2002 PLP (Trib (PTD)

"...180 Issue of show‑cause notice before confiscation of goods or imposition of penalty.‑‑‑No order under this Act shall be passed for the confiscation of any goods or for imposition of any penalty on any person, unless the owner of the goods, if any or such person‑‑‑ (a) is informed in writing (or if the person concerned consents in writing, orally) of the grounds on which it is proposed to confiscate the goods or to impose the penalty; (b) is given an opportunity of making a representation in writing (or if the person concerned indicates in writing his preference for it orally), within such reasonable time as the appropriate officer may specify, against the proposed action; and (c) is given a reasonable opportunity of being heard personally or through a counsel or duly authorized agent..."

22. Amongst other things the said provisions provide that an affected person is to be informed in writing of the grounds on which it proposes to impose penalty. In the instant case the show‑cause notice does not reveal grounds or a cause against the agent. In fact, the show‑cause notice only addresses grievance of the customs and that too against the importer. The grounds on which customs proposed to take action against the agent were never revealed. The initiation of action against the agent was thus in violation of the provisions of section 180 of the Act.

23. The effect of said provisions was interpreted in the case of Ali Haider v. Ijaz Hussain Malik etc. reported as 1968 PCr.LJ

127. While addressing the object of issuance of a show‑cause notice, their lordships observed: "..When a show‑cause notice is given, the object is that the person on whom it is served gets an opportunity to explain the allegations against him for which action is proposed to be taken. If the show‑cause notice is not to be reduced to a mere formality, the contents of the reply in response to the show cause notice must receive due consideration. The grounds mentioned in the show‑cause notice cannot become reasons for the action that may be taken unless the grounds are tested in the light of the explanation tendered and stand the scrutiny of the authority who has to take action on an objective assessment of the material supplied in proof of the allegations contained in the show‑cause notice. When the statute enjoins that the reasons must be recorded in writing, the plain meaning is that the reasons must be manifested in the order itself to be self explanatory for the purpose of showing that the order has a foundation in reason and is not capricious or arbitrary ....

24. In the case of Haji Abdul Razzaq v. Pakistan (PLD 1974 SC 5), their lordships observed: "...If the words `liable to confiscation' in section 168, Sea Customs Act, 1878, give a discretion to the Confiscating Authority to deprive a person of his property, then it follows that this discretion must be exercised upon the principles of natural justice; that is to say, the persons sought to be deprived of the property must be given notice to show‑cause, they must be furnished with adequate opportunity of putting forward their point of view and the same must receive due consideration. Furthermore, according to one of the principles now well‑accepted, no person should be deprived of his property by way of penalty unless it is clear that he is in some measure responsible for assisting or furthering the commission of the offence committed, No innocent person should be unjustly punished or deprived of his property..."

25. By applying the objective tests which their lordships have laid down in Ali Haider's case (supra) the resultant position is that the said conditions were never met in this case and the action against the appellant was taken in flagrant violation of law. The evidence against the appellant was never disclosed, and even the ‑basis whereby, the customs came to the conclusion that agent is guilty of a customs offence were also not disclosed to him. From this perspective exercise of discretion by the customs infringed the principles of natural justice.

26. Coming back for the elucidation, as to what is the true relationship, inter se the parties, particularly in the light of the submission, made by the learned counsel for the respondent, that section 209 of the Act, places a responsibility on the part of agent, it would be appropriate to review the provisions of the Act, the relevant provisions are accordingly reproduced below: " ....209. Liability of principal and‑agent.‑(1) Subject to the provisions of sections 207 and 208, anything which the owner of any goods is required or empowered to do under this Act may be done by any person expressly or impliedly authorized by the owner for the purpose. (2) Where this Act requires anything to be done by the 'owner, importer or exporter of any goods, any such thing done by an agent, clerk or servant of the owner, importer or exporter of any goods shall; unless the contrary is proved, be deemed to have been done with the knowledge and consent of such owner, importer or exporter so that in any proceedings under this Act the owner, importer or exporter of the goods shall also be liable as if the thing had been done by himself. (3) When any person is expressly or impliedly authorized by the owner importer or exporter of any goods to be his agent in respect of such goods for all or any of the purposes of this Act, such person shall, without prejudice to the liability of the owner, importer or exporter, be deemed to be the owner, importer or exporter of such goods for such purposes: Provided that where any duty is not levied or is short‑levied or erroneously refunded on account of any reason other than wilful act, negligence or default of the agent, such duty shall not be recovered from the agent..."

27. In view of said provisions of law, an agent represents the principal or the importer or the exporter, and accordingly for all his acts including making of statement, submission of documents and for other doings the principal is responsible. For example an agent can be held liable for a criminal act, or for a misconduct, an action can be taken against him under the governing rules relating to agents, but with regard to anything relating to customs duty, he cannot be charged. The issue came up before Judicial scrutiny in the case of Abdul Ghani v. Government of Pakistan (1984 PCr.LJ 540), wherein their lordships observed: "After considering the provisions of section 209 we are of the view that the act done by the Tendal Hussain who was admittedly the employee of the petitioner equally bound the petitioner in view of the provisions of subsection (2) of section 209 of the Customs Act unless the contrary was proved. Therefore, the burden of proving to the contrary was entirely on the petitioner. The Deputy Collector of Customs Collector of Customs and Board of Revenue after considering the circumstances of the 'case reached the conclusion that the petitioner was liable for the act of the Tendal Hussain who was his employee and was incharge of the launch at the relevant time. The fact that the launch was found involved in the act of smuggling is not disputed by the petitioner. There is nothing on record before us to show that Tendal Hussain acted against any express instructions of the petitioner. In these circumstances the order passed by the authorities for confiscation of the launch was, in accordance with the provisions of the law and no exception could be taken to it..."

28. Their lordships have held that effect of subsection (2) of section 209 is that where the principal knew about the happening of criminal activity (smuggling) he was responsible for the acts of his agent. Whereas in this case the circumstances are altogether different. The importer who had a right within the framework of permission given by the C.B.R. in terms of survey report was entitled to bring compressors on concessionary rate of duty. The permission so granted by the C.B.R. was never withdrawn. By issuing a general order or a public notice a right given by a specific permission could not be withdrawn. This issue came up for scrutiny before their lordships of Lahore High Court in the case of Messrs United Refrigeration Industries (Pvt.) Ltd. v. Federation of Pakistan (2000 CLC 1660).

29. In the said case, the issue involved was the same as in the present case, that is, the effect of S.R.O. 504(1)/94 and Public Notice No.21/95 (A), whereby the importers were being denied concessional rate of duty in respect of import of compressors on the plea that the same are being locally manufactured. His lordship of the Lahore High Court while examining this issue in detail summed up his findings in the following terms: " ....Without ensuring availability of compressors being manufactured by PEL in the market and its capacity of commercial production, the withdrawal of exemption of S.R.O. 504(1)/90 on the presumption of locally made compressors were available in the market was not justified. ‑‑‑With a view to provide a better living to a common person, it was essential to reduce the price of the item of general use and, therefore, a special concession in customs duty was made available to the manufacturers of refrigerators under S.R.O. No.504(I)/94, dated 9‑6‑1994 issued under section 19 of the Customs Act, 1969 with the result that the refrigerators would be available in the market within the reach of purchasing power of a common person. The components of a few items of the general use were not being produced and manufactured in the country and were being imported for the manufacturing of items such as specified in Table‑1 to the S.R.O. No.504(I)/94, dated 9‑6‑1994, therefore, the same were exempted from the customs duty chargeable under First Schedule to the Customs Act, 1969. This is admitted that the compressors being manufactured in the country were not available in the market and that the permission was given for the import of compressors under the above said S.R.O. on a concessionary rate of customs duty and the petitioner had been availing the benefit of S.R.O. in question on the import of compressors before 24th March, 1998 and again was made available to him after 30th March, 1999 and this special concession was only withheld during the period from 24th of March, 1998 to 30th of March, 1999. Thus, the pivotal question of determination would be, whether the manufacturing of compressors by PEL an industrial unit in the country without commercial production would take away the statutory concession on customs duty available to all the manufacturers of refrigerators and whether for the said reason such concession could be withdrawn through a Customs General Order for the benefit of an individual Unit. It is understandable that the concession on the import of compressors was given for the reason that the same were not being manufactured in the country were not‑ available in the market, therefore, without ensuring availability of compressors being manufactured by PEL in the market and its capacity of commercial production, the withdrawal of concession on the presumption of locally made compressors were available in the market was not justified. It is held that the petitioner being entitled to the concession of customs duty under S.R.O. No.504(1)/94, dated 7‑6‑1990 was illegally refused on the basis of Customs General Order No.7, dated 24‑3‑1998 and it is declared that the benefit of the said S.R.O. shall be available to the petitioner and notwithstanding the Customs General Order No.7, dated 24‑3‑1998, it would be deemed to have always been available to him. The Customs General Order should have no effect on the right of the petitioner relating to the claim of exemption on customs duty S.R.O. No. 504(1)/94, dated 9‑6‑1994, the refusal of the same by the respondent would, therefore, be without lawful authority. The object of S.R.O. 504(1)/94, dated 9‑6‑1994 issued under section 19 of the Customs Act, 1969 was that the refrigerators would be available in the market within the reach of purchasing power of a common person. In absence of any evidence of the sale of compressors by PEL in the market, the mere establishment of a Plant of compressors by the PEL for the use of the same in the refrigerators being manufactured in its industrial unit would not permit the respondents to take away the concession of customs duty on the import of compressors under the S.R.O. No.504(I)/90 it question, which would amount to restrict the market to the refrigerators being manufactured by the PEL and allow the said Unit to create monopoly in the business at the cost of healthy and free competition in violation of Constitution for providing fair opportunity of lawful business under Article 18 of the Constitution of Islamic Republic of Pakistan, 1973. The Customs General Order is issued for guidance of field staff to achieve the purpose of the statute where such departmental instructions are in conflict with the statutory law or tends to undo any such law, then the same has no legal effect.‑‑‑the refusal of the legitimate statutory concession made available by the Government through the departmental instructions in the form of Customs General Order would amount to undo the effect of notification issued under section 19 of the Customs Act, 1969. The departmental instructions such as Customs General Order is issued for guidance of the field staff to achieve the purpose of the Statute, and if such departmental instructions are issued in conflict to statutory law or to undo any such law, the same would not have any legal effect.."

30. Thus, the Court while interpreting the object and purpose of S. R. O. 504(1)/94, dated 9‑6‑1994 observed that the intend of said regulation was to make the refrigerators available in the market on competitive price and since the goods namely, compressors being domestically manufactured were not available openly, therefore, the object of public policy was being defeated. The Court accordingly held that any refusal to available statutory concession by Customs General Order or through a Public Notice was illegal. The action of the department in the light of said verdict of the Honourable High Court was thus ab initio wrong.

31. As regards the issue raised by the counsel of the appellant that whether not the act of the clearing agent falls within the ambit of clauses (l0A), (14) and (86) of subsection (1) of section 156 of the Act, suffice it to say that the said provisions of law are not applicable in the present case. It would be relevant here to reproduce the said provisions. The same read as follows:‑‑‑ Offences Penalties Section of the Act to which offence has reference 19 and 20 (10A) If any condition, limitation or restriction imposed by, the Government or by the Board for grant of partial or total exemption from customs duties is violated in respect of the goods on which exemption has been granted. Such goods shall be liable to confiscation; and Federal the person to whom the exemption was granted shall be liable to a penalty not exceeding ten times the value of goods ;and upon conviction by a Special Judge he shall further be liable to imprisonment for a term not exceeding two years.

14. If any person commits an offence under section 32, Such person shall be liable to a penalty not exceeding (twenty five thousand rupees) or three times the value of the goods in respect of which such offence is committed, ' whichever be greater; and such goods shall also be liable to confiscation [and upon conviction by a (Special Judge) he shall further be liable to imprisonment for a term not exceeding three years, or to fine, or to both]. Such person shall, on conviction (before a Special Judge), be liable to imprisonment for a term . which may extend to one year, or to a fine not give exceeding [(twenty five in writing to thousand rupees], or to both, 32

86. If any person, having knowledge of the commission of any offence under this Act or of an attempt or likely attempt to commit any such offence, fails to information the officer‑in‑charge of the nearest custom house or customs station, or if there be no custom house or customs station at a reasonable convenient distance to the officer‑in charge of the nearest police‑station, 192

32. As regards clause (IOA), the same is not applicable in this case as neither any violation of the terms and conditions of the relevant Notification was ever made by the appellant, nor it has been alleged in the show‑cause notice. Therefore, the said provision has no relevance to the merits of the case. Clause (14) provides imposition of penalty where an offence under section 32 did take place. As is evident do not find presence of. any fact or circumstances where by any stretch of imagination it can be assumed that an offence under section 32 did take place and that too on the part of agent. Therefore, any action under the said clause would have no relevance to the facts of Ibis case. As regard, clause (86) it refers to reporting of a customs office to the Customs' Authority. These provisions are only applicable in Cases of smuggling, that is, where the goods are brought through unauthorized routes. In the before, provisions of present case no such circumstances did exist, the section 192 were not attracted. In fact, there was no offence which the agent was under an obligation to report. Accordingly, it is evident that the said provisions of law are not attracted in this, case.

33. Now attending to the submission of the learned departmental representative, that impugned order was legally correct, .it is observed that he has not been able to bring on record any evidence whereby it can be assumed that the agent did violate any provision of law; When confronted with aforementioned legal position emanating from the case, he conceded that the departmental action was wrong and that too without

34. In the light of what has been stated above, I do not find that the respondent has been able to make out a prima facie case to punish the agent. Be that as it may, it is observed that: (a) the show‑cause notice was defective and illegal ‑inasmuch as that it held the appellant guilty without providing him an opportunity of hearing and without delivering him the evidence for the cause‑shown in the notice, thereby violating the mandatory provisions of section 180 of the Act. (b) In view of section 209 of the Act, and in the circumstances of this particular case no liability did exist against the agent. (c) The matter having been decided by the Lahore High Court in favour of the importer, any presumption of guilt against the agent was wrong. (d) No offence under clauses (l0A), (14) or (86) of section 156(1) of the Act, whatsoever took place. (e) The Department has conceded that then action was wrong.

35. Having said that, this appeal is allowed, the penalty imposed Limited, accordingly the impugned order stands modified to this extent. Q.M.H./40/Tax(Trib.) Appeal allowed.