MICRO CORPORATION through Managing Partner VS DEPUTY COLLECTOR, CUSTOMS, SIALKOT, 2006 PTD-LAHORE-HIGH-COURT-LAHORE 378 (2005)

Customs Act (IV of 1969)---

----Ss.32 [as amended by Federal Laws (Revision and Declaration) Ordinance (XXVII of 1981)] & 156(14)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Withdrawal of rebate at a rate higher than admissible under law---Lodging of F.I.R. by Revenue without undertaking adjudication proceedings against petitioner---Validity---Provisions of S.32 read with S.156(14) of Customs Act, 1969 would attract only when on proper adjudication proceedings, petitioner was found to have acted dishonestly to claim excess amount of rebate---High Court accepted, constitutional petition and quashed F.I.R. in circumstances---Principles.

A claim of a concession or a rebate at a higher rate than it is admissible under the law can attract the penal provisions of Customs Act, 1969 only if it is manifestly mala fide. The addition of words "knowing or having reason to believe that such document or statement is false" added in subsection (1) of section 32 by the Federal Laws (Revision and Declaration) Ordinance, 1981 was to clear the ambiguity in the law and to put a check on the power of the Revenue Authorities to proceed against unwary tax-payer. The knowledge of a person or the fact that he had reason to believe as to the falsity of the statement or the document can be determined and ruled upon only if a person as contemplated in the subsequent provisions of subsections (3) and (3-A) of section 32 is served with a notice and required to show cause and explain his position. The proceedings contemplated in the subsequent part of section 32 contemplate an action only on adjudication proceedings. Once these proceedings have culminated in a judgment or order that the person filing the documents knew or had reason to believe them to be false in material particular, he can be brought to justice on criminal side. The addition of words "and upon conviction" added in subsection (1) of section 32' by aforesaid Ordinance of 1981 are indicative of the fact that criminal liability under section 32 will arise only, when earlier a person had, on proper adjudication proceedings, been found to have deliberately filed a false document or had made a false statement in a material particular not only knowingly, but also if he had reason to believe that such document or statement was false.

In the present case, without adjudication proceedings, the petitioner was required to pay and he actually made payment of an amount more than the rebate excessively withdrawn. Therefore, the Revenue had a very weak case, if, at all, it is one to demonstrate that the excess claim was made and received with dishonest motive. A claim of rebate is processed at different levels of the customs hierarchy starting from lower grade clerk passing through the officers with the status of a Collector. If none of them at the relevant time noticed the difference in the rate of rebate, then the petitioner deserves a fair consideration of his defence. It is that rebate claim is a routine exercise in view of exports worth millions every year and is carried out by staff employed in his office, who are not aware of the streak of changes in law and the rates, notwithstanding the established legal maxim that ignorance of law is no excuse.

The liability of a person contemplated under the penal provisions of section 32 is primarily a civil liability entailing determination of payment of the amount specified in the show-cause notice issued under subsections (3) and (3-A). It is only after determination of that liability and on the findings recorded in that regard that the penal provisions contained in various sub-clauses of section 156 can possibly be invoked.

In the present case, the allegation of collusion between petitioner and the functionaries of the customs department has been made to give a civil proceedings the colour of criminal liability inasmuch as no official of the department had been arrested or made to join investigation from the date of recording of the F.I.R. till the filing of this petition and even thereafter till today. No restraint order in respect of the departmental officials has ever been made by High Court.

The provisions of sections 32 and 156(14) of Customs Act, 1969 would be relevant only on proper adjudication proceedings if it is established on record that petitioner acted dishonestly to claim excess amounts of rebate.

?

In view of above legal position, the objection of Revenue against maintainability of present constitutional petition on account of availability of an alternate remedy cannot be sustained.

High Court accepted present constitutional petition and quashed F.I.R. recorded against petitioner.

Waqar Azim for Petitioner.

Dr. Sohail Akhtar and Muhammad Nawaz Cheema for Respondent.

Date of hearing: 15th September, 2005.

JUDGMENT

NASIM SIKANDAR, J.---This constitutional petition was admitted for regular hearing on 30-6-2005. The admitting note reads as under:--

"The issue if in the given situation the provisions of sections 21, 26, 32, 32-A and 39 read with S.R.O. 414(D/2001 dated 18-6-2001, punishable under section 156(1), (11), (12), (14), (14A), (17), (77) and (82) of the Customs Act, 1969 stated in the impugned F.I.R. No.43 of 2005 dated 30-5-2005 were contravened for the mere reason of making a claim of rebate which was subsequently found to have been made at the higher rate than the one which was allegedly allowable at the relevant time. (needs consideration).

(2) Admit."

2. The facts leading to the filing of this constitutional petition are factually not disputed in essential respects. The petitioner/Corporation is engaged in export of specialized surgical instruments on which rebate is available as an incentive for export. The rate of such rebate keeps on changing as notified by the Revenue from time to time keeping in view the fiscal policy of the year. According to the petitioner in the month of May 2005 he was summoned by the respondents and was orally informed that he had overdrawn the amount of rebate and was asked to deposit the difference. It was done in two instalments. In the first instalment the petitioner/Corporation deposited a sum of Rs.1,000,000 on 4-6-2005 and the second instalment of Rs.500,000 on 7-6-2005. These, deposits were made after getting the challans approved from the concerned Custom authorities. On alleged demand from the authorities to deposit a further sum the petitioner approached this Court on 23-6-2005 with a prayer that they be directed to issue a show-cause notice to him if there still remained any over payment of customs rebate and also not to harass him in the meanwhile. Subsequently, the constitutional petition was sought to be amended on the ground that the Customs authorities had earlier registered an F.I.R. under the various provisions of the Customs Act as detailed in the admission note. Accordingly, the prayer made in the petition was allowed to be amended to seek quashment of the aforesaid F.I.R. inter alia for the reason that the petitioner had admittedly reimbursed the Revenue of Rs.1,500,000 as against alleged overdrawn amount of Rs.14,75,254.

3. The respondents/Revenue on the other hand claims that the petitioner fraudulently overdrew higher sum of rebate in connivance with lower staff of the department. According to para.3 of the aforesaid F.I.R. the petitioner Messrs Micro Corporation, Defence Road, Sialkot filed different rebate claims during the year 2003-2004 and withdrew the rebate at a much higher rate than the "admissible rate of rebate which resulted in loss to the Government exchequer to the tune of Rs.14,75,254. It is stated that according to S.R.O. 414 dated 18-6-2001 the rebate on the kind of exports made by the petitioner was admissible at 4.33% of the FOB value of the goods exported. Through a subsequent S.R.O. 969 dated 7-10-2003 the rate of rebate was reduced to 2.97% and through yet another S.R.O. No.649 dated 29-7-2004 the rate was further reduced to 1.47% of the FOB value of the goods exported. However, despite the change in law the exporter dishonestly filed claims from October, 2003 to December, 2004 claiming rebate at the rate of 4.33% instead of the modified rate of 2.97%, as noted above. The first such claim is stated to have been made on 18-10-2003 and the last one on 16-6-2004. Also it is stated that three other claims from 30-7-2004 to 6-9-2004 were filed under S.R.O. 969 dated 7-10-2003 at a rate of 2.97% despite the fact that in the meanwhile S.R.O. 649 dated 29-7-2004 allowing rebate only at 1.47% had also come in the field.

4. For the Revenue the maintainability of this constitutional petition is objected to on the ground of availability of alternate remedy to the petitioner before the Special Judge having jurisdiction under the Customs Act. The lodging of the F.I.R., its contents and. the provisions under which it was lodged are supported on the ground that the petitioner acted in a mala fide manner and made the aforesaid deposits of Rs.15,00,000 only in order to save his skin after the aforesaid F.I.R. had been lodged and the offences stated therein had already been completed.

5. After hearing the learned counsel for the parties I am persuaded to allow this petition for the following reasons:-

First, a claim of a concession or a rebate at a higher rate than it is admissible under the law can attract the penal provisions of the Customs Act only if it is manifestly mala fide. The addition of words "knowing or having reason to believe that such document or statement is false" added in subsection (1) of section 32 by the Federal Laws (Revision and Declaration) Ordinance, 1981 was to clear the ambiguity in the law and to put a check on the power of the Revenue authorities to proceed against an unwary tax payer. The knowledge of a person or the fact that he had .reason to believe as to the falsity of the statement or the document can be determined and ruled upon only if a person, as contemplated in the subsequent provisions of subsections (3) and (3-A) of section 32 is served with a notice and required to show cause and explain his position. The proceedings contemplated in the subsequent part of section 32 contemplate an action only on adjudication proceedings. Once these proceedings have culminated in a judgment or order that the person filing the documents knew or had reason to believe them to be false in material particular, he could be brought to justice on criminal side. The provisions of section 32 when read with sub-clause (14) of section 156 support my view. The addition of words "and upon conviction" added in that sub-clause by the aforesaid Ordinance of 1981 are again indicative of the fact that criminal liability under section 32 will arise only when earlier a person had on proper adjudication proceedings been found to have deliberately filed a false document or had made a false statement in a material particular not only knowingly but also if he had reason to believe that such document or statement was false.

Second, in the case in hand without adjudication proceedings the petitioner was required and he actually made payment of an amount more than the rebate excessively withdrawn. Therefore, the Revenue has a very weak case, if at all it is one, to demonstrate that the excess claim was made and received with a dishonest motive. It needs to be recalled that a claim of rebate is processed at different levels of the Customs hierarchy starting from lower grade clerk passing through the officers with the status of a Collector. If none of them at the relevant time noticed the difference in the rate of rebate then the petitioner deserves a fair consideration of his defence. It is that rebate claim is a routine exercise in view of exports worth millions every year and is carried out by staff employed in his office who are not aware of the streak of changes in law and the rates, notwithstanding the established legal maxim that ignorance of law is no excuse.

Third, the liability of a person contemplated under the penal provisions of section 32 is primarily a civil liability entailing determination of payment of the amount specified in the show-cause notice issued under subsections (3) and (3-A). It is only after determination of that liability and on the findings recorded in that regard that the penal provisions contained in various sub-clauses of section 156 can possibly be invoked.

Four, it also needs to be noted that the allegation of collusion between the petitioner and the functionaries of the customs department was made only to give a civil proceedings the colour of criminal liability inasmuch as no official of the department was arrested or made to join investigation from the date of recording of the F.I.R. till the filing of this petition and even thereafter till today. No restraint order in respect of the departmental officials was ever made by this Court.

Five, I am also persuaded to agree that except for the provisions of section 32 read with subsection (14) of section 156, all provisions of the Customs Act referred to in the F.I.R. were not relevant to the facts in hand. The provisions of section 32 and subsection (14) of section 156, as noted above, were relevant E only on proper adjudication proceedings it was established on record that the petitioner had acted dishonestly to claim excess amounts of rebate. And,

Lastly, in view of above legal position, the objection of Revenue against maintainability of this petition on account of availability of an alternate remedy cannot be sustained.

6. The petitioner succeeds in terms of the prayer and the aforesaid lo F.I.R. detailed in para. 1 of this order stands quashed.

S.A.K./M-1363/L??????????????????????????????????????????????????????????????????????????????? Petition accepted.