1987 PLP 630 (SCMR)

SAAD SAOOD JAN, J.‑‑This appeal by special leave is directed against the judgment and order dated 7‑4‑1976 of the Lahore High Court whereby proceedings initiated against the respondent under section 32 of the Customs Act for the refund of the rebate allowed to it were declared to be without lawful authority and of no legal effect.

2. The respondent was engaged in the business of manufacture and export of sheep casings. It made a representation to the Central Board of Revenue stating that for exporting the sheep casings it had to treat them with Tatric Acid and borax and for that purpose it had to import these chemicals. Together with the representation it filed the formula which it was using in the process of treatment. It prayed that it should be granted rebate in custom duties and the sales‑tax which it was required to pay in importing the two chemicals. The Central Board of Revenue granted the request and by a notification dated 5‑4‑1971 allowed repaying of the custom duties paid on the import of the two chemicals to the respondent. In pursuance to this notification the respondent received the refund of the custom duties and the sale‑tax which it had already paid at the time of importing the two chemicals. Subsequently, the Central Board of Revenue received information that the two chemicals were neither required nor actually used by the respondent in the treatment of the sheep casings. Thereupon by a notification dated 29‑4‑1972 it rescinded the notification of 5‑4‑1971. Later, on 18‑9‑1973 the Assistant Collector of Customs issued two notices under section 32(2) of the Customs Act to the respondent to show cause why the amount of the customs duty and the sale‑tax which had been refunded under the notification of 5‑4‑1971 be not recovered from it.

3. Instead of appearing before the Assistant Collector in response to the show‑cause notices, the respondent challenged the legality of the notices in writ jurisdiction before the High Court. A learned Single Judge who heard the writ petition took the view that section 32 of the Customs Act under which the impugned notices had been issued to the respondent was not applicable in terms as it was attracted only if an erroneous declaration had been made before an officer of the customs; in this case the alleged erroneous declaration was made before the Central Board of Revenue which could not be regarded as an officer of the Customs. He also held that under section 21 of the Act the Central Board of Revenue had plenary powers to grant or not to grant rebate; in the exercise of these powers the Board did not require any declaration or information from any source for it was a matter entirely within the discretion of the Board to allow rebate without any declaration or refuse the same in spite of such a declaration; in the circumstances the question of refund of the rebate which had been allowed in exercise of the said discretionary power did not arise. Accordingly, he accepted the writ petition and declared the impugned notices as without any lawful authority and of no legal effect.

4. It is difficult to support the grounds upon which the learned Single Judge has based his order. As stated earlier, the notices have been issued to the respondent under section 32 of the Customs Act. It reads as follows:‑ (1) If any person in connection with any matter of customs‑‑ (a) makes or signs or causes to be made or signed, or delivers on causes to be delivered to an officer of the customs any declaration, notice, certificate or other document 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 such document or statement is found to be untrue in nature and in any material particular, he shall be guilty of an offence under this section. (2) Where, by reason of any such document or statement as aforesaid or by reason of some collusion any duty or charge has not been levied or has been short levied or has been erroneously refunded, the person liable to pay any amount on that account shall be served with the notice within three years of the relevant date, requiring him to show cause why he should not pay the amount specified in the notice ..........................................

5. The notification of 5‑4‑1971 in pursuance to which the respondent obtained refund of the custom duty laid down a number of conditions Thus, it stated that repayment was to be allowed on the goods imported and used in the production or manufacture of goods. Further, under the notification the respondent was required to file a declaration on the reverse of the original shipping bill or other export documents to the effect that it was claiming repayment of the custom duty paid on the chemicals used in the production of the sheep casing. Thus, it could claim repayment of custom duties only in respect of as much of the chemicals as it had used in the treatment of the sheep casings. Therefore, if it had not used the imported chemicals in the treatment of the sheep casings it was not entitled to any rebate or repayment of the customs duties despite the notification. The learned Single Judge was not right in holding that the respondent had not made any untrue declaration before any officer of the Customs. As already pointed out that for the purpose of claiming repayment the respondent was required to file a declaration on the reverse of the shipping bill or other export documents that it had used the chemicals imported by it in treating the goods that were being exported. It is not in dispute that it did make such a declaration before the Customs Collectorate. If it had not actually used the two chemicals in treating the sheep casings and had yet made the said declaration for claiming repayment in terms of the notification, it was clearly guilty of making a false declaration before an officer of the customs. Its case would, therefore, be covered by the provision of section 32(2) of the Customs Act. In the circumstances the proceedings initiated against it for the recovery the repayment received on the basis of an incorrect declaration did not suffer from any legal infirmity. We are therefore, unable to support the order of) the learned Single Judge in the High Court.

6. It is stated by the learned Attorney‑General that during the proceedings initiated against it the respondent will be given full opportunity to show that it had in fact used the two chemicals in the treatment of the sheep casings and for that purpose it will be permitted to examine the documents which had led the Assistant Collector to believe that the chemicals were neither required nor actually used for treatment of the sheep casings. This is a fair enough offer and the respondent should have no grievance.

7. For the reasons stated above, we accept this appeal and recall the declaration made by the learned Single Judge of the High Court. There will be no order as to costs. M.I. /C‑2/S Appeal accepted.