Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.16 & 202‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Power to prohibit or restrict importation and exportation of goods‑‑‑Penalty‑‑‑Imposition of personal penalties without issuing show‑cause notices to clearing agent and without confirming and establishing the charge of mis-declaration of PCT heading with collusion of the importers‑‑‑Validity‑‑‑Notices were issued in the name of the importers and only copies of such notices were endorsed to the clearing agent‑‑‑Show‑cause notice clearly showed that charge of violation of S.16 of Customs Act, 1969 was levelled against the importers only‑‑‑Although it had been stated by the Department that incorrect PCT heading was declared in the bills of entry in collusion with the importers, no evidence to this effect had been produced nor was any mention of collusion made in the order‑‑‑Show‑cause notice was issued to and the charge of contravention of law was made against the importers and the clearing agent had been penalized without being charged of any violation of the Customs Act, 1969‑‑‑Proper show‑cause notice briefly stating the facts of the case, the offence committed and the evidence on which offence was based should have been issued to the clearing agent before imposing a penalty on him‑‑‑Decision td impose the penalty held was arbitrary and without lawful authority and clearly amounted to maladministration and imposition of penalty was illegal‑‑‑Federal Tax Ombudsman recommended that the Collector of Customs (Adjudication) to remit the penalties to the complainants.

Nadeem Ahmed Mirza, Consultant for the Complainant.

Imtiaz Ahmed Sheikh, Deputy Collector (Appraisement) for Respondent.

FINDINGS/DECISION

Messrs Muhammadi Clearing Corporation, Karachi, have filed this complaint against the Customs Department for imposition of personal penalties without issuing show‑cause notices and without confirming and establishing the charge of mis-declaration against them. They stated that they had tiled two bills of entry on behalf of the importers Messrs Muhammad Aslam & Sons, Lahore and prepared the documents showing the description of goods, PCT heading number, quantity, value, rates of duty, sales tax and income tax and amounts for duty and taxes. It was clearly shown on the bills of entry that the goods were of Indian origin and were shipped from Mumbai; India, as shown in the invoices and the bills of lading. The customs officials processed the documents, allowed clearance and no objection was raised. After lapse of about seven months, the customs found that the import of the cleared goods from India was restricted under Import Policy Order 2000‑2001 and violated the provisions of the Customs Act and the Import and Export (Control) Act, 1950. Two contravention reports were prepared' and forwarded to the Deputy Collector (Adjudication‑I) for adjudication.

2. The Deputy Collector (Adjudication‑I) issued show‑cause notices to the importers and copies were endorsed to the complainants for information. These notices were sent on their old address whereas their new address had been duly intimated to the customs: The notices were not received by the complainants and they could not reply to them nor attend hearing. The Deputy Collector passed order dated‑ 15‑11‑2001 and imposed a penalty of Rs.10,000 per consignment although no charge had been levelled against them. He passed another order dated on 31‑1‑2002 imposing another personal penalty of Rs.10,000 in one of the same two imports which too was not dispatched on the correct (new) address. This action amounted to double jeopardy barred by law. The Deputy Collector (Appraisement) stopped the complainants from performing the agency work and they had to pay of Rs.10,000 under protest in case of the second adjudication order. The Deputy Collector issued another recovery notice dated 16‑7‑2002 for payment of penalty of Rs.20,000, imposed under Order No.373 dated 15‑11‑2002, within seven days failing which action under customs law would be taken.

3. The origin of the goods were clearly mentioned on the bills of entry. The customs officials did not raise any objection about PCT heading and the status of the import. The clearing agent made the declaration on the basis of the import documents given by the importers. Since the show‑cause notices were defective and illegal and the contents of the notices and the orders were irrelevant, immaterial, illogical and invalid, the action of the Deputy Collector (Adjudication) in imposing the penalties was arbitrary, contrary to the law and illegal. They requested that the orders‑in‑original be set aside, the Deputy Collector (Appraisement) be directed not to proceed with the recovery under section 202 of the Customs Act, nor to block/suspend the operation of the license, waive the penalty of Rs.20,000, and order of Deputy Collector (Appraisement) to refund the penalty of Rs.10,000 already paid.

4. The Collector (Adjudication‑I), Karachi, replied to the complaint that the complainants were required to declare appropriate PCT heading of the imported goods but they declared incorrect PCT heading in order to clear banned items. On post‑importation scrutiny of import documents, it was found that the items were not importable from India and therefore, a copy of the show‑cause notice was endorsed to them to justify the declaration of PCT on the bills of entry. It was correct that their license was renewed with the new address, but the address on the bills of entry was the old one and therefore, the notices were sent on that address. They declared incorrect PCT heading on the bills of entry in collusion with the importers in violation of section 16 of the Customs Act and penalty of Rs.10,000 justified. The importers and the complainants were equally responsible for clearing the banned items by complainants the PCT heading.

5. The Deputy Collector of Customs (Licensing), stated in his separate reply that the complaint, was not maintainable for lack of jurisdiction under subsection (2)(b) of section 9 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000. He stated that when the copy of Order No. 31 was received on 7‑2‑2002, a notice dated 13‑2‑2002 for depositing the penalty was issued to the complainants. On failure to comply, a detention notice dated 24‑4‑2002 was issued. The complainants deposited penalty' of Rs.10,000 on 24‑4‑2002 and the detention notice was withdrawn. Another notice dated 16‑7 2002 for payment of penalty imposed in the other order was also issued but they have not deposited the amount. They were at liberty to file an appeal under section 194‑A of the Customs Act before the Appellate Tribunal and obtain stay order against recovery proceedings but he failed to avail legal option. As such the petition was not maintainable and liable to be struck down due to legal bar (lack of jurisdiction). He requested that the complaint be dismissed with the direction to the complainants to immediately deposit outstanding amount of penalty.

6. During the hearing of the complaint, the complainants consultant reiterated the background of the case and stated that the show?-cause notices were not issued to the clearing agent, only copies of the notices to the importer were endorsed and the charge, of violation of customs law was not levelled against him. The Adjudicating Officer had held in the order‑in‑original that the violation of the Customs Act was established against the importers and not the agent. The clearing agent did not conceal any facts and, acting on behalf of the importers, declared all the available facts on the bills of entry. It was the responsibility of the Customs officials to examine the entries and order release of the goods or otherwise.

7. The complainants did not receive the orders in time and could not file appeal before the Tribunal within the limitation period of 60 days. Messrs Kaka Traders, another agent similarly affected by the order of the Deputy Collector, had tiled an appeal before the Appellate Tribunal which was allowed by order dated 31‑1‑2002. It was mentioned in the order that the departmental representative admitted that show-?cause notice was not issued to the agent, only a copy was endorsed to him, and there was no material on record to accuse the agent. The Tribunal had held that the order‑in‑original was passed in, violation of the section 180 of the Customs Act and was not sustainable, the imposition of penalty was illegal and similar orders were passed in the appeals of Messrs Shoaib Enterprises and Messrs Omalsons Corporation. These precedents were applicable to the complainants' case.

8. The Deputy Collector (Adjudication) stated that in paragraph 4 of the show‑cause notice it was mentioned that the clearing agent should state whether he wanted to be heard in person or through his authorized representative which, according to him, meant that the show‑cause notice was issued to the clearing agent. Since the clearing agent had prepared the import documents, it was his responsibility to correctly mention the PCT headings of the importable gods. On account of this irresponsible action he was held responsible for the contravention of Customs Act and penalized. ????????? ?

9. The complaint against the imposition of penalties centers around the argument that no charges were levelled against the complainants and the show‑cause notices were not issued to them. This argument is supported by the fact that the show‑cause notices were issued in the name of the importers and only copies were endorsed to the clearing agent. A plain reading of the show‑cause notice shows that in paragraph 2 thereof, the charge of violation of section 16 of the Customs Act was levelled against the importers only. Although it has been stated by the respondents that incorrect PCT heading was‑declared in the bills of entry in collusion with the importers, no evidence to this effect has been produced nor has any mention of collusion made in the order passed by the Deputy Collector (Adjudication‑I). Clearly the show-cause notice was issued to and the charge of contravention of law was made against the importers and the clearing agent has been penalized without being charged of any violation of the Customs Act. A proper show‑cause notice briefly stating the facts of the case, the offence committed and the evidence on which offence was based should have been issued to the clearing agent before imposing a penalty on him. The decision to impose the penalty was arbitrary and without lawful authority and clearly amounts to maladministration.

10. It is established that the imposition of penalty of Rs.20,000 on the complainants vide order dated 16‑11‑2001 was illegal and another order dated 31‑1‑2002 passed by the same Deputy Collector imposing another penalty of Rs.10,000 in one of the two cases i.e. I.T.C. No.8 of 2001 was also not lawful. It is recommended that the C.B.R. direct.

(i) the Collector of Customs (Adjudication) to remit the penalties imposed by the Deputy Collector (Adjudication‑I), imposed on the complainants, vide Order-in-Original Nos.373 dated 16‑11‑2001 and 31 dated 31‑1‑2002;

(ii) the Collector of Customs (Appraisement) to refund the penalty of Rs.10,000 paid by the complainants; and

(iii) both the Collectors to report compliance within forty‑five days.

C.M.A./589/FTO ??????????????????????????????????????????????????????????????????????????????? Order accordingly.