Messrs SHAFIQ TEXTILE MILLS LTD., KARACHI VS FEDERATION OF PAKISTAN
2005 P T D 923
[Karachi High Court]
Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ
Messrs SHAFIQ TEXTILE MILLS LTD., KARACHI
versus
FEDERATION OF PAKISTAN through Ministry of Finance, Islamabad and 3 others
Constitution Petitions Nos.D-1226, D-1227 and D-1228 of 1994, decided 21st January, 2003.
(a) Customs Act (IV of 1969)---
----Ss. 32, 33 & 156(1)---S.R.O. 738(I)/90, dated 11-7-1990---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Refund of export duty, application for---Pleas raised in application were to the effect that export duty had been wrongly charged on export of cotton thread, which was not subject to payment of export duty; that if goods were taken to be cotton yarn even then no export duty was payable after issuance of S.R.O. 738(I)/90 and that such S.R.O. was discriminatory---Rejection of claim and issuance of show-cause notice and imposition of penalty on exporter for knowingly making false statement by giving goods a dubious description in an attempt to defraud public exchequer byfiling draw-back claim---Validity---Exporter by describing goods first as thread and then alternately terming same as cotton yarn had not made a false statement, but had only put forward its argument in support of claim---Taking of alternate pleas couldnot be termed as making a false or untrue statement nor same would amount to misdeclaration---No document was alleged to have been concealed or withheld by exporter---Ifanydocumentwasmissing,authoritycouldask for same or reject claim---No amount had been refunded by department---High Court accepted Constitutional petition and set aside show-cause notice and order of penalty by declaring same to be against lawand without jurisdiction.
(b) Customs Act (IV of 1969)---
----Ss. 32 & 33---Refund of duty, application for---Alternate pleas, taking of---Validity---Taking of alternate plea could not be termed as making a false or untrue statement nor same would amount to misdeclaration.
(c) Interpretation of statutes---
----Every person is entitled to put forward his interpretation of a provision of law before Adjudicating Authority, and it is for the latter to decide, whether or not to accept such argument.
Rasheed A. Akhund for Petitioner.
Nadeem Azhar Siddiqui for Respondent No.1
Raja M. Iqbal for Respondents Nos.2 to 4.
Date of hearing: 16th October, 2002.
JUDGMENT
S. AHMED SARWANA, J.---The brief facts as stated in C.P. No. D-1226 of 1994 are that the Petitioners, who is engaged in the business of manufacture and export of Cotton Yarn and Cotton Thread , exported several consignments of the aforesaid product in the years 1990 and 1991. Some time after the export of the aforesaid goods, the petitioners filed applications for refund of the Export Duty alleging that Customs Duty which was not payable either on Cotton Thread or Cotton Yarn had been charged on the goods and relied upon S.R.O. No.738(I)/90, dated 11-7-1990 in support of the application and thereafter sent reminders in respect thereof. Several copies of the Bills of Entry showing export of the goods and the Customs duty paid thereon which were sent with the applications have been filed as annexures with the Petitions.
On 9-8-1992, the Collector of Customs (Export) (Respondent No.3) issued a Notice to the petitioners to show cause why action should not be taken against them for wilful attempt to defraud the national exchequer by making false and untrue declarations which attract the provisions of section 32 of the Customs Act, 1969 and punishable under section 156(1)/14 of the Act. The petitioners replied to the show-cause notice explaining the position. After hearing the petitioners, respondent No.2 by order, dated 7-2-1994 rejected the claim for refund and imposed penalties in various amounts in respect of each claim.
Petitioners have filed this Petition, inter alia, seeking a declaration that the petitioners are not liable to pay any Customs Duty on the export of Cotton Thread which is a Duty Free item; and that the show-cause notice as well as the impugned order, dated 7-2-1994 imposing penalty are without lawful authority and of no legal effect.
Mr. Rasheed Akhund, learned counsel for the petitioners, vehemently challenged the contention of the Department that the petitioner had attempted to give a vague description in the application for refund with the motive of committing a tax fraud and depriving the Government of the tax which was lawfully paid by the petitioner by exporting Cotton Yarn and naming it as Cotton Thread . He submitted that the petitioners had exported Cotton Thread and not Cotton Yarn and, therefore, there was no misdeclaration. He urged that there was no violation of section 32 of the Customs Act, 1969 and, as such the imposition of penalty under section 156(1) of the Customs Act, was illegal. He confined his arguments only on the application of section 32 and the penalty imposed in relation thereto and did not press for any other relief contained in the prayer clause.
Mr. Raja Muhammad Iqbal, learned counsel for the Department, contended that as the petitioners were aggrieved by the order passed by the Collector of Customs, they should have followed the normal procedure and filed an appeal under section 193 of the Customs Act, 1969 and, as such, the petition was not maintainable. He added that there is a distinction between the Cotton Thread and Cotton Yarn and by terming Cotton Yarn as Cotton Thread , the Petitioners were guiltyof misdeclaration under section 32 of the Customs Act, 1969.
Mr. Nadeem Azhar Siddiqui, learned DAG, contended that the petitioner had declared Cotton Yarn in the Customs Documents as 21/2 or 30/2 which is an expression used only for Yarn and not for Thread . He also added that though no loss of revenue was caused but an attempt was made to cause such loss by misdeclaring the goods and, as such, the impugned order is in accordance with law and the petition was liable to be dismissed.
Exercising his right of reply, Mr. Akhund, learned counsel for the petitioners, vehemently urged that an act which is without jurisdiction is challengeable in a Constitution Petition without resorting to the remedies under the Customs Act and this was one of those cases where both the show-cause notice as well as the order in original, dated 7-2-1994 were illegal, contrary to the provisions of the Customs Act and without jurisdiction and, therefore, the petition was maintainable.
The facts of C.Ps. Nos. D-1227 and 1228 of 1994 are similar in nature and need not to be repeated as the points of law involved in all the three Petitions are identical.
We have heard Mr. Rasheed Akhund, Mr. Raja M. Iqbal and Mr.NadeemAzharSdidiqui,learnedcounselfortherespectiveparties.
It appears that the petitioner filed an application for refund of Export Duty stating that they had exported cotton thread which was exempted from payment of duty and not cotton yarn but the Collector instead of refunding the amount imposed a penalty on them holding thatthey had knowingly made an untrue statement which was false in material particular and thereby attempted to cause loss of revenue whichis punishable under section 156(1) of the Customs Act, 1969. Toappreciate the reasoning of the Customs Department, it would be appropriate to reproduce here the relevant provisions of section 32 of the Customs Act, 1969 which read as follows:---
(32)Untrue statements, 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 such 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 pay 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 shouldnot 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 amounton that account shall be served with anotice within six months of the relevant date requiring him to show cause why he should not pay the amount specified in thenotice.
(4) .
A perusal of the above provisions of section 32 indicates that they relates to three different and distinct categories of short levy, non-levy or erroneous refund of the duty paid. The first category is in relation to any declaration or statement which in the knowledge of the maker of the statement is false in any material particular, the second relates to a situation where there is some collusion and the third where by reason of any inadvertence, error or misconstruction on the part of the Customs there is non-levy, short levy or the duty has been erroneously refunded. The case of the petitioners, according to the Departmentfell under the first category, that is, knowingly making an untrue/false statement to claim refund of duty which was not justified. At this juncture, it would be proper to reproduce a specimen of the application filed by the petitioners for refund of duty. One such application, dated 14-7-1991 addressed to the Assistant Collector of Customs reads as follows:--
SUB:REFUND OF EXPORT DUTY FOR RS.59,875 PAID ON EXPORT OF COTTON THREAD VIDE SHIPPING BILL NO. 23720 DATED 29-5-1991 EGM NO. 784/91
Dear Sir,
We wish to draw your kind attention towards the export duty which had wrongly been charged by the customs against the export of Cotton Thread, while as per rules we were not required to pay the export duty on Cotton Thread. Even the export duty on Cotton Yarn is also not applicable after the issuance of notification, dated 11-7-1990 in which a discriminatory treatment has been given which is against the law of equality, further more the said export duty on Cotton Yarn had also beenwrongly improved under section 19 of the Sea Customs Act.
We, therefore, submit herewith our Claim for Refund of Rs.59,875 being export duty which was wrongly charged on above mentioned shipment.
Please refund the amount of export duty and oblige.
. . . . . .
A reading of the above Application/letter shows that the petitioners first stated that the export duty had been wrongly charged by the Customs Department on the export of cotton thread which is not subject to payment of export duty; thereafter, they stated that even if goods were taken to be cotton yarn no export duty was payable after issuance of S.R.O. 738(I)/90, dated 11-7-1990 and added that even, the Notification, dated 11-7-1990 was discriminatory and against the law of equality. The petitioners apparently took alternate pleas in the application for refund. Taking of alternate pleas cannot be termed as making a false or untrue statement. The petitioners by describing the goods first as thread and then alternately terming it as cotton yarn toadvance their argument, in our opinion, did not make a false or untrue statement but only put forward an alternate argument in support of their claim. All documents and information in support of the application were available before the Customs Department and no document was alleged to have been withheld or concealed by the petitioners. In case any certificate or document was missing for denying the benefit of the exemption from payment of Customs Duty, the Collector was at libertyto ask for the same or reject the claim. The Collector did not accept the argumenteven though the petitioners had referred to No. S.R.O. 738(I)/90, dated 11-7-1990 in support of the refund claim because the Notification in his opinion was not applicable in the circumstances and instead issued the impugned show-cause notice. The argument of the Department that by giving the goods allegedly a dubious description, the petitioner in the first phase tried to create doubt and thereafter on that basis attempted to defraud the national exchequer by filing a duty draw back claim is far fetched and based on hypothesis which cannot be made the basis of finding a person guilty of misdeclaration under section 32 of the Customs Act, 1969.
Mr. Siddiqui, learned DAG, strenuously contended that misdeclaration irrespective of loss was an attempt to cause loss which is covered by section 32(1) read withsection 32(3) of the Customs Act and therefore liable to penalty. We have already held that taking ofalternate pleas does not amount to misdeclaration and therefore the Application for refund does not fall within the mischief of section 32(1). Now Clause (3) of section 32 refers, among others, to a situation where duty or charge has been erroneously refunded. In the present case there has not been any inadvertence, error or misconstruction on the part of the Department and no amount whatsoever was refunded by it. The argument of the learned counsel is misconceived and is accordingly rejected.
As already discussed above, every person is entitled to put-forward his interpretation of a provision of law before the adjudicating authority and it is for the latter to decide whether or not to accept the argument. In the instant case, the arguments of the petitioner were not accepted by the Department and no duty was refunded. The reasons advanced by the Collector in the show-cause notice as well as in the impugned order, dated 7-2-1994 are not based on correct interpretation of section 32, and the conclusions drawn therefrom by the Collector are not sustainable in law and are accordingly rejected.
In view of the above discussions, all the three petitions are allowed,theshow-causenoticesissuedbyRespondentNo. 3andtheimpugnedordersimposingpenaltyonthepetitionersinthethree petitions are declared to be contrary to law and withoutjurisdiction and accordingly set aside. There shall be no order as to costs.
The above are the reasons for the Short Order, dated 16-11-2002 whereby these petitions were allowed.
S.A.K./S-92/KPetitions accepted.