A.R. HOSIERY WORKS, KARACHI vs COLLECTOR OF CUSTOMS (EXPORT), KARACHI and another

ORDER

' This is an appeal under section 196 of the Customs Act calling in question an order of the Customs, Excise and Sales Tax Appellate Tribunal, dated 4-4-2002. The admitted facts appear to be that the appellants are manufacturers of Hosiery products which are exported to different countries. The appellant exported 445 cartons of men's and children's Pyjamas to Belgium and in the Bill of Export declared the contents of the Fabric to be the 100% cotton. However, upon verification through laboratory test, they were found to contain 90% cotton blended with 10% polyester. The appellants were thereafter issued show-cause notice under section 32 of the Customs Act and thereafter the Collector (Adjudication) imposed a penalty or Rs,50,000 under section 32 of the Customs Act. An appeal before the Tribunal also failed whereupon the appellant moved this Court under section 196 calling in question the penalty imposed.

2. Notice was issued to the Respondent at per-admission stage and apart from learned counsel for petitioner Raja Muhammad Iqbal learned counsel appearing on behalf of the Respondent also appeared to be fully prepared to argue the case. Therefore, by consent of both learned counsel 1 decoded to admit and finally hear and dispose of the entire appeal.

3. By way of a preliminary objection Raja Muhammad Iqbal contended that only an appeal on a question of law was admissible under section 196 of the Customs Act and no such question was involved in the present case meriting maintainability of the appeal.

4. I am afraid I do not find any force in the contention inasmuch as the facts are almost undisputed and the only question to be resolved is a question of law i,e, whether a misdeclaration simplicitor or only misdeclaration intended to defraud the revenues can be subjected to penalty provided in section 32 of the Customs Act.

5. In support of the appeal Mr. Saleem Mangrio learned counsel for the appellant argued, without disputing the findings of the laboratory test to the effect that the goods in question were blended with polyester to the extent of 10% contended that in the view of inaccuracies in different test reports an understanding had been reached in a meeting held under the Chairmanship of another Collector (Export) to the effect that Custom Authorities will not take notice of the difference of a blend up to 10% of the declared contents of the exported goods. This indeed might be true but such an understanding even if arrived at in the public interest and for better dispensation of justice could not absolve the appellant from complying with strict requirements of law. Even if the authorities had chosen to turn a blind eye to minor irregularities it would not necessarily follow that no legal proceedings upon such irregularities could be founded at all unless the practice had been regular, consistent and had become a custom having the force of law.

6. The next argument, however, deserves more serious consideration. It had been argued by learned counsel that no penalty under section 32 can be imposed unless it was shown that the misdeclaration was made to avoid payment of public revenues. In this context learned counsel relied upon the observations of Kamran Industries v. The Collector of Customs (Exports) Karachi and 4 others (PTCL 1996 CL 1) and the more recent pronouncement in Messrs A lHamd Edible Oil Limited and others v. Collector of Customs and others (2003 PTD 552) to the following effect:-- "A bare reading of the section clearly indicates that it relates to a situation where a person makes any statement or files any document which is false in any material particular by reason of which any duty or charge is not levied or is short levied or is refunded. In such event, the Customs Authority is empowered to issue to the person concerned a notice to show cause why he should not pay the loss of revenue suffered by the Department and after giving him a hearing, beside any other action under law, order payment of the same, if a case is made out. The entire provision revolves around the central point of loss of revenue suffered by the Customs Department on account of the conduct of any person. Mr. Iqbal has not urged that the Department has suffered any loss on account of the conduct of the Appellants. The question of applicability of section 32 in the present circumstances apparently does not arise."

7. On the other hand, Raja Muhammad Iqbal learned counsel for Respondent referred to a large number of precedents showing that the offence of making an untrue statement in the Customs Act in terms of section 32 or its parallel provisions in predecessor Statute were clearly held to be offences of strict liability in which no mens rea on the part of the offender was to be proved.

Learned counsel indeed appears to be supported by a number of precedents including Pakistan v: Hardcastle (PLD 1967 SC 1) and the Division Bench judgments of this Court in Sikandar and Brothers v. Government of Pakistan (PLD 1986 Kar, 373) and Finest Corporation v. Collector of Customs PLD 1990 Kai. 338).. In all these cases it seems to have been held that mens rea is not an essential requirement for proving an offence under section 32 of the Customs Act and a person could be punished even in the absence of clear evidence as to his personal knowledge of an untrue declaration.

8. It may nevertheless, at the same be pointed out that in the cases decided by the superior Courts though strict proof of the importers personal knowledge was wanting it was evident that through a mis-declaration the duty liable to be paid was evaded.

9. It may nevertheless, he pointed out with great respect that learned counsel omitted to notice the Statutory change in section 32(1) of he Customs Act effected through the Federal Laws (Revision and Declaration) Ordinance 1981. It is important to.Bear in mind that initially section 32 of the Customs Act, 1969 or its predecessor i,e, section 39 of the Sea Customs Act, 1878, did not expressly stipulate knowledge of the person making the untrue declaration. Nevertheless, through the aforesaid amendment section 32(1) expressly requires that to attract the penal provision a person must be "knowing or having reasons to believe that such document or statement is false in any material particulars." Indeed the precedents cited by learned counsel do not take into account the amended provisions of the law. Moreover it may be pertinent to mention that in all the reported cases the declarant had knowingly or otherwise evaded payment of customs duty which was due.

10. One may further recall that even in the absence of express words in the Statute, the Honourable Supreme Court in Eastern Rice Syndicate v. Central Board of Revenue (PLD 1959 SC 364) proceeded to hold that to attract the penalty under section 39 of the Sea Customs Act, it was necessary to show that the declaration made was false to the knowledge of the petitioners. In the subsequent case of Pakistan v. Hardcastle Waud (PLD 1967 SC 1), the basic principle was not overruled or deviated from but it was held that the Collector need not record specific finding to the effect that the declaration was false to the knowledge of the declarant but such fact could be inferred where the duty payable was evaded. The same view was substantially followed by the High Courts.

11. It may also be mentioned that apart from the statutory change mentioned above section 32 does not merely contain punitive provision basically it deals with recovery of duties and charges payable to the exchequer either on account of fraudulent acts of persons liable to pay or through errors of Customs officials as is evident from a. Reading of clauses (2), (3), (3-A) and (4). Moreover clause (1) requires that the untrue statement must be made in connection with any material of customs and should be false in any material particular. A harmonious reading of the entire section tends to show that it does not cover every untrue declaration having nothing to do with evasion of customs duty or other charges but such statements must indicate an attempt to defraud public revenues.

12. In view of the admitted position that the fact whether the goods exported consisted of cotton or cotton blended with polyester did not attract any export duty or vary the duty draw back. I am of the view that section 32 was not attracted. In view of the above position this appeal is allowed and the impugned order is set aside with no order as to costs.