2010 PLP (Trib (PTD)

MUHAMMAD ARIF MOTON (MEMBER (JUDICIAL-II)).

By this order, I intend to dispose of above mentioned appeal filed by Collector of Customs (Export), Custom House, Karachi against Order-in-Appeal No.735-736/2007 dated 30-10-2007.

2. Brief facts of the case are that the respondent No.2 filed two G.Ds. No.91072 dated 11-5-2007 and No.90755 dated 10-5-2007 through their clearing agent M/s Arif Brothers (CHAL No.1900), for export of rice to Dubai. During the course of physical examination these consignments, bags of black channa, daal moons and dial channa were also found alongwith bags of rice. These three items attracted regulator)) duty @ 35% (total Rs.11,09,383) at the relevant time. The Additional Collector (Exports) vide Order No.14/2007 dated 25-6-2007 imposed a redemption fine of Rs.15,00,000 and penalty of Rs.1,000,000 on the exporter. The Additional Collector also held the applicability of S.R.O.425(I)/2007, dated 24-5-2007 prohibiting the export of black channa, to the subject consignment. A penalty of Rs.1,00,000 was also imposed on the clearing agent. Appeals were filed by the exporter and the agent and the Collector Customs, Excise and Sales Tax (Appeals), Karachi vide Order-in-Appeal 735-736/2007 dated 30-10-2007 modified the Order-in-Original 14/2004 to the extent of slashing the redemption fine from Rs.15,00,000 to Rs.1,50,000 and penalty from Rs.1,000,000 to Rs.200,000 on exporter while the penalty of Rs.1,00,000 on the clearing agent has been quashed.

3. In the memorandum of appeal filed by the respondent No.2 it has been contended that their submissions have not been considered in the true perspective, legal references not attended and circumstances of the case not appreciated in the proper spirit. The respondent No.2's main plea is that the mixing of pulses and black channa and rice was caused due to faulty loading of goods from their warehouse. It is explained that the packing of each bag of pulses, black channa and rice was 45 kgs as admitted by the department both in the show-cause notice as well as in the impugned order and thus it is clear that packing of different items was similar. It has been further elaborated that there was an acute and abrupt electricity breakdown in their godown due to a serious fault in the main power cable and the repair thereof continued for three days. An affidavit of Mr. Ishtiaq Ahmad (Electrician) has also been enclosed to substantiate this fact. It has also been pleaded that the headman of the labour asked them to load the goods and due to darkness and climatic suffocation, he stood outside the godown and in the meanwhile the illiterate labour loaded the mixed goods as they could not distinguish sacks of rice and pulses having same weight. An affidavit of the headman, namely, Khalid Mahmood son of Muhammad Akram has been placed on record to substantiate this fact. It has been elaborated that the respondent No.2 simultaneously had the orders of the foreign buyers for the export of pulses and copies of these orders have been placed on record, and, since they had only one godown where all the commodities were stored, this bona fide mistake of mixed loading of rice and pulses took place.

4. The learned counsel for the respondent No.2 has also pleaded that penal provisions of section 32(1) can only be applied to a person if he makes a false statement either knowingly or having reasons to believe to that effect. It has been agitated that the aforementioned contentions and pleas of the respondent No.2 were neither, investigated nor verified at any stage. Rather the departmental representative appearing before the Collector (Appeals) verbally submitted that commodities liable to imposition or payment of regulatory duty are in major quantity than actual goods meant for exports and so the element of mala fide cannot be ruled out.

5. The learned counsel for the respondent No.2 also stated that the department should have placed proof of sufficient reasons to prove existence of a false and wilful declaration by the exporter. He referred to the judgment of superior Courts reported as 2001 SCMR 838, 2006 PCr.LJ 1427= 2006 PTD 2190, 2006 PTD 2209 and 2003 PTD (Trib.) 2525.

6. He further stated that mixing of pulses with rice is a mistake caused by the error of the loaders that is not culpable under the law. He also referred to the judgments of higher judicial fora reported as PLD 1959 SC (Pak) 364 and 1988 PCr.LJ 89 (Abdul Aleem v. The State).

7. The learned counsel for the respondent No.2 has also assailed the imposition of fine and penalties in view of the facts and circumstances of the case and referred to judgments 'reported as PLD 1996 Kar. 68, PLD 1991 SC 963, 2006 PTD (Trib.) 2533; 2004 SCMR 466 = 2004 PTD 1179 and 2006 PTD (Trib.) 196.

8. It was further contended by the advocate of the respondent No.2 that Deputy Collector Customs, who had filed the appeal, is not competent to file it under section 194-A of the Customs Act, 1969 as either the Board or the Collector or an Officer authorized in writing by the Board/Collector/Director can file the appeal while no such written authorization is available on record. It has been pleaded that any appeal filed without authorization is untenable and liable to be dismissed. He referred to the judgment reported as 2006 SCMR 129, 2008 PTD 356 and the Customs, Excise and Sales Tax Appellate Tribunal (Special Bench), Lahore judgment in Appeals No.181/03, 182/03,184/04,185/03 and 127/03.

9. It has been reiterated that consignments of rice, Black Channa and pulses got mixed up due to circumstances beyond the control of the exporter and it is settled law that penalty can only be levied in case of wilful evasion of duty. The words "shall be liable to pay penalty" do not mean that the person committing those acts shall pay the penalty in all events and relied upon the judgments reported as 1995 PTD 91 and 2006 PTD (Trib.) 963.

10. The respondent No.2 has also explained that all statutes impairing rights of the citizen, are prospective in their applicability and operation, and, thus the consignment under Goods Declaration No.91072 dated 11-5-2007 exported by them is not covered by S.R.O. 425(I)/2007 dated 24-5-2007 as the subject S.R.O. has been issued 13 days after the goods were entered into Customs area. He also referred to the judgments reported as 2005 SCMR 492, 1992 SCMR 1652 and 2004 PTD 2928 and Article 12 of the Constitution of Islamic Republic of Pakistan, 1973.

11. The appellant filed parawise comments stating therein that the packing and electricity failure is not the correct excuse and the exporter should have waited for the restoration of electricity before commencing loading while the labour is always illiterate and it is not a convincing argument. It has been further pleaded that the storage problem does not relate to the issue under consideration.

12. The departmental representative mainly argued that the basic issue relates to applicability of S.R.O. 425(I)/2007 dated 24-5-2007 to the export of black channa. It has been contended that the Ministry of Commerce vide the aforesaid notification has imposed a ban on the export of this item while it was being exported along with the rice without true declaration vide GD No.91072 dated 11-5-2007 and hence it cannot be termed as shut out cargo in any manner. According to the department, the conclusion arrived upon by the learned Collector of Customs (Appeals), that aforesaid notification dated 24-5-2007, cannot apply retrospectively to the goods entered vide a Customs GD No.91072, dated 11-5-2007, wherein bags of black channa were never declared, is perverse and not sustainable under the law.

13. The representative of the appellant has also agitated that the learned Collector of Customs (Appeals), has seriously erred in law and failed to take into amount that questions of law can be raised/adjudged by the Adjudicating Authority himself at any stage of the proceedings even if the same are not mentioned in the Show-Cause Notice. It has been opined that mere non-mentioning of appropriate provisions of law in the Seizure Report or Show-Cause Notice, cannot vitiate proceedings. It has been stated that the learned Additional Collector of Customs (Export-1), Customs House, Karachi, while concluding the Order-in-Original No.14 of 2007, dated 25-6-2007 has therefore, taken cognizance of S.R.O.` 425(I)/2007, dated 24-5-2007, in accordance with law. Thus according to the department, the learned Collector of Customs (Appeals), at para.9 of the impugned Order-in-Appeal has wrongly held that "there is no mention of this notification of trade ban in the show-cause notice dated 4-6-2007 and, therefore, this issue cognizance of which was taken in the impugned order, is extraneous to the allegations made in the show cause notice."

14. The representative of the appellant has further argued that the Collector Appeals' orders to reduce the penalty/fine are not justified in view of facts and circumstances of the case. In this regard a copy of judgment of the Supreme Court in C.P.L.A. No.1098/2006 has been enclosed wherein it has been held that one who seeks equitable and discretionary relief must have equities in his favour. It has also been pleaded that the Additional Collector (Adjudication) has not bifurcated the offending goods while imposing penalty and redemption fine and, therefore, redemption fine and penalty separating the offending goods i.e. black channa is not maintainable.

15. The learned counsel for the respondent No.2 further stated that on perusal of the Order-in-Original it is manifestly clear that the learned Adjudicating Officer did not bother to examine the allegations levelled in the show' cause notice individually, although he was duty bound to do so, for the simple reason, because all such allegations cannot be generalized as they involve a harsh and penal actions and for each and every allegation, there is different pitch or minimum fine prescribed in lieu of confiscation by the Federal Board of Revenue vide S.R.O. 487(I)/2007 dated 9-6-2007 .In such a situation he should have dealt with all the allegations one by one and then should have proceeded to record his findings which he has not done, making the impugned order liable to set aside on this count alone.' If the provisions of S.R.O. 487(I)/2007 dated 9-6-2007 are examined, it would transpire that in all situations of mis declaration, such as weight, quantity, value, origin etc., these have been specifically mentioned in the S.R.O. and different rates of fine have been prescribed for them. Therefore, there could not be a situation wherein all the alleged offences could be clubbed together and a cumulative fine is imposed. In support of this contention he relied upon the judgment reported as 2002 PTD 1464 in the case of Messrs Nafa Trade Impex through Principal Officer v. Additional Collector, Customs and 2 others wherein their lordships have held as under: "Learned Tribunal on the other hand was swayed by their impression that the appellant had been guilty of fraud. Even if that was correct the appellant still needed to be dealt with in accordance with law. A punishment disproportionate to the guilt is as much illegal as the act calling for the imposition."

16. Arguments heard. Case record examined. The Advocate of the respondent No.2 elaborated various issues involved in this case and judicial pronouncements, which have been already referred to in the preceding paragraphs. In particular he argued that the case is based on faulty loading of various items due to mistake of illiterate labour mislead by packing of same size and weight of rice and pulses being loaded in darkness due to electricity failure. He further pleaded that affidavits annexed' to memo of appeal have not been controverted by counter-affidavits and thus the facts mentioned in these affidavits can' be safely relied upon. He relied upon the judgments of superior Courts reported as 1986 CLC 1408, 1908 CLC 541, and 1999 MLD 90.

17. He also submitted that the judgment quoted by the department is not applicable to the respondent No.2 case as in this case the incumbent had no defense to offer while it had evaded taxes, removed palm oil, sold it in the market during 1993-96 and deposited taxes many years later and thereafter took the technical plea of limitation and applicable rate of duty while the respondent No.2 case relates to mistaken loading of various goods without any mala fides.

18. The departmental representative argued that the goods liable to regulatory duty were found mixed up with rice and this fact alone is enough to prove the offence under section 32(1) ibid in this case. He stated that he has no comments to offer as to judicial decisions quoted by the advocate appearing for the appellant. However he admitted that the principles laid down in these precedents are enforceable and applicable to this case.

19. I have given careful consideration to the submissions made by the representative of the appellant and the advocate of the respondent No.2 following issues need to be resolved to decide this case. (i) Whether the respondent No.2 has made a false statement under section 32(1) of the Customs Act, 1969 punishable under section 156 (1) clause 14 ibid? (ii) Whether S.R.O. 425 (I)/2007 dated 24-5-2007 prohibiting export of black channa is applicable to the consignment of the respondent No.2? (iii) Whether the subject appeal filed by the appellant Collectorate is competent under section 194 A of the Customs Act, 1969?

20. As regards issue No.(i), the respondent No.2 has taken the plea of mistaken loading. I am afraid that the plea of the department that even such erroneous loading of the mixed goods creates an absolute liability for violation of section 32(1) ibid, cannot be accepted and these provisions are reproduced below for ease of reference:-- Section 32 False statement, error, etc.

If any person, in connection with any matter of customs,

(a) makes or signs or causes to be made or signed, or delivers or causes to be delivered to an officer of customs any declaration, notice, certificate or other documents whatsoever, or (b) makes any statement in answer to any question put to him by an officer of customs which he is required by or under this Act to answer, Knowing or having reason to believe that such document or statement is false in any material particular, he shall be guilty of an offence under this section, (Emphasis supplied) It is evident that the untrue and false statement attracting the mischief of these provisions needs to be proved to have been made `knowingly or having reason to believe' that such statement is false. According to the Black's Law Dictionary, a false statement means more than erroneous or untrue statement and entails intention to deceive. It is evident that presence of the words "knowledge" and "reasons to believe" in these provisions necessarily make "mens rea" or "guilty intention" an integral part of the offence under section 32 (1) ibid. It is evident that the electricity breakdowns in Karachi have become endemic. The affidavit of Mr. Ishtiaq Ahmad (Electrician) who has deposed that there was no electric power available in the godown for three days from 9-5-2007 to 11-5-2007 has not been controverted by the department. Similarly the affidavit of Mr. Khalid Mahmood is available on record wherein he has testified that rice, daal and black channa were mixed and loaded due to darkness and similar packing of these items. Even this affidavit has not been responded by counter affidavit. It has been held vide judgment reported as 1986 CLC 1408 that non-filing of counter affidavit to controvert facts stated in petition, would amount to admission of averments made in such petition. It has also been held vide 1999 MLD 90 that affidavit is considered sufficient prima facie proof and. if not rebutted by cogent evidence, it becomes conclusive proof.

21. The learned counsel for the respondent No.2 has relied on various judicial precedents that are applicable to the facts of the case. It has been held in the case 2001 SCMR 838, that the onus to prove the allegations of untrue declarations/statements on the basis of collusiveness or inadvertence lay on the department. It was held in 2006 PTD 2190 --2006 PCr.LJ 1427 that a mere assertion of the prosecution is no evidence while it was held in 2006 PTD 2209 that statement or declaration made under bona fide belief is not a mis-declaration. Similarly, it has beenhi ruled in 2003 PTD Trib 2525 that benefit of doubt always goes to the appellant/party and not the Government. A similar precedent is available in the case 2000 PTD 331 wherein it was held that benefit of doubt goes to the favour of appellant. Likewise in PLD 1996 Kar. 68, wherein it was held that the standard of proof required in penal proceedings which are criminal in nature and requires a proof beyond all reasonable doubt. If it is not so the impugned action of the department was held to be completely without jurisdiction, illegal, void ab initio and of no legal effect. It has been adjudged in PLD 1991 SC 963 that imposition of 1 penalty is illegal where the evasion of duty was not wilful while it was held in 2006 PTD (Trib.) 253 that where there was a case of confusion rather than wilful evasion, penalty can be remitted. A reference may also be made to the case 2004 SCMR 466=2004 PTD 1179 wherein it wash held that no penalty should be imposed in case of absence of mala fides, while it has been decided in 2006 PTD (Trib.) 196 that no penalty should be imposed where there is no wilful evasion.

22. It has also been held by the Supreme Court of-Pakistan in the case M/s. Eastern Rice Syndicate v. Central Board of Revenue (PLD 1959 SC (Pak.) 364) that word "untrue" in section 32 carries the sense of falsity to the knowledge of the person concerned, and here the accused is charged under section 14 of the Customs Act, 1969, Court is compelled to examine whether declarations made by the accused persons and his agent were not only false, but that they knew or had reason to believe that they were false. Relying on this judgment, the honourable Lahore High Court has followed the same principle in the case of Abdul Aleem v. The State (1988 PCr.LJ 891). In this case ordinary nylon fabrics and ordinary nylon dupattas were recovered from an export consignment wherein the contents of the consignment were declared to be knitted metallic nylon fabric and knitted metallic nylon dupattas. The exporters took the plea that the employees have packed the wrong goods from the godown due to a mistake and he was not aware of it. The Court accepted the plea and the penal action against the exporter was set aside.

23. In view of the aforesaid discussion, it is held that the mixed loading of the different items in this case was caused by the mistake of the labour of the respondent' No.2 and thus it is beyond the purview of section 32 (1) ibid and hence not punishable under clause 14 of section 156(1) ibid. As such issue No.(i) is answered in negative.

24. As regards issue No: (ii) the learned counsel for the respondents No.2 has rightly pointed out that a S.R.O. issued on 24-5-2007 cannot be applied retrospectively to the Goods Declaration filed weeks earlier as it violates the provision of Article 12 of the Constitution of the Islamic Republic of Pakistan, 1973 which provides that no law shall authorize the punishment of a person for an act or omission that was not punishable by law at the time of the act or omission. It has been held vide 2005 SCMR 492 (Government of Pakistan v. M/s Village Development Organization) that executive orders or notifications, which confer right and are beneficial would be given retrospective effect and those which adversely affect or invade upon vested right cannot be applied with retrospective effect. This view gains strength from the judgments reported as 1992 SCMR 1652 wherein it was held that a notification, which purports to impair an existing or vested right or imposes a new liability or obligation cannot operate retrospectively. Similar view has been taken in judgment reported as 2004 PTD 2928 wherein it was held that notifications or an executive order adversely affecting rights of any person could not operate retrospectively.

25. It is, therefore, held that S.R.O. 425(I)/2007 dated 24-5-2007 is not applicable to the subject consignment of black channa as the G.D. relating thereto was filed 13 days before enforcement of this S.R.O. As such the issue No. (ii) is answered in the negative.

26. The departmental appeal in this case has been filed by the Deputy Collector Customs (Export) Karachi. Section 194A(2) ibid provides: "(2) Where the Board or the Collector of Customs is aggrieved by an order passed by the Collector (Appeals), it, or as the case may be, he may prefer an appeal to the Appellate Tribunal. Such appeals shall be preferred by an officer, not below the rank of Assistant Collector or Assistant Director so authorized in writing by the Board or the Collector or the Director, as the case may be."

27. During the course of hearing of this case the departmental representative was specifically asked to explain as to why there is no authorization in writing by the Board or the Collector in favour of the Deputy Collector (Exports) to file the subject appeal, available on record. He expressed his inability to provide any such authorization. It has been held in the case 2006 SCMR 129, that section 196 requires filing of an appeal by the Collector and none else, the appeal filed by Collector of Customs would therefore be absolutely illegal, incompetent and not maintainable. It has also been held that an appeal filed by the Collector but signed and verified by the Deputy Collector or Assistant Director of Customs would be deemed not to have been filed in accordance with law. It has also been ruled in 2008 PTD 356, that appeal in the name of Collector of Customs, Sales Tax and Central Excise could be filed by Collector only and none else, even if memo of appeal is signed subsequently by Collector after expiry of limitation period, the appeal would still be non-maintainable. It has also be held by Customs Excise and Sales Tax Appellate Tribunal (Special Branch) Lahore Order in Appeal Nos. 181/03, 182/03, 183/03, 184/03 185/03 and 127/03 (Collector of Sales Tax, Faisalabad v. Deputy Collector, Collectorate of Customs, Sales Tax and Federal Excise (Adjudication), Faisalabad)] that an appeal filed by departmental officer not authorized under the law is liable to be dismissed. It is thus concluded that the Deputy Collector Customs (Exports) in the absence of specific authorization in writing to file the appeal, is not competent to file an appeal under section 194 A of the Customs Act, 1969 and the appeal filed by him is not competent. As such issue No. (iii) is answered in the negative.

28. In view of the aforesaid discussion, it is clear that the charges levelled in the show-cause notice dated 4-6-2007 are not proved and resultantly the impugned orders of the adjudicating officer and Collector (Appeals) for imposition and modification of redemption fine and penalty against the respondent No.2 are hereby set aside and the appeal is disposed of in the above terms. C.M.A./99/Tax (Trib.) Order accordingly.