KHURRAM JAMAL VS COLLECTOR OF CUSTOMS (APPRAISEMENT), 2007 PTD-KARACHI-HIGH-COURT-SINDH 131 (2006)

Customs Act (IV of 1969)---

----Ss. 168(2) & 180---Non-issuance of show cause notice within two months from date of seizure of goods---Effect---Non-issuance of such notice would neither vitiate or invalidate entire proceedings nor washed away civil and criminal liability, but only the person from whose possession goods were seized would become entitled to return of goods.

Wajiha Mehdi for Applicant.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 13th September, 2006.

JUDGMENT

MUHAMMAD MUJEEBULLAH SIDDIQUIE, J.---This appeal was admitted to consider the following questions of law:

(i) Whether on the facts and in the circumstances of the case, the provision of section 32 of the Customs Act can be attracted/applied where the consignment was subjected to First Appraisement System?

(ii) Whether the Customs, Central Excise and Sales Tax Appellate Tribunal has correctly interpreted and applied the provision contained in section 25 of the Customs Act read with relevant rules contained in the Customs Rules?

(iii) Whether the Customs, Central Excise and Sales Tax Appellate Tribunal has erred in holding that the show cause notice-was not barred under the provision of section 168 of the Customs Act, 1969?

The relevant facts as stated in the statement of facts appended with the reference application are that the applicant a Proprietory concern, is engaged in import of auto-parts and specifically Suzuki auto-parts. The applicant imported the auto-parts. Consignment arrived on 24-3-2004 and Bill of Entry was filed. According to applicant the imported consignment as examined by the staff of the customs under First Appraisement System, whereupon the declared value of US $ 5665 was enhanced to US $ 14110. According to applicant though the assessment was violative of law but in order to save himself from the demurrage, duty and taxes assessed were paid and the consignment was made out of charge on 26-4-2004. Still the delivery of consignment was refused to applicant on the verbal orders of Customs Appraisement and Intelligence. It is alleged that no Detention Memo. was served. Harassment was caused to the applicant and therefore, the applicant filed a Constitution Petition bearing No. D-73 of 2004 in the High Court contending that after charging the duty at the assessed value determined by the Customs Officials, the consignment could not be detained. The detention was challenged and prayer was made that duty paid consignment may be directed to be released. The petition was disposed of by consent order on 2-7-2004 on admission of the Advocate for customs department that the entire duties and taxes were paid and the goods were directed to be released. Thereafter on 7-7-2004 a notice under section 32(1)(2) of the Customs Act was issued stating that the applicant made misdeclaration in respect of the description, brand and origin of the goods. It was further stated that in order to check the veracity of the information the GD was intercepted and 100% examination was conducted and whereupon it was found that whole consignment consisted of genuine auto-parts of Suzuki brand of Japan origin of different models and make. It was also stated that thereafter value was assessed on the basis of information obtained from Pak Suzuki Motors Company, who imported the parts by availing 55% discount. The applicant was called upon to submit written explanation as to why penal action under section 32(2) punishable under Clauses (14) and (90) of section 156(1) of the Customs Act, may not be initiated and the difference of duty and taxes amounting to Rs.51,54,576 may not be recovered.

The applicant filed explanation through their Advocates contending that the consignment was subjected to 100% examination by the staff of the Appraisement Collectorate, who did not accept the declared value, which was enhanced. It was stated that although under section 25 of the Customs Act, it was incumbent upon the Assessing Officer to accept the transaction value, however, on account of inordinate delay in favour of the applicant, the applicant accepted the enhanced price by over 100%. The duty and taxes worked out were paid on 26-4-2004. It was further stated that the consignment was not liable to confiscation under any law and the seizure/confiscation of the goods is unlawful. It was, further pleaded that the notice under reply was barred by time under section 168(2) of the Customs Act, with the result that all subsequent proceedings were null and void ab initio. It was further pleaded that the Appraisement Intelligence Branch has no jurisdiction to evaluate and recover the amount of short levy if any which can be recovered after resorting to section 32(2) and (3) of the Customs Act. It was also averred that the allegation of contravention of the provisions of section 32(1) of the Customs Act was misconceived as the applicant had no reason or knowledge to believe that the documents submitted were false in any material particular. The applicant also took plea that in order to invoke section 32, the mensrea on the part of importer is to be established and section 32 is not to be invoked where an import makes a correct declaration on bill of entry or opts for First Appraisement for determination of correct description, PTC heading or quantity of goods. The applicant further took plea that the department was required to adopt the transaction value and that the invoice price cannot be routinely discarded except on the strength of a clear evidence that the invoice is not genuine and it does not show the real price as has been transacted between the importer and the foreign supplier.

The Adjudication Officer heard the parties and passed the order- in-original on 28-7-2004. The pleas taken in the reply of show-cause notice were reiterated on behalf of the applicant. The departmental representative submitted that AIB intercepted the consignment after having an information that it was grossly misdeclared both in terms of origin and value. It was 100% examined first by AIB, then consignment was also examined by the Additional Collectorate and Deputy Collector (Sheds) and genuine Suzuki parts of Japan origin were found in the entire consignment instead of non-genuine and Taiwanese brand declared. It was accepted that the amount of leviable duty and taxes were paid by the importer. The learned Adjudication Officer, held that the misdeclaration was proved beyond any shadow of doubt therefore, the consignment was directed to be confiscated under Clauses (14) and (90) of section 156(1) of the Customs Act, 1969. However, an option under section 181 of the Customs Act was given to redeem the confiscated goods on payment of redemption fine equivalent to 30% of the value. A penalty of Rs.3,00,000 each was imposed on the applicant/importer and the Clearing Agent.

The applicant feeling aggrieved preferred appeal before the learned Customs Sales Tax and Central Excise, Appellate Tribunal (hereinafter referred to as the Tribunal) on the following grounds:--

(1) Show-case notice, dated 7-7-2004 was issued beyond the mandatory period of two months prescribed under section 168(2) of the Customs Act, which rendered all the subsequent proceedings void ab intio.

(2) The Appraisement Intelligence Branch has no jurisdiction to evaluate and recover the amount of short levy without resort to provisions contained in section 32.

(3) The burden of proving the allegation was on the Customs Department, which they failed to discharge.

(4) There was no mensrea on the part of applicant and when an importer opts for First Appraisement System, the resort to section 32 was not available.

(5) The Customs Department was not justified in rejecting the transaction value.

At the time of arguments a plea was taken that in goods declaration form, the applicant did not specify whether the auto-parts were `genuine' or `non-genuine'. The staff of the Appraisement Collectorate specified them as non-genuine and made assessment on that basis. The learned Tribunal observed that it was expressly described on each part that it was "Suzuki Genuine Part Made in Japan", however, the applicant chose to describe them simply as auto-parts and therefore, non-mention of genuine or non-genuine was not without purpose and that originally the goods were got assessed and cleared as non-genuine auto-parts which is indicative of the purpose. It was observed that instead of giving a clear information himself, with a view to have some defence in the event of the detection of fraud, resorted to the suppression of material facts and got the job completed through the customs staff. The direct beneficiary, i.e. the importer cannot evade the responsibility by taking the plea that the act of misdeclaration was completed by customs staff, which was undoubtedly in collusion with the applicant. The learned Tribunal further observed that subsequent conduct of the applicant in making representation to the Collector for constituting a committee for the examination of the goods, insisting that the same were non-genuine parts clearly proves his involvement in the whole affair.

So far, the plea pertaining the option for First Appraisement System is concerned, the learned Tribunal held that, "The record shows that neither there was any request in that regard, nor they were allowed by any competent officer. The learned Tribunal further observed that the First Appraisement System envisages the option given by an importer at the initial stage for 100% examination of the goods instead of sample examination but in this case, the initial assessment was got done on sample examination. The request of the importer to the Collector for constitution of committee for examination of goods, for confirming the finding of AIB was at very late stage, after detection of fraud, which cannot be treated a request for First Appraisement System. The contention in this behalf was found misconceived. While dealing with the contention of competence of AIB and non-issuance of notice within the period prescribed under section 168(2) of the Customs Act, it was held that notice was issued under section 32, and the confiscation and redemption fine in lieu thereof was made by the Adjudication Authority under sections 179 and 181 of the Customs Act. It was further held that the judgment of Sindh High Court in C.P. No.D-817 of 2004 Shahzad Ahmed Corporation v. Federation of Pakistan, was not attracted as in the cited case the goods were intercepted and seized by the Directorate of Intelligence and Investigation, while in the present case, the goods were intercepted by Intelligence Branch of the same Collectorate. It was further held that even if no notice was issued within the period prescribed under subsection (2) of section 168 was issued the proceedings for imposition of penalty and fine may be continued and the only right which accrues in favour of the owner of the goods is that he becomes entitled to the return thereof. The learned Tribunal lastly held that if it was found that genuine auto-parts were imported as against initially got assessed as non-genuine parts, the question of accepting the declared value does not arise.

We have heard Ms. Wajiha Mehdi, learned counsel for the applicant and Mr. Raja Muhammad Iqbal, learned counsel for the respondent.

While arguing on the first question the learned counsel for the applicant contended that there are clear instructions of the C.B.R. that no proceedings under section 32 should be initiated if an importer opts for First Appraisement System, which means, 100% examination of the goods. She submitted that in this case, 100% goods were examined. In order to substantiate her contention she drew our contention to the inspection notes on the back page of the Bill of Entry/goods declaration.

On the other hand, Mr. Raja Muhammad Iqbal, supported the finding of the learned Tribunal to the effect that it was not the case of option for First Appraisement System, as initially the assessment was got made by the importer in collusion with the customs officials by examination of samples only which is not the attribute of First Appraisement System. He stated that the document itself speaks of sample examination initially which is attribute of second Appraisement System. The 100% examination was made subsequently on detection of misdeclaration/fraud. We have very carefully examined the noting on the Bill of Entry and have found that initially the Second Appraisement System was adopted and after sample examination the declared version was accepted. Subsequently, on interception of goods by the AIB of the same Collectorate 100% examination of the goods was made, whereafter, the misdeclaration and fraud was detected. The learned Tribunal has correctly appreciated the facts and has held that First Appraisement System was not employed. In view of this finding of fact which is fully borne on the record, we are of the opinion that the issue whether initiation of proceedings' under section 32 on account of subjecting the consignment to First Appraisement system does not arise. As the consignment was not subjected to First Appraisement System, therefore, it is held that the question as proposed does not arise from the facts and circumstances of the case.

So far, the second question is concerned, we find that the value of the goods was assessed on the basis of information received from the Pak Suzuki Motors who import the genuine parts on 55% discount. The finding of the learned Tribunal on this point that section 25 was correctly applied is not open to any 'exception but the observation that the transaction value could not be accepted is not correct. It appears that the learned Tribunal has confused the transaction value with the declared value by the importer. The transaction value has been defined in subsection (1) of section 25 to mean the price actually paid or payable for the goods sold for export to Pakistan. The applicant has not challenged that the value assessed on the basis of information from the Pak Suzuki Motors Ltd., was not the price payable of the genuine Suzuki auto-parts, at the time of sale for export to Pakistan. It is held that the assessment was made under subsection (1) of section 25 in accordance with the provisions contained therein, which is not open to any exception.

So far, question No.3 is concerned, we are of the opinion that in the facts and circumstances of the case it is not relevant at all. The reason being that in this case at no point of time the return of the goods was claimed by the applicant for the reason that the show-cause notice was not issued within two months of the seizure of the goods. In fact, on the applicant's own showing the assessed duties and taxes were deposited and the goods were got released. Secondly, the sole effect of non-issuance of notice under section 180 within a period of two months from the date of seizure is that the person from whose possession the goods are seized becomes entitled to the return of goods. It has no further effect. If the notice is not served within the period of two months it will not vitiate or invalidate the entire proceedings. The civil and criminal liability shall not be washed away only on account of non-service of notice under section 180 within the period specified under subsection (2) of section 168. The learned counsel for the applicant has conceded to the above proposition of law. Thus, in the facts and circumstances of the present case, the question No.3, is not relevant.

After hearing the learned Advocates for the parties, the reference application was disposed of by a short order. These are the detailed reasons in (sic).

S.A.K./K-40/KOrder accordingly.