2010 PLP (Trib (PTD)

HAFIZ AHSAAN AHMED KHOKHAR, (MEMBER JUDICIAL).

This judgment shall dispose of the appeal of Messrs Global Marketing Services 57-1/A Block, Satellite Town, Rawalpindi (herein after called the appellant's) filed against the Order-in-Appeal No.259 of 2008, dated 20-11-2008, passed by the Collector Customs, Sales Tax and Federal Excise (Appeals), Regional Tax Office Building, Islamabad (herein after called the respondents).

2. Brief facts of the case according to show-cause notice C. Nos.SI/IMP/MISC/189/08/1425, dated 24-7-2008 are, that as reported by the Deputy Superintendent Import Section, SAPS, AEU, Islamabad Airport, that Messrs Global Marketing Services, imported a consignment of Blood Glucose Meters, strips and repaired meters under House Air Way Bill No., ECF-0806098, dated 28-6-2008, weighing 1278 Kg, comprising of 33 cartons and filed G.D. No. 883, dated 16-7-2008 through their authorized Clearing Agent i.e. Messrs Nobel International Services, Office No. 1, Chisti Plaza, Opposite Shaheen Cargo, Islamabad Airport. The goods declaration was presented by one Mr.Faisal Ameer on 16-7-2008 at about 9-00 p.m. for examination of the said consignment. Since, packing list of the consignment was not available, therefore, 100% examination of the goods was carried out, which led to detection of huge excess in quantity of the imported goods against the declared quantity mentioned in the Import-Invoices No.INFGMS-080530-001, dated 30-5-2008. Detail of quantities and values declared vis-a-vis quantity found physically, have also been given in the show-cause notice, which are as under: S.No. Description of goods Qty. and value declared as per unit. Qty. found Physically Difference Blood Glucose Monitoring (Easygluco) system without testing strips 1000 Kits. Value declared as US $ 3.00 per unit 2199 kits 1199 Kits

2. Blood glucose Testing Strips 2500 Pkts each containing 50 strips. Value declared as US$ 0.33 per unit. 7000 Pkts. each contain 50 strips 4500 Pkts. Each contain 50 strips

3. Blood glucose Testing meters (naked/repaired 130 Nos. 130 Nos. Nil.

3. Further reported in the show-cause notice that, Messrs Global Marketing Services had earlier cleared identical goods i.e. Blood Glucose Monitoring System (Easygluco) at the declared unit value of US$ 12.50 and Blood Glucose Testing Strips at the declared unit value of US$ 7.50 vide GD No. 14222, dated 14-3-2008. Furthermore, the importer has misclassified the blood glucose testing strips under HS "Code 9027.8000, attracting C.D. @ 0% whereas the time is correctly classifiable under HS Code 3822.0000, attracting C.D.@.5%.

4. Further mentioned in the show-cause notice that Messrs Global Marketing Services, Rawalpindi attempted to clear the imported goods by evading duty/taxes to the tune of Rs.355,738 violating the provisions of sections 25 and 32 of the Customs Act, 1969 punishable under sections 156(1)1 and 14 of the Customs Act, 1969 read with Nos. 1(a) and (d) of the table of S.R.O. 487(I)/2007, dated 9-6-2007. The goods were, therefore, seized for violation of the above mentioned provisions of the Customs Act, 1969, after proper documentation on the spot and service of due notice under section 171 of the Customs Act, 1969 under the Importer, through Mr. Faisal Ameer their authorized Clearing Agent.

5. On the aforementioned contraventions, a show-cause notice was issued to the appellants by the Assistant Collector of Customs A.F.U. building Islamabad vide C. Nos. SI.MP/MISC/189/08/01425, dated 24-7-2008. During the hearing on the show-cause notice, learned counsel for the appellants preliminary pointed out that the show-cause notice issued by the Assistant Collector was illegal and without jurisdiction. Accordingly, the case file was transferred to the Office of Additional Collector of Customs, who issued a corrigendum to the appellant vide C. No.1504, dated 7-8-2008, wherein it has been stated that the charges levelled in the show-cause notice are endorsed by the Additional Collector and the show-cause notice may be considered as issued by the Additional Collector. After hearing on the show-cause notice, the Additional Collector decided against the appellant's through the Order -in-Original No. 19 of 2008, dated 20-8-2008, the concluding paragraph of order is:- "In the light of above, it is clearly established that the respondent not only misdeclared the quantity of goods but also grossly under invoiced the value of goods and also misdeclared the classification of goods, hence the charges levelled in the show-cause notice stand fully established. The seized goods are therefore, confiscated for violation of above mentioned provisions of Customs law. However, an option is given to the respondent under S.R.O. 487(I)/2007, dated 9-6-2007 to redeem the same on payment of redemption fine equal to 30% of the ascertained Customs value for misdeclaration of quantity redemption fine equal to 50% of the ascertained customs value for misdeclaration of value of the goods, along with duty/taxes amounting to Rs.3,55,738 leviable on the seized goods".

6. The appellant's feeling aggrieved from the Order-in-Original No.19 of 2008, dated 20-8-2008 moved an appeal before the Collector Appeals Rawalpindi, who also had not agreed with the stand of the appellant and passed the impugned Order No. 259 of 2008, dated 30-9-2008. The operative part of the Order-in-Appeal is as follows: "I have examined the record of the case and have also considered the verbal as well as written submissions of both the parties. From perusal of record of the case it has been observed that the appellants is a regular importer of glucose monitoring system. He has declared the value of these items in the past ranging from US$ 2 to US$ 3, whereas the strips have been declared in various GD ranging from US$ 0.33 to 0.59 per packet. The glucose monitoring system has been assessed by the Department @ US$ 2.00 to US$ 5.00 and the strips ranging from US$ 0.33 to US$ 0.76. It is astonishing to note that the values are assessed on the sweet will of the Customs staff, there is no consistency for determination of the value and the Customs staff has not made any efforts to consult the one Customs system for valuation purposes despite of the fact that the government has installed the system, spending a huge amount of expenditure. It is further observed that the blood glucose monitoring system is exempted from payment of Customs duty as well as Sales Tax, only 2% of Income Tax is leviable on clearance of goods, whereas 5% customs duty and 2% sales tax is leviable on the strips. The appellant misdeclared the quantity of goods and failed to substantiate his contention regarding correct declaration of quantity of goods, however, imposition of 50% redemption fine for misdeclaration of value is too harsh. I, therefore, waive off the 50% fine imposed on the appellant for misdeclaration of the value of goods. The order is modified to this extent only".

7. Feeling dissatisfied from the order of Collector Appeals, the appellant has preferred an. appeal under section 194-C of the Customs Act, 1969 against the Order-in-Appeal No. 259 of 2008, dated 30-9-2008, before the Customs, Federal Excise and Sales Tax Appellate Tribunal, Islamabad.

8. Mr. Farhat Nawaz Lodhi, Advocate, learned counsel for the appellants contended at the very outset that the Assistant Collector or Additional Collector do not have any authority to initiate the action through issuing the show-cause notice, against the appellants, because the power of taking the action has been given to the Deputy Collector under section 179 of the Customs Act, 1969. He further submitted that even the Assistant Collector or Additional Collector did not have the power to recover the amount of Income Tax under the cover of Customs Act, 1969, from the appellants, as no violation of provisions of Income Tax Ordinance, 2001 have been attributed in the show-cause notice, therefore, the declaration for demanding the Income Tax by the respondent is illegal and unlawful. He further submitted that the Customs authorities are only competent to collect the Income Tax by virtue of section 148(5)(6) of the Income Tax Ordinance, 2001, but they cannot go for recovery, as the recovery procedure has been provided in section 162of the Income Tax Ordinance, 2001. It is further contended by the learned counsel for the appellants that the proceedings initiated against the appellants were based on ulterior motive just to adjust the rights of the petitioner and are totally against the facts of the case. Learned counsel for the appellants further contended that no charge of misdeclaration can be levelled against the respondent as there was only incorrect declaration of quantity and value of goods. He further reiterated that no violation of section 32 of the Customs. Act, 1969, was committed as the appellant did not have the knowledge about the excess quantity of the imported goods and was evident from e-mail record produced by the appellants during the hearing before the Additional Collector. It is further contended by the learned counsel for the appellants that there is consistency in practice that the imported goods/ Glucose Meters and strips are being classified and cleared under PCT Heading 9027.8000 and there is only one occasion that subject goods/strips were classified under PCT heading 3822.0000. It is further contended by the 1G,arned counsel for the appellants that goods declaration was made on the basis of first invoice and excess quantity was not in the knowledge of the appellant till 17-7-2008, when the e-mail received from the supplier therefore, there is not mala fide on the part of appellants. He lastly submitted that both the impugned orders are illegal, unjustified, unlawful and liable to be set aside and the appeal may graciously he accepted.

9. On the other side Mr. Mujeeb-ur-Rehman Warraich, Advocate, learned counsel for the respondent's argued that the appellants mis declared the quantity, 'value and classification of the imported goods, submitted false documents having untrue statement, information, therefore, the appellants violated the provisions of section 32 of the Customs Act, 1969. Learned counsel for the respondent stated that the quantity and value of goods even in the invoice submitted along with goods declaration did not correspond with quantity and value actually found during the examination of the consignment. Learned counsel for the respondents further submitted that the value of the goods has been determined on the basis of transaction value of identical goods, taking it to consideration with the goods are same made, model origin and even same importer and as per section 25(5) of the Customs Act 1969. He further contended the strips are consumable items and not integral parts of the Glucometers and correctly classified under. PCT Heading 3822.0000 as the Strips of the Glucometers have same position as the toner in the computer. It is further contended by the learned counsel that the appellants produced the e-mail record after the cognizance of Customs authorities and this correspondence took place between the supplier and the appellants are not relevant to the respondent. He further submitted that corrigendum of the show-cause notice was rightly issued and the Additional Collector was competent to decide the show-cause notice under the Customs Act, 1969. He further argued that the Customs authorities are competent to collect and recover the Income Tax according to section 148(5)(6) of Income Tax Ordinance, 2001, therefore, the point of the appellants to the extent of Income Tax adjudication is not tenable. He lastly submitted that the impugned orders have been legally and rightly passed, therefore, the appeal of the appellant is without any force and needs to be dismissed by the honourable Tribunal.

10. I have heard the rival arguments advanced by the learned counsel for the appellants and respondents and have perused the record minutely with the assistance of the both the parties.

11. The first point which comes out from the pleading of the parties and from arguments of both the parties, whether the Assistant Collector or the Additional Collector had the authority to issue the show-cause notice or corrigendum of show-cause notice or to adjudicate upon the show-cause notice under the given power in under section 179 of the Customs Act, 1969. Before, dealing this issue, it is very important to re-produce the section 179 of the Customs Act, 1969, which clearly speaks about the power of adjudication: "[

179. Power of adjudication.

(1) subject to subsection (2), in cases involving confiscation of goods or imposition of penalty under this Act or the rules made thereunder, the jurisdiction and powers of the Officers of Customs in terms of amount of duties and other taxes involved excluding the conveyance, shall be as follows: (i) Additional Collector without limit. (ii) Deputy Collector not exceeding eight hundred thousand rupees. (iii) Assistant Collector not exceeding [three Hundred] thousand rupees."

12. Contention of the learned counsel for the appellants is that the Assistant Collector or the Additional Collector do not have any authority under section 179 of the Customs Act, 1969 for issuing the show-cause notice or issuing the corrigendum or to adjudicate thereupon to the extent of the case of appellant's, this power is only given under the law to the Deputy Collector under section 179 of the Customs Act, 1969. On the other side learned counsel for the respondents submitted that the Additional Collector was competent to adjudicate upon the show-cause notice and the corrigendum was validly issued, because unlimited power has been given to him under the law.

13. After giving due serious consideration to the facts and arguments addressed by both the sides. The competency for issuing the action and adjudication there upon has been dealt in all the aspect under section 179 of the Customs Act, 1969, wherein certain designations of Customs officials along with monetary limit has been clearly mentioned, the deviation from the given column of jurisdiction is clearly the violation of statutory provision of law. I am of the opinion that in view of the admitted position, of monetary limit the jurisdiction could only be exercised by the Customs officers according to the language of section 179 of the Customs Act, 1969, and no deviation should be made by one or any other pretext, and if the action has been taken or order has been passed without having the competency given under section 179 of the Customs Act, 1969, the same could be declared illegal, unlawful and without jurisdiction. According to the scheme of section 179 of the Customs Act, 1969, The power is given to the Deputy Collector in the case of the appellants, this is not vested with the Assistant Collector or the Additional Collector, even the corrigendum power could only be exercised by an officer who is designated with the original jurisdiction under the provision of section 179 of the Customs Act, 1969, therefore it is observed that the Additional Collector wrongly assumed the jurisdiction by issuing the show-cause notice through corrigendum and decided him by the same was illegal, unlawful and without jurisdiction. The honourable Supreme Court of Pakistan has also given its consideration in the judgment 2003 SCMR 1505 titled Khalid Saeed v. Shamim Rizwan that if method is prescribed to do a thing in particular manner, same must be followed in letter and spirit. It is further declared in the judgment 2008 PTD 1024 that maladministration is obvious when impugned order had been passed by an authority other than the Collector, and the same was contrary to law. To my view, this is the established fact that the power to hear and decide the appeal cannot be conferred, even by consent, to any officer other the one notified by the competent authority i.e. the C.B.R., which has the statutory powers to appoint the officers through gazette notifications. Equally held in PLD 1995 Karachi 587 titled as Ahida Rasheed v. Secretary, that the power vested in any authority can only be exercised by the same authority, in default whereof, the entire action would be without jurisdiction, void and ab initio and of no legal effect. In Rashid Ahmed v. The State PLD 1972 SC 271 it was held that where the mandatory condition of exercise of jurisdiction by a Court, Tribunal or Authority was not fulfilled then the entire proceedings would become illegal and all subsequent orders would be without jurisdiction. This was a case where the sanction for prosecution was not granted by the prescribed authority and it was held that all subsequent actions including cognizance by the Judge were without jurisdiction. On this score the entire action and the series of orders were annulled. Equally in Ahdul Razzak v. Muhammad Sharif PLD 1997 Lahore 1, it has been held that where power is given to do certain thing in a certain way then that thing must be done in that way or not at all and all other methods of performance not so prescribed are necessarily forbidden. Vesting of maximum monetary limit to an officer under the law does not mean that he can overlap the monetary jurisdiction of other designated officers as prescribed under the law. I am also fortified by the judgments of 2008 PTD 1024, 515, 1607 2009 PTD (Trib.) 500; PLD 1992 SC 455; PTCL 2003 CL 599; PLD 1975 Kar. 482; 2005 PTD 23; PLD 1998 SC 64; 1998 SCMR. 1404; 1999 SCMR 412 and 2008 PTD 1094.

14. Another contention of the appellants was that there is no violation of the provisions of Income Tax Ordinance attributed in the show-cause notice, therefore, the declaration of the matter by the respondent's relating to the Income Tax Ordinance, 2001, is unlawful and irrelevant, and no recovery procedure could be adopted except the procedure mentioned in the section 162 of the Income Tax Ordinance, 2001. Point of respondents was that Customs authorities are competent to collect the Income Tax and to deal the matter related to the Income Tax by virtue of section 148(5)(6) of the Income Tax Ordinance, 2001. Relevant Sections of Income Tax Ordinance, 2001 is being reproduced for ready reference as under:-- "

148. Imports.--(1) The Collector of Customs shall collect advance tax from every importer of goods on the value of the goods at the rate specified in Part II of the First Schedule. (2) This section shall not apply to-- (a) the re-importation of re-usable containers for re-export qualifying for customs-duty and sales tax exemption on temporary import under the Customs Notification No. S.R.O. 344(1)/95, dated the 25th day of April, 1995; or (b) The importation of the following petroleum products--"Motor Spirit (MS), Furnace Oil (FO), JP-1 and MTBE". (3) Where a manufacturer imports raw materials (other than edible oils) exclusively for the manufacturer's own use, the Commissioner may certify a reduction (of up to one hundred per cent) of the rate of advance tax applicable under this section if the aggregate of tax paid or collected in a tax year equals the amount of tax paid by the manufacturer in the immediately preceding year. (4) Notwithstanding the provisions of subsection (3), a person being a manufacturer who is liable to pay advance tax under section 147, imports raw materials (other than edible oils) exclusively for his, or as the case may be, its own use, the Commissioner shall upon application in writing by such person, issue an exemption certificate effective from the date on which the certificate is issued to the 30th day of June next falling."

15. Provided that where the person to whom an exemption certificate has been issued fails to pay any instalment due, the Commissioner may cancel the certificate: [(4A) Where, in the case of a person being a manufacturer importing raw materials (other than edible oils) exclusively, for his or, as the case may be its own use, the Commissioner is satisfied that the income of the person during the tax year is exempt from tax or such person is not likely to pay any tax (other than tax under section 113) on account of depreciation [ ] or brought forward loss, the Commissioner shall, upon application in writing, made by such person, issue the person certificate of exemption from the tax collectable under section 148]. (5) Advance tax shall be collected in the same manner and at the same time as the customs-duty payable in respect of the import or, if the goods are exempt from customs-duty, at the time customs duty would be payable if the goods were dutiable. (6) The provisions of the Customs Act, 1969 (IV of 1969), in sofar as relevant, shall apply to the collection of tax under this section." "Section

162. Recovery of tax from the person from whom tax was not collected or deducted.

(1) Where a person fails to collect tax as required under Division II of this part-4 [or Chapter XII] or deduct tax from a payment as required under Division III of this part-5 [or Chapter XII] the Commissioner may pass an order to that effect and] recover the amount not collected or deducted from the person from whom the tax should have been collected or to whom the payment was made. (2) The recovery of tax under subsection (1) does not absolve the person who failed to deduct tax as required under Division III of this Part 7 [or Chapter X1I] from any other legal action in relation to the failure, or from a charge of additional tax or the disallowance of a deduction for the expense to which the failure relates, as provided for under this Ordinance."

16. It is also very important to get the guidance from the black's Law Dictionary, wherein the terms of collection of recovery have been defined as well, "Recovery

1. The re-gaining or restoration of something lost or taken away.

2. The obtainment of a right to something (esp. damages) by judgment or decree.

3. An amount awarded in or collected from a judgment or decree."

17. Having carefully considered the provisions of sections 148(5)(6) and 162(1) of the Income Tax Ordinance, 2001 and recovery definition as described by the Black's Law Dictionary, it is very much clear that the customs officials merely working under section 148 of the Income Tax Ordinance, 2001, as Collector of tax as they have been given only powers to collect the amount by virtue of legislation made by the legislature under section 148 of the Income Tax Ordinance, 2001. Section 148 of the Income Tax Ordinance, 2001, also does have the corresponding section, which is section 162, wherein the Commissioner of Income Tax has the authority to recover the amount from a person to whom the amount of tax was due and was not collected by the collecting officer. Meaning thereby only the Commissioner of Income Tax can exercise his powers under section 162 of the Income Tax Ordinance, 2001, on account of default or non-payment of tax or if there is a lapse on the part of collecting officer, it could not be said that the collecting officer can himself automatically presume the jurisdiction of recovery of amount of Income Tax on the basis of assumptions or being the officer of Customs or as a collecting officer under section 148 of the Income Tax Ordinance, 2001, until the specific powers have been given to him under the law. Hence is observed that the Collector of Customs does not have the authority to recover the Income Tax later on, but he is only getting the power of collection of tax under section 148 of the Income Tax Ordinance, 2001, therefore mere collection does not mean that he can go for the recovery at the later stage, if the default is made by the person to whom the amount of Income Tax is due, the best possibility of recovery according to scheme of law is that after realizing the amount of Income Tax in form of audit or investigation, the collecting officer can refer the matter to the Commissioner of Income Tax for taking the action of recovery under section 162 of the Income Tax Ordinance, 2001. This is also a settled principle of law that a person cannot be tried on the same offence by two forums, he could he tried only where the clear cut provisions of law are available, therefore, in my opinion Section 148 of the Income Tax Ordinance, 2001, is only giving the power of collection to the Customs Department and the power of recovery in case of default under section 148 of the Income Tax Ordinance, 2001, vests with Income Tax Department and the Commissioner of Income Tax as prescribed can go for recovery.

18. The section 162(1) of the Income Tax Ordinance, 2001 is very much available and dealt with, in case of default under section 148 of the Income Tax Ordinance, 2001. To my opinion, the appropriate Income Tax officers do have the power to issue any demand for the alleged short recovery under the Income Tax Ordinance, 2001, which having contained special provisions for all short recoveries, including, under section 148 of the Income Tax Ordinance, 2001, where the Income Tax is short collected, short levied, or not so collected, either on account of misdeclaration of the importer, or, on account of error, inadvertence or mistake. The power to collect the advance Income Tax under section 148(5) of the Income Tax Ordinance, 2001 cannot have the effect of converting income tax into customs duty. Merely providing the manner of collection of tax as an advance tax under any tax enactment, the nature of the tax could not be changed, hence, the short recovery of any tax collectable under section 148(5)(6) of the Income Tax Ordinance, 2001, to a person in form of short collected, short levied, or not so collected; either on account of misdeclaration of the importer, or, on account or error, or inadvertence or under mistake, vests with the Commissioner of Income Tax alone under section 162(1) of the Income Tax Ordinance, 2001. Therefore it is of my considered opinion the Collector of Customs does not have the authority to go for the recovery, it is only the Commissioner of Income Tax who can start the proceedings of recovery against the person in case of default on short collected, short levied, or not so collected, either on account of mis declaration of the importer, or, on account or error, or inadvertence or under mistake, so the adjudication by the respondents to the point of recovery of Income Tax against the appellants is not legal, justifiable and not tenable in the eye of law and the exercising of jurisdiction on this point by the respondents and also the adoption of recovery procedure by them are hereby set aside. I am relying upon-the judgments of 1994 CLC 1612, 1990 PTD 29; 2005 PTD 23 and 2007 PTD 250 titled as Collector of Sales Tax and Federal Excise v. Messrs Qasim International Container Terminal, Pakistan Limited, the relevant para. of the judgment is as follow:-- "That there is clear distinction between the charging provisions of statute and the machinery part thereof. It is axiomatic that mode of manner of recovery does not alter the nature of a tax, nor a tax can be introduced or imposed by implication." It has been held in another judgment of honourable Lahore High Court, Lahore 2008 PTD 1973 titled as Xen Shahmir Division v. Collector Sales Tax (Appeals), Collectorate of Customs, Federal Excise and Sales Tax, Faisalabad,-- "that fiscal law is to be applied with full authority and in its natural meanings--One has to look merely at what is clearly said and there is no room for any intendment--Neither there is equity about a tax nor presumption as to tax--Nothing is to be read in, nothing is to be implied--One can only look fairly at the language used."

19. The availability of the justified reasons for imposition of Customs Duty on the appellants, were also not available with the respondents, which has also been noted down by the Collector of Appeals vide his order dated 30-9-2008, the relevant para is as follows:-- "From perusal of record of the case, it has been observed that the appellants is a regular importer of glucose monitoring system. He has declared the value of these items in the past ranging from US$.2 to US$ 3, whereas the strips have been declared in various GD ranging from US $.0.33 to 0.59 per packet. The glucose monitoring system has been assessed by the Department @ US $ 2.00 to US $ 5.00 and the strips ranging from US $ 0.33 to US $ 0.76. It is astonishing to note that the values are assessed on the sweet will of the Customs staff, there is no consistency for determination of the value and the Customs staff has not made any efforts to consult the one customs system for valuation purposes despite of the fact that the government has installed the system, spending a huge amount of expenditure."

20. In view of the foregoing reasons, the appeal of appellants is allowed, and it is declared that the respondent's wrongly assumed the jurisdiction on the show-cause notice and over the corrigendum, therefore, their exercise of jurisdiction was not legal, justifiable and also not within the four corners of law. It is further declared that the respondents action/procedure for recovery to recover the amount of Income Tax from the appellant, is also not legal, void ab initio, without any legal jurisdiction/authority and the same is also against the mandatory provisions of law. Therefore, I hold that the respondents wrongly assumed the jurisdiction, transgressed their authority, acted against the mandatory provisions of law, hence the impugned orders passed by the respondents are declared null and void and are hereby set aside, and the show-cause notice and the corrigendum issued to the appellants are hereby vacated. Appeal is disposed of accordingly with no order as to costs.

21. Announced. C.M.A./70/Tax(Trib.) Appeal accepted.