2007 PLP (Trib (PTD)

ZAFAR IQBAL (MEMBER TECHNICAL).

This appeal challenges the vires of the order, dated 3-3-2004 passed by the Additional Collector of Customs Appraisement, Karachi.

2. The facts of the case are that the appellant a private limited company imported raw materials for the manufacture of their finished product. It is the case of the appellant that service charges were levied by virtue of a notification, dated 22-10-1996 issued under section 18-B of the Customs Act, 1969 which required the levy of such service charges as are equivalent to 2% ad valorem on all such goods as are specified in the schedule of the Act. The facts of import and a refund being due have not been disputed.

3. It has already been held in the case of Collector of Customs and others v. Sheikh Spinning Mills (1999 SCMR 1402) and followed by orders in numerous cases by the Division Bench of Honourable Sindh High Court that the said 2% service charges are ultra vires the Constitution. It has already been held that the said 2% service charges charged by the Custom Authorities on the basis of notification issued by defendant No.1 and acted upon by the defendant No.2 and 3, the said defendants are liable to return such service charges with mark-up as is provided by law, the amount that they have unlawfully recovered from the plaintiff. The only impediment in the recovery could be that, if payment of such service charges has not been made: However, the respondent refers to a Circular of the Central Board of Revenue bearing No.9(20)/99-CB, dated 13-12-1999 in which it is stated by some Joint Secretary, "that only those importers are entitled to payment of refund who have not passed the incidence of payment of 2% PSI service charges on to the public." This notification seems to be a method to retain and refuse payment which are due and payable to the persons paying the same. It is a well-settled principle of law that what cannot be done directly, cannot be done indirectly. The department cannot directly say that they will refuse to make payment of an unlawfully recovered amount, but by causing hindrances shall cause, if not refuse to repay delay in payment.

4. In view of these facts, this Tribunal vide its order, dated 22-5-2003 demanded the case back to the Adjudication Officer for disposing of the refund application in accordance with law.

5. The respondent vide its order, dated 24-3-2004 has summarily rejected the claim of the appellant by stating that:-- "...I have thoroughly examined the records, the letter of the CA and 'the examination of this letter as recorded above. The matter boils down to the following: (i) There are no original B/E documents available on record but deposit of the 2% service charge can be verified from Custom House computer record, though refund w/o original documents would attract an audit objection. (ii) The claim is based solely on a letter from the CA. (iii) The CA letter is a comfort letter, based only on the B/E record given to them by the applicant company and invoices shown to them. (iv) CA has not, nor it is their mandate to do so, examined the costing exercise, or traced how the added expense were absorbed in the company books if it was not passed on. (v) The CA has taken a simplistic view that invoices do not show 2% service charge (perhaps as sales tax is shown) therefore not passed on. Their and other CA opinion is based on a simple interpretation of passed on. (vi) The applicant-company agreed finally to show the documents which would trace the absorption of the 2% service charges but after some time has shown its inability to produce the documents, as they do not keep record for more than five years. In view of the above, I find that the Chartered Accountants certificate is inadequate and is not based on a thorough study of the records of the company for the specific aim of determining whether or not the incidence of 2% service charge was passed on or not. The crux of the matter in the subject claims, as discussed above, is that neither original bills of entry nor other record is available, though the fact of payment of 2% surcharge into Government Treasury in the first place, as well the non-payment of claims previously can be determined from computer records of Custom House. The claimant is seeking refund solely on the letter of the Chartered Accountant. On the other hand the Chartered Accountant has confirmed that they do not audit setting of prices as a management function and the business decisions as it is not part of statutory audit. They had only done statutory audit and not of pricing policy and the letter issued by them is basically a "comfort letter." After this, the claimant promised to provide the documents to substantiate their claim, but at the end of January, 2004 they showed their inability to do so, claiming to have destroyed the record. In view of above I am convinced that the applied for refund is inadmissible and the subject claims amounting of Rs.27,259,904 are hereby rejected...."

6. The said order is now subject-matter of present appeal. The learned counsel appearing on behalf of the appellant contended that his claim has been rejected on assumed grounds and there was nexus in between the facts assumed by the respondent and evidence available on record. The appellant further states all the original documents were supplied to the Customs but their claim application was lost or destroyed hence a duplicate set was provided by the appellant. Since the documents were lost while in possession of respondent's functionaries, therefore, the appellant can't be blamed for Court's mistake. He further submitted that a number of other claims, have already been allowed by the Customs and his client is being discriminated. He accordingly pleaded for the vacation of the impugned order.

7. The respondent's representative, on the other hand, defended their action for the reasons given in the impugned order.

8. We have heard the rival parties at length and the case record has been examined. The learned Adjudication Officer has basically given two reasons for the rejection of claim. First being not availability of certain records for his satisfaction which was in possession of the respondent/department. It is basic principle of law that for the error of the Court no party can be made to suffer and the respondent was bound to follow the requirements laid down in the law of evidence where in absence of original record photocopies are admissible as a piece of evidence. In these circumstances, to us the finding given by the learned respondent is not based on sound legal reasoning and is not warranted by law.

9. As regards the issue of admissibility or inadmissibility of Chartered Accountant's certificate the same is misconceived. As Adjudication Officer he can go for fact-finding inquiry and can record evidences. If so was needed he could have done that. But unfortunately no such effort was ever made. In these circumstances, rejection of claim by assumed grounds is not based on sound legal footings.

10. The departmental representative conceded that a number of such claims including the claims of Messrs Pak Suzuki Motor Co. Ltd., have been allowed by the respondent's organization. The said claims involved the same issue and all the documents present in this case are the same as presented in other claims. To a query that why a deviation and discrimination is being made in this case, the departmental representative had no answer. We would like to observe that it is a very sad state of affair where a taxpayer is being victimized for no rhyme or reason.

11. In these circumstances, we do not find any merit in the impugned order which has been passed in flagrant violation of law. The same is set aside and the respondent is directed to decide the appellant's claim in accordance with law. C.M.A./108/Tax (Trib.) Order accordingly.