Messrs AKRAM INDUSTRIES LIMITED through Authorized Attorney VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2006 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1906 (2005)

(a) Customs Act (IV of 1969)---

----Ss.21-A, 19 & 219---Deferred Payment of Customs Duty Rules, 1991---Contract Act (IX of 1872), S. 72---Constitution of Pakistan (1973), Art. 27---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---S.R.O. 490(I)/91, dated 30-5-1991 (Deferment of Import Duty Rules, 1991)---S.R.O. 1076(I)/95, dated 5-11-1995---S. R.0.476(I)105, dated 19-5-2005---Deferment of collection of customs duties---Customs Department demanded additional amount as surcharge and as delayed payment surcharge due to calculation of surcharge and delayed payment surcharge @ 14% rather than 11%-Complainant contended that Customs Department had failed to encash the bank guarantee in time; that by not encashing bank guarantee the Department had waived their right to object to delay in payment; that delayed surcharge rose due to Department's own default and they could not be allowed to take benefit of their own failure and that levy of additional tax/surcharge/mark-up was illegal---Validity---Department had failed to encash the bank guarantee in time to recover the principal amount as well as surcharge @ 11% as guaranteed---Guarantee put up by the guarantor bank showed that the department had not asked the complainant to get condition 5(4) of the prescribed guarantee incorporated in the actual guarantee put up by the guarantor bank in order to secure surcharge on surcharge from the guarantor bank; yet the department was demanding, apart from 11% surcharge, which was covered by the actual bank guarantee, surcharge upon surcharge also, which was not covered by the guarantee put up by the guarantor bank---Demand raised about an amount chargeable as surcharge over surcharge was not valid and also not in consonance with the correct interpretation of the terms of the judgment of High Court to which the department was not entitled---All this amounted to maladministration---Federal Tax Ombudsman recommended that Central Board of Revenue direct the competent Customs Authorities to exclude from the notice through which demand had been raised, the amount of surcharge over surcharge.

(b) Customs Act (IV of 1969)---

---S. 21-A---Constitution of Pakistan (1973)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Deferment of collection of customs duties---Question was whether the Government was legally competent to levy surcharges---Such matter was to be decided by Courts of competent jurisdiction---Complainant may raise such questions of law before a competent Court for finding answer thereto.

(c) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S. 10(3)---Procedure and evidence---Limitation---Complainant filed civil petition in Supreme Court of Pakistan, which was subsequently withdrawn as the complainant wanted to avail remedy under the Customs Act, 1969---Supreme Court dismissed the petition as withdrawn---Complainant filed complaint before the Federal Tax Ombudsman just after 18 days of withdrawal of its petition from Supreme Court---Matter was alive before withdrawal of petition---Complaint could not be termed as time-barred in terms of the provisions of Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 because the complainant had lodged its complaint before Federal Tax Ombudsman almost immediately after withdrawing its petition from the Supreme Court---Federal Tax Ombudsman was competent to investigate the complaint.

(d) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S.9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Territorial jurisdiction---Department's objection that since transactions were made in Karachi the complaint fell outside the territorial jurisdiction of Regional Office, Lahore was misplaced because complainant's had its registered office at Lahore---Complaint could be heard at Regional Office, Lahore.

Sardar Qasim Ahmad Ali for the Complainant.

Javed Iqbal Butt, D.C. Customs for Respondents.

DECISION/FINDINGS

JUSTICE (RETD.) MUNIR A. SHAIKH, FEDERAL TAX OMBUDSMAN.---Facts of the complaint are that the complainant had imported in 1992 thirty-two Ring- Spinning Frames along with other machinery and equipment for installation and use in its Mills at Habibabad. Ring Spinning Frames were exempted from payment of customs duty and sales tax in excess of 30% of the leviable rates vide S. R. O. 1076(I)/95, dated 5-11-1995 subject to following conditions: --

(a) The 30% duty and sales tax so recoverable shall be secured in the prescribed format provided in Deferment of Import Duties Rules, 1991 notified vide S.R.O. No.490(I)/91, dated 30-5-1991.

(b) On receipt of deferred payment guarantee under S.R.O. No.490(I)/91, the bank guarantee secured previously shall be returned;

(c) The amount secured through deferred payment guarantee shall be subject to rate of mark-up as provided under S.R.O. No.490(I)/91;

(d) The instalments of payment shall be payable in five equal yearly instalments.

In S.R.O. 490(I)/91, as referred to in S.R.O. 1076(I)/95 issued under section 219 of the Customs Act, 1969 no rate of mark-up, but rate of surcharge (11% per annum) had been mentioned as payable on deferred amount. The S.R.O. in question did not allow delayed payment surcharge or additional surcharge. The complainant had made to the respondents payment amounting to Rs.3,584,089 as against the due amount of Rs.34,60,508, in excess by Rs.123,581. The respondents, however, demanded additional amount of Rs.24,99,735 (Rs.1,859,457 as surcharge and Rs.6,40,278 as delayed payment surcharge) due to calculation of surcharge and delayed payment surcharge @ 14% rather than 11% as per instructions of the C.B.R. Taking objection, the complainant filed Writ Petition No.652 of 2002 before the Lahore High Court challenging levy of surcharges as being unlawful and ultra vires of the Constitution. The Lahore High Court disposed of the said writ petition vide order, dated 25-10-2002 with the observations that the respondents would work out the amount so due on the basis of rate of 11% and not 14%. Subsequently, the complainant received a demand notice, dated 30-12-2002 wherein the Collectorate, without hearing the complainant, demanded Rs. 1,884,601. The complainant challenged the legality of demand notice along with High Court's judgment, dated 25-10-2002 before the Honourable Supreme Court through Civil Petition No.48 of 2003. The petition was, however, withdrawn from the Supreme Court with the understanding that the complainant would avail remedy. under the Customs Act, 1969. The respondents were enhancing the illegally demanded amount of Rs.1,884,601 on monthly basis. The demand notice was liable to be set aside, being illegal, because (i) the complainant had paid more than the principal amount, (ii) the C.B.R. or the Government did not have the power to levy surcharge under sections 19, 21A and 219 of the Customs Act, 1969, (iii) the levy and demand was against Article 27 of the Constitution of Islamic Republic of Pakistan, which provided that tax could be levied only by an act of Parliament, (iv) respondents were illegally demanding payment of surcharge and surcharge on surcharge which were not leviable under the Customs Act, 1969, being in the nature of interest contrary to injunctions of Islam, (v) timely payments were secured by Bank guarantee, filed by the complainant. It was respondents' failure to encash the guarantee in time, which created the problem. By not enchasing the bank guarantee the respondents had waived their right to object to delay in payment. The delayed surcharge rose against the complainant due to B respondents' own default and they could not be allowed to take benefit of their own failure. Levy of additional tax/surcharge/mark-up under S.R.O. 1076(I)/95 was illegal. The following questions of law needed to be settled:

(i) Whether delay surcharge, deferral surcharge and surcharge upon surcharge was payable under law by the complainant?

(ii) Whether there being no provision for imposition of deferral surcharge or surcharge of any kind in sections 19, 21A and 219 of the Customs Act, 1969 the Customs Authority or the C.B.R. had the power to levy surcharge?

(iii) Whether the levy and demand of deferral surcharge was against Article 27 of the Constitution of Pakistan?

(iv) Whether payments secured by the bank guarantee by the C.,B.R., which were not encashed could be deemed to have been waived and whether the respondents could be allowed to take benefit of their own delay and default in encashment of the same?

(v) Whether respondents acts of imposing surcharges in question were unlawful and amounted to `maladministration'?

It is prayed that the demand notice, dated 30-12-2002, being illegal and unlawful, be set aside and the respondents be restrained from demanding surcharge, delayed payment surcharge and surcharge-on?-surcharge. They may also be restrained from making any recovery from the complainant.

2. In reply, the respondents have submitted that the complainant had filed this complaint practically against Honourable Lahore High Court's order, dated 25-10-2002 passed in Writ Petition No.652 of 2002. Court's order had assumed finality as the complainant had withdrawn its Civil Petition No. 48 of 2003 from the Supreme Court of Pakistan. The complaint was not entertainable as the respondents were acting in compliance of the High Court's order and in accordance with the provisions of law, rules and regulations. The respondents had not committed any `maladministration'. The interpretation of law, rules and regulations being sought by the complainant fell outside the jurisdiction of the FTO in view of the provisions of section 9(2)(b) of the FTO Ordinance, 2000. The complainant had chosen to avail the facility of deferred payment in terms of S.R.O. 490(I)191, dated 30-5-1991 by its own consent and acted thereupon by providing bank guarantee covering deferred payments. In terms of section 8 read with section 72 of the Contract Act, 1872, the contract stood concluded. There was no question of subsequent complaint of `maladministration' against the respondents. The complainant had exhausted judicial remedies up to the level of Supreme Court, hence the complaint was not maintainable. The deferred payment facility was availed by the complainant in October, 1996 and the complainant was thus aggrieved first when notice, dated 17-7-2001 was issued to it. The complaint was, therefore, time-barred in terms of section 10(3) of the FTO Ordinance, 2000, as the same had been filed after six months from the date when the complainant was first aggrieved. The goods were imported and released in Karachi. Transactions were made in Karachi and the complaint fell outside the territorial jurisdiction of Regional Office, Lahore. In terms of condition (4) of the, prescribed guarantee, integral part of S.R.O. 490(I)/91, the complainant was required to make payment of `delayed payment' surcharge on surcharge amount also. The contention of the respondents had been accepted by the High Court vide order, dated 25-10-2002. In terms of section 21A of the Customs Act, 1969, the C.B.R. could, subject to certain conditions, limitations or restrictions, defer collection of customs duty. The deferred payments rules (S.R.O. 490(I)/91) were legally framed under section 219 of the Customs Act, 1969. The `Surcharge' or `deferred payment Rules' could not be termed as levy of tax. It was a facilitation fee/surcharge for providing the deferred payment facility. It was optional. If anyone wanted to avail the facility he had to comply with conditions and restrictions laid in the Deferred Payment of Customs Duty Rules, 1991. In order that the exchequer did not suffer on account of delayed recovery of duty/taxes, which were otherwise payable at the time of assessment, a lawful agreement (through bank guarantee) had been entered into between the complainant and the respondents. The respondents could enforce the agreement. Respondents had acted legally. In a similar case of Messrs General Tyre & Rubber Company of Pakistan Limited v. Deputy Collector of Customs and others (C.P. No.726/2001), the High Court of Sindh, vide judgment, dated 2-3-2005, had held that the Customs Authorities were empowered to get the surcharge (facilitation fee) on deferred amount. The said surcharge was not leviable on all imports. There was no question of violation of Article 27 of the Constitution of Islamic Republic of Pakistan. The complainant had delayed the payment due to financial constraints as was evident from its letters, dated 26-7-2001 and dated 28-6-1999. Complainant may be asked to pay surcharge and delayed payment surcharge. Even as per payment schedule, as given in the guarantee, the complainant was required to pay Rs.4,602,474 provided the payment was made up to 5-11-2000 otherwise as per para 5(4) of the prescribed guarantee the complainant was required to pay surcharge on unpaid principal and delayed payment surcharge on unpaid surcharge. The complainant had abused the facility of deferred payment and was unnecessarily dragging the government into litigation. The Lahore High Court had clearly ruled that the respondents would work out the amount so due on the basis of rate of 11% and not 14% and serve demand notice on the complainant accordingly for payment. The Court had ordered that the surcharge was agreed to be paid in terms of said deferred payment arrangement and delay in the payment of entire amount so due could also be surcharged by the respondents in terms of section 219 of the Customs Act, 1969. The respondents had acted in compliance of High Court's order. The complainant had not supplied High Court's order, dated 25-10-2002 nor had they supplied information about its decision to withdraw the civil petition from the Supreme Court. Notices issued by the respondents were legal. Respondents were correct to charge the payment of surcharge and surcharge on surcharge as per condition 5(4) of the prescribed guarantee as envisaged in S.R.O. 490(I)/91, dated 30-5-1991. The contents of complainant's letters, dated 28-6-1999 and 26-7-2001 and guarantor bank's letter, dated 27-12-2001 showed that the complainant had itself pleaded to keep the recovery proceedings in abeyance to enable it to rehabilitate its financial position. Delay in payment occurred due to complainant's attitude. The High Court had clearly ruled that delayed payment surcharge and surcharge on over-due surcharge had to be paid by the complainant. The complainant did not press its case in the apex Court, which proved that it was only trying to prolong payment of government dues. The complaint was not maintainable under the provisions of sections 2(3) and 9(2) of the FTO Ordinance, 2000. The same may be dismissed.

3. The AR reiterated during the hearing the arguments advanced in the written complaint. He placed on record a copy of unnumbered Notification S.R.O.(I)/05, dated 19-05-2005 claiming that as the aforesaid notification exempted ring spinning frames imported by those units, which had submitted surety/bank guarantee for the amount of import and Iqra surcharges thereon on account of dispute of their locally manufactured goods or otherwise at the time of clearance and had availed the benefit of erstwhile S.R.O. 1076(I)/95, dated 5-11-1995 and subsequently had gone into litigation in different Courts prior to 28-12-2004 from payment of so much of import surcharge and iqra surcharge as was in excess of 30% of the applicable rate at the time of filing of home consumption or ex-bond bill of entry, subject to the conditions laid therein, the respondents may be directed to withdraw their demand against the complainant in the light of the aforementioned S.R.O. He added that the complainant had requested for availing the facility of deferred payment on 5-11-1995. It had put up the bank guarantee on 30-10-1998 and paid first instalment of Rs. 539,840 on 7-7-1999. In fact, it had paid 30% duty and taxes amounting to Rs.35 Million. It had, therefore, paid the entire principal amount on 30-8-2000. If the complainant had defaulted in payment of instalments the respondents could have encashed the bank guarantee, which was valid up to 5-11-2000. The respondents should suffer for their own failure to encash the bank guarantee within its validity period. He further submitted that respondents demand, dated 30-12-2002 for payment of Rs.1,884,601 was unjustified.

4. The DR submitted that the respondents had acted in compliance of Honourable Lahore High Court's order, dated 25-10-2002. The demand would increase with passage of time. The complainant should pay the amount as worked out on the basis of High Court's order. Asked whether the demand notice, dated 30-12-2002 also included surcharge upon surcharge, the DR submitted that it did. He also added that the complaint was barred by time as the complainant had first notice of grievance way back when the department issued the first demand notice or when the High Court had issued its order in 2002. The AR pleaded that while in the first instance the complaint was not time-barred, as the complainant had filed civil petition before the Supreme Court, which was pending there before it was withdrawn on 25-2-2005 and thereafter the complainant filed complaint before the FTO on 13-4-2005 without loss of time. Even otherwise the Honourable FTO could consider waiving the time-bar because the complainant's case was before the Supreme Court uptill 25-3-2005 and they had filed the complaint soon thereafter. At this stage, the DR was directed to prepare and submit within one week a statement/chart showing the total amount due from the complainant, the number of instalments which the complainant was to pay, the time-schedule for payments, the date on which the bank guarantee was put up by the complainant, the validity period of the bank guarantee and also give breakdown of the demand indicating whether only 11% surcharge was calculated on the principal amount due or whether the demand included the element of surcharge on surcharge. He was also advised to let this forum know as to why the bank guarantee put up by the complainant in terms of S.R.O. 490(I)/91 was not encashed during its validity.

5. Mr. Javed Iqbal Butt, D.C., accompanied by Mr. Abid Hussain, A.C., Incharge Bank Guarantee Cell, Custom House, Karachi, presented charts/statements (added to record) on 25-6-2005 giving details of dates on which payments of instalments were due and the dates on which the principal amounts were to be paid by the importer together with other relevant information. The material so provided by the respondents shows that Ring Spinning Frames imported by the complainant were allowed exemption in excess of 30% of duty and taxes_ subject to the condition that the amount of taxes would be secured by a bank guarantee in the prescribed form provided in Deferment of Import Duty Rules, 1991 vide S.R.O. 490(I)/91, dated 30-5-1991. Clause 3 of the bank guarantee (on record) submitted by the guarantor bank shows that it covered the deferred amount and surcharge thereon but not exceeding a sum of Rs.4,602.474. As per clause 4 of the bank guarantee the bank had also undertaken to pay the Collector of Customs the deferred amount and surcharge thereon @ 11% for the deferred amount or any part thereof that remained unpaid from the date on which machinery was released to the importer. The amount of duty and taxes had to be paid in five equal yearly instalments from the date of issue of notification and the surcharge had been allowed to be paid with yearly instalments the first of which was payable on 5-11-1996.

6. As per the schedule given by the bank/importer the five instalments were due to be paid as under:

The complainant did not make any payment from 5-11-1996 to 5-11-1998. The complainant had asked the Collector for rescheduling the payment in 12-instalments. The Collector, however, allowed payment in six instalments but the complainant did not even then pay as per the revised schedule. The char provided by the respondents further discloses details of payment made by the complainant as under:-- ,

11-11-1999???? Rs.539,840????? (Principal amount)

30-11-1999???? Rs.884,884????? (Principal amount)

14-12-1999???? Rs.539,840????? (Principal amount)

16-8-2000?????? Rs.539,840????? (Principal amount & part surcharge)

Total??? Rs.3584084

The chart/statement submitted by the respondents also reveals the breakup of demand raised by them in compliance of High Court's order, dated 25-10-2002 as under:

Principal amount?????????? Rs.3502662???? (paid)

Surcharge @ 11%??????? Rs.1603356

Minus surcharge already paid??? Rs.123577

Balance surcharge payable:?????? Rs.1479779

Surcharge payable due to belated period?????????? Rs.416576

Total balance surcharge payable:?????????? Rs.1896355

According to the respondents surcharge on surcharge would keep on increasing for the period from 17-8-2000 to 25-6-2005, in addition to demand already raised, which would be separately recoverable.

7. para 4 of the bank guarantee provided for payment of deferred amount and surcharge @ 11% per annum for the whole period of deferred amount or any part thereof that remained unpaid in the event of default of payment of deferred amount. The bank guarantee was filed on 31-10-1996, it was valid up to 5-11-2000 for an amount of Rs.4,602,474 inclusive of surcharge. A perusal of the actual bank guarantee put up by the bank shows that whereas it had covered 11% surcharge vide clause 5 of S.R.O. 490(I)/91 but the bank did not bind itself to pay surcharge on surcharge in case of party's failure to pay the deferred amount and surcharge referred to above although a provision to that effect did exist at condition 5(4) of the prescribed format of bank guarantee vide S.R.O. 490(I)/91. The respondents could have enchased the bank guarantee before its expiry on 5-11-2000. They failed to encash it. Asked why the bank guarantee could not be encashed the DR submitted that it was because the complainant had, vide letter, dated 28-6-1999, requested for rescheduling of instalments and was allowed to pay six yearly instalments instead of five. He clarified that the complainant had, however, paid instalments of principal amount within the validity of guarantee but had not paid the surcharges for which a demand had been raised.

8. The arguments of the parties and record of the case have been considered and examined. Insofar as the question of interpretation of the Constitution of Pakistan and law is concerned or the question whether or not the Government was legally competent to levy surcharges, it is amatter to be decided by Courts of competent jurisdiction. Thecomplainant may, therefore, raise such questions of law before a competent Court for findings answers thereto. As regards respondents objection that the complaint was barred by time, it is observed that against High Court's judgment, dated 25-10-2002 the complainant had filed civil petition in the Supreme Court of Pakistan, which was subsequently withdrawn by it on 25-3-2005 as the complainant wanted to avail remedy under the Customs Act, 1969. The Supreme Court accordingly dismissed the petition as withdrawn. The complainant filed its complaint before this forum on 13-4-2005 just after 18 days of withdrawal of its petition from the Supreme Court. Strictly speaking, the matter was alive before withdrawal petition on 25-3-2005. The complaint cannot be termed as time-barred in terms of the provisions of FTO Ordinance, 2000 because the complainant had lodged its complaint before this forum almost immediately after withdrawing its petition from the Supreme Court. The FTO is, therefore^., competent to investigate the complaint. Respondents^' objection that since transactions were made in Karachi the complaint fell outside the territorial jurisdiction of Regional Office, Lahore is misplaced because Messrs Akram Industries Limited have its registered office at Lahore: The complaint could, therefore, be heard at Regional Office, Lahore.

9. So far as complainant^'s contention that it be exempted from payment of import and Iqra surcharges in view of Notification No. S.R.O. 476(1)/05, dated 19-5-2005 (on record) it is observed that this contention is neither relevant to this case nor tenable because the basic question involved here is not the levy of import and Iqra surcharges but, as argued by the complainant both in its written complaint and during the hearing, the payment and recovery of surcharges payable in terms of S.R.O. 490(I)/91, dated 30-5-1991 for which the respondents had raised demand in consequence of Honourable Lahore High Court's judgment, dated 25-10-2002.

10. The Honourable Lahore High Court vide its judgment, dated 25-10-2002 decided the writ petition filed by the complainant as under:

"(5) I have gone through the copies of several documents placed on record. Learned counsel has placed on record a copy of the bank guarantee filed by it 'on 31-10-1996. Para-4 of this guarantee assures the respondents that deferred amount of surcharge thereon at the rate of Rs. l 1% per annum for the whole period the deferred amount or any part thereof remain un-paid shall be paid. Timely payment has also been assured. Now it has not been denied that the entire amount due in terms of the said agreement was not paid within time agreed under the said arrangement made or deferred payment of amount due. Since the surcharge was agreed to be paid as term of said deferred payment arrangement, delay in the payment of entire amount so due could also be surcharged by the respondents in terms of section 219 of the Customs Act, 1969.

(6) In view of the above discussion, this writ petition is disposed of with observations that the respondents shall work out the amount so due on the basis of rate of 11% and not 14% and serve demand notice on the petitioner accordingly for payment. No order as to costs".

11. No doubt, the bank guarantee, covering an amount of Rs.4,602,474, inclusive of surcharge, furnished by the complainant, was valid up to 5-11-2000. Had the respondents encashed the bank guarantee prior to its expiry on 5-11-2000 they would have realized duty, taxes and surcharge covered by the bank guarantee without having to raise any subsequent demand. If the complainant was not paying yearly instalments regularly or was not paying the surcharge that it was required to pay in default, the respondents could have recovered both by encashing the bank guarantee. Clearly, the respondents had failed to encash it before its expiry. Respondents' contention that they could not encash the bank guarantee because the complainant had asked for fixation of more instalments than five, which were originally fixed, is not tenable. Even if the complainant was allowed to make payment of taxes/ surcharges in more instalment than originally fixed for payment the respondents. could have asked the complainant to extend the period of validity of bank guarantee in question which they did not. The AR cited FTO's findings, dated 3-1-2002 in a case reported as 2002 PTD 2245, C.No. 1373-K/01 (Messrs Siddique Weaving Mills (Pvt.) Limited, Karachi) requesting that it be given the same dispensation as allowed in the aforesaid complaint. In the cited case, the FTO had given findings that surcharges as demanded by the department had no legal validity and that notice issued to the complainant and the bank be withdrawn/ cancelled. A perusal of FTO's findings in the aforesaid complaint would reveal that the department had not encashed the guarantees in time and it was observed that no justification existed to demand surcharge on the deferred amount and surcharge on surcharge from the assessee for the bank for department's failure to encash the guarantees in time. In this case also the department had failed to encash the bank guarantee in time to recover the principal amount as well as surcharge @ 11%, as guaranteed. Again the guarantee put up by the guarantor bank in this F case shows that the department had not asked the complainant to get condition 5(4) of the prescribed guarantee incorporated in the actual guarantee put up by the guarantor bank in order to secure surcharge on surcharge from the guarantor bank. Yet the respondents were demanding, apart from 11% surcharge, which was covered by the actual bank guarantee, surcharge upon surcharge also amounting to F Rs.4,16,576, which was not covered by the guarantee, dated 31-10-1996 put by the guarantor bank.

12. Learned counsel for the department contended that the High Court in the judgment, dated 25-10-2002 passed in Constitutional Petition No.652 of 2002 has held that in addition to deferred/principal amount, the department was entitled to recover an amount as surcharge and on the total amount so becoming due further surcharge also. His contention was that in view of this judgment, the complainant could not approach this forum, for no modification in the terms of the said judgment can be made by this forum as such, the complaint is not maintainable which should be thrown out on this short ground.

13. The argument though appears to be ingenious but was found to be not tenable on close scrutiny of the said judgment of the High Court. The learned Judge of the High Court while discussing the facts of the case in paragraph-5 though observed that on the deferred/principal amount, surcharge could also be recovered and further surcharge on the total amount so becoming due but in the operative part of the judgment in paragraph-6 thereof, it was directed that the department should calculate the amount of surcharge at the rate of 11% and not 14% and recover the amount so found due as surcharge. In the earlier paragraph, it was not held that the department was entitled to recover further surcharge on surcharge whereas an observation was made as mentioned above. The relief given to the department in the said judgment was only to the extent of recovery of surcharge on the deferred amount at the rate of 11%. The mention of figure-11 is very much relevant for arriving at this interpretation of the judgment, for the said figure in the guarantee furnished by the complainant is relatable to the rates at which the surcharge on the deferred amount was to be recovered and not to the amount recoverable as further surcharge over surcharge. This interpretation also finds support from the fact as discussed earlier that in the guarantee obtained from the complaint, no provision was made to secure payment of any amount as surcharge over surcharge and if so at what rate.

14. The demand raised by the department about an amount chargeable as surcharge over surcharge, therefore, is not valid and also not in consonance with the correct interpretation of the terms of the judgment of the High Court to which the department is not entitled, as such, it amounts to "maladministration".

15. For the foregoing reasons, it is recommended that the Central Board of Revenue (C.B.R.) direct the competent Customs Authorities to exclude from the notice through which demand has been raised, the amount of surcharge over surcharge.

16. The compliance shall be made within thirty days of the- receipt of this order.

C.M.A./487/FTO???????????????????????????????????????????????????????????????????????????????? Order accordingly.