WEST PAKISTAN TANKS TERMINAL (PVT.) LTD. through Chairman VS COLLECTOR (APPRAISEMENT), APPRAISEMENT COLLECTORATE, CUSTOMS HOUSE, KARACHI
2007 P T D 284
[Karachi High Court]
Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ
WEST PAKISTAN TANKS TERMINAL (PVT.) LTD. through Chairman
Versus
COLLECTOR (APPRAISEMENT), APPRAISEMENT COLLECTORATE, CUSTOMS HOUSE, KARACHI
Special Custom Reference Application No.152 of 2005, decided on 19/09/2006.
(a) Customs Act (IV of 1969)---
----Ss. 30 & 156---Illegal removal of goods from bonded warehouse without payment of duties and charges---Rate of duty to be charged on such goods---Extent---Procedure provided for determining rate of duties and charges under S. 30(b) of Customs Act, 1969 would not apply to such case---Such goods would be charged with highest rate of duty applicable either on date of in-bonding of goods or date of detection of unlawful removal of goods from warehouse or date on which ex-bond of Bill of Entry was filed after detection of unlawful removal or date which evaded duties and charges were actually paid---Act of evasion of duties and charges being a wrong much higher than misdeclaration of goods or under-invoicing---Such act of removal would be as bad as smuggling of goods into country---Importer for such fraudulent removal could be criminally prosecuted under S.156 of Act, 1969---Applicability of highest rate of duty in such cases---Reasons stated.
National Construction Co. (Pakistan) Limited v. Government of Pakistan PTCL 1990 CL 217; Messrs Saira Industries (Private bonded warehouse) v. Collector of Customs 2002 CLC 616 and Collector of Customs v. Zaman Paper Board Mills Limited 2003 PTD 1791 rel.
(b) Customs Act (IV of 1969)---
----Ss. 30 & 33---Limitation Act (IX of 1908), S.19---Illegal removal of goods from bonded warehouse without payment of duties and charges---Issuance of show-cause notice to importer for recovery of evaded duty---Payment of amount by importer after such notice and its adjustment towards evaded duty---Importer claiming refund of such amount on the ground that proceedings initiated for recovery of evaded duty were barred by time---Validity---Importer after acknowledging his such wrongful act had agreed to pay evaded duty by executing a bond on stamp paper---Such acknowledgement of liability in writing vitiated plea of limitation---Recovery of adjustment of time-barred claim would not be unlawful, thus, debtor obligor could not seek refund of such amount on plea of limitation---Had there been no such acknowledgement, even then importer could not seek refund of such recovered or adjusted amount on plea of limitation---Principles.
(c) Limitation---
----Time-barred claim of money---Recovery or adjustment of such claim---Validity---Such recovery or adjustment would not be unlawful, thus, debtor or obligor could not seek refund of such money on plea of limitation---Principles.
Tariq Kamal Qazi for Applicant.
Raja M. Iqbal for Respondent.
Date of hearing: 19th September, 2006.
JUDGMENT
FAISAL ARAB, J.---The applicant owns on oil storage facility, which it uses for storing imported RBD palm oil. This facility is also a declared customs bonded warehouse where palm oil imported by the applicant, its associate companies as well as other importers is stored. Being a bonded warehouse, the applicant is obligated to release the oil from the terminal for home consumption only upon payment of customs duties and charges.
On 18-9-1996, the Directorate General of Intelligence and Investigation (Customs and Excise) Karachi raided applicant's oil storage facility and discovered that huge quantities of palm oil have been removed without payment of customs duties and charges. It was also discovered that both in-bonding and ex-bonding formalities as required to be followed under Chapter XI of the Customs Act, 1969 have been violated.
When faced with such undeniable situation, the applicant at the initial stages of investigation agreed to make payment of evaded customs duties and charges. On 5-10-1996, the applicant provisionally paid a sum of Rs.97,503,832 and undertook in writing to pay the remaining duties and charges within a period of 90 days.
On 25-1-1997 the applicant was formally served with a show-cause notice wherein it was alleged that customs duties and charges on as many as 55 consignments consisting of 53000 metric tons of RBD palm oil have been evaded from the applicant's storage facility. On 9-9-1997 the applicant paid a further sum of Rs.404,795,000, which at that time was equivalent to ten million US dollars being the value of shares held by the applicant's directors in Sheraton Hotel, Karachi.
Vide order-in-original, dated 5-12-2000, the Collector of Customs Adjudication-1 decided the matter and by applying the rate of duties and charges that were applicable on the date when the payments towards evaded duties and other charges were actually made, held that a total sum of Rs.538,495,798 was evaded by the Applicant. Out of this liability of Rs.538,495,798, a sum of Rs. 502,298,832 already recovered from the applicant was adjusted and a demand for the balance amount of Rs.57,211,656 was raised against the applicant. In addition to the amount determined towards evaded duties, a personal penalty of Rs.50 Million was also imposed on Mr. Sadruddin Gangji and his son Mr. Hashim Gangji being the directors of the applicant.
The order-in-original, dated 5-12-2000 was challenged before the Customs, Excise and Sales Tax Tribunal. The Tribunal vide its judgment, dated 23-5-2005 upheld the findings given in the order-in- original. Thereafter the applicant preferred the present reference before this Court.
Insofar as the question of unlawful removal of 55 consignment of palm oil without payment of customs duties and charges is concerned, the Applicant had no explanation. The Applicant disputed the proceedings only on two grounds i.e. (1) While determining applicant's liability, the rate of duty which was prevalent at the time of actual removal of the palm oil ought to have been applied and not the rate which was applicable on the date when the evaded duties and charges were actually paid and; (2) By the time the show-cause notice was served, the recovery of duties and charges on consignments removed in 1993 had already become barred by time and therefore the amount recovered against such time barred consignments are liable to be refunded back to the applicant.
First we shall examine the validity of the rate that was applied while determining applicant's liability towards duties and charges.
Where a consignment upon its importation is not cleared for home consumption and the importer opts to store it in a bonded warehouse, then in terms of section 30(b) of the Customs Act, the custom duties and charges on such consignment become payable at the rates which are prevalent on the date on which ex-bond Bill of Entry is filed and in case customs duties and charges are not paid within seven days of filing of ex-bond Bill of Entry, then the rate which is applicable on the date of actual payment of duties.
In the present case the consignments in question were surreptitiously removed from the oil terminal for home consumption with the intention to evade customs duties and charges. Therefore, the procedure provided for determining the rate of duties and charges under section 30(b) of the Customs Act shall not be applicable. In such cases, the consignment is to be charged at the highest rate that was applicable at any of the following stages i.e. (i) the date of the in-bonding of the consignment, (ii) the date of detection of unlawful removal of the consignment from the warehouse, (iii) the date on which the ex-bond Bill of Entry is filed after the detection of unlawful removal or (iv) the date on which the evaded duties and charges were actually paid. The reason being that the applicant by unlawful removal of the consignment has fraudulently enriched himself and pocketed the applicable duties and charges at the expense of the national exchequer. He then cannot turn around and demand that the rate of duty that was payable on the date of actual removal of consignment shall only be applied. Whatever the rate of duty on the date of removal, the evader of customs duties and charges is to be visited with the highest rate of duties applicable at any of the above mentioned four stages. An evader of duties cannot be afforded an opportunity to take financial benefit of his own wrong as this would amount to putting premium on ones fraud. This principal of applying the highest rate of duty is based on the rule that no person should take advantage of his own wrong.
The learned counsel for the Applicant has cited three cases i.e. (i) National Construction Co. (Pakistan) Limited v. Government of Pakistan reported in PTCL 1990 CL 217; (ii) Messrs Saira Industries (Private bonded warehouse) v: Collector of Customs reported in 2002 CLC 616 and (iii) Collector of Customs v. Zaman Paper Board Mills Limited reported in 2003 PTD 1791. In these cases too, the highest rate of duty at any given stage was applied.
It may be pertinent to mention here that at the time of detection of the evasion of customs duties and charges, third proviso to section 30 was not inserted in the Customs Act but its subsequent insertion is only recognition of the above mentioned principle that no one should be allowed to take advantage of his own fraud.
The cases referred by the applicant's counsel also pertain to the period which are prior to the substitution of section 30 of the Customs Act vide Finance Act, 1999 whereby a new proviso was added which is third proviso to section 30. The new proviso stipulates that where goods are illegally removed from bonded warehouse, such rate of duty shall be charged which is highest at any of the three stages i.e. on the date of in-bonding of the goods or on the date of detection of the case or on the date on which duty and taxes are actually paid. Thus the new proviso is also based on the principle that no person should be allowed to take advantage of his own fraud.
The present case though pertains to a period at which time the above referred proviso was not incorporated in section 30 in the Customs Act, yet this Court finds no reason not to invoke the above discussed principle applied in the cases cited by the applicants counsel himself, which too pertain to periods prior to amendment of section 30 of the Customs Act. In the cited cases the rate which was highest at any given stage was applied.
Thus we find no reason to differ from the findings of the both the forums below and are of the opinion that both the forums below rightly applied the highest rate of duty.
We also find that the directors of the applicant were rightly visited with person penalties. The act of evasion of duties and charges altogether is a wrong which is much higher than mis declaration of goods or under-invoicing as in such cases part of the applicable duties are still paid by an evader. The illegal removal of goods from bonded warehouse without payment of duties and charges is worst of all. In fact it is as bad as smuggling the goods into the country. In the present case, not only duties and charges were evaded at the time of removal of oil from the bonded warehouse but some of the consignments were not even lawfully in-bonded in order to conceal their importation as well. This was done with the sole purpose that subsequent unlawful removal may also go undetected. Thus before in-bonding the imported consignment, it was
intended by the applicant to evade customs duties. As stated earlier such act of the applicant cannot be defined in any other way except smuggling. Both the directors upon whom personal penalties were imposed for illegal removal of the consignment should thank their stars for not being criminally prosecuted under the provisions of section 156 of the Customs Act, for fraudulent removal of imported consignment.
The second plea that has been taken in the present proceedings is that the applicant is entitled for refund of duties on such consignments against which the proceedings have become barred by time. This plea on the face of it is misconceived. Firstly, after the detection of evasion of the customs duties and charges, the applicant acknowledged its wrongful act and agreed to pay the evaded duties and charges by executing a bond on a stamp paper. Thus there was acknowledgment of liability which in H itself vitiates the plea of limitation. Secondly, had there been no acknowledgment of the obligation in writing, even then the applicant pursuant to investigations into the entire affair of evasion of duties, made a payment of Rs.502,298,832. This recovered amount has to be applied first to the duties and charges which are first in point of time. By applying so, the entire consignment imported in 1993, against which only the plea of liitation could have be taken, stands recovered. Under the law even where a claim is barred by time, but for any reason its stand recovered or adjusted, then there exists no occasion for the debtor or obligor to seek refund of such recovered or adjusted amount on the plea of limitation. The law of limitation never extinguishes a right in a time- I barred claim. Only remedy for seeking its recovery is barred. Once the time-barred claim stands recovered or adjusted even after the period of limitation has gone by, such recovery or adjustment cannot be said to be unlawful and the debtor or obligor cannot seek refund of such amount on the plea of limitation. In the present case not only the alleged time-barred claim stands settled out of the recovered sum of Rs.502,298,832 but on account of applicant's own acknowledgment of liability in writing in the year, 1996, no portion of the demand remained barred by time.
In the present case following question of law was framed for our opinion: --
"Whether in the facts and circumstances of the case, the learned Customs, Central Excise and Sales Tax Appellate Tribunal, was justified in holding that the value and rate of duty applicable would be the date on which the bill of entry under section 104 of the Customs Act, were filed and duty and taxes were paid."
Vide short order, dated 19-9-2006 we answered the above question of law in the affirmative. The above are the reasons for the same.
S.A.K./W-10/KReference answered in affirmative.