Appeals Nos.702/LB and 703 of 1999, decided on 18th May, 2001. Versus Appeals Nos.702/LB and 703 of 1999, decided on 18th May, 2001.

JUSTICE (R.) ABDUL MAJEED TIWANA (CHAIRMAN).--- This is second appeal against the order, dated 26-11-1999, by which the learned Collector (Appeals), Lahore, had dismissed the appeal of Messrs Prefect (Pvt.) Ltd., the appellants herein, against the order-in-original, dated 9-8.1999, passed by the learned Additional Collector of Customs (Appraisement) Dryport, Lahore. By this order he had confiscated the consignment of 10 drums of Atlas Oil-89 and 10 drums of Atlasol 601-BSA (the appellants allege 15 drums) besides certain other goods being used as coverage, on the ground that they were banned items and were being imported with the connivance of the customs officials and clearing agents. He, however, released other goods on the payment of redemption fine of Rs.20000. He also subjected the importer and clearing agent to a personal penalty of Rs.20000 each.

2. Pursuant to an information about the import of some contraband under the garb of chemicals through customs agents Messrs Commercial Carriers, the Customs Intelligence and Investigation, Lahore, examined Container No. GATU-0457763 covered under Bill of Entry No.03083, dated 12-1-1999. As a result of the examination, the consignment was found to contain 10 drums weighing 1800 Kgs., having sticker of Atlas Oil-89 which indicated the presence of lard oil, besides some other chemicals. The checking staff also found 15 drums of Atlasol 601-BSA and their sticker also indicated the presence of lard besides other chemicals. Both the parts of the consignment were sized by them as their samples, on analysis by the Customs Laboratory, were found to contain lard oil, a banned item. A contravention case was eventually made out by them against the appellants as importers, their clearing agents and also against certain members of Dryport Customs Staff, who had earlier examined the imported goods and finding nothing objectionable in them, were clearing them on the receipt of customs duty and taxes. The Customs Intelligence Staff also got the case: F.I.R. No.3/99 registered against all concerned under the penal provisions of the Customs Act, 1969, the proceedings wherein were stayed by the High Court on a constitutional petition filed by the persons affected.

3. However, on the contravention report submitted by the Customs Intelligence Staff, the learned Additional Collector of Customs, Dryport issued show-cause notices to the appellants, their clearing agents and some members of Customs Staff, who were clearing the goods in the ordinary course of their official duty. They all contested the notices and asserted that the seized consignment contained no objectionable or banned item and a false case was cooked up by the Customs Intelligence and Investigation Staff. During the adjudication proceedings they stuck to their stance which the Adjudicating Officer did not accept and passed the impugned order-in-original which was maintained in appeal, ultimately giving rise to this second appeal.

4. It was argued on behalf of the appellants that samples of Atlas Oil-89 and Atlasol 601-BSA were repeatedly drawn and got tested from different Laboratories but none of them confirmed that they contained lard oil and the learned Adjudicating Officer, basing his conclusion on mis-reading of evidence, conjectures and surmises, erroneously confiscated these chemicals, which were imported by the appellants for the treatment of leather being manufactured in tanneries and factories, and the lower appellate forum mechanically affirmed the laconic order of the first forum. Elaborating his contention, he submitted that the Customs Authorities at the Dryport, during the process of clearance of the goods got the samples of the said goods tested from the Customs Laboratory, Lahore, and on the basis of its report, dated 16-1-1999, when they were about to finalize the clearance, the Customs Intelligence and Investigation by unlawfully interfering in their jurisdiction abruptly seized the said goods, commenced their own proceedings, leading to the adjudication and during the investigation they got re-checked the samples of those goods once again from the Custom Dryport Laboratory, Lahore, then from the Customs Laboratory, Karachi and finally from PSCIR Laboratory, Lahore. According to the learned counsel, when they could not get any support from the results of these analysis, they pressurized and produced before the Adjudicating Officer the author of the second report of Customs Laboratory, Lahore, who, on the basis of yellow colour of the chemical, opined that it was lard oil and the learned Adjudicating Officer, basing his conclusion his opinion, passed the impugned order and the learned Collector of Appeals, Lahore, without applying his mind, dittod the adjudication order. He also referred to the explanation/clarification of the foreign exporter of the goods in U.S.A.

5. The learned departmental representative supported both the impugned orders with all vehemence at his command. She argued that lard was a detestable and prohibited item and its presence in the chemicals even in the smallest quantity was banned and forbidden and made sensitive issue even religiously and it was in fact for that reason that the prosecution agency as also the adjudication forums were more concerned with.

6. We have perused the record in the light of the above contentions. This is not the first case in which we have come across tae undue interference with overbearing attitude of the Intelligence and Investigation Wing of the Customs in the exclusive jurisdiction and working of the officers and staff of the Dryport, Lahore and other Customs Clearance Stations and unless the C.B.R., which has given them free hand in Order No.3(4)/86, ACE.III, dated 10-3-1990, provides for some well designed system of checks and balances, they are, like other intelligence agencies in the country, likely to play havoc with the system and the rights of the citizens. We will presently demonstrate the unjustified part they have played in this case under the pretext of checking revenue evasion and under the cover of preventing the import of banned items injuring religious feelings. ???????????

7. When the Customs formation at the Lahore Dryport was busy in the clearance of the goods in question in the ordinary course of their duty after obtaining report of their chemical analysis from the Customs Laboratory, Lahore, and finding nothing objectionable in them, the Intelligence and Investigation Staff, on a so-called information, pounced upon them in their official premises and seized the goods and the record and even got a criminal case registered against them and the importers, obviously creating alaram and harassment to all concerned. Virtually substituting them, they again took the representative samples of the goods in question and sent them first to the same Customs Dryport Laboratory, Lahore, then perhaps dissatisfied with it sent one to Customs Laboratory, Karachi but probably not finding its report to suit their designs, they sent the third sample to PCSIR Laboratory, Lahore, but during the adjudication proceedings they, falling back upon the second report of Customs Dryport Laboratory, Lahore, produced its author Mr. Zia-ul-haq Khan to support his report, dated 25-1-1999. He apparently travelled beyond his report and mentioned some chemical processes and . ingredients which did not form part of his report, especially concerning Atlas Oil-89.

8. To be more precise his report regarding Atlas Oil-89 is "sample on chemical examination is found to be lard oil. It is in the form of pale yellow colour transparent, water liquid. Ref Book (5241-Merck Index)". About Atlasol 601-BSA, he opined:

"Sample on test is found to be a preparation for the oiling of leather (Fat Liquor) consisting of synthetic and animal sulphonated oil. It is completely miscible with water for transbusent stable emulsion. It is in the form of brown colour liquid."

9. Before the Adjudicating Officer, he, besides asserting that it was lard oil, alleged that in addition to the colour of the oil, he also used other criteria, namely, specific gravity, respective index, solidification point, acid value and saponification value. Had he applied these criteria, he would have mentioned it in his report but there was no such mention. It is possible that he would have made this addition only to strengthen the prosecution case at the instance of the detecting agency out the fear of their nuisance value who could blackmail him for submitting a collusive previous report as Muhammad Ijaz, S.I.O. contended before the Adjudicating Officer.

10. We would, therefore, discard his report based on the yellow colour of the oil and his statement going beyond his report, moreso when some other oils, including some vegetable oils and butter oil of a cow have yellow colour.

11. Now would see the report of Customs Laboratory, Karachi, dated 11-3-1999. Regarding Atlas Oil-89, after giving its chemical analysis, it says that "the sample was found to be some animal oil/vegetable oil whether lard oil or could not be verified because the above values coincide with other animals/vegetable oils?." With regard to Atlasol 601-BSA it says "the sample on test is found to consist of sulfated fatty acid ester, natural oil in association with free oil (petroleum oil). It is in the form of reddish viscous liquid-a Fat Liquor".

12. The third and the last report is that of PSCIR, Lahore, dated 22-4-1999, which is in fact an elucidation of early opinion in response to the query of the detecting agency. It reads "The provided sample of Atlas Oil-89 was analyzed and detailed investigation could not establish beyond doubt that the oil is of animal origin. The various physico?chemical values of the oil obtained in these laboratories cannot be relied upon to conclude that it is a lard oil".

13. The next piece of evidence to be perused is the clarification furnished by the manufacturers/suppliers/exporters namely Atlas Refinery Inc., New Jersey, USA, in their letter, dated 28-1-1999. It says?.."Atlas Refinery products are chemically modified materials for use in the leather industry. Some of the starting materials originate from the same natural source as lard but they have been chemically altered so that they cannot be used in food applications.

14. With regard to Atlasol-60 and Atlasol-173, it says "These productions utilize base compounds of animals origin but have been chemically modified." As regards Atlas-89, it explains the products which contain basic oil of animal origin which are raw and inedible or blended with other chemicals making them inseparable and inedible."

15. The above resume of various reports of different laboratories and the clarification furnished by the manufactures coupled with stickers affixed on the containers of the chemicals in question lead us to an irresistible conclusion that Atlas-89 and Atlasol-601 BSA both contain lard oil, the former in some what greater quantity and the latter in some what lesser quantity, but both of them are mixed up and blended with chemicals for making them suitable for use in leather industry. With the process of blending and mixture of some chemicals, the lard oil changes its form and properties and ceases to be an edible oil. In other words, it becomes unfit for human consumption and remains fit only for industrial purposes, mainly for external use like many other liquids and substances. If its import has been banned for the reason that it is `haram' for Muslims to consume, that is a good idea in a Muslim State like ours but if all the chemicals and substances containing some quantity of lard and other `haram' liquids and substances are banned, as in this case, we are afraid, most of the industries will have to be closed down and country is already in the grip of financial crises, mostly on account of closure of industry. We are of the view that the law banning the import of lard oil was only to the extent of its purest edible form and it did not ban its blended form, as in this case when it becomes unfit for human consumption and is useable only for industrial purposes.

16. In view of the above, we accept the appeal, set aside the impugned orders and direct the release of the confiscated goods in question to the appellants on the payment of custom duty and taxes ordinarily leviable thereon. There is some confusion about the number of drums of Atlasol 601-BSA involved in this case because, as per the impugned order, the drums were 10 in number, while, as per averment in the memo. of appeal they were 15 in number. The customs authorities will have to resolve this anomaly and make up the deficiency, if any.

17. This judgment shall also apply to the identical appeal bearing the same title "Messrs Prefect (Pvt.) Ltd. v. Additional Collector of Customs, Lahore" (C.A. No.703/LB of 1999) which is also accepted and the orders impugned therein are set aside and the customs authorities are directed to release the goods in question to the appellants therein on the payment of custom duty and taxes leviable thereon. There is, however, no confusion about the number of drums because in the impugned orders as also in the memorandum of appeal number of Atlasol 601-BSA drums is 15.

(Sd.)

(Falak Sher) ?????????????????????????????????????????????????? ????????? (Justice (R.) Abdul MajeedTiwana)

(Member Technical) ????????????????????????????????????????????????????????????????????????????????????? ? (Chairman) ????????????????????????? ????

The charge raised against the appellants is that some of the chemicals imported by them i.e. Atlas Oil-89 and Atlasol 601-BSA contained Lard Oil. Proceedings were initiated against them and the said goods were confiscated by the Adjudicating Officer.

2. The appellants denied the charge levelled against them in the show cause notice. They have made a submission in writing that a controversy has unjustifiably been raised with regard to the said goods and in order to end the same they would like to send the disputed chemical i.e. Atlas Oil-89 back to the consignor. They have requested that they may be allowed to re-export the same to USA.

3. In order to ascertain the factual position the samples of the aforesaid chemicals were examined in Customs Lab. Dryport Lahore, Customs Lab., Customs House Karachi and PCSIR Lab. Lahore. The case file shows that contradictory reports were received on this issue from these laboratories. In case of Atlas Oil-89 the chemical examiner of Customs Lab. Dryport Lahore reported that the sample was found to be Lard Oil. His report reads as under:--

"Sample on chemical examination is found to be Lard Oil. It is in the form of pale yellow colour, transparent, water immiscible liquid."

4. In this report, dated 11-3-1999 the examiner of Customs Lab. Customs House Karachi described Atlas Oil-89 as animal/vegetable oil and stated that it was difficult to ascertain whether the same was Lard Oil. The relevant portion of his report is reproduced below:--

"In view of above result the sample is found to be some animal oil/vegetable oil, whether Lard Oil or not could not be verified because the above values coincide with the other animal oils/vegetable oils."

5. In this report, dated 8-2-1999 the Principal Scientific Officer PCSIR Lahore commented on the physical values and fatty acid composition of Atlas Oil-89 and Atlasol 601-BSA and stated that the same did not "match with the, reported fatty acid composition of the Lard fat''.

6. ? In his letter, dated 24-4-1999 addressed to the Additional Director Customs Intelligence and Investigation Lahore the Chief Scientific Officer PCSIR Lahore reiterated that there was no evidence to conclude that the disputed chemicals contained Lard Oil. The relevant portion of his letter reads as under:--

"The provided sample of Atlas Oil-89 was analyzed and the detailed investigations could not establish beyond that the oil is of animal origin. The various physico chemical values of the oil obtained in these laboratories cannot be relied upon to conclude that it is a lard oil."

7. From a perusal of the aforesaid test reports it is evident that only in one test report received from Customs Lab. Lahore Atlas Oil-89 has been described as Lard Oil but the remaining three reports do not support this conclusion. As against Lahore Customs Lab. report which lacks in essential details, PCSIR experts and the examiner Customs Lab. Karachi gave detailed analysis reports wherein they discussed physical values and composition of the said chemical and came to a considered finding that Atlas Oil-89 cannot be treated as Lard Oil. These reports, in terms of their contents, quality and value are far more cogent and reliable then the one which contained an adverse finding on this issue. In view of the findings PCSIR experts and the Examiner Customs Laboratory at Karachi, the said chemical cannot be treated as Lard oil.

8. As regards Atlasol 601-BSA its sample was analyzed in different labs and it was found to consist of synthetic and animal sulphonated oil. The test reports do not contain any adverse finding/observation with regard to this chemical. It is difficult to make out that led the Adjudicating Officer to take an adverse view in this regard and confiscate the same along with Atlas Oil-89.

9. Since there is no reliable evidence to establish the charge raised against the appellants the impugned order is hereby set aside.

10. In view of the request made by the appellants they are allowed to re-export Atlas Oil-89 to USA. The remaining chemicals including Atlasol 601-BSA may be restored to the appellants on payment of customs duty and other taxes.

11. This order also applies to Appeal No. 703/LB of 1999 filed by Messrs Prefect (Pvt.) Ltd. against Order-in-Appeals Nos. 813-814 of 99, dated 27-11-1999 of Collector (Appeals) and Order-in-Original No. 19 of 1999, dated 9-8-1999 passed by the Additional Collector Customs Dryport Lahore. In view of the above discussion, the impugned order is set aside. The appellants are allowed to re-export Atlas Oil-89 to USA. The respondents are directed to restore the remaining chemicals to the appellants on payment of customs duty and other taxes.

(Sd.)

Falak Sher

(Member Technical)

Since myself and the learned Member (Technical) do not agree on an aspect of the final conclusion reached by us in this appeal, it may be placed before Mian Abdul Qayyum, the learned Member (Judicial) of Bench=II, Lahore, for his decisive opinion.

(Sd.)

Chairman

2-5-2001

C..As. Nos. 702 of 1999 and 703 of 1999

The learned counsel for the appellant has corrected the figure 90 as 89 appearing in para. C of the application submitted by the appellant which is available on the record of Appeal No. 702 of 1999.

After hearing learned counsel for the appellant and examining the record, I agree with the learned Member (Technical) of Bench-I. The chemical Atlasol 601-BSA may be released to the appellant on payment of leviable duty and taxes and the chemical Atlas Oil-89 should be sent back to the American suppliers through the appellants. The order also applies to Appeal No. 703 of 1999.

(Sd.)

Mian Abdul Qayyum

Member (Judicial) Bench-II

The Headquarter Bench of the Tribunal consisting of Justice (Retd.) Abdul Majeed Tiwana, Chairman/Member (Judicial) and Mr. Falak Sher, Member (Technical) had dealt with Customs Appeal No.702/LB of 1999 and Customs Appeal No.703/LB of 1999. Both of them n their respective judgments had agreed to accept both the appeals, set aside the ordersrs impugned therein and direct the confiscated goods, namely, certain drums of the chemicals known as Atlasol 601-BSA to be released to the appellants on the payment of customs duty and taxes ordinarily leviable thereon. They, however, differed with regard to certain drums of the chemicals known as Atlas Oil-89 to the extent that the former (Member Judicial) also directed its release to the appellants on the payment of leviable customs duty and taxes, while the latter (Member Technical) on the request of the appellants directed this chemical to be returned to the American exporters who had allegedly signified their willingness to accept the same back.

To resolve this difference of opinion, the matter was referred to Mian Abdul Qayyum, Member (Judicial) of Lahore Bench-II, who has, in his preceding note, agreed with the views of the learned Member (Technical).

Keeping in view the majority opinion, the final order of the Bench is that both the appeals mentioned above are accepted, the orders impugned therein are set aside and where the entire quantity of the chemical known as Atlasol 601-BSA is directed to be released to the appellants on the payment of customs duty and taxes ordinarily leviable thereon, the entire quantity of the chemical known as Atlas Oil-89 shall be released to the appellants for shipping it back to the American exporters on terms and conditions mutually agreed upon between them.

(Sd.)

(Falak Sher) ?????????????????????????????????????????????????? ????????? (Justice (R) Abdul Majeed Tiwana)

(Member Technical) ????????????????????????????????????????????????????????????????????????????????????? ? (Chairman)

S.A.K./87/Tax(Trib.) ??????????????????????????????????????????????????????????????????????????? Appeals accepted.