Customs Appeal No.296 of 2003, decided on 26th June, 2003. Versus Customs Appeal No.296 of 2003, decided on 26th June, 2003.
ORDER
ZAFAR IQBAL (MEMBER TECHNICAL).--- This appeal has been filed against the order, dated 20-5-2003, passed by the Collector of Customs Adjudication, Hyderabad.
2. The appellant in this case is regularly importing a product namely, "Peractive Ac Green (TAED 3870)". The said product was all along been assessed under a tariff heading' corresponding to PTC 3815,9090. However, on the basis of a post import check, the respondent raised a demand against the appellant on 14-6-2002 by stating that the said goods are classifiable under tariff heading 3824.9099 which attracts a higher rate of duty i.e. 35% compared to 10% paid by the appellant.
3. The appellant vide their reply to the show-cause notice denied the said charge and contended that goods were rightly being assessed to duty.
4. Having not satisfied with the reply of the appellant, the respondent issued a show-cause notice on 21-12-2002, whereby it was stated that the demand raised on 14-6-2002 was correct and directed the appellant to show cause for not enforcing the said demand and for imposition of penalties, as the said action of the appellant was considered an infringement of section 32 of the Customs Act, 1969.
5. In the meantime the appellant had also approached the Central Board of Revenue vide their letter, dated 2-10-2002, wherein the Board was requested to issue a ruling on the classification of disputed goods.
6. Taking cognizance of these facts, the Central Board of Revenue referred to matter for issuance of classification ruling to the Classification Committee of the Collectorate of Customs. Appraisement vide their letter, dated 6-1-2003. A copy of this letter was endorsed to the respondent, and the appellant also vide their letter, dated 10-1-2003, submitted the said instructions of the Board to the Adjudicating Officer.
7. In spite of all these facts, the respondent on 20-5-2003 passed the impugned order by holding that goods were correctly classifiable under heading 3824.9099 as suggested by the auditors and he accordingly enforced the demand against the appellant. Penalty, addition tax and other charges were also ordered to be levied against the appellant. The said orders have now been challenged through this appeal.
8. The appellant now contends that:--
(i) the matter of classification of the disputed item is pending before the Tariff Classification Committee and in the absence of its ruling the order-in-original and the demand with threat to initiate action under section 202 is illegal, mala fide and arbitrary;
(ii) the impugned demand notice, show-cause notice and order-in original are without jurisdiction, mala fide and illegal as till date the, disputed items are being imported and cleared from Port Qasim and Karachi Collectorate very regularly without having any objection of classification;
(iii) the Classification Committee has already given their recommendation that the classification of all the three chemicals are the ingredients for the preparation of washing and cleaning auxiliary. According to this report the version of the appellant is correct;
(iv) the order-in-original has been passed without taking into consideration the contentions raised by the appellant and hence is violative of the principles of natural justice;
(v) the impugned show-cause notice is barred by limitation.
9. The respondent maintained its position as outlined in the impugned order.
10. We have heard the rival parties and case record has also been examined. In order to decide and dispose of this appeal, the following. issues are relevant:
(a) Whether or not the respondent disposed of the matter in a judicious manner?
(b) Whether or not after taking cognizance of the matter by the Central Board of Revenue to decide the classification issue, the respondent disposed of the matter rightly?
11. For deciding the issue of classification it is necessary for the Central Board of Revenue through Tariff Classification Committee to issue a ruling of the correct classification which shall have a prospective effect as it amounts to a departure from existing practice. The Customs Department has all along been constantly assessing the goods under the declared classification and any departure from the same would require a public notice and accordingly the changed practice will not affect the past and closed transactions as envisaged under section 22 of the Genera Clauses Act. This view gains strength from the rule laid down by the C. B. R. by its General Order No.21 of 1973, whereby it was directed that:--
"In the instant case, the practice was adopted by the Department on a well-considered view, without in any way bringing into picture the conduct of the person paying the customs duty. The previous classification of the goods for purposes of paying the duty shall hold good till the matter is reconsidered. If there is any change, it shall take effect from the date of the change and not retrospectively."
12. Where there is a question of departing from existing practice whether governed by express order of higher authority, or not, the Collector of Customs should, if the proposed departure is in the direction of an assessment more favourable to the importer, adhere to the existing practice and make a reference to the Central Board of Revenue accepting duty meanwhile from the assessee, under protest if the assessee so requires. Where the Collector contemplates a change to a higher assessment then has been the practice, he should not take action upon his view until he has obtained orders, but such orders would not have retrospective effect.
13. When a procedural change takes place, the past practice or Customs House with regard to assessment of goods shall not ordinarily be reopened in respect of short levy of duty or the levy of excess duty, it must be held that such short levy or excess levy has been due to error or misconstruction en the part of the officers of Customs.
14. With the change in classification on the basis of a ruling, no doubt, the law is not altered but the law has been acted upon a particular manner, .through tariff rulings, and in the light of a particular interpretation being already implemented, on the basis of which certain amount of duty is charged. The said departmental practice shall continue till the same is not changed. As soon as it is altered it shall be effective from the date of its doing so. Even otherwise, an innocent person paying duty on goods in a bona fide manner to the satisfaction of the rules, is protected from being further harassed.
15. To our mind, the Customs Authorities have erred in ignoring the well settled principle that an interpretation that has been constantly acted upon by the Customs Authorities and acquired the force of law as departmental practice is not to be changed in an arbitrary manner, as it would be extremely unfair to make a departure from it after a lapse of many years and thereby disturbing the rights that have been acquired and settled by a long and consistent course of practice.
16. In the instant case as already Stated, the Customs Authorities have all along been interpreting and classifying the said goods under declared classifications. The matter is now sub judice before the Classification Committee and any change in practice will take effect once the issue is settled by the C.B.R.
17. It is a well-settled principle of law that any administrative order, violative of the provisions contained in the statute is bad and invalid to the extent of inconsistency. It is also undeniable proposition of law that instructions issued by the C.B.R. under section 219 of the Customs Act, 1969 are binding on all the officers of' the Customs employed in the execution of Customs Act by virtue of provision contained in section 223 of the Customs Act. If there is any conflict in the instructions issued by the C.B.R. and the instructions or order issued by the officer subordinate to the C.B.R., that the instructions/orders issued by the subordinate official will be invalid and inoperative to the extent of conflict.
18. In the circumstances as explained above and in view of the provisions of section 22 of the General Clauses Act and the direction given vide Customs General Order No.21 of 1973, the manner in which impugned order has been passed reveals haste, lack of application of mind and arbitrariness. The Sindh High Court in the case of Akhtari Hussain v. Collector of Customs; C. P. No. 16 of 2003 decided on 19-4-2003 has held that orders and instructions issued in the form of General Order are binding on the officer of Customs and any deviation there from would make the proceedings suffering from procedural impropriety. Hence the respondent did not dispose of the matter in a judicious manner.
19. Furthermore, once the fact that classification issue relating to the goods in dispute stands seized by the C.B.R., the respondent should have waited for the final outcome of the Classification Committees` decision. In fact once the mater was referred to Classification Committee) by the C.B.R. the officer of the Collector Adjudication became coram non judice, hence the impugned order passed by him has not been decided in accordance with law and the same is hit by the due process clause of Article 4 of the Constitution.
20. Be that as it may, the orders passed by the respondent are patently illegal, the same are set aside and the case is remanded back for de novo consideration once the classification issue is settled by the C. B. R.
C.M.A./1045/Tax (Trib.) Case remanded.