taxes and penalties imposed under the relevant law, namely:--

TABLE

[Explanation: The provisions of serial number 1, clauses (e), (f) and (g), in the TABLE, of this notification shall apply on the clearance from Model Customs Collectorate (PaCCS) only.]

5.From perusal of hereinabove Rule 17 and the provisions of aforesaid S.R.Os., it is clear that the subject consignment, which was imported under Baggage Rules, 2006 was in commercial quantity, therefore, it could be allowed release only on payment of the duty and taxes and subject to redemption of fine @ 30% in terms of S.R.O. 574(I)/2005 dated 06.6.2005 and thereafter, @ 20% in terms of SRO 499(I)/2009 dated 13.6.2009. Learned counsel for respondent which confronted with above legal position could not controvert the same, however, submitted that if the redemption fine is to be applied, then rate of 20% as provided in terms of S.R.O. 499(I)/2009 dated 13.6.2009 will be applicable, as the imports were made in the year 2009 whereas, order-in-original was passed on 12.12.2009, when aforesaid S.R.O. 499(I)/2009 dated 13.6.2009 was already in field. Learned counsel for applicant has not disputed such assertion made by the learned counsel for respondent in respect of application of 20% rate redemption fine on the subject consignment.

6.In view of hereinabove facts and circumstances of the case, we are of the opinion that the Customs, Excise and Sales Tax Appellate Tribunal Bench-II, Karachi, was not justified to remit the entire amount of fine and penalty on the pretext that since the Show Cause Notice issued by the respondents was deficient, therefore, the entire amount of fine and penalty is liable to be remitted. It may be clarified that if legal requirements, including the requirement of issuing Show Cause Notice to a taxpayer are complied with in substance and the taxpayer is confronted with the proposed imposition of duty and taxes or fine and penalty, the entire proceedings cannot be vitiated on the ground of some deficiency or inefficiency in the Show Cause. In the instant case, since the facts are not disputed, whereas, the opportunity was given to the respondents to explain their position with regard to commercial imports made under the Baggage Rules, 2006, therefore, no prejudice appears to have been caused to the respondents in this regard. The consignment imported under Baggage Rules, 2006 in commercial quantity is liable to be released on payment of duty and taxes and payment of fine @ 20% in terms of SRO, whereas, in the absence of mens rea imposition of penalty was not justified. In view of hereinabove facts and circumstances of the case, we would answer the aforesaid question in Negative in favour of the applicant against the respondent and would hold that the respondent was liable to make payment of duty and taxes and redemption fine @ 20% in terms of S.R.O. 499(I)/2009 dated 13.6.2009, whereas, remitting the entire fine and penalty by the Appellate Tribunal was contrary to legal position emerged in the instant matters.

Accordingly, aforesaid reference applications are decided in the aforesaid terms.

Copy of this order be sent to the Registrar, Customs, Excise and Sales Tax Appellate Tribunal Bench-II, Karachi.

MH/A-106/Sindh Order accordingly.