GHANDHARA NISSAN DIESEL LTD. through Director VS COLLECTOR OF CUSTOMS, 2007 PTD-KARACHI-HIGH-COURT-SINDH 117 (2006)

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

----S. 169---Jurisdiction of High Court in reference application---Scope---Reference application falling under advisory jurisdiction of High Court would be limited to questions of law arising out of order of Tribunal---No issue beyond the mandate of law could be considered.

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

----S. 32(2) [as amended by Finance Act (XXXI of 2000) w.e.f. 1-7-2000]---S.R.O. 225(I)197, dated 28-3-1997---S.R.O. 563(I)/2005, dated 6-6-2005---Imported goods---Assessment of duty at 30% on 5-3-1997 and payment of duty on 1-4-1997---Enhancement of duty from 30% to 40% w.e.f. 28-3-1997---Show cause notice, dated 7-11-2000 demanding 10% duty being short levied---Validity---Relevant date for purpose of S.32(2) of Customs Act, 1969 was 1-4-1997---Period of limitation for issuance of show cause notice as provided in S.32(2) of Customs Act, 1969 was 3 years upto 30-6-2000, which expired on 30-6-2000---Such period of limitation would not commence from date of discovery of short levy---Impugned show cause notice was thus barred by time, under which no recovery could be made-- Principles.

(c) Limitation---

----Subsequent enhancement in period of limitation---Not having effect of re-opening past and closed transaction---Principles.

Once a matter becomes barred by time, then subsequent enhancement in period of limitation shall not have the effect of re-opening the past and closed transaction and resuscitating the matter, which had attained finality and had gone in the annals of history.

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

----S. 32(2)---Detection of short levy of duty after expiry of period of limitation---Issuance of show-cause notice---Validity---Period of limitation would not commence from date of discovery of short levy of duty---No recovery could be made in pursuance of such notice---Remedy of department in such case would be to initiate disciplinary proceedings against its officer found to be negligent in detecting short levy of duty within period of limitation.

Aziz A. Shaikh for Applicant.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 22nd September, 2006.

JUDGMENT

MUHAMMAD MUJEEBULLAH SIDDIQUI, J.---The question of law requiring our consideration is as follows:--

"Whether learned CESAT (K-2) has fell in gross error of law by applying provision of section 32(2) of Customs Act, 1969 amended vide Finance Ordinance, 2000 (XXXI of 2000) to transactions concluded in April, 1997?"

The relevant facts giving rise to the question are that the applicant imported a consignment, which arrived on 20-11-1996. It was placed into bond. An Ex-bond Bill of Entry was presented on 28-2-1997. The assessment was completed on 5-3-1997 under S.R.O. 502(I)/94, dated 9-6-1994. The customs duty was assessed at 30%. The rate of customs duty was enhanced from 30% to 40% with effect from 28-3-1997. Duty and taxes were paid on 1-4-1997 on the basis of assessment order. The respondent issued show cause notice on 7-11-2000 (after lapse of 3 years 8 months and 6 days) stating that the rate of duty was enhanced from 30% to 40% with effect from 28-3-1997. According to the law prevailing at the relevant time the rate of duty on the date of payment was to be charged. Thus, on 1-4-1997 the rate of customs duty to be levied was 40% while it was charged at 30% with the result that 10% customs duty was short levied. It was specifically stated in the notice that the applicant has contravened the provisions of section 32(1) and (2) of the Customs Act, 1969. The Collector of Customs, Central Excise and Sales Tax (Adjudication) subsequently passed order-in- original on 16-2-2001 as follows:--

"The record available in the file shows that the bill of entry was filed on 28-2-1997 and the concerned assessing staff completed bill of entry on 5-3-1997. The importer paid taxes on 1-4-1997 and during the intervening period i.e. 5-3-1997 and 1-4-1997, the government issued a notification S.R.O. 225(I)/97, dated 28-3-1997 and by virtue of the same the importer was liable to pay the taxes on the enhanced rate of duty structure in terms of section 30 read with section 104 of the Customs Act, 1969. It is an admitted position that normally bill of entry remains with the clearing agent from the filing till delivery of the goods. The clearing agent in the instant case without presenting to the concerned customs officer made payment of duty and taxes which is contrary to his legal, moral and contractual obligation (Licensing Rules, 1971). If the clearing agent had presented this bill of entry to the concerned customs officer then it would not have been possible for the importer to make payment on the lower rate. The short levy has occurred due to the lack of responsibility and connivance of the clearing agent. The offence as alleged in the show-cause notice stands established and demand is hereby enforced.

(7) Owing to the reasons as discussed above, the short levied in this case has occurred due to the lack of responsibility and violation of contractual obligation (Licensing Rules, 1971) of the clearing agent. Therefore, a personal penalty equal to 100% of the duty and taxes evaded is imposed upon the importer and Rs.3,00,000 (three hundred thousand) upon the clearing agent under clauses (14) and (77) of section 156(1) of the Customs Act, 1969.

(8) The importer and clearing agent are directed to make payment of duty, taxes and penalty within thirty days of the issue of this order failing which, under section 83-A, he shall in addition to the dues payable, be liable to pay additional duty at the rate of one and a half percent per month with surcharge in terms of section 83 of the Customs Act, 1969?"

The applicant being aggrieved with the above order, preferred appeal before the Customs Excise and Sales Tax Appellate Tribunal Karachi Bench, inter alia raising the following grounds:-

"(2) Whether object of providing limitation under section 32 of Customs Act, 1969 has not been achieved by respondents and the demand so raised is not enforceable after lapse of period stipulated therein?

(3) Whether amendment in section 32 of Customs Act, 1969 vide Finance Ordinance, 2000 can have retroactive application to cover transactions concluded during 1997?"

The appeal was allowed vide order, dated 29-5-2003. The order-in-original was set aside and the case was remanded for fresh decision with certain directions including the direction to determine whether or not the demand was barred by time.

During the fresh proceedings the departmental officer took plea that the case fell within the purview of section 32(2) of the Customs Act, 1969. Period of limitation for initiation of proceedings under this provision was initially 3 years which was enhanced to 5 years by Finance Act, 2000. The evasion of duty was detected by Appraising Intelligence Branch in September, 2000, after the amendment by Finance Act, 2000, enhancing the period of limitation from 3 years to 5 years, hence the issuance of notice on 7-11-2000 which was after expiry of the original period limitation but before the expiry of enhanced period and therefore, the show-cause notice was within time.

The Collector (Adjudication) passed fresh order-in-original on 25-2-2004 holding that the order-in-original, dated 16-2-2001 was not open to any interference which was upheld. In the order, dated 25-2-2004 the Collector (Adjudication) failed to, advert to the question pertaining to limitation, although the Tribunal had specifically directed to consider the issue. It appears that the Collector deliberately omitted to consider the issue.

Being still dissatisfied the applicant again preferred appeal before the `Tribunal which was decided on 15-8-2005. It was again specifically contended that section 32 of the Customs Act, 1969 was amended vide Finance Act, 2000 with effect from 1-7-2000 while the transactions under reference were concluded in March, 1997 and the period of limitation had already expired before enhancement of the period of limitation, therefore, the amendment which was prospective was not attracted. On merits the Tribunal held that the crucial date for determination of the rate of duty was 1-4-1997 when the customs duty was paid and on the said date the rate of duty was enhanced from 30% to 40% and therefore, Clearing Agent deliberately caused loss to the revenue. While dealing with the contention on the point of limitation, the learned members of the Tribunal held that duty and taxes on the consignment were paid on 1-44997 and the show-cause notice was issued on 7-11-2000 under section 32(2) of the Customs Act, 1969. The period of limitation wherefor was enhanced from 3 years to 5 years by Finance Act, 2000. According to them the Appraisement Collectorate detected the short levy of the customs duty after the amendment by the Finance Act, 2000, therefore, the show-cause notice, dated 7-11-2000 was within time. It was further held that the applicant was continuously availing the benefit of the concessionary S.R.O. 502(I)/94, dated 6-9-1994 subject to fulfillment of certain conditions contained therein and therefore, it was not a closed transaction. With these observations the objection on the point of limitation was repelled.

We have heard Mr. Aziz A Shaikh, learned counsel for the applicant and Mr. Raja Muhammad Iqbal, learned counsel for the respondent. Mr. Aziz A. Shaikh, contended that in the facts and circumstances of the case the show-cause notice could be issued under subsection (3) of section 2 and not under subsection (2) of section 32. We have pointed out to Mr. Aziz A Shaikh that the contention cannot be 8 considered for the reason that the reference application was admitted to consider the question whether the Tribunal fell in error in applying the amended provisions of section 32 of the Customs Act, 1969 to the transactions which were concluded in April, 1997. The scope of reference application falling under the advisory jurisdiction of this Court is limited to the questions of law arising out of the order of Tribunal and no issue beyond the mandate of law can be considered. Mr. Aziz A. Shaikh did not pursue the contention and confined his arguments to the question of law arising out of the order of Tribunal.

He contended that the admitted facts are that the customs duty and taxes were paid on 1-4-1997. It is provided in subsection (2) of section 32, (as it stands now) that if any duty or charge has not been levied or has been short levied the person liable to pay any amount on that account shall be served with the notice within 5 years of the relevant date, requiring him to show cause why he should not pay the amount specified in the notice. Up to 30th of June, 2000 the period of limitation was 3 years. By Finance Ordinance, 2000 it was enhanced to 5 years with effect from 1-7-2000. He has further contended that the expression relevant date has been defined in subsection (5) of section 32, according to which if any duty is short levied then the relevant date would mean the date of payment or charge. He maintained that the relevant date according to law in this case is 1-4-1997 and according to law prevailing prior to 1-7-1997 the period of limitation was 3 years which expired on 30th March, 2000, with the result that it became past and closed transaction. The period of limitation was not enhanced with retrospective effect and thus, the amendment would not be applicable to a transaction, which was already rendered barred by time prior to the enhancement of the period of limitation.

On the other hand, Mr. Raja M. Iqbal, is not able to rebut the above contention but submitted that since it is a case of cheating and fraud therefore, no period of limitation is attracted. Elaborating his contention he submitted that the applicant was required to pay the customs duty on 1-4-1997 at the rate of 40% because it was enhanced from 30% to 40% with effect from 28-3-1997, notwithstanding, the assessment made earlier at the rate of 30% therefore, it was a deliberate act of cheating and fraud on the part of applicant and in such cases no period of limitation is applicable.

We have carefully considered the contentions raised by the learned advocates for the parties. We are not perused to agree with the contention of Mr. Raja Muhammad Iqbal, for the reason that the show-cause notice has been issued by the department under section 32 of the Customs Act and recovery of short levy of customs duty is sought under the same provision. Throughout the case of department was that the short levy of customs duty was recoverable under subsection (2) of section 32 of the Customs Act. It is, therefore, held that the period of limitation as provided under subsection (2) of section 32 is applicable to the facts and circumstances of the present case.

This brings us to the crucial point whether the enhancement of period of limitation with effect from 1-7-2000 shall have the effect of reviving a case which was already barred by time prior to such amendment. The admitted facts are that the relevant date for the purpose of subsection (2) of section 32 of the Customs Act, in the present case is 1-4-1997. It is also admitted fact that up to 30th June, 2000 period of limitation provided in subsection (2) of section 32 was 3 years. Thus, the show-cause notice could be issued under section 32(2) in accordance with the law prevailing at the relevant time within a period of 3 years which expired on 30th March, 2000. The result is that it became past and closed transaction. We are of the considered opinion that once a matter becomes barred by time then the subsequent enhancement in the period of limitation shall not have the effect of reopening the past and closed transaction and resuscitating the matters which attained finality and had gone in the annals of history. It is totally immaterial as to when the Appraisement Intelligence Branch discovered the short levy, because there is no law to the effect that the period of limitation shall commence from the date of discovery of the short levy. If the departmental officers were negligent and were not able to detect the short levy of customs duty within the period of limitation provided in law at the relevant time, the only course open with the department was to initial appropriate disciplinary proceedings against the departmental officers. The learned members of the Tribunal have fell in serious error in holding that the Appraisement Collectorate detected the short levy after amendment of Customs Act, 1969, and therefore, it was not a past and closed transaction in spite of expiry of the period of limitation.

The finding of the Tribunal is not sustainable in law. It is held that the show-cause notice issued to the applicant was palpably barred by time. No recovery could be made in pursuance thereof. The Tribunal's order stands modified accordingly.

The question of law reproduced in earlier part of the judgment is answered in affirmative. The reference application is allowed accordingly.

After hearing the learned Advocates for the parties on 22-9-2006, the Reference Application was allowed by a short order. These are the detailed reasons in support thereof.

A copy of this judgment shall be sent under the seal of the Court to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the cases conformably to the decision in this judgment as required under section 196(5) of the Customs Act.

S.A.K./G-34/KReference answered.