2023 PLP (Trib (PTD)

ABDUL BASIT CHAUDHRY, MEMBER TECHNICAL-I.

By this judgment we intend to dispose of the instant appeal filed by appellant department, against Order-in-Original No.36/2021-22 dated 04.08.2021 passed by Collector of Customs (Adjudication-I), Karachi.

2. Facts of the case as reported by MCC-Port Muhammad Bin Qasim, Karachi vide Contravention Report with their letter No. Group-VI-440/2020/PQ dated 13.11.2020 are that M/s. Lucky Commodities (Pvt.) Limited, Karachi (NTN: 4132355) imported a consignment declared to contain "Bituminous Coal in Bulk" vide IGM No. 664/2020 dated 28.08.2020 Index No.

2. The importer filed Home Consumption Goods Declaration bearing Machine No. PQIB-HC-3111 dated 26.08.2020 and declaring the quantity of Item No. 2 as 40,000 Kgs. The goods imported in bulk have been assessed on their declared weight and quantity. The actual weight of the bulk items is on at the time of delivery of the goods. When gate staff weighed the subject goods, it was found that quantity of the subject goods as 1140630 Kgs as against declared quantity of 40000 Kgs. The 1100630 Kgs found excess which is 30.6% excess. From the weighment it revealed that the importer has willfully and deliberately mis-declared the quantity to evade duty/taxes. Had this willful and deliberate offence gone undetected and goods have been released in garb of declared quantity, the government would have suffered a loss of revenue mounting to Rs. 3,214,367/-. The value of offending goods is calculated to be Rs. 11,278,144/-. This act of the importer constitutes an offence within the meanings of Sections 32(1) & (2), 79 and 209 of the Customs Act, 1969 read with Sections 3 and 6 of the Sales Tax Act, 1990 further read with Section 148 of the Income Tax Ordinance, 2001. The offence is punishable under Clauses (1), (14) and 45 of section 156(1) of Customs Act, 1969, read with SRO 499(I)/2009 dated 13.06.2009 and sections 33 and 34 of the Sales Tax Act, 1990 further read with Section 148 of the Income Tax Ordinance, 2001.

3. The Collector of Customs (Adjudication) passed the impugned Order-in-Original No.36/2021-22 dated 04.08.2021. Operative part of the impugned Order-in-Original is reproduced as under:- "I have gone through the record of the case and the arguments advanced by the Departmental Representatives (D/R) and the learned Authorized Representatives (A/R) of the respondent importers in writing and orally, intermittently on different dates of hearings. Briefly facts are that the goods (Bituminous Coal) were imported in "Bulk", via Vessel "JIA YUE", and as per IGM (No. 664/2020 dated 28-08-2020) the manifested and imported quantity was 59,629 MT, which belong to fourteen (14) different importers, including the respondents, details of which are in para. 7 of the respondent importers' "ADDITIONAL ARGUMENTS", submitted on 04-02-2021, the same are incorporated in paragraph 8 of this order. As per the declaration provided by Master of the Vessel through IGM, the respondent importer (Lucky Commodities)'s manifested and declared quantity was 3,600 MT out of 59,629 M.T and the rest of the quantity was owned by other thirteen (13) importers. It has also been brought into notice of the adjudication authority that on arrival of vessel, the "Bulk Cargo" was also inspected by the surveyors, i.e. (1) M/s. Atlantic Surveyors (Pvt.) Ltd., (ii) M/s. United Marine Surveyors (Pvt.) Ltd. and (iii) M/s. Prof Tech Marine, in the presence of Master of the Vessel. The Joint Drought Survey Report, reported that the imported weight is 59,629.498 M.T instead of 59,629, M.T, which means 498 kgs were found in excess. Which is small negligible quantity of 0.0005% only. However, at the end after delivering the manifested and declared quantity to all fourteen (14) importers, there was still balance quantity of 1100.63 M.T, which is about 1.85% in excess to the total manifested quantity. At that point of time further delivery of the balance Bulk Cargo was stopped. However, at that time the Clearing Agent, namely M/ s. Ghous Bukhsh Shipping Services (CHAL No. 1669), requested to the Principal Appraiser for delivery of the balance quantity to the respondent importer (Index No. 2) on payment of the leviable duty and taxes, vide letter dated 17-09-2020. The noting on face of the clearing agent's letter shows that the P.A (Bulk) has marked the letter to the A.O with the remarks of "As per Law". On next day (i.e. dated 18-09- 2020) the A.O has re-submitted the letter to the P.A with the note that "may be allow subject to payment and duties." Thereafter the P.A has marked the C/A's letter to A.C (Bulk) with the remarks "If approved may be marked to "S.P.O" and the A.C has return the letter to P.A (Bulk)/ S.P.0 with the note "To be attended". Thereafter, the balance (excess) quantity of 1100.63 M.T was allowed release to the customs agent of the respondent importer. However, no message for the additional duty/taxes was conveyed to them and instead the show-cause notice dated 03-12-2020 was issued, which shows that an amount of Rs.3,214,367/- was involved as duties and taxes on the balance/ excess quantity. As there was no intimation through WeBOC message for additional duty, therefore, the clearing agent, vide letter dated 02-01-2021, has submitted the amount manually through Pay Order No. 14812402 dated 02-01-2021, amounting to Rs.3,214,367/-, issued by Habib Metropolitan Bank Ltd, Main Branch, Karachi. Thereafter, number of hearings were conducted by my predecessor and finally by the undersigned on 08-06-2021. Considering the pleadings of the AR and D.R, the facts and circumstances of the case, it seems that there was a consistent practice to allow the excess quantity of "Bulk Cargo", to any one of the importer through the clearing agent. This position has never been controverted by the DR except saying that since difference between the quantity declared by the importer M/s. Lucky Commodities, and the excess balance quantity is more than 5% (precisely 30.60%). As such the contravention report was prepared as per SRO 499(I)/2009 dated 13-06-2009 for penal action on the charge of mis-declaration. The D.R has, however, admitted that if the balance excess quantity checked with the total Bulk Cargo the difference is less than 5% (precisely 1.85%). Keeping in view the Bulk Cargo's import and clearance procedure in vogue, it is clear that it cannot be scrutinized at the same para-meters, as of conventional containerized imports, where Master of Vessel declares each and every importers' consignment and its quantity separately whereas in the Bulk Cargo's imports, the whole cargo, either it belongs to two importers or twenty different importers, stacked in one bulk cargo vessel. Therefore, in the Bulk Cargo, excess quantity found cannot be attributed towards a single importer unless there is a substantial evidence of connivance of supplier with any single importer. In the instant case the DR has failed to submit any such incriminating evidence to prove the charge on the respondent importers. Intact the doctrine of presence of mensrea of defrauding is missing in this case, which is essential for taking penal action against an importer. For the sake of the arguments if there was deliberate mis-declaration on of the respondent importer then the balance excess goods were liable for confiscation and cannot be allowed release whereas the fact is that as per practice in vogue the goods were allowed release even without advance payment of the duty and taxes, which clearly means that, it was not a case of penal action against an importer, particularly in a Bulk Cargo's import and its clearance scenario. As the difference between the total landed quantity (weight) and the ascertained quantity (weight) in the end was is admittedly less than 5%. Besides, the excess quantity was released with the prior permission of the Collectorate's designated officers. Therefore, I do not find any mensrea of defrauding or deliberate attempt of evasion through mis-declaration by the respondent importers. As the delivery has already been given and the differential amount of duty/ taxes have been paid, thus, it is not a case of penal action in terms of Section 156(1)(14) of the Act, read with SRO 499(I)/2009 dt: 13-06-2009. However, considering the fact that the respondent clearing agent and importer have delayed the payment despite the fact that the permission was granted subject to payment of duties and taxes, leviable on the excess quantity, the importers are, therefore, directed to make the payment of surcharge, as per Section 83(2) of the Customs Act, 1969, for the period from the date of delivery to the date of submissions of the pay order to Customs. The custom staff, clearing agents and the importers are wanted to be careful in future in such a situation and permission for excess quantity delivery shall only be allowed after getting prior approval from the Collector of Customs and payment of duties and taxes before delivery of the goods. During the adjudication proceedings it has been gathered that there is no prescribed procedure for discharge and clearance of the Bulk Cargo. During the course of adjudication proceeding of the subject case it has also been gathered that the actual ordered quantity of the Bulk Cargo is based on the declaration of the Master of the Vessel, through Import General Manifest, in terms of Section 44 read with Section 45 of the Customs Act, 1969. The Master of the Vessel through their local shipping agent also get the goods (Bulk Cargo) Inspected and surveyed, without any association of the custom staff. The Joint Draught Survey Report and it particulars are prepared for their own consumption and their lawful declaration of imported cargo in the IGM. The provisions of Sections 47 and 156(1)(25) of the Act are precisely for the Bulk Cargo. Keeping in view the Bulk Cargo's import and peculiar nature of its clearance, I am of the view that if in the end the excess quantity (weight) is less than 5% of the total manifested Bulk Cargo then the excess quantity should have been distributed amongst all the importers proportionate to their ordered /declared quantity and not to a single importer. The penal action may have been taken only in case where the excess quantity is more than 5% of total landed/manifested quantity and in that case the show-cause notice should be issued to the shipping agent along with all the importers to explain their position. The allegation levelled against the respondent importer is not proved, hence, the show-cause notice is vacated and case is disposed of in above terms. The aforesaid observations are advisory in nature and the Collectorate may adopt the procedure as per their satisfaction to safe guard the revenue. However, it is proposed a procedure may be prescribed with the consultation of the other Collectorates, Directorate of Automation and, if require, with the Board. The Show-Cause Notice is disposed of in above terms.

4. Being aggrieved with this order, this appeal has been filed, inter alia, on the grounds given in the memo of appeal and placed on record. Respondent also filed parawise comments, which are taken on record.

5. Heard both the sides and examined the case record. The appellant in the instant appeal has contested that as the excess weight was more than thirty (30) percent, therefore, under the law, Redemption Fine is leviable on the respondent, whereas the respondent pleaded that the excess quantity removed by him was less than five (05) percent of the total manifested weight of cargo in the said vessel, therefore, no Redemption Fine is leviable under the law. The brief facts of the case are that manifested and declared weight of the total cargo in the vessel was 59,629 M.Ton belonging to fourteen (14) importers under fourteen (14) Index Numbers. As per the Joint Drought Survey Report conducted by (i). M/s. Atlantic Surveyors (Pvt.) Ltd. (ii) M/s. United Marine Surveyors (Pvt.) Ltd. and (iii) M/s. Prof Tech Marine, mentioned at para. 9 of the impugned Order-in-Original, the excess weight was 0.498 M.T, which in percentage terms is 0.0005% of the total imported bulk cargo. This clearly shows that the quantity of 11,00,630kgs removed by the respondent was much more than the ascertained excess quantity in the subject vessel as per the Survey Report. The contention of the appellant that the excess of 1100 M.ton was found at the time of gate out of the consignments has not been found to be tenable because it defeats the very purpose of third party surveys and the authenticity of such Survey Reports that are relied upon by the department in conjunction with the manifested weight in Import General Manifest (IGM) to determine actual total weight in a vessel at the port of discharge. The relevant record of delivery also shows that the manifested quantity was cleared in the year 2020 and excess quantity was removed after a considerable period of time.

6. We are of the considered view that excess weight against any specific index can be allowed release to that importer with or without Redemption Fine as the case may be, but here that is not the case, rather the excess quantity allowed by the department to the respondent against one specific index is more than twenty-two (22) times of the quantity found excess in the whole vessel having fourteen Index numbers. It is not understandable as to how and under what provisions of law the respondent importer was considered by the department as the "owner" of the excess goods available at the port. The respondent's contention that he claimed his index in the last of the fourteen (14) indices so he claimed the excess goods tuned out to be false on production of relevant record by the appellant that confirmed that the respondent was second in claiming his index and removed his manifested quantity, but he claimed and removed the excess goods in the last with the permission of the department. The respondent also could not produce any import documents etc, to prove his ownership or claim on the goods removed by him. We are of the considered view that the importer's request for release of the excess quantity, other than the manifested against his name through respective Index Number cannot be allowed merely on payment of duties/taxes. The appellant as well as respondent failed to mention any provision of law under which such permission can be granted. In our view, such goods become Government property and are liable to be auctioned through open bid. We are constrained to hold that the departmental permission given to the respondent to remove such goods is illegal and void ab initio.

7. It is also observed that it is a long standing practice of the department to auction excess left overs of such goods under section 82 of the Customs Act, 1969 when a sizeable quantity is piled up. We are constrained to observe that deciding on the appeal that whether it is a case of mis-declaration of quantity, and Redemption Fine is leviable on excess weight or not can only be determined if the goods in question bonafidely belong to the respondent and were excess against his Index number in the subject vessel. Furthermore, it will lend legitimacy to an unlawful approval of the department and consequent removal of impugned goods by the respondent. We do not agree with the Adjudicating Authority as mentioned and accepted in the impugned Order-in-Original that it is a consistent practice to allow the excess quantity of 'Bulk Cargo' to any one of the importers through clearing agent. This practice, if in vogue, is arbitrarily favourable to any one importer amongst many. Equally important is that such disposal does not include the cost of goods as the same are released on payment of duty/taxes alone. Hence, we set aside the illegal allowing of 1100.630 M.Ton of coal to the respondent on duty/taxes only by the department being illegal, void ab initio and detrimental to the interest of the state and the exchequer. The Show-Cause Notice is accordingly vacated with the direction to the appellant department to re-examine the issue of allowing a quantity of 1100.630 M.Ton lying at the port to the respondent arbitrarily and without legal authority and take further legal action as warranted under the law.

8. The Chief Collector (Appraisement), Customs House, Karachi is directed to probe the matter in the light of the above findings and strictly in accordance with the law to ensure no loss is caused to the exchequer.

9. The Registrar Bench-I is directed to endorse a copy of this order to Member (Customs-Operations) FBR, Islamabad so that if any practice of disposal of excess/left over/unclaimed 'Bulk Cargo' at the ports is not in harmony with the legal provisions of the Customs Act, 1969, the same may be discontinued.

10. The instant appeal is disposed off in above terms.

11. Judgment passed and announced accordingly. SA/26/Tax (Trib) Order accordingly.