2010 PLP (Trib (PTD)

DR. RIAZ MEHMOOD, MEMBER (JUDICIAL).

The appellant has assailed, in this appeal, the Order-in-Appeal No.191/2008 dated 25-10-2008, passed by the learned Collector (Appeals) who had partially modified the Order-in-Original No.20/2008, dated 5-9-2008.

2. The appellant has set up the case in the memo of appeal that it was trading concern and had imported consignment of Micro Plate Reader and washer with standard accessories from China. Messrs Rafaqib's Enterprises, Clearing Agents filed goods declaration No.62535 dated 15-6-2008 for clearance of the consignment on the declared value of US$ 7330 C&F. There was no cavil that it was admitted by the department that the subject goods were exempt from customs duty and sales tax and only advance income tax under section 148 of the Income Tax Ordinance, 2001 was payable thereon and which was to be collected by the Collector of Customs. The goods were assessed on the revised value of US$ 8880. However, it was alleged that in invoice relating to the subject consignment retrieved by MCD section indicated the actual value of the goods as US$ 79700 FOB. Accordingly, it was alleged that the importer with the active connivance of his clearing agent prepared and presented untrue import documents to the customs authorities in order to evade the duty and taxes. Both had, therefore, committed an offence under section 3(1) of the Imports and Exports Control Act, 1950 and section 32 (1) and (2) of the Customs Act, 1969 punishable under clause 14 of section 156(1) of the Customs Act, 1969 and section 3(3) of the Imports and Exports Control Act, 1950. The appellant submitted a self-explanatory written reply to the show-cause notice. The learned Assistant Collector, Customs Airport, Lahore without considering the important issues on law and facts, adjudicated the case vide Order-in-Original No. 20/2008, dated 5-9-2008 and ordered the appellant to pay 50% redemption fine and 100% penalty equivalent to the value of goods in addition, a personal penalty of Rs.50,000 was imposed on the clearing agent. The appellant filed an appeal before the learned Collector (Appeals) who had partially upheld the order in original by reducing the penalty equivalent to 100% of the value of goods into 100% of the amount of taxes short paid, while maintaining the quantum of redemption fine imposed by the learned adjudicating authority. In view of delicate and perishable nature of the subject goods, the appellant had been allowed by the FBR to deposit redemption fine in equal four installments and 25% fine had been deposited, while three post dated cheques and an indemnity bond had also been submitted. Both the order-in-original and order-in-appeal were not tenable in law. The learned Collector (Appeals) had failed to examine the plea of the appellants that the impugned show-cause notice and the order had been based on section 32 read with clause 14 of section 156(1) of the Customs Act, 1969. The customs provisions were not applicable to the enforcement of income tax where similar provisions of law are available in the Income Tax Ordinance, 2001. The subject goods were in fact life saving equipment to diagnose Hepatitis and so the government had exempted those equipments from the customs duty and sales tax vide S.R.O. 549(I)/08, dated 11-6-2008 and only advance income tax was payable in respect thereof under section 148 of the Income Tax Ordinance, 2001. However, the department had incorrectly charged advance income tax @ 5% which was payable before 11-6-2008 under Part-II, First Schedule of the Income Tax Ordinance, 2001. S.R.O.566(I)/08, dated 11-6-2008 had reduced the rate of advance income from 5% to 2% accordingly excess amount of income tax charged from the appellant was liable to be refunded . The short payment of advance tax was due to the mistake of the clearing agent. In similar two cases of Best Buy Computers, Lahore and the Target Computers, Lahore, the Customs, Excise and Sales Tax Appellate Tribunal, Lahore vide order dated 25-8-2003, in Customs Appeals Nos.803 and 90/G/ LB/03 had remitted the penalties imposed for such misdeclaration. The order had been upheld upto Hon'ble Supreme Court of Pakistan. The recovery of short paid income tax levied under section 148 of the Income Tax Ordinance, 2001 could be made by the concerned Commissioner of Income Tax along with penalties provided in section 183 of the Ordinance ibid. Income tax at the import stage is collected as customs duty, but this could not change its character as income tax. It could not be taken as customs duty and all the exorbitant fines/penalties provided in the Customs Act, 1969 and the S.R.Os. issued thereunder do not apply. The learned Collector (Appeals) had also failed to examine the documentary evidence/certificate dated 14-10-2008 issued by M/s Expert Cargo Services (Pvt) Limited, that Messrs Rafaqib's Enterprises, clearing agents, had received the invoice along with delivery order etc. on 16-6-2008. The clearing agent had filed goods declaration before the customs authorities. The appellant had sent him an amount of Rs.2,59,000 to pay the advance income tax calculated on the basis of actual price and a copy of pay-in-slip for current deposit account dated 16-6-2008 in favour of M/s Rafaqib's Enterprises had been produced in support thereof. Total income tax payable on the two consignments amounted to Rs.1,06,001 + 5272.50 + Rs.1,11,273.50 and it appeared that the clearing agent was motivated to save tax as any such saving would have gone to his pocket. The appellant's bona fides and credentials to pay full amount of advance income tax are proved beyond any doubt by sending the full amount of advance income tax to the clearing agent at the initial stage. There was no mens rea on the part of the appellant. The appellant had neither the knowledge nor the reason to believe that the customs agent had declared incorrect value in the customs documents. The words used "shall be liable to pay penalty" did not mean that the penalty was to be imposed in all events. The learned Collector (Appeals) had also failed to 'examine that the appellant had already deposited short paid income tax vide treasury challan dated 23-9-2008 and had not shown any resistance. It was prayed that the impugned order be set aside.

3. The department filed the comments. They admitted that the consignments were exempt from the payment of customs duty and sales tax. However, they had submitted that the clearing agent had deliberately made a misdeclaration showing the value as US$ 7380 instead of US$ 79700. The show-cause notice was exactly in accordance with law. The clearing agent had presented forged documents. The appellant were at liberty to file refund claim under the relevant provisions of the Income Tax Ordinance, 2001, if they were of the view that the advance income tax had been paid by them due to mistake. The main issue in this case was submission of forged documents along with misdeclaration of actual transactional value to hoodwink the revenue of the government. The appellants were the beneficiary. The act of the clearing agent was supposed to be an act of the principal.

4. Arguments were heard. The learned counsel argued that it had been admitted by the department that the consignment was exempt from the customs duty and the sales tax. Only the advance income tax was payable. He vehemently contended that only the provisions of Income Tax Ordinance, 2001 would be applicable and not the provisions of the Customs Act, 1969. He placed reliance on Hashwanis Hotel Limited v. Government of Pakistan and others 2007 SCMR 1131=2007 PTD 1473. He also cited the decision of this Tribunal in Appeal C.No.52/ST/IB/04 M/s Pakistan Tobacco Company v. Collector of Sales Tax., Rawalpindi, that the Hon'ble Lahore High Court, Rawalpindi Bench in Appeal No.3/2003 had also held that when there was provision of penalty in the Sales Tax Act, 1990, the provisions of Customs Act, 1969 could not be followed. He further cited M/s SCAN and Systems (Pvt) Limited v. Collector of Customs, Appraisement Karachi PTCL 1999 CL 114 where the appellant did not show any resistance and voluntarily paid the amount of duty and taxes in respect of two supplies made to the KESC the penalty imposed on the appellants was remitted.

5. The Inspector defended the impugned orders.

6. I have considered the matter carefully. Under P.C.T. Heading 9027.800, the consignment was exempt from customs duty. Under S.R.O. 549(I)/08 dated 11-6-2008, the consignment was to be charged @ 0% sales tax. The relevant portion of section 148 of the Income Tax Ordinance, 2001 may be reproduced as below:-

148. Imports.

(i) The Collector of Customs shall collect advance tax from every importer of goods on the value of the goods at the rate specified in Part-II of the First Schedule. (2) Nothing contained in subsection (1) shall apply to any goods or class of goods or persons or class of persons importing such goods or class of goods as may be specified by the [Board]. (6) The provisions of the Customs Act, 1969 (IV of 1969), insofor as relevant, shall apply to the collection of tax under this section. (9) In this section,

"Collector of Customs" means the person appointed as Collector of Customs under section 3 of the Customs Act, 1969 (IV of 1969), and includes a Deputy Collector of Customs, an Additional Collector of Customs, or an officer of customs appointed as such under the aforesaid section [