(a) Customs Act (IV of 1969)‑‑‑-

‑‑‑S.13(3)(4)‑‑‑Customs Rules, 2001, Rr.239 & 240‑‑‑Constitution of Pakistan (1973), Art.199‑‑‑Constitutional petition‑‑‑Licence for private warehouse‑‑Suspension of such licence by Collector of Customs‑‑ Conditions.

A cumulative reading of the provisions contained in sub sections (3) and (4) of section 13 of the Customs Act, 1969 and Rules 239 and 240 of the Customs Rules, 2001, leads to the conclusion that the power of Collector of Customs to suspend the licence granted under section 13 of the Customs Act, 1969 is circumscribed with the following conditions:‑‑

(1) Proceedings considering the cancellation of licence under subsection (3) of section 13 be pending, meaning thereby that a show cause notice for proposed cancellation is duly served on the licensee.

(2) During the pendency of proceedings for the cancellation of licence as explained above, the Collector of Customs is of the opinion that it is expedient to suspend the licence.

(3) The opinion is to be recorded in writing by the Collector of Customs himself and not by any subordinate or any superior official.

(4) The opinion so recorded should reflect the application of mind by the Collector of Customs himself which is indicated by the expression, "the reasons to be recorded m writing, therefore, by him appearing in sub‑rule (1) of rule 240 of the Customs Rules. The opinion must contain the reasons for entertaining such view.

(5) The reasons contained in the opinion recorded by the Collector of Customs himself, under sub‑rule (1) of rule 240 shall be communicated to the licensee within twenty‑four hours of such suspension.

The order of suspension of licence is to be made by Collector of Customs himself which is apparent from a bare reading of subsection (4) of section 13 and sub‑rule (1) of rule 240.

(b) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑S.13(3)(4)‑‑‑Customs Rules; 2001, Rr. 239 & 240‑‑‑Constitution of Pakistan (1973), Art.199‑‑‑Constitutional petition‑‑‑Licence for private warehouse‑‑‑Cancellation/Suspension of such licence‑‑‑Collector of Customs, in the present case, had not recorded any opinion as to why it was expedient to suspend the licence and had also failed to record the reasons for the same in writing himself as required under the law‑‑ Reasons contained in the letter of Assistant Collector sent subsequently could not be deemed to be the compliance of law as an officer competent to pass an order was required to do so himself and the recording of reasons by his subordinate in a subsequent communication was not warranted in law‑‑‑If an order passed by a Competent Authority was not in accordance with the law then the subsequent compliance of the conditions prescribed in law even by himself would not cure the defect and the recording of reasons by subordinate Authority had no legal 'validity‑‑‑Reasons for suspension of licence were to be communicated to the licensee within twenty four‑hours of the suspension‑‑‑Where there was no communication of reasons to the licensee within twenty‑four hours of the suspension order as required by law, such suspension order, was liable to be struck down‑‑‑High Court, however, directed that notwithstanding the setting aside of the suspension order the proceedings initiated by the Department under show‑cause notice shall continue and be decided in accordance with law.

(c) Administration of justice‑‑‑

‑‑‑‑If an order passed by a Competent Authority was not in accordance with the law then the subsequent compliance of the conditions prescribed in law even by itself would not cure the defect and the recording of reasons by subordinate Authority would have no legal validity.

Mrs. Navin Merchant for Petitioner.

Raja Muhammad Iqbal for Respondents Nos. 1 to 3.

Date of hearing: 2nd September, 2003.

JUDGMENT

MUHAMMAD MUJEEBULLAH SIDDIQUI, J.‑‑‑The sole point pressed by the learned counsel for the petitioner in this petition is pertaining to the suspension of licence for manufacturing in bond.

The relevant facts gleaned from the memo of petition and the departmental file are that the petitioner is holder of a private Warehouse Licence No. PWL 8 of 2001, issued under section 13 of the Customs Act, 1969. The petitioner regularly imports various textile machinery for knitting, weaving, dyeing, printing and other ancillary processes and clears the same in terms of S.R.O. 554(I)/98, dated 12‑6‑1998, meant exclusively for the export‑oriented industries. For this purpose the petitioner files Home Consumption Bills of Entry with the Appraisement Collectorate, Customs Department. The petitioners wrote a letter, dated 5‑6‑2003, to respondent No.1, intimating that portion of the sewing machines imported by them against bill of lading, dated 5‑4‑2003 has been temporarily shifted to their new factory at C‑16 SITE Karachi, because of the construction work at D‑99 which is, the licensed bond of the petitioners. It was further intimated that in few days the construction work at the godown shall be completed and the machinery temporarily shifted shall be brought back for installation. The petitioners further informed that in 8 to 10 days they will apply for manufacturing bond licence under S.R.O. 450(I)/2001 and for machinery bond under S.R.O. 554(I)/98 in respect of Premises No C‑16 SITE Karachi. The respondent No.1 , replied vide letter, dated 29‑6‑2003, that an inspection team has been constituted to carry out detailed survey of D‑99 and C‑16, SITE Karachi, asking the petitioners to extend full cooperation to the team. Subsequently, the respondent No. 2 was requested vide letter, dated 5‑7‑2003 to include Plot No. C‑16 and A‑38. Site Karachi in their bond No. 8 of 2001, dated 12‑6‑1998. However, instead of acceding to the request of petitioners, the respondent No. 1, issued a Circular, dated 15‑7‑2003 stating that the Collector of Customs (Export), (Respondent No.2), was pleased to suspend the Custom Bond Warehouse Licence No. PWL 8 of 2001 issued to petitioners under section 13 of the Customs Act, 1969 and de‑bond the premises for the reason that upon inspection of the said bonded premises situated at D‑99. SITE Karachi, the machines imported under S.R.O. 554(I)/98, dated 12‑6‑1998 meant for installation in the bonded premises was found to be illegally removed in contravention of condition IV of S.R.O. 554(I)/98, dated 12‑6‑1998. It was further stated that some of the illegally removed machines were found to be installed and used at an un‑licensed area i.e. C‑16. SITE Karachi and other could not be accounted for after inspection of both the licensed and unlicensed premises.

According to petitioner, the respondent No.3. stopped and withheld the clearance of current import of machines and raw material which is lying at Karachi Port with the result that the petitioner incurred heavy cost in terms of demurrage/charges of port and shipping company. The respondent No.3, further issued a demand notice, dated 15‑7‑2003 in pursuance of circular letter; dated 15‑7‑2003 demanding the payment of Rs.2,95,80,252 within 7 days of the issuance of demand notice, failing which initiation of punitive recovery proceedings were threatened. Thereafter, respondent No.2. Collector of Customs (Export) issued a Show‑cause notice, dated 6‑8‑2003, calling upon the petitioner to show cause as to why the bond licence should not be cancelled under subsection (3) of section 13 of the Customs Act, 1969 for violation of the conditions specified in the licence. The petitioner was further called upon to show cause as to why an amount of Rs.3,81,66,270 may not be recovered. The petitioner has submitted explanation in response to the various letter and show‑cause notices issued by the respondents Nos.1 and 2.

The suspension of licence has been assailed on the ground that the petitioner, has been condemned unheard and the petitioner was not communicated the reason for suspension of licence as required under the law. It is further alleged that the suspension order has been passed without recording any reason to the effect that there was an urgency for taking such harsh action. It is contended that the petitioner's licence can be cancelled after his conviction only and there is no objectivity in passing the suspension order which has caused irreparable harm to the petitioner and has devastating effect of totally destroying the petitioners business and goodwill which cannot be compensated for.

On the other hand Mr. Raja Muhammad Iqbal, learned counsel for the respondents Nos. 1 to 3, has filed comments as well as relevant record to show that the petitioners licence was suspended on consideration of facts and the requirements of law have been fully complied with. A perusal of the record produced before us shows that the Custom officials inspected licensed bond premises and found some contraventions which according to them violated the conditions of licence. After a detailed report it was proposed in para 138 of the Note sheet that keeping in mind the sensitive nature of the case: (a) licence of petitioners may immediately be suspended so that they may not be able to import any other machinery under the S.R.O: (b) thereafter, a show cause notice for cancellation of the same may be issued within the stipulated time: (c) action for adjudication of the case and recovery of taxes may be taken in the form of contravention report for the Adjudication Collectorate or show‑cause notice to be issued by the Export Collectorate. This note was submitted on 26‑6‑2003.

The respondent No.2. Collector of Customs (Export) passed by following order on 29‑6‑2003:‑‑

"The licence shall be immediately suspended followed by proper prevention report, legal action in the matter, photos of machines at both the premises should be taken, amount of recoverable duties and taxes must be immediately determined."

A perusal of the file further reveals that the Collector of Customs (Export) passed suspension order on 29‑6‑2003. However, Mr. Junaid Ahmed Memon, Assistant Collector of Customs, the respondent No. 1, passed order, dated 28‑6‑2003 as follows:‑‑

"Please ensure compliance on urgent basis personally. Please put up draft letter to inform the importer and all the concerned authorities about the suspension of the licence. Proper contravention report alongwith correct assessment of duty/taxes involved has to be submitted within stipulated time. For the purpose of taking photographs and for further verification, the following team under the leadership of (P.A. MFG. Bond) is constituted":‑‑

(1)Mr. Shamim Ahmed.(P. A.)

(2)Mr. Sher Zain(E. O.)

(3)Mr. Gohar Siddiqui(E. O)

A draft letter may be put up to be issued under the signatures of the undersigned tomorrow positively in which the party would be directed to fully cooperate with the team as the exercise is being carried out at the orders of the Collector of Customs.

Thereafter, the licensed bonded premises was inspected, several nothings were made and draft circular was prepared on 7‑7‑2003. However, several inquiries were made by the respondent No. 1 and on 12‑7‑2003, the respondent No. 1, sought approval for circulation of the suspension order of the licence. The approval was sought for issuance of show‑cause‑notice for the cancellation of licence. On 15‑7‑2003, the respondent No. 1, directed for issuance of circular intimating the suspension of licence and issuance of show‑cause notice for the cancellation thereof. On 15‑7‑2003 the circular was issued and draft show‑cause notice was prepared. On 6‑8‑2003, the show‑cause notice was issued to the petitioner calling upon to explain as to why the licence may not be cancelled. On 6‑8‑2003 the law consultant of the petitioner wrote a letter in response to the circular, dated 15‑7‑2003 and the respondent No. 1, prepared parawise comments to the effect that Private Bonded Warehouse licence was suspended under subsection (4) of section 13 of the Customs Act and the reasons for suspension were communicated on 15‑7‑2003. According to respondent No. 1, under sub rule (2) of rule 240 of the Customs Rules, the reasons to show cause were required to be communicated to the licensee after suspension of the bonded licence, and therefore, a show‑cause notice was issued on 6‑8‑2003. Subsequently Messrs Navin Merchant and associates. Addressed a letter to the respondent No.2 on 12‑8‑2003 and the respondent No.1, against submitted note that under sub‑rule (2) of rule 240, the reasons to show cause are to be communicated to the licensee after suspension of bonded licence and a show‑cause notice, dated 6‑8‑2003 was accordingly issued to the bonder.

After narrating the facts it would be appropriate to reproduce the relevant law on the issue under consideration. Subsections (3) and (4) of section 13 of the Customs Act, 1969 read as follows:‑‑

"Section 13(3)

A licence granted under this section may be cancelled by the Collector of Customs for infringement of any condition laid down in the licence or for any violation of any of the provisions of this Act or any rules made thereunder, after the licensee has been given proper opportunity of showing cause against the proposed cancellation.

(4)Pending consideration whether a licence be cancelled under subsection (3), the Collector of Customs may suspend the licence. "

Rules 239 and 240 of the Customs Rules, 2001 read as follows:‑‑

"(239) Cancellation of licence.‑‑‑The licence may be cancelled by the Collector of Customs on conviction of the licensee for any offence under the Act or non‑utilization of the licence, or for violation of any of the conditions specified in the licence or on the request, in writing by the licensee.

(240)Suspension of lience.

(1)Pending consideration whether a licence be cancelled under rule 4. the Collector of Customs may suspend the licence if he is of the opinion that it is expedient to do so and for the reasons to be recorded in writing, therefor by him.

(2)In a case referred in sub‑rule (1) the reasons to show cause shall be communicated to the licensee within twenty four hours of such suspension."

A perusal of subsection (4) of section 13 above, shows that the Collector of Customs is empowered to suspend the licence pending consideration whether a licence be cancelled under subsection (3) of section 13. A bare perusal of subsection (3) of section 13, shows that a licence granted by the Collector of Customs under section 13 may be cancelled for infringement of any conditions laid down in the licence or for any violation of any of the provisions of the Customs Act or any rules made thereunder, after the licensee has been given proper opportunity and showing cause against the proposed cancellation. It means that the proceedings to consider cancellation of licence granted under section 13 of the Customs Act, is to commence with the issuance of show‑cause notice to the licensee against the proposed cancellation. Thus, the condition precedent for exercise of jurisdiction under subsection (4) of section 13 is that there should be a pending proceeding for the consideration of the cancellation of licence. The expression pending consideration connotes the commencement of the proceedings and until it is concluded: The expression `pending consideration' further denotes the period between which cognizance is taken of a matter/issue by an Authority competent in law to pass an order. If an authority competent in law to pass an order has not performed an act which is sine‑qua‑non for passing an order of initiation of proceedings in that behalf the proceedings shall not be deemed to be pending. The condition precedent for initiation of proceedings for the cancellation of licence is the issuance of show‑cause notice and the licence can be suspended during the proceedings pending consideration whether a licence be cancelled or not.

Under sub‑rule (1) of rule 240, the Collector of Customs may suspend the licence if he is of the opinion that it is expedient to do so and for the reasons to be recorded in writing therefor, by him. Thus, A pending proceedings for cancellation of licence under section 13(3) of the Customs Act, read with rule 239 of the Customs Rules, 2001, if the Collector of Customs thinks it expedient to do so, may suspend the licence but before exercising such power he has to record his opinion containing the reasons to do so, meaning thereby, that an objectivity is to be demonstrated in exercising this power of the suspension of licence. Under sub‑rule (2) of rule 240, the Collector of Customs is required to communicate the reasons recorded by him for suspension of licence calling upon the licensee to show cause against such order. The reasons recorded as required sub‑rule (1) of rule 240 are to be communicated to the licensee within twenty four hours of such suspension.

A cumulative reading of the provisions contained in sub sections (3) and (4) of section 13 of the Customs Act, 1969 and rules 239 and 240 of the Customs Rules 2001, leads to the conclusion that the power of Collector of Customs to suspend the licence granted under section 13 of the Customs Act, 1969, is circumscribed with the following conditions:‑‑

(1)A proceeding considering the cancellation of licence under subsection (3) of section 13 must be pending, meaning thereby that a show‑cause‑notice for proposed cancellation is duly served on the licensee.

(2)During the pendency of proceedings for the cancellation of licence as explained above, the Collector of Customs is of the opinion that it is expedient to suspend the licence.

(3)The opinion is to be recorded in writing by the Collector of Customs himself and not by any subordinate or any superior official.

(4)The opinion so recorded should reflect the application of mind by the Collector of Customs himself which is indicated by the expression "the reasons to be recorded in writing, therefor, by him (underlining is mine) appearing in sub‑rule (1) of rule 240. The opinion must contain the reasons for entertaining such view.

(5)The reasons contained in the opinion recorded by the Collector of Customs himself, under sub‑rule (1) of rule 240 shall be communicated to the licensee within twenty‑four hours of such suspension.

Now we proceed to examine the admitted facts in the present case. We find that, admittedly the proceedings, for cancellation of licence under subsection (3) of section 13 of Customs Act, 1969, commenced with the issuance of show‑cause notice, dated 6‑8‑2003. Prior to the issuance of this show‑cause notice there was no proceedings pending consideration for the cancellation of licence. Thus, the respondent No. 2, has suspended the licence of the petitioner on 29‑6‑2003 when no proceeding was pending consideration for the cancellation of licence. Although the perusal of record shows that the Collector of Customs cancelled, the petitioner's licence on 29‑6‑2003 but even if contention of Mr. Raja Muhammad Iqbal, learned counsel for the respondent is accepted that the licence was cancelled with the issuance of circular issued by respondent No.1, dated 15‑7‑2003, even then the suspension of licence is not during the pendency of proceedings for cancellation of licence which commenced with the issuance of show cause notice, dated 6‑8‑2003.

The contention that the licence was suspended from 15‑7‑2003 when the respondent No.1. Assistant Collector of Customs issued a circular letter is not tenable because the Assistant Collector of Customs has no authority to pass any such order. The order of suspension of licence is to be made by Collector of Customs only which is indicated from a bare reading of subsection (4) of section 13 and sub‑rule (1) of rule 240.

The order passed by the Collector of Customs on 29‑6‑2003 reproduced in the earlier part of this judgment shows that, he has not assigned any reason in his order for the suspension of licence and 'the reasons have beer, subsequently communicated in the circular, issued by the Assistant Collector of Customs on 15‑7‑2003. The order of suspension of licence is not sustainable in law, first, for the reason that, the Collector of Customs has not recorded any opinion as to why it was expedient to suspend the licence and secondly he has not recorded the reasons in writing himself required under the law. The reasons contained in the letter of Assistant Collector, dated 15‑7‑2003 cannot be deemed to be the compliance of law as an officer competent to pass an order is required to do so himself and the recording of reasons by his subordinate in a subsequent communication is not warranted in law. It is also pertinent to observe that if an order passed by a competent Authority is not in accordance with the law then the subsequent compliance of the conditions prescribed in law even by himself shall not cure the defect and the recording of reasons by subordinate Authority has no legal validity.

The reasons for the suspension of licence are to be communicated to the licensee within twenty‑four hours of such suspension but according to the note in the file of respondent No.1, the compliance of sub‑rule (2) of rule. 240 has been made by issuance of show‑cause notice on 6‑8‑2003. According to Mr. Raja M. Iqbal, the compliance has been made by issuance of reasons contained in Circular, dated 15‑7‑2003 issued by the Assistant Collector of Customs. However, C there is no communication of reasons to the petitioner/licensee within twenty‑fours of the suspension order as required under the law and consequently, the suspension order impugned in this petition is not in accordance with the law and is liable to be struck down which we do accordingly.

Before parting with this order, we would like to observe that Mrs. Navin Merchant, learned counsel for the petitioner has stated that after suspension of licence the respondents may continue with the proceedings, for cancellation of the licence in accordance with the law. It is directed accordingly.

After hearing the learned Advocates for the parties and perusal of record, the petition was allowed on 2‑9‑2003 by a short order as follows:‑‑‑

"After hearing both learned counsel at length, this petition is disposed of in the following terms:‑‑‑

(1)The order, dated 29‑6‑2003 passed by the Collector and the Circular, dated 15‑7‑2003 issued by Assistant Collector Customs, Manufacturing Bond (Export) are hereby set aside.

(2)Notwithstanding the setting aside of the suspension order the proceedings initiated by the respondents under Show‑cause notice, dated 6‑8‑2003 shall continue and be decided in accordance with law."

These are the detailed reasons in support thereof.

M.B.A./A‑484/KOrder accordingly.