2010 PLP (Trib (PTD)

MUHAMMAD ARIF MOTON, MEMBER (JUDICIAL-II).

This order will dispose of Customs Appeal No.K-315/2008 filed by the appellant against Order-in-Appeals Nos.1069-1070/2008 dated 27-5-2008 passed by the Collector of Customs, Sales Tax & Federal Excise (Appeals), Karachi.

2. Brief facts of the case are the Messrs Instrumentation and Management System (Pvt.) Ltd., imported a consignment of System Sensor/Duct Sensor Plate, Temperature and Humidity sensor/Duradrive and body etc., vide G.D. (HC) N. 65672 dated 21-6-2006, IGM No.D-6078/06 dated 20-6-2006, Index No.12 and sought clearance thereof as its declared total value as US$10,898.25.

3. At the time of processing of GD the declared values of imported items were found to be on lower side. The goods were, however, released provisionally under section 81 of the Customs Act, 1969 and the case was referred to the Directorate-General of Customs Valuation and PCA. The Directorate-General has determined the Customs Value of items covered by GD (HC) and issued final Ruling No.857/2006 dated 29-12-2006, determined the Customs value which resulted into short levy of duty and taxes amounting to Rs.3,79,

647. After deducing the securities amount, deposited with the Customs, the recoverable amount of duties and other taxes comes to Rs.86,

335. Adjudicating proceedings were initiated against the appellant and order-in-original dated 9-2-2008 was passed against the appellant, the relevant para. 5 reproduced as under:-- "

5. I have gone through the facts of the case and considered the written submission of the respondent. The charges levelled in the Show-Cause Notice are established and duly admitted. I, therefore, order the importer to deposit the short levied duty and taxes amounting to Rs.86,335 (Rupees eighty six thousand three hundred thirty five only) in the Government Treasury forthwith. This amount is in addition to the securities already furnished by the importer at the time of provisional release of the goods. The securities earlier furnished stands forfeited and to be adjusted against the outstanding amount of duty and other taxes."

4. The appellant being aggrieved with the above impugned order -in-original filed an Appeal before the Collector (Appeals) which was also rejected by him with the following observations:- "I have examined the case record and heard submissions of both the sides. The case involves issue of valuation. The goods were provisionally assessed and the case was referred to Valuation Department for fixation of the value of impugned goods. On the basis of the Valuation Ruling the Collectorate determined the impugned amount of duty and taxes in this case. The appellants have not furnished any convincing evidence to assail the value fixed in the case. I, therefore, do not find any justification to interfere with the impugned order. Appeal is accordingly rejected."

5. The appellant has now challenged the above orders by way of this appeal. Sardar Muhammad Ishaque, Advocate appeared on behalf for the Appellant who reiterated the arguments incorporated in the memo of appeal, He mainly emphasized on the following points: (i) That the GD in this case was filed on 21-6-2006, the consignment was provisionally released under section 81 and value of few items were enhanced and few items were assessed on values lower than the declared value. The differential amount of duty was secured in the form of post dated cheque and a reference to valuation was made in June, 2006. (ii) That the ruling of Valuation Department was issued on 29-12-2006. On the basis of valuation ruling, show-cause notice was issued to the appellant on 5-7-2007 and order-in-original was issued on 9-2-2008. The learned Advocate at this juncture pointed out that in the first place, provisional assessment was not finalized within a period of six months/one year as prescribed under the relevant provisions of section 81(4) of Custom Act, 1969. It was finalized after a period of one year. The show-cause notice issued was also time-barred since not issued within a period of one year as stipulated in subsection (4) of section 81 of the Customs Act, 1969, since it was issued after a prescribed period under section 81(4) of the Customs Act. (iii) That the appellant imported the consignment in question vide IGM No.D-6078/06 dated 20-6-2006, Index No.12, the provisional assessment was not finalized within six months statutory period, which is beyond the permissible period of six months as prevalent at that time. The provisional assessment thus, stood finalized in terms of subsection (4) of section 81 of the Customs Act, 1969. The import inquestion for all legal purposes is hence a past and closed transaction and issuance of Show-Cause Notice dated 5-7-2007 received on 16-7-2007 after a period of 13 months. The Customs Appellate Tribunal, Karachi Bench has in a number of similar cases held that re-assessment of value of goods released under section 81 of the Customs Act, 1969 after the expiry of mandatory period was unlawful. The Lahore Bench of the Appellate Tribunal has also in case of Messrs International Industries Limited v. Collector of Customs, Karachi, held as follows: "The case record shows that the consignments in question were assessed to Customs duty and other taxes provisionally in terms of section 81 of the Act on the basis of the value ascertained and reported by the Pre-shipment Inspection agency. The assessment thus .made was not finalized within the period specified for this purpose and thus the provisional assessment attained finality under the aforesaid legal provision. The demand raised on the basis of the evidential value of US$390.95 PMT, being time-barred in terms of section 81 ibid has no legal sanction and is hereby vacated." That regarding section 81 of Customs Act, 1969 pertaining to the provisional assessment and section 179 of the Customs Act, 1969, pertaining to mandatory period for issuance of order-in -original by the Adjudicating Officer, the superior judicial fora has decided a number of similar cases against the Customs Department reported as 2004 PTD 1979, 2006 PTD 1276 and PLD 1974 SC 284. (iv) That it is very surprising that though the learned Adjudicating Officer was so technical in the implementation of law then too she should have implemented proviso to subsection (3) of section 179 of the Customs Act, 1969 which, says that:- "The case shall be decided within ninety days of the receipt of the report or within such period extended by the Collector for which reasons shall be recorded in writing but such extended period shall in no case exceed ninety days." (v) That in the present case the show-cause notice was issued by the Deputy Collector on 5-7-2007 without Jurisdiction/Authority, under subsection (1) of section 179 of the Customs Act, 1969 and no show-cause notice was issued by the competent authority neither any order was passed by the competent authority. The Deputy Collector passed the Order-in-Original on 9-2-2008 after 7 months, i.e., after expiry of ninety days of the receipt of the contravention report i.e. even after the extended period of ninety days without giving any reason of such extension. Since the case was not decided by the learned Adjudicating Officer within stipulated period of time, therefore, the impugned order is barred by limitation in terms of subsection (3) of section 179 of the Customs Act 1969 and as such is illegal, null and void and against the principles of settled law reported as 2005 PTD (Trib.) 601, PTCL 2005 CL 17, 2005 PTD 9, 2008 PTD 578. (vi) That since no material particulars regarding the unit value of the imported goods were mentioned in the valuation ruling, the show-cause notice was defective to this extent. (vii) That as regards valuation aspect 90 days valuation data in terms of Rule 107(a) of Customs Rules 2001 was not furnished. Evidential values relied upon by respondent are not relevant in terms of admissible period of import. The order-in-original was also issued beyond the charter of the show-cause notice. No charge of fraud or misdeclaration was mentioned in the show-cause notice or the valuation ruling issued by the Valuation Department. According to the hallmark judgment of the Honourable Apex Court delivered in case of Collector Central Excise and Land Customs v. Rehm Din, reported as 1987 SCMR Page 1840, the Adjudicating Authority is not supposed to travel beyond the charter of the show-cause notice as such the order-in- original issued on the basis of this show-cause notice is itself null and void ab initio and coram non judice. (viii) That all proceedings based upon a defective and deficient show-cause notice are also null and void ab initio in view of the judgment of Kamran Industries reported as PLD 1996 Kar. 68. (ix) That in view of the above the appellant has done substantial compliance with the requirements of law. On the contrary the respondent has passed on illegal and unlawful order without proper opportunity of hearing, without providing the documentary evidence of higher value and without providing the details of actual payable duty and taxes to the appellant and impugned order is liable to be set aside in the best interest of justice. Reliance is placed on the judgment of the Honourable Supreme Court of Pakistan in the case of 1994 SCMR page 2232 and Messrs Nishat Mills Ltd v. Superintendent of Central Excise Circle-II and others as reported in PLD 1989 SC page 222, the relevant portion of the judgment is reproduced here under:- "The proper place of procedure in any system of administration of justice is to help and not to thwart the grant to the people of their rights. All technicalities have to be avoided unless it be essential to comply with them on grounds of public policy. The English system of administration of justice on which our own is based may be to a certain extent technical but we are not to take from that system its defect to the form and not to the substance defeats substantive rights is defective to that extent. The ideal must always be a system that gives to every person what is his." That notice was issued under section 81 for recovery of short levied amount. The relevant subsection (3) of section 32 of the Customs Act, 1969 in this case has not been mentioned in the show-cause notice which makes the show-cause notice unlawful, illegal and ab initio void in terms of various judgments of Appellate Tribunal in Appeal No. H-113/2004, Appeal No.H-63/2006 and Appeal No.1761/LB/2001 reported in 2003 GST P-521 and Honourable Sindh High Court reported in 2004 PTD 2977, 2003 PTD 1797, Honourable Supreme Court of Pakistan reported as 2001 SCMR 838, 2003 PTD 1997 and 2005 PTD 480. (xi) That the show-cause notice has admittedly been issued by the Customs Department on the basis of valuation ruling. Legally speaking, an audit report/assessment/valuation ruling is, at best, an opinion of the V.O. and a material in support of the departmental version. It has been held to be a part of the charge sheet, which needs to be established through the process of adjudication in conformity with the judgment of the Honourable Lahore High Court, reported in 2004 PTD

714. That being so, a copy of the audit report is required to be forwarded to the auditee/importer and failure to do so renders the show-cause notice ab initio as decided by the Honourable Lahore Court, reported as 2002 PTD 2780. It is a matter of verifiable record that in the instant case, the Importer/Applicant has only been intimated audit observations/assessment. It is a well-settled provisions of law that mere intimation of audit observations/ assessment is not a show-cause notice as decided by the Honourable Sindh High Court, reported in 2000 PTD 1798. Even otherwise, the show-cause notice has been issued mechanically without proper verification of facts and law involved in the case and does not show judicial application of mind. The show-cause notice is; therefore, void ab initio, illegal and defective. (xii) That the Honourable Supreme Court decided its judgment in PLD 1971 Snoreme Court page 124 in respect of Messrs Mansab Ali v. Amir and 3 others, whereby it was held:- "It is an elementary principle that if a mandatory condition for the exercise of jurisdiction by a Court, Tribunal or Authority is not fulfilled, then the entire proceedings which follow become illegal and suffer from want of jurisdiction. Any order passed in continuation of these proceedings in appeal or revision equally suffer from illegality and are without jurisdiction." (xiii) That the appeal may be accepted in view of the above referred to legal infirmities and violation of mandatory provisions supported by the judgments of the superior judicial for a including the Honourable apex Court.

6. As against the Advocate's above pleading the learned Advocate for the respondent pointed out that according to the parawise comments filed by Valuation Department, goods of USA origin imported from Singapore were misdeclared in terms of material particulars including their value. He further submitted that invoices are fake and forged and this has been verified on the basis of the report of the Pre-Shipment Inspection Company SGS which is placed on record. The shipment was made against provisions of prevailing law. The proceedings were finalized by Valuation Department through issuance of the Ruling Nos.857 & 859 on 29-12-2006 and 30-12-2006 respectively. The provisional assessment was made on 7-7-2006 and 17-6-2006 as such the case of the appellant has been finalized by the respondent within the prescribed limit (period). However, the Advocate of the respondent could not satisfactorily explain the infirmities infesting the show-cause notice and, the order-in-original issued by the Deputy Collector neither rebutted the law points, raised by the appellant's Advocate.

7. I have gone through the record of the case and carefully considered the written arguments put forth by the appellant's counsel and the departmental representative. The following issues are framed for consideration by this forum: -- (i) Whether the show-cause notice issued to the appellant by the respondent was deficient in material and legal particulars? (ii) Whether the charge of fraud and misdeclaration subsequently levelled against the appellant by the Valuation Department and not incorporated in the show-cause notice issued by the respondent-Deputy Collector makes the show-cause notice and order-in-original unlawful, illegal and null and void ab initio? (iii) Whether the assessment was finalized by the respondent within the stipulated period under relevant subsection (4) of section 81 of the Customs Act, 1969? (iv) Whether the valuation data in terms of section 25 of Customs Act, 1969 read with Rule 107(a) of Customs Rules was brought on record by the respondent and the enhancement of transactional value was justified?

8. As regards issue No. (i) a perusal of the show-cause notice dated 5-7-2007 indicates that the respondent had not alleged any misdeclaration in respect of the particulars of the goods including description, quantity, quality, type and specifications, which were required to be filed and declared correctly in terms of section 79(1) of the Customs Act, 1979. The only allegation in the show-cause notice was in respect of the declared value of the imported items which was found to be on lower side. After examining the contents of the show-cause notice and the relevant section 79 of the Act ibid, relied upon by the respondent I am of the considered opinion that no violation of section 79 was made by the appellant in the instant case. In fact it was the responsibility of the Customs Officer to check the said declaration and assessment in terms of section 80 of the Customs Act, 1969 and upon such checking of goods declaration, if he arrived at a conclusion that such declaration/assessment of duty and taxes were not correct, he could have made an assessment of his own and advised the importer to make payment of additional duty and taxes if so warranted under the law. In such circumstances there is no need to issue a show-cause notice under section 168 of the Custom Act, 1969 in each and every case where such assessment is not found in conformity with the declaration made under section 79 of the Customs Act 1969. The contention of the learned counsel for the appellant in respect of the impugned order of learned Collector (Appeals) whereby the learned Collector Appellate has observed that the appellant with mala fide intent misdeclared the description though not mentioned in the show-cause notice is unwarranted because the same amounts to travelling beyond the scope of the show-cause notice and the order impugned before the Collector (Appeals). Such adjudication has been disapproved by the Honourable Supreme Court in the case of the Collector of Customs v. Rahim Din reported as 1987 SCMR 1840. Therefore, the observation of the learned Collector Appeals on the said aspect of the case is held to be illegal and is hereby set aside after following the dictum laid down by the Honourable Supreme Court. As such the issue Nos(i) & (ii) are answered in affirmative.

9. As regards issue No.(iii), the case record shows that the consignment was provisionally released in terms of section 81 of the c Customs Act, 1969. The relevant subsection (1) of the section 81 reads as under:-

81. Provisional determination of liability.

(1) Where it is not possible immediately to assess the customs-duty that may be payable on any imported goods entered for home-consumption or for warehousing or for clearance from a warehouse for home-consumption or any goods entered for exportation, for the reason that the goods require chemical or other test [or a further enquiry] for purposes of assessment, or that all the documents or complete documents or full information pertaining to those goods have not been furnished, an officer not below the rank of [Assistant Collector of Deputy Collector] of Customs may order that the duty payable on such goods be assessed provisionally: Provided that the importer (save in the case of goods entered for warehousing) or the exporter pays such additional amount as security or furnishes such guarantee of a scheduled bank for the payment thereof as the said officer deems sufficient to meet the excess of the final assessment of duty over the provisional assessment. (2) Where any goods are allowed to be cleared or delivered on the basis of such provisional determination, the amount of duty actually payable on those goods shall be finally assessed within [one year] of the date of provisional determination: Provided that the Collector of customs may in circumstances of exceptional nature and after recording such circumstances. The date of provisional assessment in this case is 8-7-2006 and Valuation Ruling was issued on 29-12=2006. A show-cause notice was issued on 5-7-2007 without mentioning section 32 of the Customs Act, 1969 for recovery of alleged dues and finalization of assessment on the basis of the aforesaid Ruling was issued on 29-12-2006. The date of judgment indicated in the order-in-original is 16-7-2007 and the date of issuance of order-in-original is 9-2-2008. As per date of issuance of judgment the assessment was finalized after the period of more than (18) months approximately which is beyond the stipulated period of limitation.

10. In this connection the Honourable High Court of Sindh at Karachi in the case of Messrs Hassan Trading Company v. Central Board of Revenue and others reported as 2004 PTD page 1979 has observed as under:-- "However, in view of the provisions of sections 32 and 81 of the Customs Act, the Customs Department was under a legal obligation to finalize the assessment under section 81 and to issue a notice under section 32 if at the time of finalization of the assessment it was discovered that the goods imported by the petitioners did not conform to the description of the imported goods. On failure of the Customs Department to proceed in accordance with the provisions of section 81 of the Customs Act, the provisional assessment attained finality after the expiry of the period of 270 days which conferred a right on the petitioners to get the imported goods cleared on the value/price declared by them. For the foregoing reasons and upon the above discussion, it is absolutely clear that the Customs Authorities had failed to make compliance of the provisions of section 81 of the Customs Act as they failed to make final assessment within the maximum period of 270 days as provided by subsection (2) and the proviso thereto of section 81, as a result of which the provisional assessment attained finality. This Constitutional petition was found to have force and by a short order dated 11-3-2004 it was allowed in terms of the relief's sought by the petitioners for reasons to be recorded later. The provisional assessment was to be treated as final assessment and the petitioners were entitled to release of the bank guarantee furnished by them in favour of the Collector of Customs. These are the reasons for the said short order."

11. The Honourable High Court of Sindh at Karachi is the case of Dewan Farooq Motors Ltd. v. Customs, Excise and Sales Tax Appellate Tribunal Karachi reported as 2006 PTD page 1276 has observed that:-- "A perusal of subsection (4) of section 81 of the Customs Act further reveals that the case final assessment is not completed within the period specified in subsection (2), the provisional assessment shall become final. A Division Bench of this Court in the case of Collector of Customs (Appraisement) v. Messrs Auto Mobile Corporation (Supra) while examining the provisions of section 81 has held as follows:-- "In other words, subsection (4) of the section 81 is a penal provision incorporated in the Scheme for the benefit of Assessee Importers/Exporters to save them from unnecessary harassment by the Customs authorities by way of lingering on their cases for indefinite period on the pretext of finalizing the assessment. When the practical working of scheme of provisional assessment, as provided under section 81 of the Act of 1969 is analyzed, it will seem that the figure of provisional assessment denotes figure of levy of duty on the basis of value declared by the Importer/Exporter plus any reasonable percentage of loading over such declared value made by the Assessing Officer to secure any excess payment of duties/charges which may be found due in addition to the duty levied on the declared value of the goods at the time of final assessment within the period stipulated by subsection (2) to section

81. It is such excess payment of duties/charges levied on the basis of loading, which are secured by charging additional amount of furnishing of guarantee of schedule bank. Thus, it is apparent that charging of such additional amount or furnishing of guarantee is subject to terms of final assessment and not otherwise. In other words, when no final assessment is made in terms of subsection (2) to section 81, the provisional assessment will become final at declared value of goods by the Assessee and disbursement of additional amount or guarantee furnished by the Importer/ Exporter, in terms of subsection (3) to section 81, will be regulated on such premises. "

12. It is an admitted position that present case also appears to be that the Customs authorities failed to finalize the assessment of the appellant within the stipulated period as provided by subsection (2) to section 81 of the Customs Act, 1969. In such circumstances the provisional assessment made by the Customs Authorities in terms of section 81(1) of the Customs Act, 1969 had attained finality on the basis of declared value of the goods by the appellant and not in any other manner.

13. In the present case provisional assessment was made on 8-7-2006 whereas order in original finalizing assessment was issued on 9-2-2008. The said order was issued after the lapse of the statutory period. A plain reading of the said provisions of law shows that the assessment proceedings were not finalized within the prescribed time. Accordingly in terms of section 81(4) of the Customs Act, 1969 the provisional assessment became the final assessment. Accordingly the impugned order having been passed after the lapse of statutory time limit is not in accordance with law. As such issue No.(ii) is answered in' negative.

14. As regards issue No.(iv), it is an admitted position that valuation data for enhancement of declared price in terms of Rule 107(a) of the Customs' Rules was not brought on record before two forums below as well as before this forum by respondent's Advocate and the departmental representative. As such the enhancement of the transaction value of the appellant without any supporting data of contemporaneous imports pertaining to ninety days valuation data is arbitrary and unlawful and against the laws settled down in the judgments of the superior judicial for a reported as 2002 PTD 2957, 2004 PTD 2993, 2005 PTD 21, 2006 PTD 1876, 2007 SCMR 1357, 2006 PTD 232, 2007 PTD 1858, 2008 PTD 1250 and 2009 SCMR

438. As such issue No.(iv) is answered in negative.

15. It has also been observed that the order-in-original was issued beyond the stipulated limit of ninety days by the Deputy Collector in terms of the subsection (3) of section 179 of the Customs Act, 1969 where no extension was sought from the Collector and reasons not recorded in writing on this count. As such the order-in-original issued by the Deputy Collector is also unlawful and coram non judice. The same view has been expressed by the apex Court and High Court in judgments reported as 2008 PTD 60, 2008 PTD 578, 2009 PTD (Trib.) 1263, 2009 PTD 762, 100 Tax 42 [H.C. Lahore].

16. In addition to the above findings, it is also observed that no show-cause notice in terms of subsections (2) and (3) of section 32 of the Customs Act, 1969 was issued to the appellant the action of the adjudicating officer is without lawful foundation as has been observed in the judgment reported as 2001 SCMR 838 the relevant extract being as follows:-- " .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 notice 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 the law to be done in a certain manner must be done in the same manner as prescribed by law or not at all ."

17. A perusal of above judgment delivered by the Honourable apex Court also strengthens the version of the appellant that 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 this case the show-cause notice issued to the appellant did not incorporate the relevant subsections (2) and (3) of section 32 of the Act as to why they should not pay the defaulted amount, therefore, in absence of aforesaid statutory provisions, the show-cause notices were without lawful foundation and the same are void ab inito and carrying no weight in the eyes of law.

18. In view of the above findings duly substantiated by the judgments of superior judicial fora in a number of similar cases this case represents gross miscarriage of justice on the part of the respondent as they have miserably failed to bring any incriminating evidence either oral or documentary on record. The provisional assessment was to be treated as final assessment and the appellant were entitled for release of the pay order furnished by them in favour of the Collector of Customs. Under these circumstances the impugned orders are without jurisdiction and ab inito void, being issued without complying with the statutory requirements of issuance of show-cause notice or adhering to the time frames set forth in the relevant sections of the Customs Act, 1969 discussed above. The impugned orders are, therefore, set aside. The subject appeal is accordingly allowed. H.B.T./26/Tax (Trib.) Appeal allowed.