2022 PTD 1345

FARM PLANT Versus The COLLECTOR OF CUSTOMS (ADJUDICATION-I)

Citation2022 PTD 1345

CourtCustoms Appellate Tribunal

Judge(s)Abdul Jabbar Qureshi, Member Judicial-I and Abdul Basit Chaudhary, Member Technical-I Messrs FARM PLANT

ABDUL JABBAR QURESHI, MEMBER JUDICIAL-I.---- By this judgment, we intend to dispose of Customs Appeal No.K-7569/2021 filed against Order-In-Original No.1708714 dated 20.09.2021 passed by the Collector of Customs (Adjudication-I), Karachi.

2. Briefly, facts of the case as reported by MCC vide their contravention report are that Messrs Farm Plant electronically filed Goods Declaration No.KAPW-HC-179111-07-06-2021 declared to contain GUMCOPAL under PCT heading 3101.9090 at a declared unit value 0.75 US$ and declared invoice value 11250.00 US$. The importer determined his liability of payment of applicable duties and taxes in terms of Section 79(1) of the Customs Act, 1969. In order to check as to whether the importer has correctly paid the legitimate amount of duties and taxes, the under reference 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. As per customs house lab test the goods are found Seed Lac (Lakh Dana) as against declared description "GUNCOPAL". The found goods are correctly classifiable under PCT heading 1301.9020 assessable @ US $ 11.51/kg as per VR 1492/2020 dated 25.11.2020 as against declared PCT heading 1301.9090 and declared value 0.75 US $. Thus, the importer deliberately mis-declared the description of goods to avoid legitimate duty and taxes hence was charged under relevant provisions of law.

3. Show-cause notice issued and matter was adjudicated. The Adjudicating Officer passed impugned Order-In-Original No.1708714-20.09.2021 as under:

"I have gone through the record of the case and the submissions made by the department as well as the importer. In view of the examination report and in the light of the two chemical laboratory imports the impugned goods have been confirmed as "Seed Lac" which are resinous secretion of lac insect. Therefore, the charges of mis-declaration levelled against the respondent importer are established beyond any doubt. The impugned goods are accordingly confiscated under clause (14) of section 156(1) of Customs Act, 1969. However, an option is given to the importer under Section 181 of Customs Act, 1969 read with SRO 499(I)/2009 dated 13.06.2009 to redeem the offending goods on payment of a redemption fine of Rs.9,478,894/- @ 35% of the offending customs value of Rs.27,082,553/-, (subject to the condition that the imported goods are otherwise importable under the IPO in vogue) in addition to leviable duty and taxes. However, the Collectorate may re-check the calculation with respect to value of the offending goods and amount of penalty prior to release of goods, A personal penalty of Rs.500,000/- is also imposed on the importer under clause (14) of Section 156(1) of Customs Act, 1969"

4. The appellant being aggrieved with Order-In-Original No.1708714-2009/2021 passed by the Collector of Customs (Adjudication-I), Karachi filed the instant appeal before this Tribunal on ground that the appellant is a partnership concern and is a regular importer of Agricultural Products. His principal activity includes wholesale of Agricultural Machinery, Equipments and Supplies on regular basis of various clients. The appellant is a scrupulous concern and, through years of hard work, dedication and devotion to quality. The appellant has built considerable goodwill and respect for itself and its operation in the industry. The appellant recently imported a consignment consisting of "Gum Copal (Natural Resin) at value of US $ 11,250/- from Sri Lanka. On arrival of consignment, the appellant filed Goods Declaration No.KAPW-HC-179111 dated 07.06.2021 wherein appellant has declared the actual description as per import commercial documents under PCT heading 1301.9090 at a declared unit value at US $ 0.75 per kg. In the subject GD, the appellant truthfully declared the particulars of consignment with supported import documents i.e. Bill of Lading, Commercial Invoice and Packing List. Thereafter, the appellant made payment of the leviable duties and taxes on 07.06.2021 as ascertained in terms of Section 25 or 25-A of the Act. In terms of Section 25 of the Act, 1969, the customs value of the imported consignment is determined by implementing the sequential methods of valuation contained therein. Alternatively, Section 25-A of the Act, 1969, empowers the competent authority to determine the applicable customs values of imported goods prior to import of such goods. The determination of values under Section 25-A of the Act, 1969 is also carried out after following the methods laid down in Section 25 of the Act, 1969. In the presence of an instrument under Section 25-A of the Act, 1969, the relevant imported goods are valued at the customs value determined under the said instrument and duties and taxes are levied accordingly. The subject import commercial documents being provided by the shipper were scanned and provided to the appellant to file the subject goods declaration for clearance of the consignment. The subject GD was selected for scrutiny under Section 80 of the Customs Act, 1969 and examination was conducted and no discrepancy was found in material particulars with respect to description, quantity, weight, origin value etc. The subject GD was forwarded to the assessing officer for assessment of the subject items as reflects in the GD. The GD was marked for examination in order to seek further confirmation of the actual description of goods as against declaration of the appellant. The examining officer had then referred the samples of the impugned goods to the Customs House Laboratory who has reported as follows:-

"Receipt No. 13004,

Report: the sample on test is found to consist of Seed Lac (Lakh Dana). It is in the form of maroon/dark brown color irregular pieces.

Note: This report is pertain only to the samples received and tested in lab and is based on as per available testing facility in the lab."

5. On the basis of the above lab test report, a contravention report was forwarded for issuance of show-cause notice and same was replied by the appellant. A re request was made that samples may be sent to Pakistan Council of Science and Industrial Research (PCSIR) for ascertaining the actual description of the goods which was allowed. The PCSIR vide its report No.ILD/ATR-2021-11898 dated 12.07.2021 in the light of appellants letter dated 30.06.2021 addressed to Respondent No.1 which reported that the goods were found as per declaration of the appellant. The lab rest report is reproduced below:-

"It is a Gum Copal, which is a Natural Gum Resin, Dark Brown colored solid, crude (unrefined)"

6. The respondent sought third opinion from HEJ Lab on cost of appellant vide letter dated 16.07.2021 which report was against appellant. The appellant requested for the adjudication of case as per show-cause notice and PCSIR report but no order issued yet which resulting heavy port demurrages and container detention charges accumulating on daily basis on no fault of the appellant. During the pendency, the appellant vide letter dated 29.07.2021 requested for shifting of the consignment to CPF Bond, the respondent No.2 did not entertain the request of the appellant for shifting of consignment to CPF Bond hence, the appellant filed a Constitutional Petition No.4693/2021 dated 31.07.2021 before the Hon'able High Court. On 25.08.2021 the Hon'able High Court ordered for shifting of consignment to CPF Bond on expenses of appellant.

7. At the time of assessment the respondent No.2 shall also give the benefit of SRO No 280(I)/2014 dated 08.04.2014 in respect of certificate of origin of Sri Lanka namely South Asian Free Trade Area (SAFTA). The subject certificate has already been verified by the respondent No.2 and already claimed by the appellant. The issue before this forum is to correct description and classification of the disputed items as mentioned in show-cause notice dated 15.06.2021 covered vide GD No.KAPW-HC-179111 dated 07.06.2021 and Bill of Lading No.CMB-KHI-1868 dated 20.05.2021. The respondent No.1 passed the impugned ONO illegally and unlawfully without considering the Hon'ble High Court order dated 10.09.2021 as well as direction given by the Additional Collector Customs to Respondent No.1 for implementation in pursuance of Hon'ble High Court order passed in C.P. No.D-5385 of 2021. It is duty of respondent No.2 to ascribe correct description and PCT to the imported goods under Section 80 of the Customs Act, 1969 and Rule 438 of Sub-chapter III of Chapter XXI of Customs Rules, 2001 as held by the Superior Judicial Fora. No mis-declaration of any material particulars viz description, quantity, quality, origin, size, weight and value has been committed by the appellant. The assessing officer ignored the provisions of Section 80(1) and Rule 438 of Sub-Chapter III of Chapter XXI of the Customs Rules, 2001 which lays built in responsibility on the Customs officials to check the declaration of the imports while completing assessment which include "correctness of the particular import, including declaration, assessment and in case of Customs Computerized Systems, payment of duty and taxes and other charges thereon" and Rule 438 read as "where any declaration has been filed under Rule 433 or additional documents has been submitted under Rule 437, the Customs shall satisfy itself as to the correctness including its value, classification, claim of exemption, payment of duties and taxes and may re-assess the goods during or after clearance". No charge can be invoked with regard to PCT heading against an importer / appellant. The importer only assists the custom by citing PCT heading of the goods which may be called a claim for assessment of taxes, which means that the request may be accepted or rejected by the competent authority but is not punishable offence under any of the provision of the Customs Act, 1969. The citation of the particular PCT heading in the GD does not amount to mis-declaration within the meaning of Section 32 of the Customs Act, 1969. It is a well settled principle of the law in Customs Jurisprudence through a series of judgment of Judicial Fora of Indian and Pakistani Jurisprudence starting with the same Monno Industries Ltd. v. Government of Pakistan reported as Pet. D-199/194 to State Cement Corporation v. Government of Pakistan reported as 2002 MLD 1980. In another case the Hon'able late justice Sabihuddin Ahmed ridicule the irrational approach of the Customs Authorities in reported judgment 2002 MLD 180 State Cement Corporation of Pakistan v. Collector of Customs and another while observing that:

"We asked both Messrs Raja Muhammad Iqbal and Javed Farooqi as to whether no responsibility developed upon the hierarchy of customs officials to levy and assess duty according to law and they had no answer. We are rather amazed at the line of reasoning put forwarded to the effect that while an assesses is required to interpret the law and relevant notification correctly and could be held guilty of a penal offence for not doing so in terms of Section 32 of the Customs Act, 1969 no responsibility of any kind would devolve on customs officials. His lordship also held that it is well settled that an erroneous interpretation of statutory notification cannot be deemed to be a false declaration in terms of Section 32(1) of the Customs Act, 1969. Impugned order as no case has been made out against him".

8. The incorrect PCT for the declared item as against customs determined PCT heading does not tantamount to any mis-declaration in the light of the Superior Courts judgments reported as Collector of Customs Karachi v. Power Electronic Pakistan (Pvt.) Ltd. Lahore reported as 2011 PTD 2387 wherein it has been held as under:-

"A Comparison of two PCT headings, which are in dispute, show that they can be misinterpreted and on the basis of such misinterpretation the goods in question can be declared any of these PCT headings and, thereof, we are of the opinion that it has been proved that the alleged misdeclaration was not intentional and deliberate. As far as claim of exemption is concerned we are of the opinion that they may fall within the ambit of such exemption and it is a settled law that claim of exemption in good faith if it is disallowed then penal action cannot be taken for the lesser payment of taxes due to the claim of such exemption"

9. In another judgment of the Hon'able Sindh High at Karachi in the case of Collector of Customs v. Shaikh Shakeel Ahmed reported as 2011 PTD 495 also supports the aforesaid new. Relevant extract is as under:- "it is settled law that in cases where a wrong interpretation of a section is made and tax or duty has been short paid due to misconstruction or misinterpretation of the relevant law in good faith such shortfall cannot be termed as misdeclaration and will therefore not be liable to levy of penalty".

10. The statutory duties were not properly performed by the department and found transgression from the statutory provisions of law as well as constitutional obligations under Article 4 of the Constitution of Islamic Republic of Pakistan every citizen enjoy the protection of law and to be treated in accordance with law is inalienable right of every citizen, wherever he may be and every other person for the time being within Pakistan, clause (a) of Sub-Article (2) express that no action detrimental to the life, liberty, body, reputation or property of any person shall be taken except in accordance with law. In the instant case the proceedings initiated by the respondent No.2 are in "unlawful manner" in negation of Article 4 and the judicial principle laid down from time to time by the Superior Court. The action taken is without proper application of mind by the quasi judicial authorities would also not qualify as an action in accordance with law and would have to be stuck down as being action taken in unlawful manner. In order to thwart, the commission of unlawful act in derogation of the provision of the statute the Hon'ble Supreme Court of Pakistan in reported judgment 2002 PTD 2457 held that "the thing should be done as they are required to be done, or not at all" and in PLD 1971 Supreme Court 61 "neglect of plane requirement of an absolute statutory enactment prescribing how something is to be done would invalidate thing being done in some manner" and PLD 1973 Supreme Court 236. The Hon'ble Apex Court in 2001 SCMR 838 and 2003 SCMR 1505 held that "while considering the impact of violation or non-observance of the method prescribed by law for doing an act in a particular manner or mode, such provision of law is to be followed in letter and spirit and achieving or attaining the objective of performing or doing of a thing in a manner other than provided by law would not be permitted. The same observation has been made by the Hon'ble Supreme Court of Pakistan in the Civil Appeal filed by Director General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others reported as 2006 SCMR 129 "if the law had prescribed method for doing of a thing in a particular rammer, such provision of law is to be followed in letter and spirit and achieving or attaining the objective of performing or doing of a thing in a manner other than provided by law would not be permitted." The impugned order was passed illegally and unlawfully without considering the Hon'ble High Court order dated 10.09.2021 as well as direction given by the Additional Collector Customs-I to respondent No.1 for implementation in pursuance of Hon'ble High Court order in C.P. No.D-5385 of 2021. The learned counsel for the appellant prayed that the impugned order and show-cause notice may be set aside / vacated being ultra vires, arbitrary, illegal, unlawful and without lawful authority and remit imposed fine and penalty.

11. Parawise comments were filed in response of grounds of appeal. Mr. Aman Baloch, A.O. appeared on behalf of respondents and argued the case in light of show-cause notice and impugned order as well as relied on grounds of appeals. Since the case was under adjudication, therefore Collectorate has taken no action till order passed by the adjudicating authority. The appellant filed a C.P. No.D-4693/2021 before the Hon'ble High Court of Sindh and challenged show-cause notice. The petition was disposed of as under:

"This is not a frame of this petition as it challenges a show-cause notice with ancillary prayer of shifting of goods to the CPF bond. In case the petitioner seeks release of goods after securing demurrage charges incurred as well as payment of duties and taxes, he may file fresh lis, as required under the law. This petition has served its limited purpose and is accordingly disposed of along with the listed application".

12. The charge of mis-declaration against the appellant has been established therefore adjudicating authority has imposed fine and penalty on importer / appellant because appellant has tried to evade government legitimate revenue thus lie is liable to be penalized by denying any concessionary benefits of duty / taxes. It is a clear case of mis-declaration in description as per Custom House Laboratory report and two other reputed Laboratories (i.e. PCSIR and HEJ Research Lab) have also confirmed the goods as 'Seed Lac' against the declaration as `Gum Copal' which attract higher value under the Valuation Ruling No.1492/2020.

13. Arguments heard and concluded. The bone of contention between the rival parties is that the department has pleaded that the appellant committed an offence of mis-declaration of description, value and PCT heading of imported consignment of agricultural products. The appellant contention is that a consignment was imported from Sri Lanka and GD No.KAPW-HC-179111-07.06.2021 was filed by declaring the actual description as per import commercial documents provided by the shipper i.e. Bill of Lading, Commercial Invoice and Packing List under PCT heading 1301.9090 for clearance under Section 79(1) of the Customs Act, 1969. On subsequent scrutiny of documents and lab reports, the imported goods were found Seed Lac (Lakh Dana) instead of Gumcopal thus department alleged that appellant has committed above mis-declarations and impugned order was passed for payment of differential amount of duty and taxes along with payment of fine and penalty, therefore, the appellant challenged the subject order with prayer that there is no mis-declaration because GD has been filed in accordance with law and import documents, even otherwise, if there was any deficiency in import documents or mis-declaration regarding description, value and PCT heading then same can be corrected by charging the differential amount of duty and taxes without imposition of fine and penalty by saving the appellant from further losses on cost of demurrage and detention charges.

14. In view of the above stated circumstance, the respondent can determine correct description and PCT of the imported goods under Section 80 of the Customs Act, 1969 and Rule 438 of Sub-chapter III of Chapter XXI of Customs Rules, 2001 as held by the apex Courts as well as benefit of SRO No.280(I)/2014 dated 08.04.2014 is extendable to the appellant in presence of verified and valid certificate of origin of Sri Lanka namely South Asian Free Trade Area (SAFTA). No mis-declaration has been committed by the appellant in the light of Rule 438 which says that: "where any declaration has been filed under Rule 433 or additional documents has been submitted under Rule 437, the Customs shall swish itself as to the correctness including its value, classification, claim of exemption, payment of duties and taxes and may re-assess the goods during or after clearance".

15. No charge can be invoked with regard to PCT heading as the importer only assists the custom by citing PCT heading of the goods for assessment of taxes, declared PCT may be accepted or rejected by the competent authority but it is not punishable offence under any of the provision of the Customs Act, 1969. The citation of particular PCT heading in the GD does not amount to mis-declaration within the meaning of Section 32 of the Customs Act, 1969. It is a well settled principle of the law in Customs Jurisprudence through a series of judgment of Judicial Fora of Indian and Pakistani Jurisprudence starting with the same Monno Industries Ltd. v. Government of Pakistan reported as Pet.D-199/194 to State Cement Corporation v. Government of Pakistan reported as 2002 MLD 1980. In another case the Hon'ble late justice Sabhiuddin Ahmed ridicule the irrational approach of the Customs Authorities in reported judgment 2002 MLD 180 State Cement Corporation of Pakistan v. Collector of Customs and another while observing that:

"We asked both Messrs Raja Muhammad Iqbal and Javed Farooqi as to whether no responsibility a developed upon the hierarchy of customs officials to levy and assess duty according to law and they had no answer. We are rather amazed at the line of reasoning put forwarded to the effect that while an assesses is required to interpret the law and relevant notification correctly and could be held guilty of a penal offence for not doing so in terms of Section 32 of the Customs Act, 1969 no responsibility of any kind would devolve on customs officials. His lordship also held that it is well settled that an erroneous interpretation of statutory notification cannot be deemed to be a false declaration in terms of Section 32(1) of the Customs Act, 1969. Impugned order as no case has been made out against him".

16. The incorrect PCT for the declared item as against customs determined PCT heading does not tantamount to any mis-declaration in the light of the Superior Courts judgments reported as Collector of Customs Karachi v. Power Electronic Pakistan (Pvt.) Ltd. Lahore reported as 2011 PTD 2387 wherein it has been held as under:-

17. In another judgment of the Hon'able Sindh High at Karachi in the case of Collector of Customs v. Shaikh Shakeel Ahmed reported as 2011 PTD 495 also supports the aforesaid view. Relevant extract is as under:- "it is settled law that in cases where a wrong interpretation of a section is made and tax or duty has been short paid due to misconstruction or misinterpretation of the relevant law in good faith such shortfall cannot be termed as misdeclaration and civil therefore not be liable to levy of penalty".

18. Article 4 of the Constitution of Islamic Republic of Pakistan says that every citizen enjoy the protection of law. Clause (a) of Sub-Article (2) express that no action detrimental to the life, liberty, body, reputation or property of any person shall be taken except in accordance with law. In the instant case, the proceedings initiated in "unlawful manner" in negation of Article 4 and judicial principle laid down from time to time by the Superior Courts. In order to thwart, the commission of unlawful act in derogation of the provision of the statute the Hon'ble Supreme Court of Pakistan in a reported judgment 2002 PTD 2457 held that "the thing should be done as they are required to be done, or not at all" and in PLD 1971 Supreme Court 61 "neglect of plane requirement of an absolute statutory enactment prescribing how something is to be done would invalidate thing being done in some other manner" and PLD 1973 Supreme Court 236. The Hon'ble apex Court in 2001 SCMR 838 and 2003 SCMR 1505 held that "while considering the impact of violation or non-observance of the method prescribed by law for doing an act in a particular manner or mode, such provision of law is to be followed in letter and spirit and achieving or attaining the objective of performing or doing of a thing in a manner other than provided by law would not be permitted. The same observation has been made by the Hon'ble Supreme Court of Pakistan in a case reported as 2006 SCMR 129.

19. In view of above detailed deliberations on the factual and legal aspects of the case and by getting strength from the judgments of apex Courts referred herein above. We are of the considered view that as per circumstances of the case the appellant / importer has not committed any offence of mis-declaration of value, description and classification therefore we hereby set aside the impugned order only to the extent of redemption fine and penalty imposed upon the importer / appellant and remit the same in all. The differential amount of duty and taxes be charged as per found goods under relevant PCT heading. The respondent is further directed to issue and delay and detention certificate as to save the appellant from demurrage and detention charges.

20. Judgment passed and announced accordingly.

21. This order consists on 10 pages and each page bears my initial and office seal.

SA/38/Tax (Trib) Appeal allowed.