Messrs IHSAN SONS (PVT.) LTD., KARACHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2006 P T D 1333
[Federal Tax Ombudsman]
Before Justice (Retd.) Munir A. Sheikh, Federal Tax Ombudsman
Messrs IHSAN SONS (PVT.) LTD., KARACHI
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Review No.60 of 2005 in Complaint No. 558-K of 2004, decided on 24/12/2005.
(a) Customs Act (IV of 1969)---
----S.18---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---S.R.O. 450(I)/2001---Goods dutiable---Federal Tax Ombudsman recommended to remit the demurrage charges and reimburse the amount already paid---Karachi Port Trust contended that it was working within the ambit and scope of its own laws and could not be directed to accept the said detention certificate and waive demurrage charges as it was neither part of Revenue Division nor the amount of demurrage was a tax---Validity---Karachi Port Trust was acting for and on behalf of Customs Authorities relating to a matter as to payment of custom duty, etc., as such, its legal status in relation thereto was that of assignee or agent of Customs Authorities---For such limited purpose, Karachi Port Trust was as much part of Revenue Division as its principal was for whom they were detaining the goods---Karachi Port Trust was bound to clear goods without charging demurrage once a certificate was issued by the Customs Authorities---Application was dismissed by the Federal Tax Ombudsman and the Karachi Port Trust was directed to implement the recommendations of remission of the amount of demurrage to the complainant by refunding the amount already received by it.
Constitutional Petition No. 2518/D of 2001 distinguished.
(b) Customs Act (IV of 1969)---
----Preamble---Demurrage is a tax---Since the demurrage normally was payable by the importers in a case where detention was prolonged on account of non-payment of customs duty or other taxes due as such, it was in the nature of penalty on delayed payment of taxes, therefore, it was also a part of tax.
Muhammad Iqbal, Manager.
Faisal Khan, A.C. (Appraisement)
Masood Sabir, A.C. Customs (Exports)
Syed Faisal Aijaz, Law Officer, KPT.
Aslam Yousaf, Traffic Officer, KPT.
DECISION/FINDINGS
JUSTICE (RETD.) MUNIR A. SHEIKH (FEDERAL TAX OMBUDSMAN).---This decision shall dispose of the application made by Karachi Port Trust (hereinafter referred to as the "KPT") for recalling the recommendations made in the decision dated 11-4-2005 in Complaint No. 558-K/2004.
2. The recommendations, which are sought to be recalled made in the said decision are hereby reproduced below in extenso for facility of ready reference:
"(i) recommend to the Ministry of Communications to remit the demurrage charges and reimburse the amount already paid by the Complainants;
(ii) direct the Collector of Customs (Exports) not to delay clearance of the import consignments for manufacturing bonds and export of finished goods;
(iii) Compliance be reported to this office within forty five days".
3. The facts of the case relevant for disposal of this application shortly stated are that the respondents-complainants are manufacturers and exporters of textile products including knitted gloves, operating under the manufacturing bond license of no duty and no drawback under S.R.O. 450(I)/2001. According to the complainants, a trial order for manufacture and export of gloves was finalized and a consignment of blended multi-coloured mixed yarn arrived on 14-2-2004 and bill of entry was filed on 21-2-2004 for duty and tax free clearance under the above mentioned S.R.O. but the Collectorate of Customs (Exports) withheld the consignment at the KPT premises claiming that it was stock-lot. A show-cause notice was issued against the complainants on 27-4-2004'making out a contravention case for import of stock lot goods, which was refuted by the complainants. The Deputy Collector (Adjudication) visited manufacturing premises, verified the status of knitting and after detailed hearing passed adjudication order on 19-5-2004 which was received by the complainants on 8-6-2004. it was held through this order that the complainants were genuine manufacturing bond license holder and detention of imported consignment since March, 2004 caused undue demurrage. On the basis of this order, delay and detention certificate as was used to be issued previously for a very long time, was issued but KPT refused to waive the demurrage on account of which the complainants were made to pay an amount of Rs. 68,570 for clearance of goods against which Complaint No. 558-K/2004 was filed. It was accepted and the above mentioned recommendations were made.
4. Through this application, the KPT has raised the contention that recommendations made by the FTO to the Ministry of Communications to remit the demurrage charges and reimburse the amount already paid by the complainants were made without affording opportunity of hearing to the said Ministry, which was against the principles of natural justice. It has also been contented that KPT dues are statutory charges in lieu of the services rendered by the KPT and not the tax and as such the jurisdiction of FTO was barred. In amplification of this contention, it has also been maintained that no provision to accept the delay/detention certificate issued by the Customs Authorities existed in the relevant S.R.O. and as such KPT was bound to follow its rules, therefore, KPT was not in a position to accept or implement the said recommendations. In the end, it has further been maintained that there was neither any mal?administration on the part of KPT nor KPT was impleaded as party in the proceedings.
5. Learned counsel for the KPT and Ministry of Communications contended that through resolution passed by the Board of Trustees, KPT on the recommendations of Finance Committee of which one of the officers of the Customs Department was also a member, the provision in the KPT Rules of acceptance of delay and detention certificate issued by the Customs Authorities for waiver of demurrage was omitted, therefore, the KPT was working within the ambit and scope of its own law and' could not be directed to accept the said detention certificate and waive demurrage which was neither part of Revenue Division nor the amount of demurrage was a tax. As was mentioned in the application, it was contented that the amount was charges of the services rendered by KPT by detaining the goods at their premises. Learned counsel also maintained that the complainants should have been directed to recover the amount of demurrage from the Revenue Divisions which course of action would have been in accordance with the judgment of the Sindh High Court in a similar matter passed in Constitutional Petition No.2518/D of 2001.
6. I have considered the contentions and arguments of learned counsel for KPT and complainants and gone through the record.
7. As to the contention that KPT while dealing with the consignment in question was rendering services of detaining the goods at their premises as such the amount of demurrage was due for the services rendered and not a tax, it may be mentioned here that learned counsel for KPT when questioned was unable to refer to any provision of law by which KPT was established authorizing it to detain goods on account of non-payment of custom duty or any tax relating to Customs Authorities. He, however, frankly admitted that the goods were detained at the KPT premises by the KPT Authorities for and on behalf of the Customs Authorities/Revenue Division till it was decided as to whether on the import of these goods, custom duty was chargeable. The decision was to be made under customs law by, the Authority established under those laws, otherwise KPT had no authority under its own law to refuse the importers to receive the goods as no amount of KPT itself was payable and due. From this, it is clear that the KPT was acting for and on behalf of Customs Authorities relating to a matter as to payment of customs duty, etc., as such, its legal status in relation thereto was that of assignee C or agent of Customs Authorities, therefore, it can safely be held that for this limited purpose it was as much part of the Revenue Division as its principal was for whom they were detaining the goods, otherwise the importers could legally maintain that since KPT Authorities under its law had nothing to do with determination of customs duty by the Customs Authorities or the question whether the same were liable to payment of customs duty, therefore, they could not detain the goods for which they were liable to be sued for damages.
8. After having held that in the matter of detention of goods by KPT in connection with payment of custom duty, etc., on behalf of Customs Authorities, it was part of the Revenue Division, the next question which arises is whether KPT of its own by making amendment of the rules for omission thereof provision of acceptance of delay/ detention certificate issued by the Customs Authorities could maintain that it was not bound by the said certificate of its principal. It may be mentioned here that in the matters relating to detention of goods for want of clearance of customs duty on behalf of Customs Authorities, it was neither governed nor regulated by the law and rules of KPT, therefore, even if such a resolution was held to have been validly passed. The same did not alter the legal position that by acting as agent of the Customs Authorities in respect of detention of goods, the KPT Authorities were Wend to act also on the directions and the decision of the Customs Authorities, as regards clearance of the goods without payment of amount of demurrage. Since the demurrage normally is payable by the importers in a case where detention is prolonged on account of non-payment of customs duty or other taxes due as such, it was in the nature of penalty on delayed payment of taxes, therefore, it was also a part of tax. The argument that amount of demurrage is recoverable by the KPT as an amount for services rendered is not tenable for even if KPT is held to be rendering services, it may be doing so to Customs Authorities and not to importers whose goods were wrongfully detained though no tax or customs duty was chargeable. The KPT if so advised may settle the matter with the Customs Authorities on whose behalf it detained the goods.
9. Reverting to the judgment of the Sindh High Court passed in Constitutional Petition No.2518 of 2001, it may be mentioned here that the contention of the importers was accepted that they were not liable to pay the amount of demurrage and it was ordered that after getting clearance of goods by payment of demurrage to KPT, the Customs Authorities should be approached to pay the said amount by them. It is clear that the High Court had accepted the said position that so far as importers were concerned, they were not to suffer on this account. I find that this judgment was passed keeping in view that it is the Revenue Division, which was liable to compensate the importers and not the KPT which was functioning under its own law. The question whether the KPT Authorities were part of the Revenue Division while detaining goods for and on behalf of Customs Authorities till clearance of custom duty and other taxes of the Revenue Division was neither raised nor adjudicated in the said judgment. This question has been raised before me through this application by KPT as to whether KPT was part of Revenue Division, as regards non-clearance of goods for want of payment of customs duty and act of detention of the goods for the purpose for and on behalf of the Revenue Division has now been answered that it is part of the Revenue Division for this limited purpose, therefore, it was bound to clear goods without charging demurrage once a certificate was issued by the Customs Authorities.
10. For the foregoing reasons, the application made by the KPT and the Ministry of Communications is hereby dismissed and the KPT is hereby directed to implement the recommendations of remission of the amount of demurrage to the complainants by refunding the amount of Rs.68.570 already received by it.
C.M.A./35/FTO?????????????????????????????????????????????????????????????????????? Application dismissed.