2010 PTD 335

MIAN MUHAMMAD HANIF TAHIR, JUDICIAL MEMBER:--- This order shall dispose of Customs Appeals No.409/LB/2009, 410/LB/2009, 412/LB/2009, 413/LB/2009 as the same have been filed against one and the same consolidated Order-in-Appeal No.57-72/2009 passed by the Collector of Customs, Sales Tax and Federal Excise (Appeals) Lahore. All the appeals contained identical facts and legal issues.

2. Brief facts of the case are that the Federal Government vide S.R.O. 482(I)2007, dated 9-6-2007 imposed RD 25% on the export of ferrous waste and scrap re-melting scrap ingots of iron and steel and the Collector of Customs, Lahore had received an information that the highly under-invoiced value in order to evade the regulatory duty. During the scrutiny of the record, it revealed that the exporters had filed GD for the export of different quantities of stainless steel bundles scrap declaring values ranging between US$ 400 to 600 per metric ton. The customs staff at the time of weighment did not take care while calculating regulatory duty under the above mentioned S.R.O. as the similar/identical goods exported from Karachi port during the same period were checked and it as found that the same were exported US$ 1450 per metric ton and the evidential record of KEXP export GD No. 27269, dated 17-11-2007 of Karachi port was also available with them to prove the under-invoicing of the subject goods. The matter was adjudicated, by the Adjudicating Authority and the order-in-original was passed against the appellant whereby an appeal was filed before the Collector (Appeals) Lahore who had too dismissed the appeal by holding that in case of uniform scrap items, such unusual value differences were not acceptable for taxation purpose. Being aggrieved from the impugned order, the appellant had filed the present appeal before this Tribunal.

3. The learned counsel for the appellant argued that the impugned order is illegal and void having been passed in violation of the judgment delivered by the superior Courts. He further argued that the impugned order is also violative of the order, dated 25-9-2008 passed by the Director-General Customs Valuation Karachi in Review Application No.DG (V) Val. Rev/67/2007 in which identical question of under-invoicing the exported goods and evasion of regulatory duty imposed under the same notification was involved. It was held that after exportation of the goods, the matter became past and closed and subsequently determination of value would have no nexus with such a past and closed transaction. He also relied upon case "Messrs S.T. Enterprises through Proprietor v. Federation of Pakistan through its Secretary (Revenue Division-FBR), Islamabad and 4 others (2009 PTD 281)" in which similar views were taken by the Hon'ble Lahore High Court Lahore. He further argued that the learned Collector (Appeals) Lahore has failed to address and give finding on legal issues raised by the appellant which rendered his order void and illegal. He further argued that section 32(1)(2)(3) and (3A) of the Customs Act, 1969 can not be invoked together. According to him the present case relates to the past exportation check which falls under subsection (3A) of section 32 of the Customs Act, 1969 for which Import and Export Processing Authorities have no power and it was for the valuation department to issue show-cause notice in such cases. Moreover, the specific subsection of section 32 was to be invoked in the show-cause notice is lacking in this case and thus, the show-cause notice and subsequent proceedings became illegal as held in case "Messrs Atlas Tyres (Pvt.) Ltd. Sheikhupura v. Additional Collector (Adjudication) Collectorate of Central Excise Lahore and another 2003 PTD.1593" The learned counsel further argued that no case of misdeclaration is made out against the appellant as authenticity of none of the export/shipping document was doubted by the appropriate officer at the time of scrutiny of the documents, examination and valuation of the goods. He further pointed out that even in the show-cause notice there was no allegation that the appellant presented fake or forged documents. He further argued that according to section 25(15) of the Customs Act, 1969 no value for export can be based on evidence as the customs value of any exported goods shall be the value at the prescribed time (i.e. the date on which GD was delivered) on a sale in open market for exportation to the country to which the goods were consigned. He further argued that the scrap was of various grade and unless and until the description as found on examination of the goods in question is the same, the value of one consignment cannot be applied to the other. He further argued that methods of valuation prescribed under subsections (1) (5) (6) (7) (8) and (9) of section 25 of the Customs Act, 1969 cannot be applied in case of goods meant for exportation. He further argued that the appellant was never confronted with any material showing the higher value of identical goods in respect of which the GD was filed on the same date. According to the learned counsel the goods on presentation were properly examined, assessed .and out of charge and allowed to be exported by an appropriate officer of Customs and there was no justification for enhancing the value subsequently more particularly when neither the contract entered into by the appellant with the importer abroad nor any other document was alleged to be doubtful. Moreover, the description, quantity, weight and other particulars of the goods were also not disputed. He further argued that the value for export can neither be based on evidences of identical or similar goods nor it can be enhanced on the basis of KCH data. He further argued that the export was made against proper contract on the value agreed between the exporter and the importer and the remittance was also made accordingly by the importer abroad through State Bank of Pakistan and no evidence could be brought on record to establish that appellant received remittance through any other mean and as such re-opening such past and, closed cases at this belated stage would neither be justified nor legal.

4. The learned departmental representative while supporting the impugned order has argued that the same was validly passed after applying judicious mind and considering the law laid down by the superior Courts. He, however, admitted that the consignment was properly examined, assessed, valued and allowed to be exported by the customs authorities. He also admitted that the documents presented by the appellants were accepted by an appropriate officer. He however, argued that there was no bar for raising demand of regulatory duty on the basis of value subsequently enhanced on the basis of record of identical and similar goods. He further contended that when the goods exported by the appellants were compared with the goods exported at Karachi it transpired that the appellants had under-invoiced the value. On confronting as to how comparison of the goods was carried out, learned DR argued that the documents were compared and not the goods. He further argued that section 25(15) of the Customs Act, 1969 did not create bar on application of uniforms values. He, however, agreed that the customs value of the exported goods shall be the value at the prescribed time on sale in open market for exportation to the country to which the goods were consigned. He further argued that no irregularity has been committed by the department in this regard. Affording to him section 32(2) provides a period of 5 years where short levies made on account of un-true statement orally or through a document by the person concerned and if no case of misdeclaration was made at the time of export the same can be initiated at later stage as provided under subsection (1)(2)(3A) of section 32 of the Customs Act, 1969. On specific question, he was unable to controvert that there was no allegation of presenting false documents and that the case should either be under subsection (2) or (3Ap of section 32 of the Customs Act, 1969. He further contended that terminology of "grade" is always attributed to prime quality goods and not to scrap. He, however, was unable to controvert the assertion of the learned counsel for the appellant that there would be lot of difference in value of the bundle scrap and ingots. He further argued that the data of Karachi Custom House was fully applicable to the exported consignment of the appellants. However, he was unable to point out the provision of law or rules in this behalf. He could not meet the arguments of the learned counsel for the appellant with regard to the re-opening of the past and closed transaction merely on the basis of valuation and there being no allegation regarding falsity of the documents or as the case may be difference in description, quantity, weight or classification of the goods.

5. I have heard the learned counsel appearing on behalf of the appellant and the learned departmental representative and pursued the record available on the file. So far as the arguments of the learned counsel for the appellants that the export processing authorities which examined, assessed and allowed exportation of the goods were not authorized to carry out post clearance audit and issue show-cause notice the controversy stood resolved in case "Messrs Pak Suzuki Motors Co. Ltd. through Senior General Manager (Corporate Plying and Logistic) Karachi (2006 PTD 2237)" in which Division Bench of Hon'ble High Court of Sindh at Karachi held as under:--

"We are of the opinion that para. 44 of CGO 12 of 2002, is very clear and fully supports the contention of Mr. Aziz A. Sheikh. We are persuaded to agree with the submission and consequently hold that the Assistant Collector, Import Processing Port Muhammad Bin Qasim who issued the show-cause notice under section 32 and passed the order-in-original had no jurisdiction. It was clearly a post importation case and therefore, the officers of the Valuation Department could 'initiate action for recovery of the government dues under section 32 of the Customs Act. The Tribunal has 'fallen in error in holding that the order in original was with jurisdiction."

6. The contention of the learned counsel for the appellants that once the consignment is out of charge it becomes past and closed transaction so far its value is concerned also hold force.

7. Similar views were taken by the Hon'ble Lahore High Court Lahore in "Messrs A.S. Enterprises and Messrs Sunny Traders reported as (2009 PTD 281)" Director General of Customs Valuation Karachi in number of cases where the allegation of under-invoicing. the exported goods was levelled and the exporters were made to pay regulatory duty under the same notification which is applied in this case has also followed the law laid down in the aforesaid cases so far as the invocation of section 32 of the Customs Act, 1969 in valuation cases was concerned. It is further pointed out that the appellant in the first instance invoked the constitutional jurisdiction of the Hon'ble Lahore High Court Lahore in this case by way of filing Constitutional petition (W.P. No.16715 of 2008) which was disposed of vide order, dated 19-12-2008 with the direction to the appellants to approach the first "appellate authority as provided under the law and rules. While disposing of the aforesaid petition it was observed by the Hon'ble Lahore High Court Lahore that so far as the arguments of the respondents (department) that section 32 can be invoked sparingly without any valid proof is concerned, this Court in principle do not agree with the same" this supports the contention of the learned counsel for the appellant. There is no denial on the part of the respondents that neither the contract nor any other shipping document was doubted or found false at export stage nor such allegation was levelled in the show-cause notice. There is also no denial that there is lot of difference in law of valuation in respect of import and export. The learned DR has failed to point out if any remittance was received by the appellants through any un-authorized means other than the remittance made through the State Bank of Pakistan which strengthened the argument of learned counsel for the appellant that the export was made against contract and the value mentioned therein was remitted through banking channel. There is also no denial that the dates of CGs shipping documents of the appellants and the evidential GD are different. The contention of the learned counsel that the case should either by under subsection (2) or (3A) and both these provisions cannot be invoked together also carry weight. He has rightly argued that neither' there was difference in description, quantity, weight, classification of the goods nor 'there was any allegation regarding falsity of documents and thus, no case of misdeclaration is made out against them also hold field. There is also no denial that neither the goods were physically compared nor any lab test of both the consignments i.e. the consignment exported by the' appellant and the one exported at Customs House Karachi was carried out. Thus, it cannot be said that both the consignments consisted of same type of scrap. When confronted the learned DR did not point out any other material or evidence accept the evidential GDs mentioned in the show-cause notice. The valuation of exported goods on the basis of value of identical or similar goods cannot be assessed as such methods are only prescribed for import. The learned DR was also unable to controvert the assertion of the learned counsel that if the department had evidences of higher value then why the same were not applied when the consignment was presented for exportation. The contention of the learned DR that section 32(2) authorizes the department to raise demand within 5 years is without merit because 'there is no allegation of falsity of documents or misstatement or any collusion of the appellant with Customs Authorities. The contention of the learned DR that there is no terminology of grades in scrap is also without force because as pointed out by the learned counsel for the appellants there is lot of difference in value of the scrap of various type like magnetic and non-magnetic scrap. This Tribunal in its judgment, dated 29-6-2009 passed in C.A. No.155/LB/2009 has already resolved the question of past and closed transactions as well as invocation of section 32 in such cases.

8. The upshot of the above discussion is that the department has made out cases on the basis of mere evidential GD without physical comparison of goods by alleging that the value of exported goods would have been higher being any cogent material and, thus, this Tribunal holds that making case of misdeclaration against the appellant was a result of illegal exercise of jurisdiction. This, obviously means acceptance of the appeal and setting aside the impugned orders passed by the lower forum.

9. In view of the above discussion, there is no force in the arguments advanced by the learned Departmental Representative (department) so, the appeal in hand in hereby accepted and the consolidated Order-in-Appeal No. 57-72 of 2009 are set aside. Parties be informed through registered post AD or by TCS.

10. File be consigned to the record after completion.

C.M.A./160/Tax(Trib.) ???????????????????????????????????????????????????????????? Appeal accepted.