1996 PLP 1365 (CLC)

6. Having dealt with the maintainability of the writ petitions we now turn to the merit of the case. The main contention that requires to be determined is as to whether subsection (2) or subsection (3) of section 32 of the Act is applicable in this case and within which period of limitation a notice as conceived under this section of law is to be served on the petitioners. In order to decide this issue the entire section 32 of the Act is reproduced as under:‑‑ "

32. Untrue statement, error, etc.‑‑(1) If any person, in connection with any matter of customs, ‑‑ (a) makes or signs or causes to be made or signed, or delivers or causes to be delivered‑to an officer of 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, (knowing or having reason to believe that such document or statement is false) in any material particular, he shall be guilty of an offence under this section. (2) Where, by reason of any 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 by any amount on that account shall be served with a notice within three years of the relevant date, requiring him to show cause why he should not pay the amount specified in the notice. (3) Where, by reason of any inadvertence error or misconstruction, 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 a notice within six months of the relevant date requiring him to show cause why he should not pay the amount specified in the notice. (4) The appropriate officer, after considering the representation, if any, of such person as is referred to in subsection (2) or subsection (3) shall determine the amount of duty payable by him which shall in no case exceed the amount specified in the notice, and such person shall pay the amount so determined. (5) For the purposes of this section, the expression "relevant date"means:‑‑‑ (a) in any case where duty is not levied, the date on which an order for the clearance of goods is made; (b) in case where duty is provisionally assessed under section 81, the date of adjustment of duty after its final assessment; (c) in a case where duty has been erroneously refunded, the date of its refund; (d) in any other case, the date of payment of duty or charge." It clearly emerges from the bare reading of the above provisions that subsection (1) provides a situation where the petitioner has submitted false declaration knowing that document submitted by him is incorrect and false to benefit the company by reducing the rate of tax. To check such happenings the subsection provides a procedure against the false deponent who can be penalized under section 156(1) of the Act. Subsection (2) of section 32 of the Act provides 'such document'. Such document definitely refers to the document referred to in subsection (1) which document is false and the petitioner has reason to believe that it was intentional. therefore, he was to be served with a notice within 3 years of the 'relevant date as explained in subsection (5) of section 32 of the Act'. It must be noted that period of limitation fixed for service of notice is three years. The reason for giving such a large frame of time is to give respondents/department enough time for proper investigation and also to proceed against the culprit and such proceedings may conclude into punishment for misguiding the department. Subsection (3) also refers to such document but here the mens rea is not available and assessment is caused by error or inadvertence of the respondents/department in which the petitioner does not happen to play a criminal role and period of notice is only six months. There is a rationale behind provision of short period for notice in subsection (3). If the petitioner paid the assessed taxes at the reduced rate due to respondents/department these savings were transferred to the consumer by readjustment of ex‑factory prices so as to have upper hand in the competition. The industrialists always use such savings by passing on to the consumers to have an edge over the competitors. The process of manufacturing and distribution of goods in the market is estimated to be of six months, therefore, lesser period is provided for the notice so that before the finished goods are supplied to the market the industrialists could pass on readjusted indirect tax to the consumer.

7. Reverting to next question as to what type of notice under subsections (2) and (3) is conceived and whether the impugned notice meets the requirements of notice under section 32(2) and (3) of the Act. The plain reading of above provision of law suggests that by issuance of show‑cause notice, an opportunity is given to the petitioner to explain why he should not pay the charges or duty specified therein which may necessitate the petitioner to file the representation and the officer concerned may after considering application of the petitioner determine the claim by reducing the amount given in the notice. Show‑cause notice as contemplated by section 32(2)(3) in essence provides an opportunity to explain any wrongdoing in filing/paying the taxes. In the show‑cause notice proper allegations are framed, pointing the false declarations which were wilfully made to cheat the tax department whereas through the impugned notices the petitioners were straightaway called upon to pay the deficient amount failing which the petitioners were threatened to be proceeded against. Until and unless proper hearing is granted to the importers to explain as to why they would not pay the short levied customs duty, the demand for payment of such amount cannot be made. The impugned notice thus does not comply with the requirements of subsections (2) and (3) of section 32 of the Act.

8. This brings us to the last issue which requires to be resolved is whether the petitioners have misdeclared the aluminium caps of bulbs as raw material in the import document which in fact was a component liable to be taxed at the rate of 30%. The petitioners on the basis of SRO 504(1)/94, dated 9‑6‑1994 applied to the C.B.Rs'. Chief, Survey and Rebate, on the prescribed Form‑S for the survey of the claim. The petitioners' units were accordingly visited by the Chief, Survey and Rebate alongwith the staff of Collector, Central Excise and Customs, Peshawar, who verified the claim, certified the annual capacity of the units and quantity of various types of raw materials where after final certificate dated 6‑12‑1994 was issued in super session of provisional certificate dated 2‑10‑1994. The goods in question (aluminium caps) have been described as raw materials by the authority in the schedule statement by visiting the units and physically verifying the claim. Theoretically you can give all sorts of definitions but no definition can beat the reality. After this final certificate there has not been any other circular changing the abovementioned items to be brought under definition .of components except the general customs order issued after six months of the issuance of final certificate. As discussed earlier that manufacturer passes additional cost in the form of price to the consumers. we have established earlier that manufactured goods are sold to the consumers within six months by fixing the price based on its expenses, the manufacturer collects the additional cost from the consumers by way of adjusted prices. Industries in Pakistan have a very poor industrial base and any unjustified claim or tax which cannot be passed on to the consumers will be a set‑back to the industries which will result in higher unemployment and uncertainty in business group and irrecoverable loss to the community as a whole. For what has been discussed above, the impugned notice is declared to be without lawful authority and of no legal effect. The petitions are accordingly allowed leaving the parties to bear their own costs. M.B.A./1952/P Order accordingly