ASSISTANT COLLECTOR CUSTOMS and others vs Messrs KHYBER ELECTRIC

' MIAN MUHAMMAD AJMAL, J.---By this common judgment we propose to dispose of Civil Appeals Nos.1358 to 1361 of 1997 as they are against the same impugned judgment and involve identical questions of law and facts.

2. Brief facts are that the respondents are manufacturers of Electric Bulbs and import raw material etc. For manufacturing of the said product, from abroad. The Federal Government vide Notification SRO 504(1)/94, dated 9-6-1994 exempted raw materials, components and sub-components for manufacturing of goods specified in Table-I from so much customs duties as were in excess of the rates specified in Table-II thereof. To avail this exemption, the respondents applied on the prescribed forms-S to the Chief, Survey and Rebate, C.B.R., who after issuance of a provisional certificate surveyed the units, worked out the quantities of raw material required to manufacture the bulbs and issued the final certificate on 6-12-1994. The respondents regularly paid assessed duty on the imported goods at the rate of 109 in terms of the aforesaid SRO. On 25-7-1995, appellant No,1 issued notices to the respondents under section 32 of the Customs Act, 1969 SCMR requiring them to pay the short assessed duty within 7 days of the notice on the ground that the goods imported were components and not raw material, as such, were liable to customs duty at the rate of 30% instead of 10%, as paid by the respondents. The respondents challenged the said notices before the Peshawar High Court, Peshawar through Writ Petitions Nos.794, 795, 958 and 960 of 1995. The respondents took the plea that the above demands were issued to them without prior show-cause notice as required by law, as such the same may be declared void and illegal. The appellants raised preliminary objection that as against demand express remedy in the relevant law was provided to the respondents, therefore, writ petitions were not maintainable. A learned Division Bench of the Peshawar High Court, vide its impugned common judgment holding the writ petitions maintainable, declared the demand as void and illegal. Feeling aggrieved, the appellants filed petitions for leave to appeal before this Court, wherein leave was granted on 17-11-1997 in the following terms:-- "The learned counsel for the petitioners in seeking leave to appeal in the above petitions contended before us that the learned Judges after having reached the conclusion that the notices dated 25-7-1995 served on the respondents were not in accordance with section 32(2)(3) of the Customs Act, should have either remanded the cases to the Customs Authorities or left it open to them to proceed against the respondents in accordance with the law instead of merely declaring such notices to be as without lawful authority and of no legal effect. It is further contended by the learned counsel that the question whether the goods cleared by the respondents by declaring them as raw material, were in fact raw material or a sub component, was a question of fact which could only be determined by the Customs Authorities and the learned Judges of the High Court could not in exercise of jurisdiction under Article 199 of the Constitution, record a binding finding in this behalf. The grant of leave is opposed by the respondents. After hearing the parties, we are of the view that the contentions raised by the petitioners require further examination and we, accordingly, grant leave to appeal to consider the same."

3. We have heard the learned counsel for the parties and gone through the record of the case.

4. Demand notices dated 25/26-7-1995 were issued under section 32 of the Customs Act, 1969 (hereinafter to be called the Act) without specifying the subsection of the said section as to whether the alleged untrue declarations/statements were knowingly filed or there were reasons to believe that such documents were false or the same were collusive or inadvertently or erroneously filed and payment of duty short paid. Likewise show-cause notices dated 16-7-1995 and 29-8-1995 also do not reflect whether alleged untrue declarations/statements were collusively or inadvertently filed though the same were purported to be under section 32(2)(3) of the Act. The onus to prove the allegations of untrue declarations/statements on the basis of collusiveness or inadvertence lay on the department. Under section 32 of the Act, if any person in connection with any matter of Customs duty makes any declaration/statement to any officer of Customs Department knowingly or having reason to believe that such document or statement was false, he would be guilty of an offence under this section. Under its subsection (2), if such a document by reason of collusion is made so as to avoid duty or it is short levied or has been erroneously refunded, the person liable to pay the amount would be served with show-cause notice within three years of the relevant date calling upon him to show cause as to why he should not pay the amount and under its subsection (3) if by reason of inadvertence, error or misconstruction any duty has not been levied or short levied or erroneously refunded, the person liable to pay such duty would be served with a show-cause notice within six months of the relevant date as to why he should not pay the amount. In Civil Appeals Nos.1358 and 1359 of 1997, no show-cause notices as required under subsections (2) and (3) of section 32 of the Act were given to the respondents to show cause as to why they should not pay the defaulted amount, therefore, demand notices in absence of statutory show-cause notices were without lawful foundation. It is well-settled proposition of law that a thing required by law to be done in a certain manner must be done in the same manner as prescribed by law or not at all. Since prerequisite show-cause notices as required by law have not been served on the respondents, therefore, no straightforward demand notice for payment of alleged short levy could be issued. Show-cause notices under subsections (2) and (3) of section 32 of the Act are two distinct and separate types of notices as different grounds and different period for service of notice in each subsection has been prescribed. Under subsection (2) for non-levy, short levy or erroneous refund, specific allegations of any collusion between the assessee and the Custom Staff has to be levelled with proper particulars in the show-cause notice which has to be served within three years of the relevant date whereas under subsection (3) if non-levy, short levy or erroneous refund is done due to inadvertence, error or misconstruction then show-cause notice to the importer has to be served within six months of the non-short levy. If such specific particulars are not stated in the notice, the notice would be vague and would not be in consonance with the requirement of subsections (2) and (3) of section 32 of the Act. The show- cause notices dated 16-7-1995 and 29-8-1995 in Civil Appeals Nos.1360 and 1361 of 1997 do not speak that respondents made the declaration/statement knowingly or having reason to believe that they were untrue/false in any particular. The aforesaid show-cause notices issued to the respondents under section 32(2) and (3) of the Act only state that Tungsten Filaments are the sub- components of bulbs and filament tube as envisaged in C.G.O. No,8 of 1995 but to same have been cleared as raw material @10% Customs Duty instead of 30% Customs Duty and respondents were directed to deposit the short-levied amount within 7 days. It has not been alleged in the show- cause notices that the respondents knowingly or having reason to believe that documents which were false in any material particular, were filed. It is necessary under subsection (1) of section 32 of the Act to show that the declarant had the knowledge or had the reason to believe that declaration or statement made by him was untrue/false and in absence of such allegation notice would be vague and would not be in accordance with law. Similarly, notice under subsection (2) of section 32 of the Act must contain the allegation of collusiveness and notice under subsection (3) of section 32 of the Act should speak of inadvertence, error or misconstruction and without such allegations the notices would be defective and against law. It may be mentioned that the respondents -after survey had been issued Final Certificates certifying that they were manufacturers of Electric Bulbs and the quantities of raw material required for their products were- worked out. In the Survey report the 'Base Cap' and 'Filaments' were shown as raw material and the duties thereon as such were paid on their import. From the Survey report and the Final Certificates, it appears that the Customs Staff itself either collusively or inadvertently short-levied the duty for which specific notice under the relevant subsection of section 32 of the Act had to be served on the importer within the specified time but it failed to issue/serve any such show-cause notice in accordance with law in Appeals Nos.1358 and 1359 of 1997, therefore, in absence of statutory notice, demand notices dated 25-7-1995 and 26-7-1995 were without lawful authority and thus, of no legal effect. Similarly, show-cause notices dated 16-7-1995 and 23-8-1995 in Appeals Nos.1360 and 1361 of 1997 have been held to be vague and not in conformity with the law, therefore, the same have no legal effect.

5. It was urged by the appellants that the learned High Court after finding the notices to be defective and not in accordance with law should have remanded the cases to the Customs Authorities for proceeding in accordance with law, but we do not find any substance in this contention as the period prescribed by law for service of notices has already expired and it would be a futile exercise in remanding the cases to the Customs Authorities. In case of Federation of Pakistan v. Messrs Ibrahim Textile Mills (1992 SCM R 1898), it has been ruled that in case of short- levied duties on account of inadvertence, error or misconstruction, section 32(3) of the Act provides that for recovery notice shall be served within six months, if that is not done, like a suit for recovery of money after lapse of time prescribed by law of limitation, the recovery becomes unenforceable.

6. Learned counsel for the appellants has not been able to point out any legal infirmity in the impugned judgment, inasmuch as, notices are concerned. These appeals have no merits, which are accordingly dismissed.