ALBA INTERNATIONAL, LAHORE VS COLLECTOR OF CUSTOMS (APPRAISEMENT), DRY PORT MUGHALPURA, LAHORE, 2018 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 2162 (2016)

Customs Act (IV of 1969)---

----Ss. 32, 33 & 156(1)(14)---Mis-declaration---Refund, claim of---Importer filed goods declaration, of the goods as "Paper Board" classified under PCT Heading 4802.1000 declaring the value US$ 11780---Representative samples were drawn and sent to laboratory for test---On chemical examination, the sample was actually found metal foil backed paper, which appropriately fell under Heading 7607.2000 of PCT---Said variation in nomenclature of merchandise, not only instigated change in PCT from 4802.1000 to 7607.2000, but also was consequential in increase of assessable value from US$ 11780 to US$ 57350---Appellant was changed with the offence of mis-declaration under S.32(1)(2) of the Customs Act, 1969 punishable under S.156(1)(14) of said Act---Goods in question were put to auction by the customs authorities---Importer filed constitutional petition before High Court, with the request to restrain the customs authorities from auction---High Court directed the customs authorities not to deliver the impugned auctioned goods to the bidder, but despite the court's specific order the goods were delivered to the bidder/purchaser---Importer filed claim of admissible refund of sale proceed---Said claim was rejected being barred by time---Validity---Section 33 of Customs Act, 1969, had created an exception with regard to customs duties or charges inadvertently paid or over paid while keeping a statutory silence over the other species of refunds---When legislature explicitly had enumerated certain exceptions, additional exceptions, were not to be implied, in the absence of a contrary legislative intent---Refund of sale proceeds pertaining to residual value left after deduction of charges mentioned under S.201(2) of the Customs Act, 1969 being neither customs duty nor a charge, the time limitation envisaged under Customs Act, 1969 for the purposes of refund, was not applicable thereon---Importer's substantive right to refund of the illegally recovered retained money by the State, would flow automatically as an absolute right from the mandates of the philosophy and the core values of the Constitution---Importer right to refund, could not be diluted or affected by any plea, such as the application of objects of limitation envisaged under S.33 of the Customs Act, 1969---Appeal was accepted, impugned order was quashed and Collectorate of Customs was directed to process appellant's refund claim and remit the sale proceed of impugned auctioned merchandise to the importer in accordance with Auction Rules.

Sakhi Muhammad for Appellant.

Irshad Ahmad, Inspector for Respondent.

JUDGMENT

OMAR ARSHAD HAKEEM, MEMBER (JUDICIAL).---This judgment shall dispose of an appeal filed against Order-in-Appeal No. 40/2016 dated 03.03.2016 passed by the learned Collector of Customs (Appeals), Lahore.

2.Precise facts of the core controversy involved in the instant appeal are that the appellant imported a consignment from Malaysia and filed GD declaring the goods as "Paper Board" classified under PCT Heading 4802.1000 declaring the value US$ 11780. The representative samples were drawn and sent to the Lahore Dryport Laboratory for test. The Assistant Chemical Examiner endorsed the test report as under:--

"Samples put for test is not a product of Chapter-48 as claimed by the party. On chemical examination sample is actually found a metal foil backed with paper in the form of a 49 x 80 cm rectangular sheet having its grammage 245 gm/sq meter. It consist of metallic foil (Aluminum foil of thickness less than 0.02 mm), which is coated on the surface side with golden yellow colour lacquer and it is backed with paper of bleached chemical wood pulp. By virtue of above quoted references, such metal (Aluminum) foil backed with papers stand excluded from the ambit of Chaper-48 and appropriately falls under Heading 7607.2000 of PCT".

3.The variation in nomenclature of merchandise, not only instigated change in PCT Heading from 4802.1000 to 7607.2000, but also was consequential in increase of assessable value from US$ 11780 to US$ 57350.

4.In view of fore-mentioned facts a show cause notice was issued to the importer for recovery of Rs. 13,60,025/- (CD Rs. 5,66,734/-, ST Rs. 5,09,161/-, IT Rs. 2,34,214/- and Addl. ST Rs. 50,916/-), charging him with the offence of mis-declaration under section 32(1)(2) of the Customs Act, 1969 punishable under section 156(1)(14) ibid.

5.The adjudicating proceedings culminated into passing of an order in original, which reads as under:--

"I have examined the case record and written as well as oral submissions of both the sides. The laboratory report is comprehensive and leaves no doubt that the imported goods fall under PCT Heading 7607.2000. The respondents have not been able to contest the above laboratory report with convincing and cogent arguments. As regards the respondents plea that details of the evidential GD No. 47565 dated 22.05.2007 (applied for reassessment of goods in the instant case) was not disclosed to them, the detecting agency has categorically stated that aforesaid evidential GD was properly shown to the respondents before framing of the contravention report. The plea of the respondents that discriminatory treatment is meted out to them has been examined and it is observed that in the instant case the misdeclaration of physical description has been established on the basis of laboratory report, therefore this case cannot be treated at par with cases where change of PCT or value is accepted voluntarily.

In view of what has been discussed above I am led to conclude that the charges levelled in the show-cause notice stand established. Therefore I order for confiscation of the imported goods in terms of clause (14) of section 156(1) of the Customs Act, 1969. However, an option to redeem the same under section 181 read with S.R.O. 487(I)/2007 dated 09.06.2007 is given on payment of redemption fine equal to 50% of the assessed value of the goods in addition to payment of duty and taxes leviable thereon. A penalty of Rs. 50,000/- is also imposed upon each respondent in terms of clause (14) of section 156(1) ibid"

6.The goods were put to auction by the Customs Authority against lot No. 19/10. The appellant, therefore, filed Writ Petition No. 7254/ 2010 before the Hon'ble Lahore High Court, Lahore with the request to restrain the customs authorities from auction/delivery of the impugned auctioned goods to the bidder. The Hon'ble High Court passed order dated 13.04.2010, whereby the concerned customs authorities were directed not to deliver the impugned auctioned goods to the bidder, whereas despite the Court's specific order the goods were delivered to the bidder/purchaser vide Delivery Order No. 4142 dated 10.04.2010.

7.The appellant then filed claim of admissible refund of sale proceeds vide application dated 08.06.2015. In response to the said refund claimed the Deputy Collector (R&R) Customs Dry Port, Mughalpura, Lahore issued a show cause notice on the following two grounds:--

(i)That the refund claim is time barred by 1675 days.

(ii)That the appellant violated Import Policy Order and mis-declared goods.

8.The case was forwarded to the Deputy Collector Customs (Auction) CFS, NLC, Lahore, who sent back the same to the adjudicating officer with the following report:--

"Messrs Alba International, Lahore have violated import policy order and mis-declared goods. On scrutiny of the documents it is observed that the claim under section 201 of the Customs Act, 1969 has been filed after the permissible time limit. The claim should have been filed within six months of the sale of the goods. In the subject case goods were auctioned on 10.04.2010 and refund was claimed on 08.06.2015. Thus the claim is barred by time 1675 days."

9.The adjudicating authority went through the case record and considered the written reply as well as heard verbal submission of authorized representative of the applicant and opined that the court case referred to, is not relevant to the instant claim of refund of sales proceed from auction; Hence the claim is time barred; Therefore, the same is hereby rejected being barred by time on the basis of record available on file.

10.Being aggrieved from the aforesaid order of the adjudicating authority, she appellant filed an appeal before the learned Collector of Customs (Appeals), Lahore, who vide impugned order in appeal rejected the same. The operative part of the said order is reproduced below:--

"I have examined the case record considered the grounds of appeal and verbal arguments advanced by the learned counsel for the appellant and the departmental representative during hearing and have found that in this case the goods were auctioned by the Collectorate on 10.04.2010. The appellant did not apply for refund of the sales proceeds till 08.06.2015. Furthermore there was no bar from any court for filing application for refund of sales proceeds with the competent authority as per law. During the course of hearing the appellant could not state any cogent reason for filing of refund claim at the belated stage. The refund application is time barred by 05-years, 01 month and 28 days. In view of the above, the refund claim of the appellant has been legally rejected by the Deputy Collector (Adjudication) vide Order-in-Original No. 09/2015 dated 15.12.2015. The instant appeal is rejected being not substantiated and the Order-in-Original No. 09/2015 dated 15.12.2015 is upheld."

11.Being aggrieved from the aforesaid order of the learned Collector of Customs (Appeals), Lahore the appellant has filed the instant appeal before the Tribunal on the following grounds:--

(a)That the impugned order in appeal as well as order-in-original being void ab initio misconceived, non speaking, unsubstantiated, devoid of merits and without lawful authority is not sustainable under the law.

(b)That the provisions envisage under section 33(3) of the Customs Act, 1969 clearly specify the mechanism of starting of refund application date in the case of litigation. In the case where refund has become due in consequence of any decision or judgment by any appropriate officer of customs or the Board or the appellate tribunal or the court the said period of one year shall be reckoned from the date of such decision or judgment as the case may be.

(c)That it is pertinent to mention here that the above stated provision being general in nature and is eventually applicable in all refund cases, whereas the Deputy Collector Customs Refund and Rebate overlooked the fore-stated facts.

(d)That the Hon'ble Supreme Court in the case of M/s. Pfizer Laboratories v. Federation of Pakistan has given the land mark decision on the subject matter and made an exhaustive review of the case law and laid down "The denial of the refund of the amount involved would be violative of Article 24(1) of the Constitution which lays down that "no person shall be deprived of his property save in accordance with the law".

(e)That where duty and tax charged and recovered was not payable at all then S. 33 of Customs Act, 1969 would have no application and refund could be sought even after beyond six months period. Moreover the amount of sales proceeds is solely property of appellant which also does not attract application of limitation of period on the above stated settled grounds by the principle of law.

(f)That confiscated goods to be sold by public auction after notice to the owner: subsection (1) manifestly provides, that the sales of goods contemplated by this section is to be made only after notice to the owner. It may be noted that section 215 of the Act specifically provides that the notice must be served by sending it by registered post to the person for whom it is intended or to his agent. Where the notice cannot be served in this behalf it may be affixed on the notice board of the custom house. A sales of the confiscated goods exceeding the value of Rs. 1,00,000/- must be conducted in terms of provisions of Rule 11 of the Registration of Auctioneers and Auction Procedure Rules, 1980 read with Customs General Order No. 5 of 1997. These rules make it incumbent on the authorities to have sold the confiscated goods by public auction after notice to the owner of such goods. It was held that the authorities acted in breach of the mandatory provisions of law where the goods were sold without such notice to the owner of the goods. In such cases the owner would be entitled to take back the goods instead of taking the amount of auction proceeds after the order of confiscation was set aside by the appellate authorities.

(g)That disposal of things/goods seized and liable to confiscation. Pre-requisites. Such things would be properly stored and taken care of. Such things might be sold by department even during pendency of adjudication proceedings or appeal but its sale proceeds would be kept in deposit till final decision of case. Pre- requisite for sale of things under section 169 of Customs Act, 1969 or sale of goods under section 201 thereof would be issuance of due notice to owner thereof to be served through registered post. Where such notice was not given then sale proceeds of things/goods would be paid to owner thereof despite the fact that goods had been outrightly confiscated. Word any goods used in section 201 of the Customs Act, 1969 would cover both goods liable and not liable to confiscation. If such things/goods afterwards found not liable to confiscation then entire sale proceeds would be handed over to its owner after deduction of necessary duty taxes etc.

(h)That it is settled law that where things have not been done in the manner as required by law and procedure the same cannot be given legal sanctity particularly when the same are resulting in penal consequences or causing rights of individual.

12.Heard, record perused;

13.We deem it necessary at the outset to reproduce in verbatim the operative portion of the impugned appellate order:--

"I have examined the case record, considered the grounds of appeal and verbal arguments advanced the learned counsel for the appellant and the departmental representative during hearing and have found that in this case the goods were auctioned by the Collectorate on 10.04.2010. The appellant did not apply for refund of the sales tax proceeds till 08.06.2015. Furthermore, there was no bar from any court for filing application for refund of sales proceeds with the competent authority as per law. During the course of hearing appellant could not state any cogent reason for filing of refund claim at the belated stage. The refund application is time barred by 5 years 1 month and 28-days. In view of the above, the refund claim of the appellant has been legally rejected by the Deputy Collector (Adjudication) vide Order-in-Original No.9/2015 dated 15.12.2015. The instant appeal is rejected being not substantiated and the Order-in-Original No. 9/2015 dated 15.12.2015 is upheld"

14.The point which evokes from the submissions of the respective counsels as well as the impugned orders is as to whether under the facts and circumstances of the case the refund claim of residual value of auction proceeds of impugned merchandise was barred by time under section 33 of the Customs Act, 1969?

15.Section 33 the provision relevant to refunds under the Act reads thus;

33. Refund to be claimed within [one year].---(1) No refund of any customs-duties or charges claimed to have been paid or over-paid through inadvertence, error or misconstruction shall be allowed, unless such claim is made within [one year] of the date of payment [:]

[Provided that no refund shall be allowed under this section if the sanctioning authority is satisfied that incidence of customs duty and other levies has been passed on to the buyer or consumer.]

(2) In the case of provisional payments made under section 81, the said period of [one year] shall be reckoned from the date of the adjustment of duty after its final assessment:

101(3) In the case where refund has become due in consequence of any decision or judgment by any appropriate officer of Customs or the Board or the Appellate Tribunal or the Court, the said period of one year shall be reckoned from the date of such decision or judgment, as the case may be.]

16.A bare reading of subsection (1) of afore-reproduced Section 33 of the Act reveals that the same creates an exception with regards to customs duties or charges inadvertently paid or over paid while keeping a statutory silence over the other species of refunds, thus it can safely be assumed that the phrase "No refund" incorporated by the legislators at inception of scheme of section 33 followed by the sentence "of any customs-duties or charges claimed to have been paid or over-paid through inadvertence, error or misconstruction" carries an intent of creating exception and exclusion over other species of refund for the purposes of limitation thus the golden rule "expressio unius est exclusio alterius" (the inclusion of one is the exclusion of others) squarely applies; It is well settled law that when legislature explicitly enumerates certain exceptions, additional exceptions are not to be implied, in the absence of a contrary legislative intent; resultantly we are of the considered opinion that refund of sales proceeds pertaining to residual value left after deduction of charges mentioned under subsection (2) of section 201 of the Customs Act, 1969 is neither customs duty nor a charge therefore the time limitation envisaged under the Act for the purposes of refunds is not applicable thereon; We are constrained to emphasize that the importer's substantive right to refund of the illegally recovered/ retained money by the State, flows automatically as an absolute right from the mandates of the philosophy and the core values of Constitution of Islamic Republic of Pakistan and that of Section 72 of the Contract Act, 1872; Article 77 of the Constitution which is declaratory in nature, says that 'tax to be levied by law only'. It need not be emphasized more that this basic feature of the Constitution cannot be ignored and therefore if no tax can be collected except by authority of law, the same logic would prevail for amounts retained without the authority of law and we are of the considered opinion that in case the appellant is denied refund, the retention of illegally retained money by the State would tantamount to violation of the constitutional mandate enshrined under Article 77 of the Constitution, thus appellant's right to refund cannot be diluted or affected by any plea such as the application of objects of limitation envisaged under section 33 of the Customs Act, 1969.

17.Upshot of the above discussion is that we accept this customs appeal, quash the impugned order, and direct the respondent Collectorate to process appellant's refund claim and remit the sale proceeds of impugned auctioned merchandise to the appellant in accordance with Auction Rules ibid section 201 of the Customs Act, 1969.

18.Parties be informed through registered post A.D or by UMS.

19.File be consigned to record after completion.

HBT/97/Tax(Trib.) Appeal accepted.