2005 PLP (Trib (PTD)

(i) Whether or' not proceedings initiated against the appellant in respect of detained goods were within the framework of law? (ii) Whether or not the Directorate is authorized under section 26 of the Customs Act, 1969 to make indiscriminate, roving or fishing inquiry irrespective of the fact that the scope of such inquiry should be restricted to the facts disclosed in the notice under section 26 of the Customs Act, 1969? (iii) Whether or not the documents produced by the appellant discharged the burden of proof laid on him? (iv) Whether or not in the circumstances of the case respondent Collector was justified in rejecting the documentary evidence produced by the appellant?

9. As regards the first two issues, it may be noted that the object of section 26 of the Customs Act, 1969, is to empower the authority to ask for information or require the production of documents or inspect the same in order to determine the legality or illegality of importation or exportation of goods which have been imported or exported, the value of such goods, the nature, amount and source of the funds or the assets with which goods were acquired and the customs duty chargeable therein or for deciding anything incidental thereto. The authority can only for specific purposes of determining the legality or illegality call for such information as required by section

26. The authorized officer can call upon any importer or exporter to furnish information in case where such determination is required. It cannot make a roving inquiry or issue a notice by merely shooting in the dark in the hope that it will enable him to find out some material out of those documents and then charge the party of irregularity or illegality. The authority has to state and disclose in the notice, the purpose for which the party is required to produce those documents or supply information. Unless such purpose is specified in the notice, it will be a matter of anybody's guess and the accused party will be put to inquiry without any specific allegation or fact disclosed to him. It does not permit any authority to employ the provisions of section 26 to make indiscriminate, roving and fishing inquiry irrespective of the fact whether any determination of legality or illegality in import, export of funds with which the goods were acquired is to be determined. Even in cases of suspicion of commission of illegality, details should be provided to the party to enable him to have an opportunity to produce all the relevant documents and disclose information.

10. The principle of law that the State functionaries have no power and authority to conduct fishing and roving inquiries without possessing any definite and proper information, just in the hope to unravel some concealment and illegality on the part of the assessee/taxpayer/citizen is very well-settled. In other words, before embarking upon any inquiry the State functionary must already possess some definite material so as to establish any illegal action having been taken by the citizen. In this regard reference is invited to 1995 PTD (Tribunal) 580 wherein similar observations had been made while interpreting certain provisions of the Income Tax Ordinance, 1979. It is not only in fiscal laws but also in other laws that a similar principle of law duly exists. We have been able to place our hands on Karachi Administration Employee Cooperative Housing Society Limited v. Government of Sindh 2004 YLR 1070 wherein the petitioner had called into question the inquiry launched by the Registrar of Cooperative Societies under section 43 of the cooperative Societies Ac. 1925. Striking down the inquiry a Division Bench of the Honorable Sindh High Court was pleased to hold that the Registrar possessed no reason or material warranting initiation of such inquiry. In other words, it was felt by the Court that as the respondent in that case possessed no material, he could not be justified to launch fishing and roving expedition. Depending on the facts and circumstances of case, any notice without disclosing any fact or particulars for which information or documents are required will be in violation of the principles of natural justice and may be struck down as illegal and without jurisdiction.

11. This issue came up for judicial scrutiny before the Supreme Court of Pakistan in the case of Assistant Director, Intelligence and Investigation v. Messrs B.R. Herman: PLD 1992 SC 485, wherein their lordships had observed as under:-- "...the object of section 26 of the Customs Act is to empower the authority to ask for information or require the production of documents or inspect the same in order to determine the legality or illegality of importation or exportation of goods which have been imported or exported, the value of such goods, the nature, amount and source of the funds or the assets with which goods were acquired and the customs duty chargeable therein or for deciding anything incidental thereto. The authority can only for specific purposes of determining, the legality or illegality call for such information as required by section

26. The authorized officer can call upon any importer or exporter to furnish information in case where such determination is required. It cannot make a roving inquiry or issue a notice by merely shooting in the dark in the hope that it will be able to find out some material out of those documents and then charge the party of irregularity or illegality. The authority has to state and disclose in the notice, the purpose of which the party is required to produce those documents or supply information. Unless such purpose is specified in the notice, it will be a matter of anybody's guess and the accused party will be put to inquiry without any specific allegation or fact disclosed to him. It does not permit any authority to employ the provisions of section 26 to make indiscriminate, roving and fishing inquiry irrespective of the fact whether any determination of legality or illegality in import, export of fund with which the goods were acquired is to be determined. Even in cases of suspicion of commission of illegality, details should be provided to the party to enable him to have an opportunity to produce all the relevant documents and disclose information. Depending on the facts and circumstances of the case, any notice without disclosing any fact or particulars for which information or documents are required will be in violation of the principles of natural justice and may be struck down as illegal and without jurisdiction .... "

12. For the exercise of powers conferred under section 26 of the Customs Act, 1969, their lordships of the Supreme Court in the case cited supra laid down the following governing principles:-- (a) The authority can only for specific purposes of determining the legality or illegality of importation or exportation call for such information as required under section 26; (b) an authority cannot make a roving inquiry or issue a notice by merely shooting in the dark in the hope that it will be able to find out some material out of those documents and then charge the party of irregularity or illegality; (c) the authority has to state and disclose in the notice, the purpose for which the party is required to produce those documents or supply information; and (d) it does not permit any authority to employ the provisions of section 26 to make indiscriminate, roving and fishing inquiry irrespective of the fact whether any determination of legality or illegality is to be determined.

13. In the light of the settled law, when we examine the facts of the present case, it becomes evident that at the time of seizure of the betel nuts, there was no pending inquiry or information in respect of the disputed goods. For example, no reasons for detention of goods were disclosed on 26-10-2003. Detention notice was issued on 28-10-2003, i.e., two days after the seizure of betel nuts and the proceedings under section 26 were initiated much after. These facts suggest that neither any purpose was specified in the detention notice nor the basis upon which inquiry was initiated was disclosed to the appellant. For example, the notice, dated 28-10-2003 reads as under:-- "...Whereas this Directorate is investigating the legality of import of consignments consisting of tea lying in Godown No. C. 1 & 2 of Messrs Karachi Cotton and Wool Company Limited, E-17, S.I.T.E. Karachi. (2) Now therefore, the import documents of above consignments are requisitioned under the power conferred upon undersigned in terms of section 26 of the Customs Act, 1969 to be provided within seven days, failing which it would be presumed that the subject tea has not been brought into the country legally and the case will be processed in accordance with the law..."

14. It is evident from the reading of the notice that no specific charge, regarding illegality of importation was disclosed. Even if there was any suspicion of commission of illegality, details should have been provided to enable the appellant to have an opportunity to produce all the documents and disclose information. Thus, the inquiry initiated against the appellant was nothing but a roving inquiry only to net him for any charge to be found out from the documents called. And as observed by the Supreme Court in the case of Assistant Director, Intelligence and Investigation v. Messrs. B.R. Herman (supra), such an action was unwarranted by law.

15. As regards the issue regarding the documents produced, the record shows that Bills of. Entry regarding tea were verified by Quetta Collectorate vide their letter, C. No.65-Cus/Misc./Imp/Statt/DP/NLC/ 2003, dated 6-5-2004.

16. The Headquarters Frontier Corps vide their letter No.511-17/234/AS; dated 11-5-2004 also confirmed the documents relating to purchase of tea from the auction.

17. The POL products were imported by Messrs Agha Enterprises as duly confirmed. Bills of Entries were also produced in respect of detergent powder which were duly verified and confirmed. The bills of entry in respect of milk powder was also produced which were found to be genuine.

18. Confronted with this situation, the respondent-Directorate started re-assessment proceedings for which they lacked the jurisdiction or authority, as the goods once assessed by the Assessing Officer under section 80 and given out of his charge, could not be re-assessed by any other authority including the Directorate, who was only authorized to call for the documents as envisaged under section 83 of the Customs Act, 1969, only to the extent of confirming the non-payment or short payment of duty on the Bill of Entry filed for home consumption or for their verification. The appellant has successfully met with the burden to prove the legal import and now the burden to prove smuggling stands shifted to the Directorate, and for that they have miserably failed to lead any evidence (NB: The concept of shifting of burdens of proof have been ably examined in Kamran Industries v. Collector of Customs PLD 1996 Kar. 68). Their action to issue notices under section 26 to persons, issuing invoices asking them to show sales tax invoice was beyond their' competence as held by the Supreme Court in the Herman case cited supra. Thus no ground for confiscation of goods was ever available to the, respondent. Furthermore, the seized goods are importable under the free list, and any presumption of their being smuggled goods requires direct evidence which is absent in this case. As such the order passed by the Collector was patently incorrect.

19. Attention is also invited to a Division Bench decision of the Honourable Sindh High Court passed in CT. No. D-817 of 2004 i.e. Shahzad Ahmed Corporation v. Federation of Pakistan, where the Court was examining the powers and scope of inquiry available to the Directorate of Intelligence and Investigation; their lordships while examining the law on the subject observed that: "....32: This brings us to the documents produced by the Respondent No.3, in support of his contention that the officials posted in the Directorate of Intelligence and Investigation are empowered to exercise all the powers conferred on any Customs official under the Customs Act. He has mainly relied on the Charter of Functions for the Directorate-General of Intelligence and Investigation (Customs and Excise) issued by the CBR. In the first instance, these are not shown to have been issued by any officer competent in law. Secondly, at the most they are in the nature of guidelines and have no binding force conferring any specific jurisdiction. Thirdly, a perusal of the Charter of Functions, shows that the Directorate-General of Intelligence and Investigation, has been established mainly for prevention of smuggling and for preventive operations in this behalf. In fact the jurisdiction is conferred on the officers of the Directorate -General of Intelligence and Investigation (Customs and Excise) under Notification No.388(I)/82, dated 22nd April, 1982. The relevant part of the S.R.O. has already been reproduced above and the learned Federal Counsel has taken us through each and every section specified in the notification conferring jurisdiction on the Respondent, No.3 and has not been able to show that under any of the sections specified therein, the Respondent No.3, or any officer of the Directorate General of Intelligence and Investigation (Customs and Excise) is empowered to, detain or seize or re-examine the goods already examined and assessed by the appropriate officers of the Appraisement Department. It appears that the Respondent No.3, and probably his officers in the Directorate General of Intelligence and Investigation, have assumed that in addition to the powers conferred on them under Notification 388(1)/82, they have been appointed as Ombudsman and have been conferred with the Supervisory duty and have been given a mandate to check and control the duties performed by the Appraisement Department. This assumption is totally unfounded. As already observed the Directorate of Intelligence and Investigation, has been established mainly for the prevention of smuggling and performance of preventive operations relating to smuggling and evasion of Federal taxes through clandestine removal of dutiable goods, misdeclaration, valuation frauds, fraudulent claims of refund and rebate etc. However, such powers conferred on them have no overriding effect on the powers conferred on other officers/officials of the Customs Department. The officers in each category under the Customs Department are required to act within the specified sphere and parameters without encroaching upon the powers of the officers of the other departments such as Appraisement Department and to the detriment of the importers whose consignments are out of charge after due process specified in law. In this case the power of examination, evaluation and assessment has been assigned to Customs Appraisement official and the Respondent No.3, could at the most require the production of order under section 83 as provided in section

174. The Respondent No.3, has produced a statement filed on behalf of CBR in the Lahore High Court in Writ Petition No.27301 of 1997 in reply to query if the Directorate of Intelligence and Investigation, has jurisdiction to intercept and seize baggage items before these are formally presented to Customs. The CBR has opined that in pursuance of the jurisdiction conferred under Notification S.R.O. 388(I)/82, dated 22nd April, 1982, the Directorate of Intelligence and Investigation, have lawful jurisdiction to seize such goods. It will be seen that the query was in respect of baggage items and not in respect of goods imported for which Bill of Entry is filed. Secondly, it was in respect of the baggage which were not presented to the customs. The CBR has ..that the Directorate of Intelligence and Investigation, is empowered to seize the goods which have been imported and have been duly examined and assessed by the Customs Appraisement officials after filing of Bill of Entry and the consignment is out of charge, after payment of assessed duty and taxes. (33) For the foregoing reasons, we hold that the respondents Nos.2 and 3, had no jurisdiction to stop the release of goods owned by the petitioner and all subsequent acts in pursuance thereof are declared to be unlawful and void ab initio. All such proceedings are hereby quashed. The Respondents Nos.2 and 3 are directed to release the consignment of the petitioner forthwith, which was already out of charge. They are restrained from interfering in any manner with the release of the consignment. They are further directed to issue the delay and detention certificate immediately as the petitioner cannot be saddled with the liability on account of illegal acts committed on behalf of the Respondents Nos.2 and 3..." In these circumstances, we conclude, that the action of the respondent Directorate was unwarranted by law.

20. As regards the findings of the Collector, he has completely ignored the facts and evidence available on record. The order cannot be termed as a quasi judicial order. There is yet another aspect of the case, which cannot be ignored. After the examination of the impugned order we find that the same is sketchy, slip shod and devoid of reasons. The said order is not at all a speaking order and cannot be called a "quasi judicial order" within the parameters set up by law. The tenor of the order amply manifests non application of judicial mind and no reasons have been assigned by the learned Adjudicating Officer in coming to the impugned conclusions. Even it has been enjoined upon an executive authority, as per) section 24-A of General Clauses Act, 1897 (inserted by General Clauses Amendment Act, 1997, Act No. XI of 1997) to give reasons for making the order.

21. The Honourable Supreme Court of Pakistan has time and again disapproved the passing of such perfunctory orders in the causes involving valuable rights of the parties. It is settled law that a quasi- judicial order must be a speaking order manifesting by itself that the Tribunal has applied its judicial mind to the issues and the points of controversy involved in the causes. Furthermore, when the reasons would not be forthcoming, obviously the Appellate Court would be deprived of the views of the subordinate forum. In any way the impugned order, which is not a speaking order and devoid of reasons is not sustainable in law being in contravention of law declared by the Honorable Supreme Court of Pakistan in various cases like Adamjee Jute Mills Ltd. v. The Province of East Pakistan and others (PLD 1959 SC (Pak.) 272). Gouranga Mohan Sikdar v. The Controller Import and Export and 2 others (PLD 1970 SC 158). Mollah Ejahar Ali v. Government of East Pakistan and others (PLD 1970 SC 173) and Muhammad Ibrahim Khan v. Secretary, Ministry of Labour and others (1984 SCMR 1014) etc. After section 24-A GCA the obligation to advance reasons is now a statutory requirement and cannot be casually ignored (see Airport Support Services v. Airport Manager QIA 1998 SCMR 2268).

22. Having said that, we do not find any merit in the impugned order, the same is accordingly set aside.

23. Nevertheless, if the respondent has any direct evidence of the smuggling of goods they will be at liberty to proceed in the matter in accordance with law. H. B. T./261/Tax (Trib.) Appeal accepted.