Versus Tariq Najib , Dr. Akhtar Hussain, D.R. and Farrukh Ghulam Abbas

SAEED AKHTAR, MEMBER (TECHNICAL).--- This appeal is directed against Order-in-Original No.628/MN of 2000 passed by the learned Collector of Customs, Sales Tax and Central Excise (Adjudication), Faisalabad, issued vide C. No.MDPT/155/Audit/7/98/3022 dated 31-10-2000 whereunder the appellant was directed to deposit demanded amount of Rs.6,25,777 (customs duty Rs.3,66,756 sales tax Rs.2,24,222 and income tax Rs.29,794) along with additional sales tax under section 34 of the Sales Tax Act 1990.

2. Brief facts of the case are that Messrs Pride Spinning Mills (Pvt.) Ltd. Multan imported a consignment of Ring Spinning Frames and got the clearance vide Bill of Entry No.83 dated 2-2-1998 availing the benefit of S.R.O.424(I)/97 dated 13-6-1997. During post clearance scrutiny of the record it was observed by the auditors that according to S.R.O.424(I)/97 dated 13-6-1997, exemption of customs duty and sales tax was conditionally admissible and it was admissible to the machinery/ goods not manufactured locally. Ring Spinning Frames at the time of import were included in the list of locally manufactured articles issued vide Customs General Order No.17/94 dated 30-10-1994. As such exemption of customs duty and sales tax allowed to the importer under S.R.O.424(I)/97 dated 13-6-1997 was irregular which resulted in the loss of duties and taxes amounting to Rs.6,25,777. A show-cause notice C. No.MDPT/155/Audit/7/98/1951 dated 16-9-1998 was issued calling upon the importer to show cause as to why an amount of Rs.6,25,777 may not be recovered from them. The learned adjudicating officer decided the case ex parte against the appellant on the basis of material available on record as the respondent now appellant could not appear to defend the charges laid down in the show-cause notice. The appellant feeling aggrieved with the orders of adjudicating officer, 'riled appeal before this Tribunal under section 194-A of the Customs Act, 1969.

3. The main contentions of learned counsel for the appellant were as under:-

(1) The learned' Collector in the impugned order has directed the appellant to pay the demanded amount of Rs.6,25,777 along with additional sales tax under section 34 of the Sales Tax Act, 1990. The Show-cause notice was limited to the demand of Rs.6,25,777 only whereas the impugned order has directed to pay additional sales tax which is beyond the scope of show--cause notice, therefore without jurisdiction.

(2) The allegation in the show-cause notice was irregular exemption of duties under S.R.O.424(I)/97 dated 13-6-1997 but irregularity was not specified.

(3) The machinery imported was not locally manufactured. The Customs General Order No.17 of 1994 is not mandatory. It is advisory in nature. The advice is given to the department and not to the appellant. The Customs General Orders are issued for the guidance of officials of the department only. The Customs General Order cannot impose any condition on the rights of citizen. In ease of dispute/objection regarding local manufac turing of goods, there is a right available to the appellant under para 3 of the Customs General Order.

(4) The Customs General Order No. 7 of 1998 was issued on 24-3-1998 which included Ring Spinning Frames against Serial No.77. The entry was omitted vide CGO 14/1998 w.e.f. 24-3-1998. Para 3 of Customs General Order No.17/94, CGO No.7/98 and CGO No.14/1998 may be read together. In this way CGO No.14/1998 is order of the Central Board of Revenue under para 3 of CGO No.17/94. Letter dated 6-1-1999 of Engineering Development Board clarifies the matter.

(5) The Order-in-Original No.405/2000 passed by the Collector Faisalabad on the basis that the case is covered under S.R.O.424(I)/97 whereas impugned order has been passed on the allegation that the case is not covered under S.R.0.424(I)/97. The impugned order may kindly be set aside.

4. The respondents were represented by learned departmental representative Dr. Akhtar Hussain who opposed the contentions of learned counsel for the appellant and stated that the impugned order has been passed strictly in accordance with the law in view of the fact that exemption of duties and taxes under S.R.O.424(I)/97 dated 13-6-1997 was illegally claimed and wrongly granted by the Customs as the imported machinery at the time of import was manufactured locally and it was included in the list of locally manufactured goods issued vide Customs General Order No.17/1994 dated 30-10-1994. The learned departmental representative contended that the appeal lacks merit and needs to be dismissed.

5. We have heard the contentions of both the sides and perused the appeal file before us. The appellant imported textile machinery Ring Spinning Frames and claimed exemption of duties and taxes under S.R.O.424(I)/97 dated 13-6-1997 on the face of Bill of Entry No.83 dated 2-2-1998. According to notification S.R.O. 424(I)/97 dated 13-6-1997, exemption of duties and taxes on machinery etc. was available subject to fulfilment of conditions of concessionary S.R.O. Exemption/ concession of duties and taxes under the notification was available to goods not manufactured locally. The goods/machinery etc. manufactured locally was notified by the C.B.R through a Customs General Order No.17/1994 dated 30-10-1994. This CGO was later on superseded by CGO No.7/1998 dated 24-3-1998. In these Customs General Orders, Ring Spinning Frames were mentioned as goods which were manufactured locally. The CGO issued by the C.B.R provides guidelines to the Customs Officers about the goods manufactured locally.

The exemption/concession of duties and taxes as claimed was granted by the customs on the Ring Spinning Frames imported by the appellant in spite of the fact that this machinery was included in the list of goods manufactured locally. This discrepancy was detected by the audit and demand was raised by the customs against the appellant for the recovery of non-levied/evaded duties and taxes amounting to Rs.6,25,777. The learned adjudicating officer issued show-cause notice and provided opportunity of hearing to the parties before enforcing the demand. We have observed that the appellant failed to avail the opportunity of hearing and remained absent during proceedings of the case before the adjudicating officer.

6. The learned counsel for the appellant has pointed out that in the impugned order, the learned adjudicating officer has directed the appellant to pay the demanded duties and taxes amounting to Rs.6,25,777 along with additional sales tax whereas relevant section 34 was not invoked in the show-cause notice. We have observed that section 34 regarding levy of additional sales tax was not invoked in the show-cause notice and in view of this fact additional sales tax cannot be levied We have further observed that CGO No.17/1994 dated 30-10-1994 was the relevant document available at the time of import of machinery which can provide information about the goods manufactured locally. The CGO No.7/1998 dated 24-3-1998 which superseded the earlier CGO No.17/1998 was issued on 24-3-1998 i.e. after the import of machinery. This CGO was amended vide CGO No. 14/1998 dated 3-8-1998 and omitted the entry regarding Ring Spinning Frames w.e.f. 24-3-1998 upto 30-6-1998 and this amendment was made in CGO No.7/1998 dated 24-3-1998 as a consequence of decision taken in a meeting held under the Chairmanship of Dr. Muhammad Akram Sheikh, Vice-Chairman/Chief Executive, Engineering Development Board which was attended by the representatives of the manufacturers and users of Ring Spinning Frames and concerned Government officials to discuss the local status of manufacturing of Ring Spinning Frames. According to letter No.EDB-009(01)/98 dated 6-1-1999 of Engineering Development Board, it was decided in the meeting with consensus of all participants that the Ring Spinning Frames shall be treated as not included in CGO No.7/1998 dated 24-3-1998 from the date of issuance of CGO No.7/1998 up to 30-6-1999. This decision brought about an amendment in CGO No.7/1998 by the C.B.R. vide CGO No.14/1998 dated 3-8-1998. The relevant entry No.77 about Ring Spinning Frames was omitted from the CGO No.7/1998 w.e.f. 24-3-1998.

7. We have observed that Central Board of Revenue in its letter C.No.2/5/Mach./95 dated 25-7-1998 addressed to Collector of Customs and Central Excise Multan on the basis of information provided by the EDB, advised the Collectorate to treat the two Ring Spinning Frames imported by Messrs Khokhar Textile Mills Limited as not manufactured locally. The Period of import of Ring Spinning Frames by Messrs Khokhar Textile Mills was not mentioned in the C.B.R. letter dated 25-7-1998. We have further observed that Engineering Development Board 'in its letter dated 6-1-1999 addressed to Member Customs, C.B.R Islamabad pertaining to clearances of Ring Spinning Frames on 25-2-1998/28-2-1998 and 25-2-1998 by Messrs Ahmad Hassan Textile Mills Limited and Maqbool Textile Mills Limited respectively stated that Ring Spinning Frames were not manufactured locally in February, 1998 and these should also be treated as covered under the decision which recommended to the Board to treat the Ring Spinning Frames as not included in the list of CGO No.7/1998 between the period 24-3-1998 upto 30-6-1999.

8. We have carefully considered the contentions of learned counsel for the appellant. The C.B.R in its letter C.No.2/5/Mach./95 dated 25-7-1998 advised the Collectorate to treat the Ring Spinning Frames imported by Messrs Khokhar Textile Mills Limited as not manufactured locally but the period of import was not mentioned in the Board's letter. The outcome of recommendations of EDB in respect of Messrs Ahmad Hassan Textile Mills Limited and Messrs Maqbool Textile Mills Limited to treat the RSFs imported by them in February, 1998 as not manufactured locally, is not known. Both the parties in the dispute before us failed to provide assistance to this Tribunal about the outcome of recommendations of EPB in the cases of Messrs Ahmad Hassan Textile Mills and Messrs Maqbool Textile Mills to treat the RSFs imported by them in the month of February, 1998 as not manufactured locally. No letter of C.B.R in these cases to treat them covered under the CGO No.7/1998 is available on record.

9. The learned counsel for the appellant contended that para. 3 of CGO No.17/1994, CGO No.7/1998 and CGO No.14/1998 may be read together. In this way CGO No.14/1998 is order of C.B.R under para. 3 of CGO No.17/1994. There is no doubt about the fact that CGO No.14/1998 dated 3-8-1998 amended CGO No.7/1998 and omitted the entry No.77 relating the RSF for the period 24-371998 to 30-6-1998 but it is not possible to treat that the amendment for omitting RSF from the CGO No.7/1998 vide CGO No.14/1998 shall be treated that RSFs were omitted from the list of locally manufactured goods issued vide CGO No.17/1994 dated 30-10-1994. According to para 3 of CGO No.17 of 1994 dated 30-10-1994, the importer in case of disputed item is required to produce a certificate from a known local manufacturer of disputed item or from the Ministry of Industries stating that the imported item is not being manufactured locally in addition to a clarification from the C.B.R. No such certificate or clarification appears to have been produced by the appellant in the instant case. According to information available against Entry No.77 i.e. RSF in CGO No.17/1994, this machi nery was produced by Messrs Spinning Machinery Co. (Pvt.) Limited. Lahore and Messrs Textile Machinery Co. (Pvt.) Limited, Karachi.

10. We have observed that the impugned order is an ex parte decision and orders were passed without taking into consideration the view point of the importer. In view of the facts discussed above we find it appropriate to remand the case to the learned Adjudicating Officer to enable the appellant to produce clarification of C.B.R. to the effect that the RSFs of the specification imported by the appellant were not manufactured locally on 2-2-1998 when import/clearance of machinery was effected. The impugned order is set aside and case is remanded to the learned adjudicating officer for de novo consideration and fresh decision within 60 days of issuance of this judgment after affording opportunity of hearing to both the parties. The appellant is directed to furnish necessary clarification of C.B.R. to the adjudicating officer within 45 days of this order. The respondents are also directed to find out from the C.B.R. the outcome of recommendations of EDB to the C.B.R. in respect of import of RSF in the month of February, 1998 by Messrs Ahmad Hassan Textile Mills Limited and Messrs Maqbool Textile Mills Limited and provide the information to learned adjudicating officer within 45 days of this judgment to enable him to decide the case within two months.

The appeal stands disposed of accordingly.

H.B.T./135/Tax/(Trib.) Order accordingly.