KHYBER INTERNATIONAL OFFICE Versus FEDERATION OF PAKISTAN through Secretary Revenue Division/Chairman, FBR, Islamabad
SYED ARSHAD ALI, J.--- This consolidated judgment disposes of the instant petition along with the connected W.P. No.2760-P/2025, as both involve common questions of law and fact requiring simultaneous adjudication.
2. It is the case of the petitioners in both petitions that they are engaged in the business of import of goods. The imported consignments arrived at the Port of Karachi and were subsequently transshipped to their final destination, Azakhel Dryport, pursuant to the filing of Goods Declarations ( "GDs" ) and Transshipment Permits ( "TPs" ) by the authorized bonded carrier under Section 79 of the Customs Act, 1969 ( "the Act" ), read with Section 121 of the Act and Rule 489 of the Customs Rules, 2001 ( "the Rules" ). Upon arrival at Azakhel Dryport, the petitioners submitted their GDs under Rule 433 of the Rules through their authorized clearing agents. However, instead of processing the clearance in accordance with the procedure prescribed under the Act, the respondent department adopted the clearance mechanism through the Faceless Customs Assessment ( "FCA" ), introduced via Customs General Order No. 06 of 2024, dated 09 December 2024 ( "CGO No. 6 of 2024" ).
3. Both learned counsel for the petitioners contend that the mechanism for assessment and clearance of goods through FCA is inconsistent with the provisions of the Act, insofar as its application to the clearance of goods at Azakhel Dryport is concerned. Accordingly, they seek a declaration that the said mechanism is illegal and without lawful authority.
4. Conversely, the worthy Additional Collector of Customs and the learned counsel appearing on behalf of the respondent department have defended CGO No. 06 of 2024, contending that the Federal Board of Revenue ( "FBR" ) is vested with the authority under Section 223 of the Act to issue Customs General Orders. It is asserted that the impugned order was promulgated with the objective of introducing uniformity and transparency in the processing of GDs, rationalizing the workload of Appraising Officers, and promoting trade facilitation.
5. The arguments advanced by learned counsel for the parties were heard, and record of the case was examined with their valuable assistance.
6. Prior to addressing the question of validity of CGO No. 06 of 2024, it is pertinent to examine the statutory framework governing the clearance and assessment of imported goods.
Scheme of declaration and assessment of goods for home consumption, appraisement and clearance of goods under the Act.
7. Section 79 of the Act outlines the process for declaring imported goods in Pakistan. 1 It requires the importer to file a GD within ten days of the arrival of goods, accompanied by supporting documents such as the commercial invoice, bill of lading, and packing list. The provision applies to goods intended for home consumption, warehousing, or transshipment. For registered users of the Customs Computerized System ("CCS") , it also includes the assessment and payment of duties and taxes at the time of filing. An explanation appended to the section clarifies that, in the case of transshipment, the assessment and payment of duties and taxes are to take place at the port of destination. The provision sets out the basic procedural requirements and timelines for initiating the customs clearance process.
8. Since the petitioners' consignments were transshipped from the port of arrival to Azakhel Dryport, the legal framework governing transshipment becomes relevant. Under Rule 326 of the Rules, transshipment refers to the movement of goods from one customs station to another without the payment of duties and taxes. Sections 121(1) 2 and 123 3 of the Act further clarify that goods distinctly manifested for transshipment may be transported under bond to another customs station, where they are to be treated, upon arrival, as fresh imports subject to the standard clearance and assessment procedures. Thus, the law envisages that clearance and assessment of such goods be undertaken at the port of final destination, not at the port of first entry.
9. For the purpose of assessment, Section 80 of the Act further delineates the role of the Customs authorities upon receipt of a GD under Section 79. It mandates that the officer of Customs must satisfy himself regarding the accuracy of the particulars declared, including the assessment and, where applicable, the payment of duties, taxes, and other charges through CCS. The provision authorizes the officer to examine the goods at any point after their arrival in Pakistan and to requisition relevant documents either during or after the clearance of goods. Subsection (3) of Section 80 provides that where any discrepancy is found in the goods declaration or supporting documents, particularly concerning the assessment, the officer shall reassess the goods accordingly, without prejudice to any other legal action that may be taken under the Act. In cases involving CCS, the examination of goods is to be undertaken based on computerized selectivity criteria.
10. Similarly, Section 83 of the Act provides that where the owner of goods entered for home consumption, and assessed under Section 80 or 81, has paid the applicable import duty and other charges, the appropriate officer may, upon satisfying himself that the import is neither prohibited nor in violation of any applicable restrictions or conditions, issue an order for clearance of the goods.
11. A cumulative reading of Sections 80 and 83 of the Act reveals that the authority to verify self-assessment, conduct reassessment, and examine or test imported goods is expressly vested in the "officer of Customs." 4 Similarly, the discretion to clear goods for home consumption rests with the "appropriate officers 5 after he has satisfied himself regarding compliance with all statutory and regulatory requirements.
12. On the other hand, Section 3 of the Act stipulates that, for the purposes of the Act, the Board may, by notification in the official Gazette, appoint, in relation to any area specified in such notification, any person to be-
(a) a Chief Collector of Customs;
(b) a Collector of Customs;
(c) a Collector of Customs (Appeals);
(d) an Additional Collector of Customs;
(e) a Deputy Collector of Customs;
(f) an Assistant Collector of Customs;
(g) an officer of Customs with any other designation.
13. A holistic reading of the aforementioned provisions establishes that only those officers who have been expressly designated with jurisdiction over a specified area under Section 3 of the Act may exercise powers as the "appropriate officer" or "officer of Customs" in relation to that area. In this context, Notification/S.R.O. 2301(I)/2022 dated 22nd December 2022, issued by the FBR under Section 3 of the Act and Sections 30 and 31 of the Sales Tax Act, 1990, assumes critical relevance. Through this Notification, the Collector, Collectorate of Customs Appraisement, Peshawar, has been entrusted with jurisdiction over all customs-related matters, including imports, exports, and temporary admissions, within the province of Khyber Pakhtunkhwa, explicitly encompassing the Customs Port at Azakhel.
14. It thus follows that the Collector so designated under the said Notification is the only officer legally competent to pass orders concerning the clearance of goods under Sections 79, 80, and 83 of the Act, in respect of consignments destined for Azakhel Dryport. In this backdrop, it becomes imperative to examine whether the impugned Faceless Customs Assessment (FCA), introduced through Customs General Order No. 06 of 2024 dated 09th December 2024, in any manner derogates from or contravenes the jurisdictional scheme envisaged under the statute and reinforced by the above-mentioned Notification. For this purpose, the relevant contents of CGO No. 06 of 2024 are reproduced as under:
GOVERNMENT OF PAKISTAN
(REVENUE DIVISION)
FEDERAL BOARD OF REVENUE
C.No. 3(8)/L&P/2024 Islamabad, the 9th December, 2024
CUSTOMS GENERAL ORDER NO. 06 OF 2024
SUBJECT: PROCEDURE FOR FACELESS CUSTOMS ASSESSMENT (FCA) THROUGH ESTABLISHMENT OF CENTRAL APPRAISING UNIT (CAU)
In order to improve the quality of assessment, bring uniformity and transparency in processing of Goods Declarations (GDs), rationalize the workload of Appraising Officers (AOS) and to ensure trade facilitation, Faceless Customs Assessment (FCA) is introduced. For this purpose, a Central Appraising Unit (CAU) shall be established at Karachi. The following procedure is prescribed for the working of the CAU:--
1. Consignments arriving at all terminals of Karachi Port and Port Muhammad Bin Qasim (PMBQ) shall be processed through CAU. The GDs filed at the Collectorates of Customs-Appraisement East/ West/ SAPT and Port Muhamad Bin Qasim, Karachi shall be allocated to CAU for assessment. In the next phase, the FCA shall be rolled out to AFUs, dry ports and border customs stations in the country.
2. The CAU shall be located at a designated place in Karachi, to be notified by the Chief Collector of Customs Appraisement (South), Karachi.
3. Deputy/Assistant Collectors MIS/CAU shall be posted in CAU by the Chief Collector of Customs Appraisement (South), Karachi, who shall be responsible for resolution of system-related and/or operational issues.
4. The Chief Collector of Customs Appraisement (South), Karachi shall ensure complete isolation/sanitization of the work environment of the relevant CAU Hall. No cellular phones shall be allowed in the CAU.
5. The GDs allocated to CAU for assessment in the Customs Computerized System (CCS), shall be assigned to the AOs posted in CAU randomly in a group-less setting, one GD at a time on 'first in first out' (FIFO) basis.
6. The assessment of GDs shall be completed as per provisions of the Customs Act, 1969 and rules made thereunder including Valuation Rulings, Customs General Orders, Public Notices and instructions issued by the Board from time to time, and other applicable laws and regulations.
7. GDs where documents are called by an AO or PA (CAU) will be assigned to the same AO/PA (CAU) upon submission of documents by the importer/agent. Such GD shall be given priority in assignment to the AO/PA who had called documents.
8. In case the importer/agent does not accept the assessment, the first review against the assessment shall lie with the Principal Appraisers (PA) posted in the CAU which shall be randomly assigned to the PA.
9. After completion of the assessment by AO or PA (CAU), the system shall randomly select GDs, cleared or under clearance, for re-checking and assessment quality assurance by a dedicated team to be constituted by the Chief Collector of Customs Appraisement (South), Karachi. The assessment quality assurance carried out by the said team shall constitute an important element of the accountability and performance evaluation of the AOs and PAs posted in CAU.
10. The GDs related to provisional assessment under section 81 of the Customs Act, 1969 or GDs of any specified category of goods, such as exemptions and any other GDs which are required to be finalized at the level of Assistant/ Deputy Collector under any legal provisions, procedures or administrative orders shall be forwarded to the Assistant / Deputy Collector of the concerned Group of the respective Collectorate where the GD is filed, for further processing.
11. In case of any misdeclaration or violation of law, the AO shall forward the GD to the PA along with assessment notes and remarks for appropriate action under the law.
12. The post clearance actions like pursuance of contravention cases and audit observations/paras, recovery of short-paid amount and court cases/FTO complaints etc. shall be dealt with by the respective Collectorate.
13. Collector Headquarters-Appraisement (South), Karachi shall have complete visibility of GDs in CAU for necessary vigilance and anti-evasion actions.
Sd/--
(Zakir Muhammad)
Secretary (Law and Procedure)
15. A plain reading of CGO No. 06 of 2024 indicates that its initial operational scope was confined to the Karachi Port and Port Muhammad Bin Qasim. However, clause (1) of the said CGO stipulates that, in the subsequent phase, the FCA mechanism shall be extended to Air Freight Units (AFUs), dry ports, and border customs stations across the country. While the assessment mechanism introduced through CGO No. 06 of 2024 may serve as an efficient and uniform system for ports within its original operational ambit, its proposed extension to other customs stations must conform to the jurisdictional framework envisaged under the Act. For instance, clause (5) of CGO No. 06 of 2024 provides that GDs, once allocated to the Centralized Assessment Unit ( "CAU" ) within the CCS, shall be assigned to Appraising Officers (AOs) posted in the CAU on a randomized, group-less basis, one GD at a time, following a 'first-in, first-out' (FIFO) protocol. Further, clause (6) mandates that the assessment of GDs shall be carried out strictly in accordance with the provisions of the Act, the rules made thereunder, including Valuation Rulings, Customs General Orders, Public Notices, and instructions issued by the Board from time to time, as well as any other applicable laws and regulations.
16. Notably, CGO No. 06 of 2024 gives the impression that officers posted at the CAU, Karachi, may pass assessment orders in relation to the clearance of goods where the GD has been filed at Azakhel Dryport. This operational scheme, however, stands in clear contradiction to the statutory mandate of Sections 79, 80, and 83 of the Act. These provisions collectively envisage that the declaration, assessment, and clearance of goods, particularly in cases involving transshipment, must take place at the port of final destination under the jurisdiction of the officer of Customs appointed for that specific area. Consequently, the extension of assessment authority to officers stationed at a geographically distinct customs station, without express statutory authorization or corresponding jurisdictional notification under Section 3 of the Act, is incompatible with the legal framework and undermines the scheme established under the Act.
17. Before delving further into the merits of the case, it is important to reiterate a fundamental principle of statutory interpretation: a statute must be read as a whole, and its provisions must be applied with due regard to the doctrine of harmonious construction. This approach ensures that the legislative intent is preserved and that apparent inconsistencies between different sections of a statute are reconciled in a manner that upholds the coherence and integrity of the legal framework. When applied to the Customs Act, 1969, this doctrine requires that the jurisdiction and powers of customs officers, particularly in matters concerning assessment and clearance of goods be construed by reading Sections 79, 80, and 83 in conjunction with the foundational provisions, namely Sections 2, 3, 4, 5, and 6 of the Act. This construction gives effect to the legislative scheme in its entirety and avoids any interpretation that would render one provision nugatory or redundant. In this context, the principle of harmonious interpretation, as elucidated by Dr. Avtar Singh and Dr. Harpreet Kaur in Introduction to Interpretation of Statutes (3rd ed., 2009, pp. 69-70) , is instructive:
"The basis of the harmonious construction is that the legislature never intends to contradict itself by providing two repugnant provisions in the same statute. The Act has to read as a whole and its provisions have to be harmonized giving effect to all of them. The rule of harmonious construction says that when two or more provisions of the same are repugnant, the Court tries to construe these provisions in such a manner, if possible, as to give effect to both by harmonizing them with each other. The court may do so either by holding two or more apparently conflicting provisions as dealing with separate situations or by holding that one provision merely provides for an exception of the general rule contained therein. Although it may be very difficult to determine whether separate provisions of the same statute are overlapping or are mutually exclusive but the court tries to harmoniously construe them."
This interpretive framework reinforces the conclusion that the Act vests exclusive authority in jurisdictionally appointed officers under Section 3 and pursuant to relevant notifications to undertake assessment and clearance functions within their defined territorial remit. Any interpretation that permits officers stationed outside such designated areas to exercise jurisdictional functions would disrupt this statutory harmony and contravene the structure and intent of the Act.
18. Needless to state, the FCA system introduced through CGO No. 06 of 2024 is a policy initiative of the FBR and is subordinate to the scheme of the Act. No doubt, prima facie, it appears that through FCA, the FBR has devised a transparent mechanism for the clearance of goods, however, the implementation of the scheme must remain consistent with the jurisdictional framework prescribed under the Act.
19. Indeed, it is settled law that the rules framed under a statute if are inconsistent with the provisions of the statute and defeat the intention of Legislatures expressed in the main statute, same shall be invalid. The rule making authority cannot clothe itself with the power which is not given to it under the statutes and thus the rules made under a statute, neither enlarge the scope of the act nor can go beyond the act and must not be in conflict with the provisions of statute or repugnant to any other law in force. 6
20. Therefore, any order passed by an officer stationed at CAU Karachi concerning goods that have arrived at Azakhel Dryport and for which GDs have been duly filed for their clearance risks giving rise to jurisdictional challenges. Such actions are likely to result in a multiplicity of litigation as orders passed without lawful jurisdiction may further complicate matters, delay the clearance process, and hinder the smooth functioning of customs operations.
21. In view of the foregoing, we are constrained to partly allow this petition as well as connected W.P. No.2760-P/2025 and accordingly direct the respondent FBR to make necessary amendments to CGO No. 06 of 2024, so as to bring it in conformity with the statutory scheme governing the assessment and clearance of goods, particularly with respect to the jurisdiction of customs officers as delineated under Sections 79, 80, and 83 of the Act. Unless the CGO No.06 of 2024 has been aligned with the statutory provision of the Act, the FCA system introduced through CGO No.06 of 2024 shall not be applicable to clearance of goods lying/reached at Azakhel Dryport.
MH/110/P Order accordingly.
1 79. Declaration and assessment for home consumption or warehousing [or transshipment].- [(1)The owner of any imported goods shall make entry of such goods for home consumption or warehousing [or transshipment] or for any other approved purposes, within [ten] days of the arrival of the goods, by,‑
(a) filing a true declaration of goods, giving therein complete and correct particulars of such goods, duly supported by commercial invoice, bill of lading or airway bill, packing list or any other document required for clearance of such goods in such form and manner as the Board may prescribe ; [omitted
(aa) the documents mandatory for assessment of the goods shall be uploaded by the importer or his agent with the goods declaration, as may be prescribed by the Board; and ]
(b) assessing and paying his liability of duty, taxes and other charges thereon, in case of a registered user of the Customs Computerized System:
[Provided that if, in case of used goods, before filing of goods declaration, the owner makes a request to an officer of customs not below the rank of an Additional Collector that he is unable, for want of full information, to make a correct and complete declaration of the goods, then such officer subject to such conditions as he may deem fit, may permit the owner to examine the goods and thereafter make entry of such goods by filing a goods declaration after having assessed and paid his liabilities of duties, taxes and other charges:]
Provided further that no goods declaration shall be filed prior to ten days of the expected time of arrival of the vessel.]
[Explanation.- For the purposes of this clause, the assessment and paying of duty, taxes and other charges in respect of transshipment shall be at the port of destination.]
2 [121. Transshipment of goods without payment of duty.- (1) Subject to the provisions of section 15 and the rules, the appropriate officer may, on application by the owner of any goods imported at any customs-station and specially and distinctly manifested at the time of importation as for transshipment to some other customs station or foreign destination, grant leave to transship the same without payment of duty, if any, chargeable on such goods with or without any security or bond for the due arrival and entry of the goods at the customs-station of destination:
[Provided that at customs-station where the Custom Computerized System is operational, the system may automatically authorize transshipment to other customs-station subject to risk selectivity criteria.] [...]
3 [123. Entry, etc., of transshipped goods.- (1) All goods transshipped under subsection (2) of section 121 to any customs-station shall, on their arrival at such customs station, be entered in the same manner as goods on their first importation and shall be dealt with likewise.
(2) All goods being transshipped under subsection (1) of section 121 from a customs-station of first entry into the country, where the Customs Computerized System is operational and the goods are determined to be high risk by the risk management system shall be dealt with under rules on the subject.]
[Explanation.- For the purpose of transshipment of LCL goods, the customs station of first entry shall be the customs-station where the goods are de-consolidated.]
4 Section 2(o) of the Act: "officer of customs" means an officer appointed under section 3;
5 Section 2(b) of the Act: "appropriate officer" , means the officer of customs to whom such functions have been assigned by or under this Act of the rules made there under:
6 Pakistan through Secretary Finance, Islamabad and 5 others v. Aryan Petro Chemical Industries (Pvt.) Ltd., Peshawar and others (2003 SCMR 370) and National Electric Power Regulatory Authority v. Faisalabad Electric Supply Company Limited (2916 SCMR 550).