SULTAN MUHAMMAD VS SECRETARY, CENTRAL BOARD OF REVENUE, ISLAMABAD, 2002 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 2632 (2002)

(a) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑

‑‑‑‑S.10(3)‑‑‑Limitation‑‑‑Condonation of delay‑‑‑Commencement of period of limitation‑‑‑Period of six months commences from the date on which the person aggrieved first had the notice of the matter alleged in the complaint‑‑‑Where special circumstances existed the Federal Tax Ombudsman had been empowered to entertain the complaint which he deemed proper in the interest of justice ‑‑‑Delay could be condoned where such circumstances existed and justice so demanded.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑S.19‑‑‑Sales Tax Act (VII of 1990), S. 13(l) ‑‑‑ Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 10(3)‑‑‑Pakistan Afghanistan Transit Trade Agreement, 1965, dated 2‑3‑1965‑‑‑S.R.O. No.1162(I)/94, dated 21‑1‑1994 (21‑12‑1994)‑‑‑S.R.O. No.109(I)/95,dated 13‑12‑1995 (13‑2‑1995) ‑‑‑ S.R.O. No.368(I)/95, dated 2‑5‑1995‑‑‑Rules of Business, 1973‑‑‑Chief Executive's directive, dated 15‑1‑2000‑‑‑General powers to exempt from customs duty‑‑‑Condonation of delay‑‑‑Department was adamant not to release the consignments in spite of the judgment of the Supreme Court and the directive issued by the Chief Executive Validity‑‑‑Petitions/complaints were filed when the complainants living in war torn area of Afghanistan came to know about the Chief Executive's directive allowing goods to be released‑‑‑Facts and circumstances of the case justified extension‑of time and condonation of delay‑‑‑Case was not an ordinary one of the traders but related to international agreement between the two sovereign States in which goodwill and relations at governmental level were also involved‑‑ Unreasonable attitude of the Customs Department and Central Board of Revenue in insisting not to release the goods in violation of Supreme Court judgment and blatant breach of Chief Executive's Directive established maladministration on their part‑‑‑Federal Tax Ombudsman recommended the Central Board of Revenue to implement Directive of the Chief Executive and release consignments to the complainants/petitioners within three weeks from the date of the decision.

Jehangir Khan for the Complainant.

Rizwan Basharat, AC for Respondent.

FINDINGS/DECISION

By this decision, all these petitions will be disposed of as common and identical questions of facts and law are involved. The facts narrated are in respect of petition filed by Mr. Sultan Ahmad (C‑1640/2001) and shall be treated as common facts in all the petitions.

2. The petitioners are Afghan nationals who imported consignments through Karachi Port for transit to Afghanistan. An agreement called Pakistan Afghanistan Transit Trade Agreement, 1965, dated 2‑3‑1965 was reached between the Government of Islamic Republic of Pakistan and the Kingdom of Afghanistan for regulation of traffic and transit of goods. The petitioners imported certain consignments under the following bills of lading:

3. All these consignments arrived at Karachi Port and Afghanistan Transit Documents were filed with the Customs Authorities in order to facilitate clearance of the consignments for onwards dispatch to Afghanistan. However, the transit facilities were denied in view of.C.B.R. Notification No.S.R.O.1162(I)/94, dated 21‑1‑1994 and S.R.O. 109(I)/95, dated 13‑12‑1995, banning transit and import of 15 items including auto parts, electrical equipments and chemical and dyes. Although these transit documents for clearance were filed before the issuance of the said notifications, the Customs Authorities refused to clear them. The Customs Authorities pressed into service S.R.O. 368(I)/95, dated 2‑5‑1995 and demand duties and taxes in Pakistan on these detained consignments. The importers filed petitions in the High Court of Sindh challenging actions of the Customs and KPT Authorities in detaining goods and imposing demurrage charges. The Sindh High Court allowed the petition and declared the order of the Customs Authorities null and void. It was observed that the Transit Agreement was enforceable and the C.B.R. had no valid justification or authority to issue notification banning transit of. trade goods to Afghanistan. It was held that jurisdiction for issuing such notification vested with the Ministry of Commerce. The C.B.R. and KPT filed appeals in the Supreme Court of Pakistan which were dismissed by judgment dated 12‑7‑1995. After judgment of the Sindh High Court dated 17‑12‑1992 and during the pendency of appeals before the Supreme Court the C.B.R. issued S.R.O. 368(I)195, dated 2‑5‑1995 in exercise of powers conferred under section 19 of the Customs Act, 1969 and subsection (1) of section 13 of the Sales Tax Act, 1990 stating that the Federal Government pleased to direct that the goods imported under the Afghan Transit Trade Agreement, 1965 which were mentioned in the table for clearance and home consumption shall be subjected to conditions specified therein on payment of concessional rate of customs duty and sales tax. The petitioners applied for conversion of bill of entry into home consumption bill of entry but when duty and tax were assessed, they refused to pay and the goods are still lying at the port area. The Supreme Court while upholding the judgment of the Sindh High Court observed that the Customs Authorities had no justification in the matter at all. They could neither ban the import of goods in question nor refuse to allow them to be transited to their destination. Under the Rules of Business, 1973, made in exercise of the powers conferred by the Constitution, the business regarding the import and export across Customs Frontiers including treaties, agreements, protocols and conventions with other countries and international agencies bearing on trade and commerce and the transit trade has been allocated to the Ministry of Commerce, which has exclusive jurisdiction in such matters. It was further observed that the learned Judges of the High Court were perfectly justified in quashing letters and orders impugned in the Constitutional petition directing the appellants to perform their functions in respect of Afghan Transit goods in terms of Transit agreement and protocol. The petitioners applied for transit of goods to Afghanistan but the Customs Authorities reused on the ground that bill of entry has been converted into home consumption bill of entry which cannot be reversed, and therefore, the goods cannot be allowed to be transported to Afghanistan. Afghan Traders filed a representation before the Chief Executive who ordered release of 371 consignments for transit to Afghanistan in term of the Agreement without charging any duty. In spite of this order petitioner's consignments were not released. The petitioner then filed these petitions.

4. The Customs Department submitted their reply that the transit facility was in terms of S.R.O. 1162 (I)/94, dated 21‑11‑1994 and S.R.O. 109(I)/95, dated 13‑2‑1995 and the subject consignment was imported under the bill of lading but the importer did not provide the bill of entry. S.R.O. 368(I)/95, dated 2‑5‑1995 was issued to facilitate the Afghan Importers so that they could take delivery of banned items after payment of duties and taxes. On the basis of judgment of Sindh High Court, the C.B.R. ordered clearance of stock involved for immediate transit to Afghanistan. Due to change of status of bill of entry from .transit to home consumption, which carries great significance and difference as the same is subject to taxes and duties, whereas there is no duty or tax on Afghan transit goods. The substitution of bill of entry to home consumption was a voluntary act of the petitioners and the C.B.R. did not force them to do so. Due to change of status of the bill of entry the consignments could not be treated transit goods. There are 371 consignments that have not been cleared.

5. Another significant development in this case was that on representation made to the Chief Executive, a directive, dated 15‑1‑2000 was issued to release all 371 consignments of Afghan Transit goods detained at Karachi without payment of demurrage charges. The said directive is reproduced as follows:

"The Chief Executive has been pleased to direct that as a gesture of goodwill, the Government of Pakistan has decided to release 371 consignments of Afghan Transit Goods detained at KPT Karachi without payment of demurrage charges. The subject consignments should be cleared under the terms and conditions laid down in the Afghan Transit Trade Agreement which was in force at the time of arrival of consignments. However, it may be ensured that only random checking may be done, if required, and consignments allowed to be moved in the shortest possible time."

In spite of this directive, the department is adamant not to release the consignments.

6. The learned representative of the complainants, Mr. Jehangir Khan submitted that after the judgment of the Supreme Court and the directive issued by the Chief Executive, there is no legal justification to withhold the consignments and refusing transit to Afghanistan. I do not wish to go into the illegality of the S.R.Os. which have been adjudged as void by the apex Courts nor any comments can be offered in respect of the Directive of the Chief Executive which is clear and complete answer to the objections raised by the Customs Department. Firstly, the refusal to allow transit to Afghanistan was void and illegal and secondly, during the intervening period and before the judgment of the Supreme Court was announced, the Department issued S.R.O. No. 368(I)/95, apparently providing some concession in customs and sales, tax provided bills of entries were converted into home consumption. Naturally, frustrated with the delay and litigation, the petitioners applied for such conversion but did not pay the tax and duty, and therefore, the consignments remained where they were. S.R.O. which is being pressed into service by the Department itself has its doubtful validity. But the dispute was settled completely by the Directive of the Chief Executive. It is an admitted fact that 371 consignments which were ordered to be released under the directive included the consignments of the petitioners which are subject‑matter of these petitions. Directive is clear and without any ‑reservation in respect of nature of consignments or nature of bills of entry. The said directive should have been obeyed in letter and spirit. This is not a case of ordinary transaction in the normal course of business in Pakistan but it relates to inter‑Government and international agreement and convention between two sovereign states in which due care is being taken to diplomatic norms and sanctions as well. The Chief Executive's Directive clearly refers to this aspect of the case while stating that as a gesture of goodwill, the Government of Pakistan has decided to release 371 consignments of Afghan Transit goods detained at KPT Karachi without payment of demurrage and the consignments should be cleared under the terms and conditions laid down in the Afghan Transit Trade Agreement. The learned representative of the department contended that while issuing the directive, the conversion of the bills of entry was not brought to the knowledge of the Chief Executive. This plea is not tenable and exposes the department, as before the directive was issued departmental summary of the case would have been forwarded. In the face of this directive, the objections raised by the learned representative of the department have no force.

7. Mr. Rizwan Basharat, learned AC contended that petition is barred by time as it has been made after the expiry of 6 months from the date cause of action, has arisen. Section 10(3) of the Federal Tax Ombudsman Ordinance, 2000 reads as under:

"Section 10(3):

A complaint shall be made not later than six months from the day on which the person aggrieved first had the notice of the matter alleged in the complaint, but the Federal Tax Ombudsman may conduct any investigation pursuant to a complaint which is not within time if he considers that there are special circumstances which he deems proper in the interest of justice to entertain the complaint."

The period of six months commences from the date on which the person aggrieved first had the notice of the matter alleged in the complaint. However, in cases where special circumstances exist the Federal Tax Ombudsman has been empowered to entertain the complaint which he deems proper in the interest of justice. Therefore, where such circumstances exist and justice demands time can be extended and delay condoned.

8. Mr. Jehangir Khan stated that after the directive of the Chief Executive was known to the petitioners who were residing in Afghanistan being engulfed in war, he approached the C.B.R. on 10‑5‑2000 personally and presented a representation but so far no reply has been received. Thereafter, a Petition No. C‑1640 of 2001 was filed on 4th December, 2001. Other petitions were filed in February, 2001 when the petitioners living in war torn area of Afghanistan came to know about the Chief Executive's directive allowing goods to be released. The, facts and circumstances of the case justify extension of time and condonation of delay. It is not an ordinary case of traders but relates to international agreement between the two sovereign States in which goodwill and relations at governmental level are also involved. Unreasonable attitude of the Customs Department and C.B.R. in insisting not to release the goods in violation of Supreme Court judgment and blatant breach of Chief Executive's directive established maladministration on their part.

It is recommended that:

(i) C.B.R. to implement directive of the Chief Executive and release consignments to the petitioners within three weeks from the date of the decision.

(ii) Compliance be reported within one week thereafter.

C.M.A./M.A.K./392/FTO

Order accordingly.