PAKISTAN STATE OIL COMPANY LIMITED VS COLLECTOR OF CUSTOMS, EXCISE AND SALES TAX (ADJUDICATION-II), 2007 PTD-KARACHI-HIGH-COURT-SINDH 1862 (2007)

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

---S.32---Untrue statement, error, etc.---Limitation---Categories of cases falling under the mischief of S.32 Customs Act, 1969 stated.

A bare reading of S.32 of the Customs Act, would show that for the purpose of limitation, cases falling under the' mischief of this section, have been placed in two categories. Subsection (2) is to be read in conjunction with subsection 1(a) & (b) and it deals with the matters, where by reason of some collusion any duty or charge has not been levied or has been short-levied or has been erroneously refunded. The period of limitation prescribed under this subsection is five years, which was earlier three years up to 30-6-2000, while in subsection (3) the period of limitation prescribed is three years, which was earlier six months up to 30-6-2000, and it covers those matters where, by reason of any inadvertence, error or misconstruction, any duty or charge has not been levied or has been short-levied or has been erroneously refunded.

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

----S.32(1)(2)---Untrue statement---Allegation of "hoodwinking" by assessee in the show-cause notice---Limitation---"Hoodwink" connotation---Such allegation clearly brings. the show cause notice within the scope of S.32(1) & (2) of Customs Act, 1969 which provided three years limitation at the relevant time---Principles.

(c) Words and phrases---

--"Hoodwink"-Connotation.

(d) Words and phrases---

----"Evade"---Meaning.

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

----S.32(1)(2)---Untrue statement---Act of assessee of charging the value of products inclusive of customs duty etc. from the buyer and making a wilful declaration that the supplies were duty free provisions and stores as admissible under S.106 Customs Act, 1969 fell under the mischief prescribed under subsections (1) and (2) of S.32, Customs Act, 1969 and not under S.(3) of S.32 thereof.

PLD 1963 SC 322; PLD 1969 SC 187; PLD 1970 SC 80; PLD 2001 SC 38; 1984 MLD 562; 2000 PCTL 117(sic); PLD 1999 Kar. 391; 2005 PTD 78; PLD 1986 Kar. 373; PLD 1990 Kar. 338; 1999 CLC Kar. 520; 2005 PTD 1654; PLD 2000 SC 825; 2000 SCMR 678; Collector of Customs, E&ST and Sales Tax v. Pakistan State Oil Company Ltd. 2005 SCMR 1636; Pakistan State Oil Company Ltd. v. The Collector of Customs, Excise and Sales Tax Appellate Tribunal and others 2006 SCMR 425 and Oxford Dictionary ref.

Taha Ali Zai for Applicant.

Raja Muhammad Iqbal for Respondent.

ORDER

ANWAR ZAHEER JAMALI, J.---By this order, we propose to dispose of the above titled six reference applications, arising out of the common order dated 1-7-2006, passed by the Customs, Excise and Sales Tax Appellate Tribunal, Karachi, in Customs Appeal Nos.K-741 to 746 of 2002. The identical question of law, proposed in these applications for the opinion of this Court in terms of section 196(1) of the Customs Act, 1969, read as under:---

"Whether the Appellate Tribunal erred in upholding the validity of the respondent's show-cause notice which was wrongly issued under section 32(1)(2) when in fact it should have been issued under section 32(3) of the Customs Act, 1969, since the respondent's own case against the appellant was one of "wrong interpretation."

2. Briefly stated, the relevant facts of the case are that the applicant, which is a leading oil marketing company of Pakistan, and engaged in the business of marketing and distribution of POL products, had been m icing supplies of POL products (high speed diesel) to the Pakistan Navy, for a considerable period of time. In the context of such business of the applicant, six show-cause notices dated. 30th January, 2002 were issued to them by the respondent alleging therein about the non-payment of customs duty and taxes etc. on their supplies made to Pakistan Navy, due to the wrong interpretation of section 106 of Customs Act, 1969. It was further averred in the show-cause notices that from the facts it was established that the applicant has since long hoodwinked the Department and succeeded in evading duty and taxes on a large number of consignments.

3. Reply to these show-cause notices was furnished by the applicant on 18th March, 2002, wherein justification for such wrongs was furnished in the terms that this practice was in vogue for a number of decades and the supplies were being made to the naval ships at a price fixed by the Ministry of Petroleum in terms of the notifications issued from time to time, therefore, the applicant were not at fault and as soon as this mistake was realized the payment of customs duty etc. was made by the applicant. Plea of show-cause notices being barred by time, was also raised by the applicant on the premises that in substance these notices were covered by section 32(3) which provided six months' time frame for issue of such notices, at the relevant time.

4. During the proceedings before the Collector, based on such show-cause notices, all the identical cases were decided against the applicant, and it was ordered that recoverable amount shown in each show-cause notice be deposited in Government treasury within 30 days. However, no penalty was levied as the act of non-payment of customs duty by the applicant was not found mala fide. The six identical appeals against such order dated 18-5-2002, raising only the issue of limitation, filed before the Customs, Excise and Sales Tax Appellate Tribunal Karachi, also failed, as the Tribunal came to the conclusion that the notices issued to the applicant were covered by section 32(1) &A (2) of the Customs Act, 1969. Relevant discussion reads as under:

"Case record and arguments by both parties have been examined. It has been established by the Department/respondent beyond any doubt that Messrs Pakistan State Oil had charged the price fixed by Ministry of Petroleum and Natural Resources for supply to Pakistani ships other than for foreign voyages. This fact they did not disclose in the shipping bill and instead claimed the supplies under section 106 of the Customs Act, 1969, which allows export of warehoused/bonded goods without payment of import duty for use on board any conveyance proceeding to a foreign territory. This act of Messrs Pakistan State Oil of charging the value of petroleum products inclusive of customs duty etc. from Pakistan Navy and making a wilful declaration that the supplies are duty free provisions and stores as admissible under section 106 of the Customs Act, 1969 falls under the mischief prescribed under subsections (1) and (2) of section 32 of the Customs Act, 1969. It is therefore held that the impugned order does not suffer any infirmity. The appeal is accordingly rejected."

5. In the context of 'question of law, proposed in these reference applications, Mr. Taha Ali Zai has vehemently argued that from the contents of the show-cause notices. It is palpably clear that such notices, for the purpose of limitation, were covered by section 32(3) of the Customs Act, 1969, as applicable at the relevant time, providing six months' period of limitation, thus, show-cause notices in all these reference applications, were time-barred. In support of his submission, learned counsel has placed reliance on the following cases:---

(1) PLD 1963 SC 322, (2) PLD 1969 SC 187, (3) PLD 1970 SC 80, (4) PLD 2001 SC 38, (5) 1984 MLD 562, (6) 2000 PCTL 117(sic), (7) PLD 1999 Kar. 391 and (8) 2005 PTD 78.

6. On the other hand, Mr. Raja Muhammad Iqbal, learned counsel for the respondent, has squarely placed reliance upon the judgment of this Court in the case of Collector of Customs (supra) and contended that by this judgment, the very question of limitation, as regards issuance of identical show-cause notices, was taken into consideration by the Apex Court and the judgment of a Division Bench of this Court, on the question of limitation, which was in favour of the applicant, was set aside, thus, there remains no further room for deliberations in these reference applications, as regards the same question of limitation raised by the applicant. To fortify his submission, learned counsel has further placed reliance on the following cases:

(1) PLD 1986 Kar. 373, (2) PLD 1990 Kar. 338, (3) 1999 CLC Kar. 520, (4) 2005 PTD 1654, (5) PLD 2000 SC 825 (6) 2000 SCMR 678.

7. In his reply arguments, Mr. Taha Ali Zai has contended that the submissions of Mr. Raja Muhammad Iqbal are misconceived as in these cases the issue of limitation was raised by the applicant for the first time before the Customs Authorities, therefore, the bar of section 196(1) of the Customs Act, 1969 is not applicable, and this issue is to be decided by the Court on its merits, with reference to the contents of the show-cause notices issued in each case separately.

8. We have carefully considered the arguments advanced by the learned counsel and perused the material placed on record as well as the case law cited at the bar. In the first instance, examining the contention of Mr. Raja Muhammad Iqbal, raised in the context of two earlier judgments of the Hon'ble Supreme Court of Pakistan passed in 130 other identical petitions of the applicant, it will be pertinent to mention here that admittedly the controversy, as regards the merits of the claim of the applicant in those petitions, based on the interpretation of section 106, of the Customs Act, was conclusively decided against them in the case of Collector of Customs, Excise and Sales Tax v. Pakistan State Oil Company Ltd. 2005 SCMR 1636, which is a consolidated judgment in Civil Petitions Nos.3-K to 131-K of 2005, dated 897-K of 2005, whereby the judgment of the Sindh High Court dated 23-5-2005 (2005 PTD 78) was set aside with the observations that since the plea of limitation was not raised before the customs hierarchy, thus, the High Court in exercise of its jurisdiction under section 196(1) of the Customs Act, 1969, was not competent to examine such question for the first time, as it was not arising out of the order of the Tribunal impugned before it. The review applications submitted by the applicant before the Hon'ble Supreme Court of Pakistan in respect of its earlier judgment dated 23-5-2005, in 130 connected petitions, were also dismissed, vide order dated 23-12-2005 in the case of Pakistan State Oil Company Ltd. v. The Collector of Customs, Excise and Sales Tax Appellate Tribunal and others 2006 SCMR 425 on the ground that no case for review of the earlier judgment, which was rendered after due consideration of the material points on the basis of foundation laid by the parties, was made out. In our view, since in the earlier proceedings the applicants were non-suited on the plea of limitation on the sole ground that such, plea was not urged in the customs hierarchy, therefore, the High Court in exercise of its jurisdiction under section 196(1) of the Customs Act, was not competent to examine this question for the first time, having not been arisen out of the order under section 194(b) of the Customs Act, these applications, based on different premises, viz. the question of limitation having been raised before the customs hierarchy, cannot be dismissed on this ground as argued by Mr. Raja Muhammad Iqbal. To sum up, the question of limitation raised in these applications, is thus to be decided on merits.

9. Reverting to the examination of question of limitation on merits, it will be advantageous to reproduce hereunder relevant part of section 32 of the Customs Act, which reads thus:

"32. (Untru) statement, error, etc.---If any person, in connection with any matter of customs,---

(a) makes of signs or causes to be made or signed, or delivers or causes to be delivered to an officer of customs any declaration, notice, certificate or other document whatsoever, or

(b) makes any statement in answer to any question put to him by an officer of customs which he is required by or under this Act to answer,

(knowing or having reason to believe that such document or statement is false) in any material particular, he shall be guilty of an offence under this section.

(2) Where, by reason of any such document or statement as aforesaid or by reason of some collusion, any duty or charge has not been levied or has been short-levied or has been erroneously refunded, the person liable to pay any amount on that account shall be served with a notice within (five) years of the relevant date, requiring him to show cause why he should not pay the amount specified in the notice.

(3) Where, by reason of any inadvertence, error or misconstruction, any duty or charge has not been levied or has been short-levied or has been erroneously refunded, the person liable to pay any amount on that account shall be served with a notice within (three years) of the relevant date requiring him to show cause why he should not pay the amount specified in the notice:

Provided that if the recoverable amount in a case is less than one hundred rupees, the Customs Authorities shall not initiate the aforesaid action.

(3A) *:k****

(4) * * * * * * * * * * *

(5) * * * * * * * * * * *"

10. A bare reading of the above provision of the Customs Act, would show that for the purpose of limitation, cases falling under the mischief of this section, have been placed in two categories. Sub-section (2) is to be read in conjunction with subsection 1(a) & (b) and it deals with the matters, where by reason of some collusion any duty or charge has not been levied or has been short-levied or has been erroneously refunded. The period of' limitation prescribed under this subsection is five years, which was earlier three years up to 30-6-2000, while in subsection (3) the period of limitation prescribed is three years, which was earlier six months up to 30-6-2000, and it covers those matters where, by reason of any inadvertence, error or misconstruction, any fluty or charge has not been levied or has been short-levied or has been erroneously refunded.

11. In these reference applications, perusal of show-cause notices, which are word to word identical, except the change in their relevant figures, goes to show that they do contain the assertion on behalf of the Department about the wrong interpretation of section 106 of the Customs Act, 1969, by the applicant, but in addition to it, it is also categorically stated in these show-cause notices that it was fully established from the record that the applicant had since long hoodwinked the Department and succeeded in evading duty and taxes on a large number of consignments. It is on the basis of such allegations that the show-cause notices were issued to the applicant under section 32(1)(2) of the Customs Act, 1969, providing a period of limitation of three years at the relevant time. Though the applicant has categorically denied any deliberate act on their part in the evasion or payment of duties and taxes to the respondent, but on perusal of case record it is clearly established that for the relevant consignments supplied to Pakistan Navy, applicant had collected customs duty and other taxes on such supplies of POL product, but the same were neither declared nor appropriated in the account of respondent. These facts floating on the surface of record, not controverted by the applicant, clearly go on to show that it was a deliberate act of the applicant that for evading taxes and duties collected by them in the account of respondent on such supplies, they did not disclose the collection of customs duty and other taxes and falsely claimed the supplies as duty free provisions and stores. If, for the arguments sake, the disputed supplies were duty free provisions and stores admissible under section 106 of the Customs Act, 1969, as claimed by the applicant, then they should not have collected such duties and taxes, which they had admittedly collected. Obviously, for determining 'the nature of the show-cause notice that whether it is issued under subsections (1) and (2) of the section 32 or under subsection (3), its contents are to be read as a whole and then on the basis of its substance it is to be judged that whether it is a show-cause notice under subsections (1) & (2) of the section 32 or otherwise. The respondent in their six identical show-cause notices dated 30th January, 2002 have portrayed the conduct of the applicant as an act to "hoodwink" the department and to "evade" duties and taxes. These words have their own meaning and connotation. As per "The Oxford Dictionary" of English language, the word "hoodwink" denotes an act of deceiving, cheating or defrauding by false appearance or trick, while the word "evade" refers to an act or escape from or to avoid specially by bullying, tricking or eluding. In the legal parlance, looking to the nature of controversy, meanings of these two words seem to be even more severely adverse to the conduct of the applicant. Thus, these allegations clearly bring the impugned show-cause notices within the scope of subsections (1) & (2) of section 32 (Mid), which provided three years' period of limitation at the relevant time.

12. The Customs, Excise and Sales Tax Appellate Tribunal Bench-III, Karachi, in its common order passed in Customs Appeals Nos.K-741 to 746 of 2002 has clearly observed that the Act of the applicant of charging the value of petroleum products inclusive of customs duty etc. from Pakistan Navy and making a wilful declaration that the supplies are duty free provisions and stores as admissible under section 106 of the Customs Act, 1969, falls under the mischief prescribed under subsections (1) and (2) of section 32 of the Customs Act. From these established facts on record, there can be no cavil to such findings of fact recorded by the Tribunal, which duly justified issuance of show-cause notices by the respondent under section 32(1)(2) of the Customs Act, 1969, and belies the contention of Mr. Taha Ali that in substance all the show-cause notices would fall under subsection (3) to section 32 (ibid).

13. The result of the above discussion is that the submissions of the learned counsel for the applicant that the show-cause notices issued to the applicant, were in fact show-cause notices under section 32(3) of the Customs Act, 1969, providing six months' period of limitation for the issue of such notices, at the relevant time, are devoid of force.

14. This being the position and relying upon the definite findings of fact, recorded by the Tribunal against the applicant, the question of law proposed is answered in the negative and these reference applications are disposed of accordingly.

M.B.A./P-12/KOrder accordingly.