JAMIL BROTHERS, MULTAN VS COLLECTOR OF CUSTOMS, MCC - ADJUDICATION-I, KARACHI, 2018 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 1607 (2017)

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

----Ss. 32, 79, 156(1), (14), (74) & 181---SRO No.499(I)/2009, dated 13-6-2009---Mis-declaration---Confiscation of offending goods and imposition of fine---Importer had filed home consumption goods declaration---Imported goods were examined under first examination system for verification of description/PCT/quantity/weight under "RED" category---On physical examination, the Shed Staff reported that it was a case of misdeclaration of description; that importer had deliberately, knowingly and willingly mis-declared the description of goods, PCT heading; which act of the importer constituted an offence within the meaning of S.32(1)(2) of the Customs Act, 1969 punishable under S.156(1)(14)(74) of the Customs Act, 1969---Collector of Customs (Adjudication-I)/Adjudicating authority, held that charge of misdeclaration, stood established against the importer---Adjudicating Authority ordered confiscation of offending goods, with option under S.181 of the Customs Act, 1969 to redeem confiscated goods on payment of 35% redemption fine and penalty of Rs.800,000 was also imposed on the importer---Importer, on the basis of the customs documents i.e. Commercial Invoice, Bill of Lading, had filed the goods declarations before the Customs Authorities---Information declared by the importer was in total conformity with the documents provided to him by the overseas supplier and the shipping company---Adjudicating Authority had based his reasoning on assumption and presumption only, which led to believe that Authority had failed to establish any mens rea on the part of the importer; as there was no evidence on record to substantiate that the importer had misdeclared the description, in collusion with the overseas supplier and the shipping company---Show-cause notice, did not show element of "mens rea" and existence of knowledge "or" reason to believe as well as any collusion with Customs officials and in support thereof no evidence substantiated the alleged offence---Provisions of S.32 of the Customs Act, 1969, could not be invoked in the case of the importer, in circumstances---Subject show-cause notice, wherein specific particulars were not stated, would be vague and would not be in consonance with the requirements of subsection (2) of S.32 of the Customs Act, 1969---In order to bring an act, or action within the framework of the word "false" as used in S.32 of the Customs Act, 1969, the act should either be a conscious wrong or culpable negligence and should be untrue, either knowingly or negligently---Mala fide and mens rea, were necessary ingredients for committing any offence, including that of "smuggling"---If element of mens rea, was not visible, and guilty intention was not proved, provisions of S.32 of the Customs Act, 1969, could not be invoked---Adjudicating Authority, had passed the impugned order with least application of judicious mind; pitch of fine and penalty, did not correspond with the gravity of offence---Fine and penalty imposed on the goods and the importer, were ordered to be remitted---Impugned order-in-original was modified accordingly.

2011 PTD (Trib.) 79; Omalsons Corporation v. The Deputy Collector of Customs (Adjudication) Karachi 2002 PTD (Trib.) 3053; Moon International v. Collector of Customs (Appraisement) Lahore PTCL 2001 CL 133; Union Sport Playing Cards Co. v. Collector 2002 YLR 2651; Al-Hamd Edible Oil Limited v. Collector 2003 PTD 552; A.R. Hosiery Works v. Collector of Customs (Export) 2004 PTD 2977; Ibrahim Textile Mills Limited v. F.O.P. PLD 1989 Lah. 47; Central Board of Revenue v. Jalil Sheep Co. 1987 SCMR 630; State Cement Corporation v. G.O.P. C.A. No.43 of 1999 and Cargill Pakistan Seeds (Pvt.) v. Tribunal 2004 PTD 26 ref.

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

----Ss. 15, 16 & 181---SRO No.499(I)/2009, dated 13-6-2009---Option to pay fine in lieu of confiscated goods---Option in S.181 of the Customs Act, 1969, did not specify the amount or value on the basis of which the owner of the goods, could be given the option to pay in lieu of the confiscation of goods such fine as the officer would think fit---First Proviso to S.181 of the Customs Act, 1969 provided that Federal Board of Revenue through an order, could specify the goods or class of goods, where such option would not be given; whereas second Proviso thereof, referred to the amount of fine which the Board could fix through issuance of an order and could be imposed on any goods or class of goods imported in violation of the provisions of S.15 or a notification issued under S.16 of the Customs Act, 1969, or any other law for the time being in force---First Proviso limited the powers of the Adjudicating Authority in regard to certain goods or class of goods; whereas, no option for redemption of the goods was given, instead was to be outrightly confiscated---Legislature, intentionally left the imposition of fine on the discretion of the Adjudicating Authority, who had to use that sparingly and in the benefit of the taxpayer, rendering the fixation of redemption fine on the goods or class of goods other than of Ss.15 & 16 through SRO No.499(I)/2009, dated 13-6-2009, as ultra vires to the provisions of S.181 of the Customs Act, 1969 and as such without lawful authority.

Superior Textile Mills Ltd v. FOP 2000 PTD 399; The Collector of Sales Tax and others v. Superior Textile Mills Ltd and others PLD 2001 SC 600; Saleem Raza v. FOP and others 2012 PTD 302; Messrs Weave and Knit (Pvt.) Ltd. v. Additional Collector of Customs, (Adjudication) Karachi and others 2004 PTD 2981 ref.

M. Adeel Awan for Appellant.

Faiz Mudassar, A.O. present for Respondent.

Date of hearing: 21st March, 2017.

JUDGMENT

MUHAMMAD NADEEM QURESHI, MEMBER (JUDICIAL-I).---By this order we intend to dispose of the Customs Appeal No. K-1456/ 2015 filed by the M/s. Jamil Brothers, 2261-Loha Market, Nishat Road, Multan, under section 194-A of the Customs Act, 1969, against Order-in-Original No.427475-07102015 dated 07.10.2015 passed by the Collector of Customs (Adjudication-I), Karachi.

2.Brief facts of the case as reported in Show-Cause Notice No.CN-411574-19082015 dated 27.08.2015 that M/s. Jamil Brothers, 2261 Loha Market, Nishat Road, Multan imported a consignment declaring to be "Cold Rolled Steel Coils Secondary Quality 500846 Kgs" in the import documents as well as Goods Declaration vide IGM No.369 dated 03.08.2015, Index No.59. The importer filed home consumption GD vide Machine No.KPPI-HC-7825-11-08-2015. The goods were examined under first examination system for verification of description/ PCT/quantity/weight/under "RED" category and on physical examination the shed staff reported as follows:

"THIS IS THE CASE OF MISDECLARATION OF DESCRIPTION EXAMINED THE GOODS IN THE LIGHT OF GD RETRIEVED THROUGH WEBOC SYSTEM .. DECLARED DESCRIPTION:-COLD ROLLED STEEL SHEETS IN COILS OF SECONDARY QUALITY, KGS HOWEVER ON PHYSICAL EXAMINATION FOUND ARE AS UNDER:

1)COLD ROLLED STEEL SHEETS IN COILS OF SECONDARY QUALITY, SIZE ASSORTED WIDTH AND GAUGE, APPROX WEIGHT 99737 KGS

2)GP STEEL SHEETS IN COILS OF SECONDARY QUALITY, SIZE ASSORTED WIDTH AND GAUGE, APPROX WEIGHT 411,098 KGS"

3.The goods mentioned above at S. No. 02 mis-declared the description of goods therefore, importer has deliberately knowingly and willingly mis-declared the description of goods, PCT heading and the offending value of the goods comes to USD221581.80/- (Rs.22,987,822/-). Had this willful and deliberate offence gone undetected and the goods have been cleared as per importer declaration, the Government would have suffered a loss of revenue amounting to Rs.10,480,950/-. This act of the importer constitutes an offence within the section 32(1) & (2) of the Customs Act, 1969 read with section 3(1) of Import and Export (Control) Act, 1950 read with sections 3 and 6 of the Sales Tax Act, 1990, further read with section 148 of the Income Tax Ordinance, 2001 further read with S.R.O. 499(I)/2009 dated 13.06.2009 as amended vide S.R.O. 794(I)/2011 dated 25.087.2011, the offence is punishable under Clauses (14) and (74) of section 156(1) of the Customs Act, 1969, read with section 3(3) of Import and Export (Control) Act, 1950 and S.R.O. 499(I)/2009 dated 13.06.209 as amended vide S.R.O. 794(I)/2011 dated 25.08.2011.

4.On the basis of Show-Cause Notice No.CN-411574-19082015 dated 27.08.2015, the Collector of Customs (Adjudication-I), Karachi, issued an Order-in-Original No.427475-07102015 dated 07.10.2015. The operative part of this order is reproduced as under:

"I have gone through the case record and considered written/ verbal arguments of the respondent and the department. As per record the respondent declared the import consignment comprising `Cold Rolled Steel Coils Secondary quality weight 500,846 Kgs'. On physical examination the weight and description of impugned goods was found as (i) Cold Rolled Steel Coils Secondary quality weight 99, 737 Kgs and (ii) GP Steel Sheets in coils of Secondary quality weight 411,098 Kgs. Therefore, the respondent mis-declared the description/ quantity of GP Steel Sheets. Under section 79(1) of the Customs Act, 1969 the importer is required to file correct declaration mentioning therein complete and correct particulars of the consignment and to pay duty and taxes as per declaration. It is obvious that the respondent mis-declared 'GP Steel Sheets Coils' in the garb of 'Cold Rolled Steel coils' to evade payment of legitimate amount of duty and taxes leviable thereon. The other contention that since they have made declaration and onus is on examining/assessing officer to ascertain correct assessment under section 80 of the Customs Act, 1969, is not tenable. In automated WeBOC system declaration and its correctness is job of importer or his representative ever the duty/ taxes are paid upfront, any mis-declaration, therefore warrant relevant provision of Customs Act and its subordinate rules.

In view of the above, the charge of mis-declaration as levelled in the show-cause notice stands established. I, therefore, order for confiscation of the offending goods under Section 156(1) clause 14, read with Section 32(1) & (2) of the Customs Act, 1969. However, an option under Section 181 of the Customs Act, 1969 is given to the importer to redeem the confiscated goods on payment of 35% redemption Fine Rs.8,045,738/ - (Rupees eight million forty five thousand seven hundred and thirty eight) in terms of SRO 499(I)/2009 dated 13.06.2009 of the value of offending goods (as determined by the department) in addition to payment of duty and taxes leviable thereon. A penalty of Rs.800,000/- (Rupees eight hundred thousand only) is also imposed on the importer."

5.Being aggrieved and dis-satisfied with the impugned Order-in-Original No.427475-07102015 dated 07.10.2015, passed by the Collector of Customs (Adjudication-I), Karachi, the appellant filed the instant appeal before this Tribunal on the grounds incorporated in the Memo. of appeal which is place on record, the relevant portion is reproduced as under:--

"a.That the Show-Cause Notice has been issued under the mischief of section 32 of the Customs Act, 1969. Whereas, no cognizance warrant under section 32 of the Customs Act, 1969 in the particular circumstances of the case. Because, the goods were mandatory for first appraisement, and the description of goods declared and found are chargeable to same rate of customs duty i.e. 20%

b.That there is no mens-rea on part of the importer, the declaration was made as per contents of the Shipping Documents. The importer has no option to examine the goods first before filing of Goods Declaration. The PCT heading is provision of law, moreover incorrect mention of PCT Heading does not render the case as mis-declaration under Section 32 of the Customs Act, 1969 relied upon Order Para 101 of Customs General Order 12/2002 and citation in 2011 PTD (Trib.) 79.

c.That there is no mis-declaration of value of the goods, the price paid/ transaction value vide Letter of Credit is the Customs Value of the goods under section 25(1) ibid. The value assessed as disclosed in the Contravention Report, has arbitrarily been assessed without going through the valuation methods mandated under Section 25 of the Customs Act, 1969. The difference is declared value and the assessed value is less than 30% as mandated under SRO 374(I)2002 vide Order 101 of CGO 12/2002, no cognizance under Section 32 ibid warrants.

d.That the respondent is an officer duly appointed under section 3 of the Customs Act, 1969, who has limited jurisdiction to perform as mandated under Section 4 ibid. But the respondent acted under various enactments, passed the impugned ONO and penalized the appellant under the authority of Sales Tax Act, 1990, Income Tax Ordinance, 2001 and Import and Export (Control) Act, 1950. The impugned Order-in-Original is nullity in the eyes of law on this single ground.

e.That the GD was prepared on the basis of shipping documents supplied by the exporter. The same documents were in line with the goods ordered and Letter of Credit established by the importer. The importer has no facility to examine the goods prior to filing of GD. There is no mens-rea or deliberate act of mis-declaration on part of the importer. The declaration was made as per the then available information, the contents of the shipping documents, and the goods are the Red Category and subjected to mandatory first appraisement (assessment of duty taxes as per examination.)

f.That the consignment was mandatory for first appraisement, the quantity was found correct, the Quality of the goods was found as correct, the nomenclature of goods was also found correct being Cold Rolled Steel Coils. The rate of duty was 20% on both the goods found or assessed, as well as the PCT Heading declared or assessed. That customs value of the goods was assessed, by the appropriate officer, on exercise of application of methods mandatory under Section 25(1)(4) of the Customs Act, 1969. The difference of value is USD 118PMT, against the assessed value of USD 539/- it works out equal to 18% only but less than 30%.

g.That the Nomenclature of goods equal to 411.098 M/T was reported as mis-declared due to coating found on the Cold Rolled Steel Coils. The under declared offending part of the value as alleged is equal to USD 118/PMT (assessed 539/ minus declared 421/-) hence the offending Customs Value of 411.089 works out equal to USD48,509 in Pak Rs.49,47,976/-. Which has been incorrectly take as US$221,577/- in Pak Rs.2,26,00,854/- and taken as basis for imposition of redemption fine escalated by more than 4.5 times.

h.That the appellant ordered confiscation of goods, which are not liable to confiscation under the Customs Act, 1969 vide section 17 read with section 178 ibid. The goods are raw material and does not fall within the mischief of Section 15 as well as there is no restriction notification duly issued under the authority of section 16 of the Customs Act, 1969. The order for confiscation of raw material steel items is unwarranted by facts and law of the case. The imposition of penalty in absence of mens-rea is illegal, without jurisdiction and under apparent non-bona fides.

i.That the consignment is lying with port area and has been incurring heavy penalties in terms of Container Detention Charges, Port Storage Charges workable on daily basis. The impugned order has been passed in clear disregard to the mandate of section 24-A of the General Clauses Act, 1897.

6.We have heard the arguments of the advocate of the appellant, DR of the respondent MCC, Port Muhammad Bin Qasim, Karachi, and gone through the complete record of the case. It is imperative to discuss here that the appellant on the basis of the customs documents i.e. Commercial Invoice, Bill of Lading, filed the Goods Declarations before the customs authorities. The information declared by the appellant is I total conformity with the documents provided to him by the overseas supplier and the shipping company. In this context the DR of the respondent MCC, Port Muhammad Bin Qasim, while submitting the parawise comments on behalf of the respondent has stated in para 5:

"5. That regarding the contents of Para (E) it is respectfully submitted that the appellant being an importer was well aware of the actual description of goods and he was definitely in contact with the supplier prior to filing the GD and as such the act of misdeclaration on the part of the appellant and merely saying that he was not aware about the actual description of the goods, the appellant cannot escape from his responsibilities and as such there was a clear mens rea on the part of the appellant."

7.Perusal of this comment of DR of the respondent makes us to believe that while stating this the respondent has based his reasoning on assumption and presumption only which further lead us to believe that the respondent has failed to establish any mens rea on part of the appellant as there is no evidence on record to substantiate that the appellant has mis-declared the description, in collusion with the overseas supplier and the shipping company.

08. Now, it is important to point out that in the subject show-cause notice the element of "mens rea" and "existence of knowledge" or "reason to believe" as well as any collusion with customs officials and in support thereof no evidence substantiated the said alleged offence brought on record by the respondent. The subject impugned goods were examined under the First Appraisement System, in compliance of section 79(1) of the Customs Act, 1969, where the said option was given, the provisions of section 32 cannot be invoked the language of section 32 can only be applied on the basis of documents delivered or furnished by the importer or the statement given by him before the Custodians authorities, in this particular case while making the declaration the same was in support of the import documents and the description given on said documents the declaration made thereon are of same details. The language of that section gives a very clear impression that the person who in action with any matter of customs makes or signs or causes to be made sign, or deliver causes to be delivered to an officer of customs any declaration, notice, certificate or other documents in any form or gives statement in reply to a question before the customs authorities knowingly and intentionally, having the reasons to believe that such documents and statements are falls under any material particular and he shall be guilty by an offence under this Section the question to giving the reply to an officer in this particular case in presence of the compliance of section 79 (1) of the Customs Act, 1969 does not arise and element of "mens rea" having "fraudulent intention", "knowledge" and "reason to believe" about the declaration in a material particular has no legal warrant of charge, in absence of the subsequent and specific evidence, which constitutes a sufficient cause in favour of the appellant. It is also a settled law that if such specific particulars are not stated in the Show-Cause Notice, the notice would be vague and would not be in consonance with the requirement of subsection (2) of Section 32 of the Customs Act, 1969.

9.A perusal of Section 32 of the Customs Act, 1969 further reveals, that in addition to declaration any communication, or answers to questions, put by customs officers and found wrong in material terms, constitute an offence within the framework of the said section." So, in order to bring an act, or action within the framework of the word 'false', as used in section 32 of the Act, the act should either be a conscious wrong, or culpable negligence and should be untrue either knowingly or negligently. (Omalsons Corporation v. The Deputy Collector of Customs (Adjudication) Karachi) (2002 PTD (Trib.) 3053). Mala fide and mens-rea are necessary ingredients for committing any offence, including that of smuggling. (Moon International v. Collector of Customs (Appraisement) Lahore PTCL 2001 CL 133). There are two questions which need to be addressed before invoking section 32 of the Customs Act, 1969, for mis-declaration (a) whether mens-rea which is essential element for the purpose of subsection (1) of section 32 has been proved and (b) whether a demand for short recovery can be made under the provisions of subsection (2) of section 32, without proving any guilty intention, knowledge, or mens-rea on the part of the maker of the statement. If element of mens-rea is not visible and guilty intention is not proved then provisions of section 32 cannot be invoked as held in the judgments. Union Sport Playing Cards Co. v. Collector 2002 YLR 2651, Al-Hamd Edible Oil Limited v. Collector 2003 PTD 552 and A.R. Hosiery Works v. Collector of Customs (Export) 2004 PTD 2977. This celebrated principle of law in customs jurisprudence that mis-declaration charges under section 32 of the Customs Act, 1969, shall not be invoked has now been well settled in large number of cases, i.e. Ibrahim Textile Mills Limited v. F.O.P. PLD 1989 Lahore 47, Central Board of Revenue v. Jalil Sheep Co. 1987 SCMR 630, State Cement Corporation v. G.O.P. C.A. No.43 of 1999 and Cargill Pakistan Seeds (Pvt.) v. Tribunal 2004 PTD 26.

10.Now the other principle question involved in this case, whether the penal provisions of Customs Act, 1969 read with Notification vide S.R.O. 499(I)/2009 dated 13.06.2009 under the option of section 181 of the Customs Act, 1969 are validly applicable under such circumstances as dealt in present case by the adjudicating officer.

11.The option of section 181 of the Customs Act, 1969 does not specify the amount or value on the basis of which the owner of the goods may be given an option to pay in lieu of the confiscation of the goods such fine as the officer thinks fit. However, through 1st proviso the Board through an order can specify the goods or class of goods where such option shall not be given, whereas 2nd proviso of section 181 refers to the amount of fine which the Board may fix through issuance of an order be imposed on any goods or class of goods imported in violation of the provisions of Section 15 or a notification issued under section 16, or any other law for the time being in force. The 1st proviso limit the powers of the adjudicating authority in regards to certain goods or class of goods, wherein, no option for redemption of the goods be given, instead be outrightly confiscated. In 2nd proviso the Board can notify the pitch of fine through a notification on the goods imported in violation of the provision of section 15 or notification issued under section 16. Confirming that the Board cannot fix any pitch of fine on any goods or class of goods not falling within 1st and 2nd proviso of section 181 of the Customs Act, 1969. The goods imported through the instant consignment by the appellant are not those of section 15 nor of those where any notification has been issued under section 16 of the Customs Act, 1969 or any other law for the time being in force. Instead a case of sections 32 and 32A of the Customs Act, 1969, for which Board is not empowered to issue notification with fixation of pitch of fine under section 181 ibid. The legislature intentionally left the imposition of fine on the discretion of the Adjudicating Authority, who has to use that sparely and in the benefit of the tax payer as held by Superior Judicial Fora in plethora of reported judgment, rendering the fixation of redemption fine on the goods or class of goods other than of sections 15 and 16 ibid through Notification No. 499(I)/2009 dated 13.06.2009 as ultra vires to the provision of section 181 of the Customs Act, 1969 and as such without lawful authority as held in reported judgment 2000 PTD 399 Superior Textile Mills Ltd. v. FOP, PLD 2001 SC 600, The Collector of Sales Tax and others v. Superior Textile Mills Ltd and others 2012 PTD 302 Saleem Raza v. FOP and others. Notwithstanding to the fact, that it is for the legislature or the Board to revisit the provision of section 181 or the Notification No.499(I)/2009 dated 13.06.2009 in the light of observation made in the instant judgment. The Tribunal also intend to resolve the bone of contention that what does the word "custom value" mean in the notification. Although this controversy already has been laid to rest by the Hon'ble Division Bench of the High Court of Sindh in reported judgment 2004 PTD 2981 M/s. Weave and Knit (Pvt) Ltd. v. Additional Collector of Customs, (Adjudication) Karachi and others. In the said case the fine was imposed on the basis of total amount of duty and taxes of the consignment instead of the amount of duty and taxes evaded.

12. By getting the strength, what has been stated and observed herein above particularly the interpretation of law and legal prepositions in the light of prescribed law and to follow the ratio decidendi from the judgments of Superior Courts along with our additional observations made thereon, the adjudicating officer passed the impugned order with least application of judicious mind, pitch of fine and penalty does not correspond with the gravity of offence, we hereby pass the order to remit the fine and penalty imposed on to the goods and the appellant respectively. The impugned Order-in-Original is hereby modified to the extent of observations and orders made above. The appeal is accordingly disposed of in above terms.

13.Judgment passed and announced accordingly.

HBT/74/Tax(Trib.) Order accordingly.