MIAN SHAFIQ BUSINESS INTERNATIONAL VS DEPUTY COLLECTOR (APPRAISEMENT WEST), 2018 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 580 (2015)

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

----Ss.181, 15, 16, 32 & 32A---Allegation of misdeclaration of value of imported goods---Exercise of discretion---Goods imported in the present case neither fell within the category of S.15 nor within any notification issued under S.16 of the Customs Act, 1969---Sections 32 & 32A of Customs Act, 1969 were attracted in the present case, for which Federal Board of Revenue was not empowered to issue notification regarding fixation of pitch of fine under S.181 of Customs Act, 1969---Legislature intentionally left the imposition of fine on the discretion of the Adjudicating Authority who had to use such discretion sparingly and in the benefit of tax payer.

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 and Saleem Raza v. FOP and others 2012 PTD 302 rel.

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

----Ss.25, 179 & 181---Confiscation of imported goods---Option to pay fine in lieu of confiscation---S.R.O. 499(I)/2009, dated 13.06.2009---"Customs Value"---According to S.179 of Customs Act, 1969, "value" meant the amount short paid/evaded and fine was to be imposed in accordance with the evaded amount---In case of confiscation of goods, the redemption fine was to be worked out with reference to the duty and taxes attempted to be evaded and not the duty and taxes leviable on the whole consignment---Notification S.R.O. No.499(I)/2009, dated 18-6-2009 though was amended from time to time, but, no drastic changes were made---"Customs value" determined under S.25 of Customs Act, 1969 did not mean the value determined for levy of fine---According to S.181, for levy of fine, the value has to be taken under S.179 of the Customs Act, 1969.

Messrs Weave and Knit (Pvt.) Ltd. v. Additional Collector of Customs, (Adjudication) Karachi and others 2004 PTD 2981 rel.

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

----S. 32---Untrue statement and misdeclaration, of---According to S. 32(2) of Customs Act, 1969, in case of untrue statement and mis-declaration there had to be evidence of mens-rea and that of collusion, for the person to be liable to be charged under S.32---No evidence of mens rea as well as collusion was submitted nor placed in show-cause notice---According to S. 32, the quest for mens-rea was not mandatory, it is only to be seen when a criminal liability is to be established against a person and not for the cases in which assessment of even duty/taxes has been detected.

Messrs Liver Brothers of Pakistan Ltd. v. Customs Sales Tax and Central Excise Appellate Tribunal and others 2005 PTD 2462 rel.

Monnoo Industries Ltd. v. Government of Pakistan 2003 PTD (Trib.) 293 ref.

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

----S.32---Word "False" occurring in S.32 of Customs Act, 1969---Connotation, scope and applicability---Section 32 of Customs Act, 1969 provides that any declaration regarding communication or answer to question put by Department, if found wrong in material terms do qualify to constitute an offence within the framework of said section---In order to bring an act, or action within the framework of word "false" as used in S.32 of the Act, the act should either be a conscious wrong, or culpable negligence and should be untrue either unknowingly or negligently.

Omalsons Corporation v. The Deputy Collector of Customs (Adjudication), Karachi 2002 PTD (Trib.) 3053 rel.

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

----S.32---Imposition of penalty---Scope---In order to invoke S.32 of Customs Act, 1969 it had to be seen that whether mens-rea which is essential element for the purpose of S.32(1) had been proved and whether a demand for short recovery can be made under S.32(2) of the Act, without proving any guilty intention, knowledge or mens-rea on part of the maker of statement.

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 rel.

Mohabbat Hussain Awan for Appellant.

S.M. Wasi, A.O. for Respondents.

Date of hearing: 30th March, 2015.

JUDGMENT

MUHAMMAD NADEEM QURESHI, (MEMBER JUDICIAL-I).---This order shall dispose of the instant appeal under section 194-A of the Customs Act, 1969, filed against the Order-in-Original No.ONO-318050-27012015.

2.Brief facts of the case as reported in the show-cause notice are that it was reported by the MCC Appraisement-West that the importer Messrs Mian Shafiq Business International electronically filed goods Declaration No. KAPW-HC-76621-21-11-2014 and declared to contain D/Camel/MRT/MTAX/MMRT brand tyres without tube 16426 Pcs and declared value as US$ 89456.31 from China. The importer determined his liability of payment of applicable duties and taxes and sought clearance under section 79(1) of the Customs Act, 1969 under self-assessment system. The GD was selected for scrutiny in terms of section 80 of the Customs Act, 1969 and was referred to examination for confirmation of description, quantity and other physical attribute of the goods. Perusal of the Goods Declaration in the light of Examination Report and other available information revealed that the actual description of goods is Tyres with Tubes and Flaps of 15866 sets and only 260 Pcs are without tube/flap as against the total quantity declared quantity as 16426 Pcs without tube/flap. Besides the Valuation Ruling and PCT heading were also mis-declared to lower valuation and lower slab of duty and taxes. The assessed GD reflects the factual position of actual assessment. The mis-declaration is detected through importer own packing list and invoice scanned where only 506 Pcs were declare as only tyres and rest of 15866 Pcs as Sets but GD was prepared as without tube and flap on pieces basis instead of sets to hood wink the customs authorities to assess the goods as only tyres instead of sets.

3.Thus the importer has deliberately mis-declared the description, PCT heading and violated the valuation ruling. The importer itself has cleared the identical goods on higher slab of duty and higher as imposed and applied in this case on item to item basis and actual value of goods is US$ 129642 as against the declared US$ 89456.31 (44.922% less) in order to get the goods cleared on lower value and incorrect PCT headings of lower slab of taxes willfully and with mala fide intention to defraud/deprive the state exchequer from its legitimate revenue to the tune of Rs.2051151/- in the shape of Customs duty and other taxes. The offending value of the goods comes to Rs.4074829/-. Therefore, the appellant/importer was charged with sections 32(1), 32(2), 32(A) and section 79(1) of the Customs Act, 1969, section 33 of Sales Tax Act, 1990, section 148 of Income Tax Ordinance, 2001 and S.R.O. 499(I)/ 2009 dated 13-06-2009.

4.According a show-cause notice was issued to the appellant/ importer and the matter was referred to the adjudication officer, who vide order-in-original adjudicated the matter and concluded his observations as followed:

"I have gone through the case record and considered written/ verbal arguments of the respondent and the department. As per record the respondent imported the consignment declared to contain Tyres of different brands without tube 16,426 Pcs Value US$ 89,456.31. On examination the goods were found to be Tyres with Tubes and Flaps 15,866 sets and only 560 Pcs were found without tube/flaps, out of total declared quantity as 16,426 Pcs without tube/flap. Under section 79(1) of the Customs Act, 1969 the importer is responsible to give correct declaration of the goods mentioning therein complete and correct [particulars of the consignment and to pay duty and taxes as per declaration. By giving wrong description with deliberate intention to evade duty and taxes does not absolve the importer from his liability that the department would conduct the examination, make assessment and calculate the leviable amount of duty and taxes. It is evident that the respondent mis-declared description, classification and value of the impugned goods to pay less amount of duty and taxes. In view of the above the charges leveled in the show-cause notice stand 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 respondent to redeem the confiscated goods on payment of 35% Redemption Fine Rs.1,426,190/- (Rupees one million four hundred twenty six thousand one hundred and ninety) in terms of S.R.O. 499(I)/2009 dated 13.06.2009 on the value of offending goods as determined by the department, in addition to payment of duty and taxes chargeable thereon. I also impose a penalty of Rs.100,000/- (Rupees one hundred thousand) on the importer."

5.Being aggrieved with the impugned order-in-original, the appellant filed the instant appeal before this Tribunal on the grounds mentioned in the memo. of appeal.

6.Learned advocate appearing on behalf of the appellant argued the matter and contended that the appellant is regular importer of tyres and known as renowned importer of this product in Pakistan and his track record is neat and clean. As per show-cause notice and order-in-original two charges were leveled against the appellant i.e. mis-declaration of description of PCT Heading and mis-declaration of the value. He further contended that PCT Heading No.4011.4000 was mentioned in the GD by the clearing agent mistakenly and it was really a clerical mistake on the part of clearing agent, however he has furnished invoice with packing list and bill of lading which clearly showed the correct description of goods as "Tyres Sets" i.e. tyres with tubes/flaps, correct value of goods US$ 89456.31, correct quantity, weight and all other particulars, which showed that no mis-declaration was committed by the appellant. The appellant declared the description of goods, tyres sets i.e. tyres with tubes the quantity of goods and value of the goods as per invoice, packing list and bill of lading. As a matter of fact it was typographical mistake on the part of clearing agent. He also pointed out that PCT Heading is automatically shown in relevant box of GD against the description of goods declared/feed in computerized system. The charges of mis-declaration of PCT Heading is baseless as it is sole responsibility of Customs to determine the correct PCT Heading of any consignment and even declaration of wrong PCT Heading does not invoke section 32 of the Customs Act, 1969, and therefore, there is no justification to impose fine and penalty on the appellant. The citation of a particular PCT Heading in the bill of entry does not amount to mis-declaration within the meaning of section 32 of the Customs Act, 1969, is a well settled principle of law in Customs jurisprudence through a series of judgments of Superior Judicial Fora of Indian and Pakistani jurisdiction starting with the case of Monnoo Industries Ltd. v. Government of Pakistan reported as PET D-199/1984 (2003 PTD (Trib.) 293). The incorrect quoting of PCT is not tantamount to mis-declaration within the ambit of mischief of sections 32(1), 32(2) and 32(A) of the Customs Act, 1969, since a positive assertion of facts is a pre-requisite for bringing charges of mis-declaration against the taxpayer. If the wisdom of the Customs Authorities for invoking section 32 in cases of incorrect citing of PCT Heading is acceded to no responsibility obviously devolve upon the hierarchy of the Customs officials to levy and assess the duty according to law. He further contended that determination of PCT Heading is sole function of the Customs officers and the question of taking cognizance of mis-declaration of description, value and PCT Headings, for invoking provisions of mis-declaration under section 32 of the Customs Act, 1969 prima facie, an element of mens rea should be present i.e. there should be a attempt of wilful and deliberate false declaration. The importers may not be charged for mis-declaration under section 32 of the Customs Act, 1969, in the following situations:

"Where the description of goods is as per declaration but incorrect PCT heading has been mentioned in the bill of entry no mis-declaration case under section 32 of the Customs Act, 1969, be made out provided there is no change in the rate of customs duty as a result of ascertained PCT heading "Srl. No.101 of CG 2002".

7.Learned advocate argued that the determination of appropriate PCT Heading or an incorrect claim to PCT heading would not constitute and advert ant, intentional and deliberate act of mis-declaration. Incorrect claim to PCT Heading whether under self automation clearance system or otherwise would not constitute as act of mis-declaration. PCT Heading submitted by importer could be either accepted or rejected by the assessing officer at the time of completion of assessment. Erroneous interpretation of statutory notification could not be deemed to be a false declaration. Appellant could not be charged for mis-declaration on account of transmitting erroneous PCT Heading. He further contended that in the presence of Customs Valuation Ruling there is no importance of declared value. Hence assessment is strictly made in accordance with Valuation Ruling. At present Customs Valuation Ruling No.659/2014 dated 29-03-2013 is in the filed therefore, there is no concept of under invoicing of any type of tyres imported from any country. Moreover, charge of under invoicing or mis-declaration of value cannot be leveled against an importer in the presence of Valuation Ruling and the charges farmed against the appellant are not warranted under section 32 of the Customs Act, 1969, and as such show-cause notice and impugned order-in-original are liable to be set aside as there was no justification to impose fine and penalty on the appellant, in the absence of mens rea. Appellant's advocate further prayed that the appeal may be allowed, the show-cause notice and the impugned order-in-original may be set aside.

8.The respondent has not filed any counter objection in compliance of subsection (4) of section 194-A of the Customs Act, 1969. In spite of that the representative of the respondent argued and supported the impugned order-in-original. He further contended that the adjudicating officer rightly passed the impugned order-in-original No.ONO-318050-27012015. The same may be upheld and the appeal be dismissed.

9.Arguments heard from both the parties and after thorough examination of the entire case record, it has been observed that the Godos Declaration (GD) was filed by the appellant vide No.D/CAMEL/MRT/MTAX/MMRT brand tyres without tube. In the light of examination report and other available information revealed that the actual description of goods is tyres with tubes and flaps and only 560 are without tube/flap as against the total quantity declared by the appellant. As per the show-cause notice and order-in-original two charges were leveled against the appellant (i) mis-declaration of PCT heading and (ii) mis-declaration of value. The appellant admitted that the PCT heading was mentioned in the GD by the clearing agent mistakenly and it was really a clerical mistake on part of the clearing agent. However, the appellant furnished invoice with packing list and bill of lading which clearly differentiated the description of goods as "tyres sets" i.e. tyres with tubes/flaps and also indicated the correct value, quantity, weith and other particulars. After getting that information and documents thereon the importer in the line of compliance under section 155-R of the Customs Act, 1969, reported the matter to the Collector, but on the contrary the department issued the show-cause notice against the appellant. As a matter of fact, it was typographical mistake on the part of clearing agent, the charges of mis-declaration of PCT heading is baseless as it is a sole responsibility of the customs to determine the correct PCT heading of any consignment, and even declaration of wrong PCT heading does not correspond to invoke section 32 of the Customs Act, 1969 and as such there is no justification to impose fine and penalty on the appellant. Now it is important to observe that, whether the respondent was justified to impose fine on the value of goods seized against the amount of duty and taxes as expressed in section 179 of the Customs Act, 1969 and in accordance with an actual and factual impression of section 181 of the Customs Act, 1969 and Notification S.R.O. 499(I)/2009 dated 13-06-2009. For dispensation of justice it is better to refer the contents of the section 181 of the Customs Act, 1969 which reads as under:--

"181. Option to pay fine in lieu of confiscated goods.---Whenever an order for the confiscation of goods is passed under this Act, the officer passing the order may give the owner of the goods an option to pay in lieu of the confiscation of the goods such fine as the officer thinks fit 19[:]

20[Provided that the Board may, by an order, specify the goods or class of goods where such option shall not be given:

Provided further that the Board may, by an order, fix the amount of fine which, in lieu of confiscation, shall be imposed on any goods or class of goods imported in violation of the provisions of section 15 or of a notification issued under section 16, or any other law for the time being in force.]

Explanation.---Any fine in lieu of confiscation of goods imposed under this section shall be in addition to any duty and charges payable in respect of such goods, and of any penalty that might have been imposed in addition to the confiscation of goods."

10.The above section 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 with regard to certain goods or class of goods, wherein, no option for redemption of the goods be given, instead by 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 sparingly 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 and 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 Messrs 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, under Notification No.1374(I)/98 dated 17.12.1998, which is the parent notification containing the word "value of the goods", which meant the value defined in section 179 of the Customs Act, 1969 for assuming the jurisdiction for adjudication, in the said section the value mean the amount of duty and taxes involved in the consignment, i.e. the amount arrived at said to be short paid/evaded and fine has to be imposed in accordance with the evaded involved amount, while holding that in case of confiscation of goods the redemption fine was to be worked out with reference to the duty and taxes attempted to be evaded and not duty and taxes leviable on the whole consignment. The said notification was amended from time to time by the FBR and the latest notification in series is 499(I)/2009 dated 13.06.2009. No drastic changes were made in the proceeding notifications instead of number and date, the column 3 of the notification remained the same since 1998 to this date reading as "custom value" for levy of duty and taxes to be determined under section 25 of the Customs Act, 1969, this does not mean that the determined custom value is for levy of fine instead for fine the value has to be taken as given in section 179 ibid as this is in accordance with the provision of section 181 of the Customs Act, 1969 and intention of the legislature and the judgment of the High Court, even otherwise the notification has to be read in harmonious manner and for the benefit of the tax payer. In presence of valuation ruling there is no importance of declared value. Valuation Ruling No.659/2014 dated 29.03.2014 is in field charges of under invoicing or mis-declaration does not hold the field in this case.

11.In case of "untrue statement and mis-declaration" in terms of section 32, subsection (2) must have evidence and mens-rea and evidence of collusion and by reason of these the person should be liable to be charged under these sections. The evidence about the element of mens-rea as well as collusion was never submitted nor placed in the show-cause notice, it is clear that the quest for the present mens-rea for taking action in terms of section 32 of the Act has not mandatory, the mens-rea is only to be seen when a criminal liability is to be established against a person and not for the cases of assessment whether even duty/taxes has been detected that view was observed by the Honourable High Court of Sindh in its reported judgment of Messrs Liver Brothers of Pakistan Ltd. v. Customs Sales Tax and Central Excise Appellate Tribunal and others (2005 PTD 2462). Further perusal of section 32 of the Act 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 cither 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 ha snow been well settled in large number of cases, i.e. 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. No criminal liability has been established against the present appellant, nor any substantial evidence in proof thereof has been brought on record by the department, except the reference of documents, which were in fact provided by the appellant along with Goods Declaration (GD) and alleged detection does not falls under the warrant of law.

12.Subsequent performance and activity caused and conducted by the appellant reflected the bona fide intention which surely discarded the presence of the element of mens-rea in this case specially when the Department has not provided any further evidence to establish their allegations against the appellant.

13.By getting the strength what has been stated and observed herein above, particularly, the interpretation of the law and legal preposition in the light of prescribed law and by following the ratio decidendi observed in the judgments of Superior Courts along with the additional observations made thereon, the adjudicating officer passed the impugned order with least application of judicious mind, pitch on fine and penalty not corresponded with the gravity of offence. We hereby remit the fine and penalty imposed on the goods and appellant respectively. This being so, the impugned order is modified to the extent of observations made above, the appeal is accordingly disposed of in the above terms.

14.Order passed and announced accordingly.

RR/68/Tax(Trib.) Order accordingly.