2010 PLP (Trib (PTD)

MUHAMMAD ARIF MOTON (MEMBER JUDICIAL-II).

This order will dispose of Customs Appeal No. K-573 of 2009 filed by the appellant against Order-in-Appeal No. 1976 of 2009, dated 5-9-2009 passed by the Collector of Customs (Appeals), Karachi.

2. Brief facts of the case as reported are that the appellant electronically filed goods declaration vide CRN-I-HC-915593-210209 declared to contain (i) used monitor 14", 937 pcs (ii) used monitor 15", 335 pcs--(iii) used monitor 17" 243 pcs (iv) TV 42" I pc (v) new car CD player, 1 pc at total invoice value of US$. 20,293.00. The importer sought clearance under section 79(1) of the Customs Act, 1969 by determining the liability of the duty and taxes at their own. In order to check as to whether the appellant has correctly paid the legitimate amount of duties and taxes under reference GD was selected for scrutiny in terms of section 80 of the Customs Act, 1969. Scrutiny of the Goods Declaration in the light of examination report revealed that the importer had misdeclared the description by importing excess quantity, undeclared and banned items. Moreover the item at serial No.5 of the GD arc not importable in used condition vide serial No.9 of Appendix-C of the IPO 2008-2009.

3. The aforesaid facts. proved that the appellant deliberately mis declared the description, classification, quantity and value besides importing excess quantity, undeclared banned item in order to suppress the value, wilfully and with mala fide intention and attempted to defraud the 'Government from its legitimate revenue amounting to Rs. 207,

404. Considering the available data of similar kind of goods in terms of section 25 of the Customs Act, 1969 and Rule 107(a) of the Customs Rules, 2001, the determined value of the offending goods has been worked out to Rs. 564 648.00. Resultant show-cause notice was issued and the respondent No. 1 while disagreeing with the reply of the show-cause notice passed order-in-original in the following words:-- "I have examined the case record. The examination report is reproduced below for ease of reference: "(MISDECLARTION, DESCRIPTION FOUND IN SIZE) EXAMINED THE GOODS IN THE LIGHT OF GD. DESCRIPTION (1) USED MONITOR 14" ASSORTED BRAND-PHIPLS, DEL, NEC, VEARDES, IBM,HP, ACCER, VIEW SONIC ETC.. I/O MALAYSIA, CHINA, KOREA 86 USA QUANTITY 937 PCS (2) USED MONITOR IN ASSORTED BRAND-HP, ACCER, VIEW SONIC, DAT AMINI, PHIPLS ETC I/O CHINA, MALAYSIA,, USA, THAILAND-578 PCS (3) NEW PANASONIC LCD COLOUR TV 42 INCHES MODEL NO.-TH42PV8H, PEDISTIAL STAND INCLUDED I/O SINGAPORE QUANTITY-1 PC 940 USED SONY COMPACT DISC CHANGER MODEL NO.-CDX36, DC 12V QUATITY-1 PC (5) USED SONY CASETTE CAR STERO MODEL NO. - XR-M-500R, QUANTITY-1 PC CHECK WEIGHT 100% FOUND-19505 KGS VIDE KICT SLIP NO 110437 DID 24-2-2009 IMAGES ATTACHED". From the above report it is clear that the importer declared 335 pcs of 15" size monitors, which were actually found 17" monitor. So this is a case of misdeclaration of sizes, rather than undeclaration of items. Anyway difference has no bearing on fate of this case. In view of the foregoing the charges levelled in the show-cause notice are established. I therefore, order for outright confiscation of used Sony compact disc changer and Sony Cassette Stereo as the same are not importable as per Import Policy Order, furthermore, I order confiscation of the rest of the offending goods under section 156 of the Customs Act, 1969. However, an option is being given to the importer in lieu of confiscation under section 181 of the Customs Act, 1969, read with S.R.O. 487(1)/2007 dated 9-6-2007 to redeem the offending goods (except the outrightly confiscated item) after payment of redemption fine equal to 50% of the value of the offending goods, in addition to leviable duty and taxes on the ascertained description and quantity of the offending goods. A personal penalty of Rs.50,000.00 is also being imposed on the importer".

4. The order was challenged before Collector (Appeals), who also vide his order dated 5-9-2009 rejected the appeal by observing that: "I have examined record and given due consideration to the arguments made before me. Admittedly, the size of 335 monitors was found to be 17" as against declared 15". The appellants had paid the duty/taxes under the self assessment scheme of PaCCS on the basis of their (mis)declaration which means that had the consignment not been selected for physical examination and thorough scrutiny under the system managed selectively criterion, the appellants would have got away with aforesaid misdeclaration and caused huge loss of revenue to the Exchequer. Thus intention to evade revenue and commit fraud by way of misdeclaring description/specifications of the goods is clear from the facts of the case. In view of the factual position given above, the argument's advanced by the appellants' consultant hold no weight. The penal action taken against them is also in consonance with the parameters prescribed under notification S.R.O.487(I)/2007 dated 9-6-2007 and the gravity of offence committed in this case. Therefore, I hold that the impugned order is correct in law and on facts and there is no reason to interfere with the same. The appeal is rejected accordingly."

5. The learned Counsel appearing for the appellant put forth the following contentions: (i) That the allegation of excess quantity is based on misconceived and erroneous transmitted examination report, which instead of stating that 937 pieces of 14", 335 pcs of 15" and 243 pcs of 17" used monitors were found, transmitted that 937 pcs of 14" and 578 pcs of 17" (without any indication of 15" monitors). The said fact stood verified from the 1 and 1 Para of the show-cause-notice which clearly states 335 pcs of monitor of 15" and the said quantity is being shown in the schedule referred above to the contents of show-cause notice. (ii) That in case, the quantity was in excess the examiner should have stated in clear terms in examination report that 335 pcs of 17" monitor were found in excess of the declared 335 pcs of 15" monitors or 17" monitors were found as against declared 15" monitors. No such allegations are levelled in the show-cause notice, confirming that not a single piece was excess, rather the examiner failed to transmit the quantity of declared 15" monitors and in fact he bracketed 15" and 17" monitors and transmitted the quantity 578 pcs without any segregation. Meaning thereby, that the quantity remained the same as per declaration i.e. 1515 pieces (declared 937 + 335 243 1515/found 937 + 578+ 1515). (iii) That the appellant's stance, further stood cemented from the fact that in a 40' high cube container, only goods having capacity of 60 M3 can be stuffed e.g. of the appellant consider his entire consignment is of 14" monitor, its M3 comes to 62.55 (length 1.4", breath 12" and height 15") confirming that even 1515 monitor of 14" cannot be stuffed in 40' high cube container. So how a container can adjust quantity of excess shown monitor of 17", in addition to the declared quantity of 937 pieces of 14",335 pcs of 15" and 243 pcs of 17" monitors obviously having different M3 (refer for calculation of M3 to Google Search). That as regards the quantity of monitors not a single piece is excess as against declared, the unwarranted controversy was created by the examiner by transmitting erroneous and confusing examination report having no nexus with reality in any manner. Hence the charges to the said extent stand diluted. (iv) That it is mandated upon the respondent to pass order-in- original within four corners of show-cause notice which revolves around the ground of excess quantity. Contrary, the respondent No.1 passed order-in-original on the grounds that in the instant case there exist no misdeclaration of quantity, rather of sizes. By virtue of the said opinion endorsed at page 3 of the order-in original, he travelled beyond the scope of show-cause notice. Such orders are being termed palpably illegal. Reliance is placed on the reported judgment 1987 SCMR 1840, The Collector of Central Excise and Land Customs and others v. Rahm Din. Wherein their lordship of Supreme Court held that:- "Order being ultimately based on a ground which was not mentioned in the show-cause notice or earlier taken was palpably illegal on face of it." (v) That no charge suppressing (misdeclaration) of value in the given circumstances can also be levelled on the appellant, because he discharged the burden of proof in regards to the value laid upon him under rule 109 of the Customs Rule, 2001. His value has to be treated as transaction value within the confines of section 25(1) of the Customs Act, 1969. Nevertheless, if the value is disputed upon, the onus of proof stands shifted to the department and it takes upon itself the responsibility to produce material to substantiate that the value of the goods has been misdeclared as directed in Para 78 of CGO 12/2002 dated 15-6-2002. He relied upon revenue loss of R. 207,404.00 on the basis of assessed value of Rs. 564,648.00 is nullity, as it is not based on evidential invoice or data of import as expressed in Rule 110 of the country and period mentioned in rule 107(a) ibid. Rather on the basis of value data base (VDB) made arbitrarily/unilaterally by the department of the cleared consignments. The said VDB stood abolished by the Board vide letter C. No. 1(25) S/Val/98 dated 22-7-2000. No evidence as per mandated requirement of law was provided by the Customs. Reliance is placed on judgments of High/Supreme Courts reported as 1986 MLD 190 Messrs Mughal Tobacco Limited v. Collector of Customs, PLD 1996 Karachi 68 Messrs Kamran Industries v. The Collector of Customs, Exports and 4 others, 2002 PTD 2957 Messrs Punjab Beverages (Pvt.) Ltd. v. Appellate Tribunal Customs and Excise and Sales Tax and 2 others, 2004 PTD 38 Innovative Trading Co. Ltd. v. Appellate Tribunal and 2 others 2005 PTD (Trib.) 617, 2006 PTD 909 Rehan Umer v. Collector of Customs, Karachi and 2 others, 2008 PTD 1250 Najam Impex Lahore v. Assistant Collector of Customs, Karachi and 4 others and 2008 SCMR 438 Collector of Customs Port Muhammad Bin Qasim v. Zymotic Diagnostic International, Faisalabad. (vi) That no order of confiscation can be passed in the absence of mention of applicable subsection of section 156 of the Customs Act, 1969. Ordering confiscation of freely importable goods allowing its release on payment of redemption fine and penalty under section 181 ibid under the entire section 156 of the Customs Act, 1969 render the show-cause notice and order passed subsequent to that as ab inito void. Reliance is placed to the reported judgment D.G. Khan Cement v. Collector of Customs 2003 PTD 1797, Messrs Atlas Tyres v. Additional Collector 2003 PTD 1593, Zamindara Paper v. Collector 2003 PTD 1257 and Assistant Collector v. Khyber Electric Lamps 2001 SCMR 838. (vii) That as regards the found Cassette player that was in fact stuffed in the container as a. sample piece and is not importable under IPO. Nevertheless, that can be released on payment of redemption fine as held by Supreme Court of Pakistan in its reported judgment 2004 PTD 2187 Abu Bakar Collector of Customs, Lahore, on the strength of which the Tribunal and High Court released numerous consignment, confiscated by the customs do the pretext of importability. (viii) The appeal with the respondent was filed on 27-3-2009 and an order under the proviso of subsection (3) of section 193-A of the Customs Act, 1969 and the appeal should have been decided by the respondent within 90 days from the date of filing of appeal or within a further extended period of 90 days during the initial period of 90 days after serving a notice to the person concerned and thereafter the respondent has to record the reason for extension in writing for the extension of the stipulated period. In the instant case the order-in-appeal was passed on 5-9-2009 i.e. after the expiry of total stipulated period of 90 days without any extension. Rendering the order-in-appeal barred by time by 72 days. (ix) The mention of respondent No. 2 at Para 5 of the order-in- appeal that proceeding in this case could not be finalized within the stipulated time limit due to extended hearing and adjournment granted on the request of both parties, therefore the requisite extension in terms of 1st proviso to subsection (3) of section 193-A of Customs Act, 1969 was granted is without any substance as only one hearing was fixed in the subject appeal` i.e. on 23-7-2009, on which date the hearing stood completed and order was issued as evident from Serial Nos.3 and 4 at page 1 of order-in-appeal. Nullifying the stance of the respondent No.2 that time was extended on the request of both the parties for adjournment. In the light of the narrated facts the order-in-appeal is hopelessly time barred and as such is of no legal effect and cannot be enforced. Reliance is placed on the judgments reported vide 2008 PTD 60 Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax,. Gujranwala and 2008 PTD 578 Messrs Hanif Strawboard Factory v. Additional Collector (Adjudication) Customs, Sales Tax and Central Excise Gujranwala, 2009 PTD 762 Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax and 3 others, 2009 PTD (Trib.) 1263 Messrs Syed Bhai Lighting Limited, Lahore v. Collector of Sales Tax and Federal Excise, Lahore and 2 others and 2009 PTD 1978 Leo Enterprises v. President of Pakistan and others.

6. The departmental representative vehemently supported the order- in-original and order-in-appeal being correct in law and fact and prayed for dismissal of the appeal as being based on irrelevant grounds.

7. Rival parties heard and case records perused and the following issues are framed for consideration by this forum: (i) Whether an act of misdeclaration has been committed by the appellant in respect of 335 pieces of Monitors of 17" to attract mischief of provisions of sections 32(1)(2) and 32-A of the Customs Act, 1969? (ii) Whether the respondent has enhanced the declared transaction values in terms of section 25 of the Customs Act read with Rules 107(a) and 110 further read with para. 78 of the Customs General Order No.12 of 2002, dated 15-6-2002 of Customs Rules, 2001? (iii) Whether the grounds not enumerated in the show-cause notice can be inserted and adjudicated upon in the order-in-original? (iv) Whether order-in-appeal is time barred under the provisions of subsection of 3 of section 193-A of the Customs Act, 1969?

8. As regards issue No.(i), this forum has minutely scrutinized the declaration made by the appellant, posted examination report and the grounds advanced by the appellant. The appellant declared in GD (i) 14" Monitor in used/second hand condition, quantity 937 Pcs, (ii) 17" Monitor in used/second hand condition, quantity 243 Pcs. Whereas the Examining Officer instead of stating that 937 Pcs of 14", 335 Pcs of 15" and 243 pcs of 17" used monitors were found, transmitted that recovery of 937 Pcs of 14" and 578 Pcs of 17" monitors without any indication of 15" monitors and the said fact stands proved from 1st para of the show-cause notice as the said quantity is being shown in the schedule referred to in the contents of show-cause notice. In case the quantity was excess as against the declared, the examining officer should have stated in clear terms in examination report that 335 Pcs of 17" monitors were found in excess of the declared 335 pcs of monitors or 17" monitors were found as against declared 15" monitors. No such allegations are levelled in the show-cause notice, confirming that not a single piece was imported excess by the appellant. Rather the examiner failed to transmit the quantity of declared 15" monitors and in fact he bracketed 15" and 17" monitors and transmitted the quantity 578 pcs without any segregation meaning thereby that the quantity remained the same as per declaration i.e. 1515 pieces (declared 937 + 335 + 243 = 1515/found 937 + 578= 1515). The fact further stood verified from the fact that in a 40' high cube container, only goods having capacity of 60 M3 can be stuffed e.g. if it is considered that the entire consignment is of cube container, only goods having capacity of 60 M3 can be stuffed e.g. if it is considered that the entire consignment is of 14" monitor, its M3 comes to 62.55 (Length 14", breath 12" and height 15") confirming that even 1515 monitor of 14" cannot be stuffed in 40 ft. high container. So there is no possibility that how a container of 40 ft. can adjust quantity of reported excess monitors of 17" in addition to the declared quantity of 937 pieces of 14", 335 pcs of 15" & 243 pcs of 17' monitors. That while calculating with the Google search formula it is confirmed without any ambiguity that not a single piece as against declared was imported by the appellant and the controversy was created by the examiner by transmitting erroneous and confusing examination report, having no nexus with reality in any manner. Hence, the charges to the said extent stand extinguished. As such issue No. (i) is answered in the negative.

9. As regards issues Nos. (ii) and (iii) when description of the goods remains the same and difference of sizes arises, allegation of mis declaration under section 32 cannot be invoked by virtue of the fact that no false declaration was submitted. Secondly both sizes of goods fall under the same HS Code attracting the notified duty and taxes under the said heading. The only criterion left for determination of the product in question will be its declared value which has to be determined under the provisions of section 25 of the Act, 1990 and Valuation Rules given in Chapter IX of Custom Rules, 2001. The difference in sizes of the goods does not alter the specification or quality because the description/ specification of the contentious goods remains the same. The Para B(ii) of Para 101 of CGO 12 of 2002 dated 15-6-2002 is relevant, containing direction for the Customs an importer may not be charged for mis declaration under section 32 of the Customs Act, 1969, in the following situation: (i) Where an importer makes a correct declaration on bill of entry or opts for 1st appraisement for determination of correct description, PCT heading of quantity of goods. (ii) When a consignment is found to contain goods of description other than the one declared falling under separate PCT heading but chargeable to same rate of duty. (iii) Where the description of goods is as per declaration but incorrect PCT heading has been mentioned in the bill of entry no misdeclaration case under section 32 of the Customs Act, 1969, be made out provided there is no change in the rate of customs duty as a result of ascertained PCT heading.

10. The contentions of the respondent that said Para of the CGO is not applicable as it was the clarification of notification No. S.R.O. 374(I)/2002 dated 15-6-2002, which stood cancelled and was issued when there was no clearance of cargo through self-assessment in terms of Pakistan Customs Computerized System, (PACCS) is without any foundation because S.R.O. No. 487(I)/2007 dated 9-6-2007 is continuation of S.R.O. No. 374(I)/2002 in which pitch of redemption fine has been notified by the Federal Board of Revenue. The notification is binding on all Collectorates allowing clearance either manually or electronically. Since the Para B (ii) of Para 101 of CGO 12/2002 dated 15-6-2002 was incorporated by the Federal Board of Revenue in the Customs General Order for facilitation/minimizing the hardships of the importer it has, not been to this date either amended, altered or rescinded. The stance of departmental representative also stood nullified from the prescribed penalties in notification number 487(I)/2007 without any mention of misdeclaration/redemption fine on difference of sizes. On the contrary the stance of the appellant that no misdeclaration in terms of section 32 of the Customs Act is attracted in respect of Issue No. (ii) is fortified by the recent judgment delivered by Hon'ble Lahore High Court reported as 2009 PTD 467.

11. In addition to the above legal position, it is also a settled law that when the Customs dispute the value of any goods, they take upon the responsibility to produce material to substantiate that the value of the goods has been misdeclared. The evidential invoice of the product in question of the country of export and period of import in Pakistan expressed in sub-rule (a) of rule 107 of Customs Rule, 2001 as per direction contained in Para. 78 of CGO 12/2002, dated 15-6-2002 or data import expressed in rule 110 ibid are to be brought on record and also to be forwarded to the taxpayer. The respondent relied upon data/ repository of the "assessment, which stood withdrawn by the Federal Board of Revenue vide letter C.No.1(25) S/Val/98 on 22-7-2000. The reliance upon the data base instead of evidential invoice of contemporaneous imports is palpably illegal because such valuation or assessment falls under the ambit of sub-rule (iii) of rule 110. (Prohibited methods). The department in the instant case miserably failed in submitting any provision of the Act/Rules or any other notification nullifying the proposition of law and did not rely on any admissible or convincing material e.g. evidential invoice on the strength of which charge of misdeclaration was levelled against the appellant, thereby rendering the charge of misdeclaration of value as unsubstantiated and based on presumptive considerations. Admittedly the department has failed to discharge the onus of establishing that the price declared by the appellant of the imported goods is not correct. The same view has been taken by the Hon'ble Supreme Court of Pakistan and High Courts in judgments reported as 1986 MLD 190, PLD 1996 Karachi 68, 2002 PTD 2957; 2004 PTD 38 Innovative Trading Co. Ltd. v. Appellate Tribunal and 2 others, 2005 PTD (Trib.) 617, 2006 PTD 909, 2008 PTD 1250 and 2008 SCMR

438. As such Issue No.(ii) is answered in the negative.

12. As regards issue No. (iii) it mainly revolves around the fundamental objection raised by the learned consultant that the allegations adjudicated at page 3 of the order-in-original dated 21-3-2009 have not been incorporated in the show-cause notice by the officer of original jurisdiction. The claim of the consultant is borne out by the bare reading of Para No. 2 of show-cause notice dated .19-3-2009 where any reference to the said allegation is non-existent., It is well settled principle of law that grounds not mentioned in the charter of show-cause notice cannot be subsequently taken up and adjudicated by the adjudicating authority in the adjudication order. This view has been taken by the Hon'ble apex Court in its hallmark judgment reported as 1987 SCMR F 1840 and followed by Hon'ble High Court of Sindh in its judgment reported as 2004 PTD 1449. The impugned order-in-original based on such a deficient show-cause notice which doesn't mention the ground is palpably illegal and hence void. The Issue No.(iii) is answered in negative.

13. As regards issue No. (iv) the respondent No. 2 in Para 5 of the order-in-appeal stated that the proceedings in the case cannot be finalized within the stipulated time limit due to extended hearing and adjournments granted on the request of both parties, therefore, requisite extension in terms of. 1st provision to subsection (3) of section 193-A of the Customs Act, 1969 was granted. This observation of the appellant Collector is contrary to the facts. Hearing was conducted on 23-7-20.09 when the hearing stood concluded. The order-in-appeal was issued on 5-9-2009 rendering it time barred and not enforceable under law. The same view has been taken by the superior Courts in their judgments reported as 2008 PTD 578, 2009 PTD 762, 2009 PTD (Trib.) 1263, 2009 PTD 1978. As such issue No. (iv) is answered in the affirmative.

14. The undeclared two items namely used Sony Disc Changer and used Soney Cassette Car Stereo are hit by the provisions of the relevant Import Policy Order being old and used items have been rightly confiscated outright by the officer of original jurisdiction.

15. In view of the foregoing the impugned orders are set aside and the appeal is allowed in the above terms. H.B.T,/171/Tax(Trib.) Appeal allowe