Messrs ISLAM BROTHERS VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2007 P T D 1380
[Federal Tax Ombudsman]
Before Justice (Retd.) Munir A. Shaikh, Federal Tax Ombudsman
Messrs ISLAM BROTHERS
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No.C-993-K of 2006, decided on 17/11/2006.
Customs Rules, 2001---
----R. 346---Partnership Act (IX of 1932), S.11---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Licence of bonded warehouse---Renewal of---Four partners, on account of dispute, had withdrawn power of managing the affairs of the warehouse given to the applicant partners---Renewal of the bonded warehouse was held in abeyance by the customs authorities as four partners of the firm had requested that it may not be allowed till the announcement of the decision of Court---Validity---Collector, in view of the letter of the partners and suit filed before the High Court, was not satisfied that the licence be renewed---Customs Authorities, however had not given any reason in writing or issued any show-cause notice to the complainants and had not responded to the application for renewal of licence---No justification existed for the Customs Authorities not to renew the licence and stop the in-bonding of goods unless an order to that effect was passed by a Court of competent jurisdiction or partnership was legally dissolved---Complainant seemed to have a genuine grievance that their business was suffering losses due to discontinuation of in-bonding of imported goods and adverse action taken against them without due process---Maladministration thus was established---Federal Tax Ombudsman recommended that Central Board of Revenue should direct the Collector of Customs to allow renewal of bonded warehouse and its regular operations within fifteen days.
M. Ali Hakro for Complainant.
Rizwan Mahmood for Respondent.
ORDER
The Complaint has been filed against the Customs Department for not renewing the licence of a bonded warehouse although the application for renewal, pay order towards establishment charges and insurance policy along with other required documents were submitted on 30-6-2006. The complainants have stated that the respondent has not communicated any adverse order to them nor given any reason for delay in the renewal of the licence.
2. It has been stated that as a result of the above inaction the in-bonding of imported goods and ex-bonding of goods already lying in the warehouse have been blocked. It has been alleged that the inaction and non-renewal of the licence have been done with the mala fide intention of causing immense and irreparable loss to the complainants.
3. It has been stated that they have learnt that civil proceedings in Suit No.649 of 2004 were pending in the High Court of Sindh, wherein an award pronounced in respect of joint family properties of the partners and the Complainants' firm was the, subject-matter for consideration. The Complainants stated that it was explained to the respondent through a notice, dated 19-7-2006 that the business of the public bonded warehouse was not the subject-matter of the proceedings of the suit which pertained to accounts between the members of the family including the partners of the complainant firm. Attention of the respondent was also drawn to section 11 of the Partnership Act, which provided that the powers of the Managing Partner or other partners could not be varied except through unanimous resolution. It was alleged that the respondent has failed to respond to the repeated personal visits and the legal notice and its functionaries were acting in bad faith and were guilty of maladministration.
4. It was reiterated that the Complainants had fulfilled all pre-conditions and since no deficiency had been communicated, there was no reason for the Department to withhold the renewal of licence. The Department's inaction was depriving them of the clientele developed over a period of twenty-three years and the importers could not wait indefinitely and pay KPT demurrage charges. There was no complaint about the working of the bonded warehouse. The pendency of the Suit No.649 of 2004 should not be considered or treated as a ground for non-renewal of licence. The licence was renewed in July, 2004 and July, 2005 while the suit was instituted on 1-6-2004, and the respondent was not party to the proceedings of the suit. The renewal of licence has no nexus with the proceedings of the aforesaid suit.
5. It was added that the respondent was notified by the High Court's order, dated 3-2-2005 with the direction that no third party interest was to be created in the fixed assets and properties of partnership firm aryl the status quo was to be maintained. Therefore, no other partner of the Complainants firm could file any representation to the detriment of the interest of the complainants. It was requested that respondent be directed to renew public warehouse Licence No.7/83 on the basis of application, dated 30-6-2006 without further delay.
6. Assistant Collector of Customs, Appraisement-Bond, replied to the complaint that Messrs Islam Brothers were registered with the Registrar of the Firms in 1981 with five partners and Customs Public Bonded Warehouse Licence was granted in 1983. Due to dispute between the partners, the estranged four partners had withdrawn power of managing the affairs of the warehouse given to Mr. Muhammad Khalid. The renewal of the bonded warehouse has been held in abeyance as four partners of the firm have requested that it may not be allowed till the announcement of the decision of the High Court of Sindh. According to condition (5) of the licence "the licence will cease to be valid whenever there is change in the constitution of the firm, unless renewed". As a result of the dispute the in-bonding facility to the licence has been stopped but no restriction has been imposed on ex-bonding of already stored goods to avoid inconvenience of the owners/importers.
7. Assistant Collector of Customs vehemently denied the charge of mala fide intention. The licence operating bonded warehouse was granted to a registered partnership firm and not to an individual. Since the majority of the partners requested for stoppage of renewal of licence, the Collectorate was under obligation to entertain the request in order to safeguard the revenue on imported goods and the warehouse and in the interest of the public.
8. During the hearing of the complaint the learned Advocate representing the complainants reiterated the facts and the arguments stated in the complaint. He further stated that:
(i) The main grievance of the complainants pertained to the renewal of the licence of the bonded warehouse, which was not an issue in the Suit No.649 of 2004.
(ii) Amongst the petitioners before the High Court only Mr. Haris was partner in the warehouse and other four petitioners were not partners thereof.
(iii) The application made before the Principal Appraiser of Bond Section was signed by only one partner. While the bonded warehouse was not under litigation in the petition. There was no process for dissolution of the partnership, which owned the bonded warehouse.
(iv) Customs Department is not a party to the suit sub judice before the High Court.
(v) According to the High Court's order, dated 3-2-2005 the status quo should not be disturbed.
(vi) Under Rule 346 of the Customs Rules, 2001, the Complainants have fulfilled the requirements for renewal of licence, paid the establishment charges and deposited insurance policy of Rs.330 million. It was incumbent on the Customs Authorities to renew the licence because there was no complaint against the licencee.
(vii) Customs Authorities have not given any reason in writing about the non-renewal and in fact given no response to their applications so far which is clearly an act of maladministration on the part of the Customs. Due to inaction on the part of the Customs, the complainants have been suffering from huge loss for no fault on their part.
9. Assistant Collector of Customs replied that besides the letter of the partners addressed to the Principal. Appraisar Bond, another letter, dated 23-8-2006 was sent by Mr. Obaid-ur-Rehman, attorney of Habibur Rehman, Shafiq-ur-Rehman and Muhammad Haris, stating in sub-para. (8) that Mr. Khalid was no more Managing Partner of the firm "Islam Brothers" as decided by the Majority of the partners. It was decided not to allow the renewal of the aforesaid licence and in-bonding of the goods be stopped. According to the Customs Rules, the renewal of the licence was contingent on the satisfaction of the Collector and if the Collector was not satisfied with the circumstances prevailing at the time the renewal was solicited, he had the authority not to renew the licence. While it was true that the in-bonding was not allowed and licence not renewed, the Customs had acted justly by allowing the already in-bonded goods to stay in bond and be ex-bonded as and when the owner desired.
10. The counsel for the complainants stated in his counter arguments that the letter, dated 23-8-2006 mentioned about an individual Mr. Muhammad Khalid, but the warehouse licence was issued to a registered firm and unless legal recourse was taken to dissolve the partnership and the partnership ceased to be in existence, there was no justification for the Customs not to renew the licence of the firm.
11. The contents of the complaint and the arguments put forward by the learned counsel for the complainants have been examined. The respondent's reply and submissions of the Assistant Collector of Customs have also been taken into account. The complaint centres around the grievance that the licence of the bonded warehouse has not been renewed by the Customs Authorities although all the formalities have been completed and there was no charge against the warehouse established about 23 years ago. In its interim order, dated 3-2-2005 the High Court directed the Nazir of the Court to verify whether the premises S-73-B, SITE comprised a Customs Bonded Warehouse or any portion was rented out and prepare the inventory stock goods and machinery lying there. The Court further ordered that "Till the next date of hearing, no third party interest is to be created in the fixed assets and properties subject-matter of instant proceedings by either of the parties". The Hon'ble High Court did not stay the renewal of the warehouse licence by the Customs. On the other hand the partnership deed remains intact and has not been dissolved. Customs have not renewed the license merely on the basis of a letter from partners of the firm that Mr. Muhammad Khalid did not represent them and in-bonding of goods may not be allowed.
12. The Customs Authorities on the other hand have stated that in view of the letter of the partners and fife suit filed before the High Court, the Collector was not satisfied that the licence be renewed. However, Customs have not given any reason in writing or issued any show-cause notice to the Complainants and not responded to the application for renewal of licence. Clearly there was no justification for the Customs not to renew the licence and stop the in-bonding of goods unless an order to that effect was passed by a Court of competent jurisdiction or partnership was legally dissolved. Complainants seem to have a genuine grievance that their business was suffering losses due to discontinuation of in bonding of imported goods and adverse action taken against them without due process. Maladministration is established.
13. It is recommended that C.B.R. direct the Collector of Customs to:
(i) Allow renewal of bonded warehouse and its regular operations within fifteen days; and
Compliance be reported to this office within thirty days.
C.M.A./22/FTOOrder accordingly.