Messrs SHAFIQ TRADERS through Proprietor VS COLLECTOR OF CUSTOMS and another, 2007 PTD-LAHORE-HIGH-COURT-LAHORE 2092 (2007)

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

----S.81(2) [as amended by Finance Act (VII of 2005)]---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Provisional assessment---Limitation, extending of---Power of Collector---Scope---Grievance of importer was that as period of final assessment had been reduced from one year to nine months from the date of provisional assessment, therefore, provisional assessment had become final---Validity---Held, as a rule S.81(2) of Customs Act, 1969, was a machinery provision and therefore, it took effect from the date of enforcement of Finance Act, 2005 i.e. 1-7-2005, accordingly the reduced limitation from one year to dine months immediately became applicable to all pending provisional assessments---Power vested in Collector to extend period of limitation was not a carte-blache, as he could exercise such power only in exceptional circumstances and was also required to record such circumstances---Although the Collector was the sole arbiter of existence of exceptional circumstances, yet record must show as to what such circumstances were not how Collector considered them to be of exceptional nature---Mere agreement with a joint proposal made in respect of number of .cases initiated from a junior officer through intervening hierarchy of officers did not answer the legal requirement as contained in proviso to S.81(2) of Customs Act, 1969---Final assessment being not only out of time but also the extension given by Collector paving been made without answering the conditions prescribed for exercising such power, same was unlawful and without jurisdiction---Petition was allowed in circumstances.

(b) Jurisdiction.---

----Exercise of jurisdiction---Principles---Where exercise of jurisdiction by any authority, court or tribunal is made subject to existence of a specific condition, then such power cannot be exercised in absence of that condition---Where an executive authority exercises its jurisdiction after expiry of period provided if a statute, such .exercise of jurisdiction is illegal.

(c) Custom Act (IV of 1969)---

----S.81, proviso---Word "exceptional"---Object and scope---Word "exceptional" used in proviso by its very meaning indicates that law contemplates, exercise of that power by Collector rarely---Purpose of vesting the power in an individual officer to extend a limitation prescribed by law itself is an exceptional provision and had the only object that the State money is not lost even in cases of force-majeure---Exceptional circumstances are bundle of facts which render it impossible for the concerned officer to make final assessment within the prescribed limitation.

(d) Limitation---

----Fiscal statutes---Limitation---Applicability---Once time prescribed for doing an act by an executive authority expires, the taxpayer is clothed with a vested right of escapement of assessment.

Nagina Silk Mill, Lyallpur v. The Income Tax Officer, A-Ward Lyallpur and others PLD 1963 SC 322 and Commissioner of Income Tax, Meerut v. Hari Raj Swarup and Sons, 1982(138) ITR 462 ref.

(e) Words and phrases---

---"Exceptional circumstances"---Connotation.

Shahzada Mazhar for Petitioner.

Rana Muhammad Arshad fo Respondent.

Date of hearing: 26th April, 2007.

JUDGMENT

NASIM SIKANDAR, J.---The provisions of section 81 of the Customs Act, 1969 (for short the Act) provided for "provisional assessment of duty". Subsection (2) of section 81 as originally framed contemplated that after release of goods on the basis of provisional assessment the final assessment shall be made "as soon as may be "and on completion of such assessment the appropriate officer shall order that the differential between the amount already paid or guaranteed be adjusted against the amount payable on the basis of final assessment. These provisions were amended to provide for making of final assessment within one hundred and eighty days. That period was however, subsequently extended to one year by Finance Ordinance 2000. Also the Collector was allowed to extend the period of one year "under circumstances of exceptional nature" by not more than thirty days "after recording such circumstances". That provisions again underwent a change by Finance Act, 2005 when whole of the provisions of section 81 were substituted. Subsection (2) of the amended section 81 of the Act reduced the period for framing of final assessment from one year to nine months of the date of provisional assessment. However, the competence of 'the Collector to extend that period by not more than ninety days and the said conditions for exercise of such jurisdiction remained intact.

2. In the case in hand the petitioner Messrs Shafiq Traders imported a consignment of Cylindrical Door Lock and Handle Door Lock from China. The Goods Declaration No.12603 was filed on .23-2-2005. The consignment was provisionally assessed under section 81 of the Act on 25-2-2005 at US $ 8.00 per dozen as against the declared price al US $ S.UO and US $ 4.80 per dozen respectively. The matter was thereafter referred to Directorate of Customs Valuation & PCA Karachi for supply of exact transactional value. On receipt of the report the concerned Officer of Customs disagreed with the declared value and on accepting the report of the Directorate which was based upon the investigation made by Messrs SGS China proceeded to determine the price of Cylindrical Door Lock or US $ 16.56 per doyen and Handle Door Lock at US $ 23.10 per dozen.

3. The assessment so finalized on 22-5-2006 is challenged through this constitutional petition on a number of grounds. However, at the time of arguments it is only the objection against expiry of limitation provided for in subsection (2) of section 81 of the Act which has been pressed.

4. According to the petitioner under section 81 of the Act as amended by Finance Act, 2005 only a period of nine months was available to the Customs Authorities to frame final assessment from the 'date of provisional assessment which was made in this case on 25-2-2005. It is stated that the final assessment having been made after about 15 months was clearly beyond the limitation provided for in the said provisions as amended by Finance Act, 2005. It is accordingly slated that on the failure of the Department to finalize the assessment within the period fixed by the statute the provisional assessment automatically matured into a final assessment. Therefore, according to the petitioner no further demand can possibly be raised on the basis of the final assessment made on 22-5-2006 being clearly out of the prescribed limitation.

5. Learned counsel for the Revenue however, claims That since the goods declaration in the case in hand was filed on 23-2-2005 and the provisional assessment was also made on 25-2-2005, the limitation of one year as it existed on the relevant clay with the rider of competence of Collector to extend the same by another thirty clays will apply and not the one which was inserted/provided by way of the Finance Act, 2005 w.e.f. 1-7-2005. In support of his submissions that the amended provisions of subsection (2) of section 81 and the reduced period of nine months provided therein will not apply in the case in hand he places reliance upon unreported judgments recorded by two Beaches of this Courts in Writ Petition No.6394 of 2006 re. Dr. Shabir Ahmad v. Mst. Azra Khanam and others dated 23-11-2006 and Writ Petition No.3705 of 2006 dated 30-6-2006. Also makes mention of another order recorded in Writ Petition 3608 of 2006 re. Noor Impex v. C.B.R. and others dated 5-3-2007 to claim that the alternate remedy of appeal being available to the petitioner against the final assessment order this constitutional petition is not maintainable.

6. After hearing the learned counsel for the parties, I am inclined to agree that the final assessment made in the case of the petitioner is not countenanced by the provisions of subsection (2) of section 81 as also the proviso thereto. Following are my reasons:--

(i) As a rule subsection (2) of section 81 is a machinery provision and, therefore, it took effect from the date of enforcement of the Finance Act, 2005 i.e. 1-7-2005. Accordingly, the reduced limitation from one year to nine months immediately became applicable to all pending provisional assessments.

(ii) Even if the submissions made at the bar for the Revenue are accepted as correct, still the final assessment made in the case remains bad in law. It is an admitted position that after the expiry of one year the Collector in exercise of his powers conferred under proviso to subsection (2) of section 81 proceeded to extend the limitation by 90 days. As a matter of fact the final assessment was made on the 90th day after the expiry of the claimed limitation of one year. The petitioner has placed on record a copy of the extension order in which a proposal was made by a "junior officer in the office of the Collector that in order to finalize the cases within stipulated period an extension of 90 days in time may be granted. It was a joint request made in respect of as many as 10 cases including the case in hand. This proposal was forwarded to the Collector by three intermediary officers and on 21-2-2006 the Collector simply initiated the proposal and accordingly the final assessment was made on the same clay. Neither the proposal pointed out the "circumstances of exceptional nature" nor the Collector while granting the extension recorded "such circumstances". The file does not betray an application of mind much Less to stale the nature and recording the exceptional circumstances.

(iii) The power vested in the .Collector to extend the period of limitation is not carte-blanche. He can exercise that power only in exceptional circumstances and is also required to record such circumstances. Although he is the sole arbiter of existence of exceptional circumstances, yet the record must show as to what these circumstances were and how the Collector considered them to be of exceptional nature. Mere agreement with, a joint proposal made in respect of a number of cases initiated from a junior officer through the intervening hierarchy of offices does not answer the legal requirement as contained in proviso to subsection (2) of section 81 of the Act.

(iv) If is a settled law that where exercise of "jurisdiction by any Authority, Court or Tribunal is made subject to existence of a specific condition, then such power cannot be exercise in the absence of that condition. The word "exceptional" used in the proviso by its very meaning indicates that the law contemplates exercise of that power by the Collector as a rarity. The purpose of vesting the power in an individual officer to extend a limitation prescribed bylaw by itself' is an exceptional provision and has the' only object that the State money is not lost even in cases of force-majeure. Exceptional circumstances to my mind arc bundle of facts which rendered .it impossible for the concerned officer to make final assessment within the prescribed limitation.

(v) There is hardly any doubt that once time prescribed for doing an act by an executive authority expires, the taxpayer is clothed with a vested right of escapement of assessment. If au authority is needed, one may see the ratio settled in re. Nagina Silk Mill, Lyallpur v. The Income-Tax Officer, A-Ward Lyallpur and others (PLD 1963 SC 322). The right so accrued, it was held in re. Commissioner of Income-Tax, Meerut v. Hari Raj Swarup and Sons, (1982(138) ITR 462) cannot be waived by the affected party i.e. the taxpayer.

(vi) The two judgments relied upon at the bar for the Revenue are not relevant to the issue in hand. In these judgments while interpreting Article I2 (Protection against retrospective punishment) of the constitution Hon'ble Khawaja Muhammad Sharif, J. and Fazal-e-Miran Chauhan, J. set aside the orders made on complaint under section 3 of the Illegal Dispossession Act, 2005 on the grounds of the occurrence admittedly having taken place "before the date of enforcement of the said Act and,

(vii) The objection against maintainability of this petition is also not worthy of serious consideration. The question of limitation in the perspective of the power of an executive authority is always considered to be a question of jurisdiction. Therefore, where an executive authority exercises its .jurisdiction after the expiry of the period provided in a statute, such exercise of jurisdiction, without any iota of doubt, is illegal. In re: Nagina Silk Mill, Lyallpur v. The Income Tax Office, A-Ward Lyallpur and others (supra) a Larger Bench of the Supreme Court agreed that a writ could issue against the Income Tax Office where owing to lapse of time no assessment could in law be made. Since the appellate Forums provided under the Customs Act, 1969 cannot look into that aspect of au impugned order this constitutional petition is very well maintainable.

7. The final assessment made in this case being not only out of time but also the extension given by the Collector having been made without answering the conditions prescribed for exercise such power shall be set aside as being unlawful and without jurisdiction.

8. Petition accepted.

M.H./S-115/LPetition allowed.