TAUSEEF MIRZA VS COLLECTOR OF CUSTOMS (APPRAISEMENT), 2016 PTD-KARACHI-HIGH-COURT-SINDH 548 (2015)

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

----Ss.32 & 32-A---Constitution of Pakistan, Art. 199---Constitutional petition---Import of goods---Fiscal fraud---Misdeclaration of goods by importer---Department's plea was that payment by importer to department was made upon incorrect values declared by importer in Goods Declaration (GD) presented before Customs Authorities for payment of 1% warehousing surcharge---Contention of importer was that he was unaware of correctness of declared value and about correct/actual invoice value was not acceptable as he was dealing with clearance of imported goods namely "Ethyl Hexanole" and "Ortho-Xylene" for many years for several clients---Validity---Importer in connivance of clearing agent simply used forumula of 50% under-invoicing i.e. half of actual price was declared at the time of inbonding to defraud public exchequer revenue---Declaration of fake value on customs copy of GD and actual value on importers copy of GD established such fact that importer had deliberately committed offence of misdeclaration---Importer was liable for wilful act, negligence or default on account of which duty was short levied which department was entitled to recover from importer---Constitutional petition was dismissed.

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

----Ss. 18 & 209---Goods dutiable---Liability of principal and agent---Scope---Amendments made by Finance Act, 1992 and Finance Act, 1996, made clear that term "duty" used in proviso of S. 209 of Customs Act, 1969 in context of clearing agents was duty levied and payable under S. 18 of Customs Act, 1969 and as per amendment by Finance Act, 1992 and Finance Act, 1996 the same would be levied and collected as an additional customs duty as surcharge on warehoused goods @ 1% of value of such goods.

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

----S.209---Customs Rules 2001, R. 101(e)---Responsibilities of licensee---Scope---Rule 101(e) of Customs Rules, 2001,provided that importer could not evade payment of amount of duties and taxes along with 1% additional customs duty as warehousing surcharge to Department levied on actual value of imported goods---Department could recover such duty from importer inasmuch as importer was jointly and severally responsible along with Department for causing loss to National Exchequer by misdeclaration of imported goods chargeable at the time of in-bonding of goods in public/private bonded tanks terminals under Finance Act, 1991.

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

----S. 209---Liability of agent---Agent was responsible to fill various columns of bill-of-entry in a proper manner and neglect to do so would amount to wilful neglect which would make him liable for duty which was not levied or short levied.

Sohail Muzaffar for Petitioner.

Sarfaraz Ali Metlo and Zia-ul-Makhdoom, DAG, Ilyas Ahsan Khan, Appraisal Officer, Customs Department for Respondents.

Date of hearing: 29th April, 2015.

ORDER

SYED SAEEDUDDIN NASIR, J.---Through this petition, the petitioner impugns the demand for recovery of 1% warehousing Surcharge being claimed by the respondent No.1 and seeks declaration to the effect that 1% warehousing Surcharge being claimed by the respondent No.1 is neither a Custom Duty nor any tax levied under the Customs Act, 1969 and as such cannot be recovered from the petitioner, the same can be recovered from the respondent No.3 through invoking the jurisdiction of the Civil Court, inasmuch as it is the respondent No.3 who is responsible for mis-declaration of goods.

1.That no offence under Section 32 or 32-A of the Customs Act, 1969 is made out, the Petitioner who is a clearing agent, cannot be prosecuted for violation of Section 32 or 32-A of the Custom Act, 1969.

2.That under Section 209 of the Custom Act, 1969 no duty or charges can be recovered from the Clearing Agent.

3.That the recovery of alleged warehousing charges being a rent for bonded warehouse, only the jurisdiction of Civil Court can be invoked against the Respondent No.3 for the recovery of such charges as rent and Clearing agent cannot be compelled to pay such charges.

4.That the license of the clearing agent cannot be blocked as no government revenue is involved and whatever alleged money is involved is not the liability of the clearing agent.

5.The Petitioner has further prayed for a direction to the Responder No.1 to D-Block the licence of the Petitioner and quash the FIR No.SI/Misc/IB/698/2012-Oil dated 27-08-2012.

6.The brief facts of the case are that the Petitioner is a licence clearing agent, which licence has been granted to the Petitioner by Respondent No.1 who is the Licencing authority for the grant of the same, and is running a firm as clearing and forwarding under the name and style of "MUFEED CORPORATION". The Petitioner was engaged for filing Goods Declaration (GD) by the Respondent No.3 and at the time of import during the period commencing from May, 2011 to 16-07-2012, the respondent No.3 got his consignment in to Bond and was liable to pay 1 % of the declared value as warehousing surcharge, which according to the petitioner is a rent for storage of cargo in the Bonded warehouse from where the goods are later cleared after payment of duty and taxes to the respondent No.1. The petitioner, as a clearing agent, filed various Goods Declarations (GD) on behalf of the Respondent No.3 on the value of the goods as declared by the Respondent No.3, and got them stored in the Bonded warehouse. The Warehouse storage charges were calculated on the basis of Declared value and the amount so calculated was intimated to the respondent No.3 who got prepared various pay orders in the name of respondent No.1, which pay orders were issued by a commercial bank and were crossed as "Accounts Payee only" and were in the name of Collector of Customs (Appraisement), the Respondent No.1 herein. It is further stated in the instant Petition that these Pay Orders could have been sent by the Respondent No.3 directly to the Collector or through Clearing Agent.

7.The allegation in the FIR lodged against the Petitioner as well as the Respondent No.3 was that upon the value of the Imported Goods 1% duty was required to be paid as warehouse duty surcharge, which was short paid by the Respondent No.3 by mis-declaration of the value of the consignment as the consignment was later found out to be in excess of 0.28%, which duty was leviable according to the assessment and declaration filed by the Respondent No.3. The Respondent No.1, after conducting thorough investigation into the misdeclaration as aforesaid, as a result of which the warehousing charges were paid less than what should have been actually paid by the Respondent No.3, called upon the Respondent No.3 to pay the balance amount. Thereafter, an F.I.R. was registered for payment of less warehousing charges against the Petitioner and the Respondent No.3 under Section 32 of the Custom Act, 1969 for Misdeclaration of CFR (Cost and Freight) values of imported chemicals in Customs copies of into bond GDs in violation of Section 32(A) of the Custom Act, 1969 punishable under Clause 14(A) of Section 156(1) ibid.

8.The Learned counsel for the Petitioner has inter alia argued that the FIR in respect of misdeclaration of the warehousing charges and not in respect of Custom Duty and Taxes, therefore, the same do not attract the Provisions of Sections 32 and 32(A) of the Customs Act, 1969, inasmuch as the misdeclaration of the consignment, if any, was made by the Respondent No.3 in respect of the charges for warehousing, and if, such charges have not been recovered from the Respondent No.3, the same cannot be recovered from the Petitioner. He further contended that the Goods Declaration (GD) is always filed by a Clearing Agent under specific instructions of the Importer, who is the Respondent No.3, who supplied proof of the value of goods in the form of purchase invoice, and on the basis of documents so supplied by the respondent No.3 to the Petitioner, the Goods Declaration (GD) was filed by the petitioner by signing the same. The GD of the consignment was filed for in-bonding the goods on the basis of value declared by the Respondent No.3 as per invoice received by the Respondent No.3 and later the goods were ex-bonded after the warehouse charges were paid. The entire scrutiny of documentation filed by the petitioner was done by the Custom department, who scrutinizes each and every paper before clearance of goods and, therefore, the question of anything being committed by the clearing agent/petitioner on his own does not arise.

9.The learned counsel for the Petitioner next contended that the allegations levelled in the FIR against the Petitioner are absurd inasmuch as the Petitioner being the Clearing Agent is neither owner nor beneficiary of the goods, and under Section 209 of the Custom Act, 1969 no duty or charges can be recovered from the License Clearing Agent specially when the Importer i.e. the Respondent No.3 is available and traceable. The amount which is being claimed is basically not a Custom Duty but 1 % charges levied on the Goods for allowing warehousing facilities, and when such charges do not qualify as duty or tax, they do not attract the Provisions of Sections 32 and 32-A of the Customs Act, 1969.

10.Controverting the argument for the Petitioner, the learned counsel for the respondent No.1, the department of customs, argued that the Petitioner has been found to be involved in the concealing of the actual import invoice prices of Chemicals Imported in bulk by its clients and misdeclared the values of these consignment at original warehousing stage into Bond Goods Declaration to evade payment of legitimate amount of 1% warehousing surcharge, calculation to be Rs.23,206,840/- chargeable at the time of in-bonding of goods in Public/Private Bonded Tanks Terminals under the Finance Act XII of 1991.

11.The Reporting agency has also requested for suspension of licence of the Clearing Agent, the petitioner therefore, the Competent Authority suspended the license of the Petitioner under Rule 102 (4) of Customs Rules, 2001. The Petitioner instead of exhausting remedy available under Rule 103 for filing the Appeal before the Chief Collector within 60 days before passing Order, filed the instant Constitution Petition. Therefore, the instant Constitution Petition is not maintainable when the alternate remedy as aforesaid was available to the Petitioner.

12.The Learned Counsel of the Department next contented that the provision of Section 209 suggests that if the duty or charge has been short levied due to the wilful act of the Customs Agent such short levy shall also be recoverable from the Custom Agent. It is established that the payment by Respondent No.3 were made upon incorrect values declared by the Petitioner in Goods Declaration (GD) presented before the Customs Authorities for payment of 1% warehousing surcharge. The contention of the Petitioner that he was unaware of the correctness of the declared value and about correct/actual invoice value is not acceptable as the Petitioner is dealing with the clearance of the imported goods namely "ETHYL HEXANOLE" and "ORTHO-XYLENE" for many years for several clients. The importers in connivance of clearing agent simply used the formula of 50% under invoicing i.e. half of the actual price was declared at the time of in bonding to defraud the precious public exchequer revenue; the declaration of fake value on customs copy of GD and actual value on the importers copy of GD established this fact that the Petitioner had deliberately committed the offence of misdeclaration. Inasmuch as the petitioner was all along aware of the actual value of the goods.

13.He further contends that under Rule 101(e) of the Customs Rules, 2001 a licensee i.e. the clearing agent is liable to pay the evaded amount of duties and taxes in case it is established that evasion has taken place because of his negligence, failure to perform his functions as prescribed under the law or because of connivance or wilful act of its employee or permit holder.

14.The learned counsel for the department has also placed before us during the course of arguments a copy of amendment of Finance Acts, 1992 and 1996 for levy of 1% surcharge on warehoused goods, which is taken on record. According to this amendment an additional customs-duty shall be leviable on the warehousing of goods specified in the first schedule thereof which are entered for warehousing in the customs bonded warehouses @ 1% of the value of the said goods as determined under Sections 25 and 25(b) or under any procedure in vogue under the said Act for determination of value of the goods.

15.At the end of his arguments, the Learned Counsel for the department submits that since the Learned Court of Special Judge (Customs Excise and Taxation), Karachi has taken cognizance of the offence alleged to have been committed by the Petitioner under Section 32(A) of the Customs Act, 1969, wherein the Petitioner is already on bail and challan has been submitted, therefore, the Petitioner should be directed to pursue his remedy before the said Court for quashing the FIR registered against him.

16.We have heard the Learned Counsel for both the parties at length perused the material available on record of the case with able assistance of the Learned Counsel, since short controversy is involved in the instant Petition, therefore, we intent to dispose of the same as "Katcha Pashi" stage.

17.It is pertinent to mention here that vide Order dated: 19.09.2013 this Court formulated only one question of Law for the disposal of instant Constitutional Petition and inter alia observed that :

"Insofar as the Petitioner is concerned, Learned Counsel for the Department draws attention to the proviso to Section 209 of the Custom Act and states that the liability of the Petitioner arises on the basis of this proviso. We have considered to proviso. It refers to "duty", and admittedly this term is not defined as such in the Custom Act. In our view an important question of law has arisen in the facts and circumstances of the present case, namely, whether this term, as used in the proviso to Section 209, and in the context of clearing agents, is limited to customs duty stricto sensu (i.e. the duty levied and payable under section 18 of the Custom Act and/or under any other law imposing customs-duty) or is to be given a wider and broader meaning, which is the case of the department".

"This is the only question that will be considered and answered by this Court and the Petition will be disposed off on this basis".

18.In view of the aforesaid Order for the disposal of the instant Petition it will not be out of place to examine the proviso to Section 209 which is reproduced herein below:--

"Provided that where any duty is not levied or is short- levied or erroneously refunded on account of any reason other than wilful act, negligence or default of the agent, such duty shall not be recovered from the agent".

19.It is an admitted position that the payment by Respondent No.3 were made upon incorrect values declared by the Petitioner in Goods Declaration (GD) presented before the Customs Authorities for payment of 1% warehousing surcharge. The Importers with active connivance of the Clearing Agent deliberately concealed the actual value of the goods though the Imports were made through confirmed Letter of Credit (L/C). The contention of the Petitioner that he was unaware of the correctness of the declared value and about correct/actual invoice value is not acceptable as the Petitioner is dealing with the clearance of the imported goods namely "ETHYL HEXANOLE" and "ORTHO-XYLENE" for many years for several clients. The importers in connivance of clearing agent simply used the formula of 50% under invoicing i.e. half of the actual price was declared at the time of inbonding to defraud the precious public exchequer revenue. The declaration of fake value on customs copy of GD and actual value on the importers copy of GD established this fact that the Petitioner had deliberately committed the offence of misdeclaration. Therefore, the Petitioner is liable for wilful act, negligence or default on account of which the duty is short levied, which the Respondent No.1 is entitled to recover from the Petitioner. Moreover, the Finance Acts, 1992 and 1996 provide for levy of 1% additional Customs Duty as surcharge on warehouse goods. It will be equally advantageous to reproduce the said amendment for the sake of convenience as under:--

Surcharge on warehousing of goods

[For reference please see section 10 of the Finance Act, 1991 (Act XII of 1991 dated 27-6-1991) as amended by Finance Acts, 1992 and 1996 or levy of 1% surcharge on warehoused goods]

"There shall be levied and collected an additional customs-duty as surcharge (other than penal surcharge leviable under Section 98 of Customs Act, 1969 (IV of 1969), on the warehousing of goods specified in the First Schedule thereof, which are entered for warehousing in the customs bonded warehouses at the rate of 1 % of the value of said goods as determined under Section 25 or Section 25B or under any procedure in vogue under the said Act for determination of the value of goods".

20.Therefore, by plain reading of the aforesaid amendment in Finance Acts, 1992 and 1996 there remains no doubt that the term "duty" as used in the proviso to Section 209, in the context of clearing agents, is Customs Duty in the strict sense of the word i.e. the duty levied and payable under Section 18 of the Customs Act, 1969 and as per amendment in the Finance Acts, 1992 and 1996, which shall be levied and collected as an additional Customs-duty as surcharge on warehoused goods @ 1% of the value of said goods. The questions of Law formulated by this Court vide; Order dated: 19.09.2013 is answered accordingly.

21.Furthermore, the Custom Rule 101(e) of the Customs Rules, 2001, which contemplates the responsibilities of the licnesee reads as under:--

"A Licencess shall pay the evaded amount of duties and taxes in case it is established that evasion has taken place because of his negligence, failure to perform his functions as prescribed under the law or because of connivance or wilful act of its employee or permit holder".

22.In view of the afore-mentioned Customs Rule 101(e) of the Customs Rules, 2001 it becomes crystal clear that the Petitioner cannot evade payment of amount of duties and taxes along with 1% additional custom duty as warehousing surcharge to the Respondent No.1 levied on the actual value of the imported goods. The Respondent No.1 can recover the impugned duty from the Petitioner inasmuch as the Petitioner is jointly and severally responsible along with Respondent No.3 for causing huge loss to the National Exchequer by misdeclaration of imported goods calculation to be Rs.23,206,840/- chargeable at the time of in-bonding of goods in Public/Private Bonded Tanks Terminals under the Finance Act XII of 1991.

23.We are fortified in our view by 2006 PTD 207 wherein it is held that it is the responsibility of the Agent to fill various columns of the bill of entry in a proper manner, the neglect to do so, amounts to wilful neglect, which makes him liable for the duty which is not levied or is short levied.

24.We, therefore, hold that there is no merit in the instant Petition, which for the aforesaid reasons is dismissed in limini. The Respondent No.1 can recover the impugned duty from the Petitioner inasmuch as the Petitioner is jointly and severally responsible for causing huge loss to the National Exchequer by misdeclaration of imported goods. However, in the interest of Justice, we condone the delay for filing appeal under Rule 103 of the Customs Rules, 2001 before the Chief Collector of Customs against suspension of Petitioner's Licence of the Custom Agent in order to enable the Petitioner to avail that remedy under the law.

25.Since the Learned Court of Special Judge (Customs Excise and Taxation), Karachi has already taken cognizance of the offence alleged to have been committed by the Petitioner under Sections 32(A) of the Customs Act, 1969, wherein the Petitioner is already on bail and challan has been submitted, therefore, the Petitioner may pursue his remedy for quashing the FIR before the said Court.

Petition stands disposed-off in terms of the foresaid order along with all listed pending applications.

RR/T-12/SindhOrder accordingly.