MUHAMMAD ARSHAD JAMAL VS ABDUL WAHID KHAN, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1066 (2004)

2008 P T D 1066

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MUHAMMAD ARSHAD JAMAL

Versus

ABDUL WAHID KHAN and another

Complaint, No.801-K of 2003, decided on 31/01/2004.

Customs Act (IV of 1969)---

----S. 2(s), 16, 32, 79, 192, 156(1) & Cl. (89), (90)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Complaints against Customs Officials by a Customs Clearing Agent in respect of embezzlement and fraudulently encashment of pay orders by the Guarantee Cell of Custom House through collusion between officials of National Bank of Pakistan; destruction of relevant record by the Customs officials with the help of Bank official's and evasion of Customs duty in clearance of miscellaneous goods being aided and abetted under the patronage of Collector Customs (Appraisement)---Biased attitude, inattention and delay in clearance of consignments of such complaint---Validity---Evidence of alleged bias against the complainant in the action of the department in the consignments handled by the complainant---Such action was mala fide because these were in retaliation to complaints made by the complainant to the higher authorities in the Collectorate as well as in the Central Board of Revenue---Evidence was available of inattention and delay, as well, in pursuing the case in the Customs Court as well as in issuing charge sheets and conducting enquiries against tax employees involved in the cases of evasion of duty on clearance of consignments of miscellaneous goods---Biased action, inattention and delay were included in the definition of "maladministration" under S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended that the Member Customs, Central Board of Revenue ensured proper representation of the Department in the case pending in Custom Court and the Member Custom, Central Board of Revenue ensured that all tax employees named in F.I.Rs. in case of violations of provisions of law were issued charge-sheets promptly and proper enquiries were held against them in right earnest till the logical conclusion of the legal process.

S.M. Sibtain, Advisor (Dealing Officer).

Arshad Jamal for the Complainant.

Wajid Ali, D.C. Customs (Appraisement) for Respondents.

DECISION/FINDINGS

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---Maladministration is alleged in the instant complaint against Collector Customs (Appraisement) Karachi and his subordinate firstly of conniving with the destruction of record of the case of embezzlement and fraudulent encashment of Pay Orders deposited by importers with the Collectorate as security against provisional release of goods pending final assessment of duty through collusion between the guarantee Cell of Custom House and National Bank officials. The information was given by the complainant which resulted in red-handed arrest of Customs and Bank Officials involved in it.

2. Complainant is the proprietor of Messrs Jamal Associates, Customs House Agents under Licence No.15451. Complainant claims that he met Mr. Ramzan Bhatti in 1999, the then Collector Customs (Appraisement) and informed him that pay orders were being embezzled and fraudulently encashed through collusion between officials of N.B.P. and the Guarantee Cell of Custom House, Karachi. According to complainant the Collector gave him a pay order on trial basis and he not only got it encashed through the officials involved in the racket but also helped the department in their handed arrest, An F.I.R. was lodged by the Collectorate of Appraisement, Karachi on 23-11-1997 against staff of National Bank of Pakistan (N.B.P.) and Guarantee Cell of Custom House, Karachi for fraudulent embezzlement of pay orders and culprits were arrested.

3. However, it is alleged that subsequently the relevant record in the case was destroyed by the Customs officials with the help of Bank official's despite willingness of the accused persons in the case to deposit upto a sum of Rs.50,000,000. The alleged motive for spoiling the case was the involvement of senior Custom officials and a chain of Bank staff.

4. The complainant has alleged that the Custom officials have not yet recovered even the amount of Rs.4,500,000 on the basis of which aforesaid arrests were made, F.I.R. was registered and the case was established. According to the complainant even C.B.R. has taken no notice of the complaints made by him against negative attitude of the Collectorate towards the case.

5. It is further alleged by the complainant that he brought to the notice of Chairman 'C.B.R. in November, 2002 that evasion of Customs duty in clearance of miscellaneous goods were being aided and abetted under the patronage of Collector Customs (Appraisement), Karachi. He alleged informed the Chairman of C.B.R. that the Head of Appraisement Intelligence Branch (A.I.B.) as well as officers of Group 6 were also a party to the racket. The complainant has alleged the following procedural irregularities committed to run the aforesaid racket:--

(A) The elaborate software installed in the computers of Custom House, Karachi and the detailed Standing Orders issued from March, 1998 to December, 2002 in respect of clearance of miscellaneous goods are being circumvented and bypassed by the concerned officials with impunity. It has been admitted in such Standing Orders that irregularities were being committed in the cases of miscellaneous goods. The following alleged irregularities are said to be supported by documentary evidence enclosed with complaint and placed at pages 29 to 34 of the complaint.

(i) Bills of Entry (BE) were being accepted by a blue-eyed UDC without requiring the Customs Agent to enclose detailed invoice, packing list, article number etc., openly disregarding the Standing Orders agent illicit consideration of Rs.1,000 per case.

(ii) Appraisement groups too were overlooking such shortcomings in the BE and relaxing the requirement of calling for samples of all items.

(iii) The shed staff was neither filling in the prescribed "examination sheet" properly nor preparing the required detailed "Examina tion Report" nor feeding in the on line computer the data supposed to be filled and recorded in the Examination Sheet and Examination Report.

(iv) Consequently the duty of submitting the duly sealed samples in the Custom House was not being performed by the shed staff.

(v) The Deputy Collector too was not fulfilling his "mandatory" obligation to examine all containers of miscellaneous goods and to sign each Examination Report. He did not check complete daily record of consignments of sundry goods.

(B) All the concerned officers and. staff have thrown the law and procedures overboard in the cases handled by a person named Sadruddin, who is only an intermediary between Officers and consignee. He is not even a clearing agent. Consequently there was no regularity in ensuring:

(i) that the BE bore the signature of DC (Shed);

(ii) that the sheet being submitted by the Importer or his Clearing Agent match with the report of BE;

(iii) that the Examination Sheet supposed to be issued under the signature of shed staff was original or a photocopy;

(vi) that the person presenting the BE was the genuine importer or a Clearing Agent;

(v) that the Appraiser, allegedly, was not doing his duty of ensuring complete and correct feeding in the computer and

(vi) that the clerk was not ensuring that the copy of BE duly signed by the Appraiser, Commercial Invoice, Packing List and Original Examination Sheet were placed in his record.

6. The aforesaid procedures were being thrown overboard by the concerned officers and staff to create a mess in order to facilitate making Rs.50,000 to Rs.100,000 per container. The AIB was also alleged to be a party in the racket. It was alleged that fax message received from the informer Raja Basharat about dubious containers were passed on by the Collector to AIB who under the command of its head Mr. Imran Mohmand, the Deputy Collector used to encash the information for still higher consideration. Their role in aiding and abetting the evasion was allegedly proved by the fact that the AIB did not take any cognizance of the shortcomings in the Bills of Entry.

7. In the end the complainant has alleged that the Collector had blocked 20 dubious containers in November, 2002 and did not release even when the consignees fulfilled first part of their commitment in the following understanding arrived between them and the Custom Officers-Additional Collector Mr. Tariq Huda and the Senior Appraiser Mr. Mukhtar through the good offices of the complainant.

(a) The importer would initially deposit, Rs.10 million; being half of the duty and taxes to be assessed on the entire consignment, and eight containers would be released.

(b) All those accused arrested without evidence would be released.

(c) The remaining containers would be released on payment of balance duty and taxes in the next stage.

The consignees were requesting release of consignment on payment of duty and taxes 8. upto Rs.20 million but the Collector was contemplating to auction the goods. The complainant claims that he explained the position to the Chairman C.B.R. that release of goods would yield substantial revenue but the concerned officers did not honour their commitment even after recovery of Rs.10 million. Instead F.I.R's. were made in all the cases. Consequently not only the balance recovery was held up, the consignment too are rotting, demurrage is being incurred and supply is being denied to the market/consumers. Thus he alleges that while sundry goods are being cleared by dubious means, legal clearance is being denied /delayed.

9. The complainant claims that the information given by him was found correct and around rupees twenty million were recovered in cases identified by him. He alleged that a minimum amount of rupees one hundred million was expected to be recovered had the Collector not avoided, deliberately, to appoint an enquiry committee. Further the Collector, allegedly, not only did not ensure safety of record in spite of the fact that Audit Section was closed but connived with maximum possible disappearance of record. According to the complainant, in case an enquiry committee is constituted, his contention that record is missing from relevant files will be proved. The fact that responsibility for the evasion discovered in the aforesaid cases has not been fixed on any officer involved in it is a conclusive proof of his allegation that the Collector himself was a party to it.

10. Parawise comments have been offered on the complaint by the Deputy Collector Customs, Appraising Intelligence Branch (AIB) in response to the notice issued under section 10(4) of Ordinance XXXV of 2000. However, the parawise comments precede by the following remarks about the complainant:--

"Before submitting pointwise replies to the complaint it is necessary to bring into the knowledge of the Honourable Federal Tax Ombudsman the background and character of the complainant. The complainant, as a clearing agent has been involved in a number of cases of fraudulent misdeclarations and is also facing many prosecution cases lodged by this Collectorate (Annex-A-F). The reputation of the complainant is thus marred by scores of wrongful and fraudulent acts which render his complaint incredible and liable to be dismissed and has been made with malicious intent to influence the case against him."

Parawise comments add that the licence of complainant's clearing and forwarding firm Messrs Jamal Associate has been suspended due to a case of misdeclaration involving evasion of duties and taxes to the tune of Rs.8.4 million.

11. Regarding fraudulent embezzlement of pay orders by staff of National Bank of Pakistan and Bank Guarantee Cell of Custom House, Karachi the respondent submitted that F.I.R. was lodged by the Collectorate on 23-11-1997 and culprits were arrested. Prosecution proceedings of the case are still pending in Customs Court. The case has not attained finality and the allegation regarding closure of the case on the behest of senior customs officers is baseless and a malicious contempt of the honourable Customs Court with intent to interfere in a sub judice case.

12. It is admitted that information regarding misdeclaration in import of miscellaneous goods were provided by the complainant. The cases were being actively pursued. Twenty-one such cases had been detected in which F.I.R's. were lodged in Customs Court and the main culprit Sadruddin had been arrested. The said accused was still in jail custody as his bail applications had been rejected by the Customs Court as well as High Court. Recovery of Rs.10 million had been made. The allegation regarding destruction of the case record was totally baseless.

13. It was denied that Standing Orders issued by Appraisement Collectorate were not followed by concerned staff. In fact the aim of issuance of a number of Standing Orders in respect of clearance of miscellaneous goods was to improve the system and to curtail the opportunities of miscellaneous by the mafia of importers of such goods. In fact it was due to strict implementation of the Orders/Instructions which led the culprits to resort to acts of forgery.

14. The consignments of miscellaneous goods were being examined through concerned Deputy/Assistant Collectors (Sheds). Similarly the detailed inventory of goods was also fed into computerized data. This procedure was being strictly followed. However, one odd omission could happen when the Assistant Collector did not sign the bill of entry which did not necessarily mean that he did not examine the consignment or that there was something wrong. The respondent submitted that the allegations against the Appraisement Staff of flouting Standing Orders against speed money and allegation against the AIB of overlooking the non-compliance of Standing Order by taking bribe were completely baseless. According to respondents, the complainant had made allegations 'against Appraising Intelligence Branch, Custom House due to the reason that a number of contravention cases were made by AIB in respect of consignment of the complainant. The respondent had enclosed instances.

15. It was further submitted that three containers out of 20 containers had been released in compliance of order of the High Court and Adjudicating Authority. The clearance of remaining 17 containers that related to the scam of miscellaneous goods was held up due to contravention/Court cases being pending in respect of the held up consignments.

16. The complainant submitted a rejoinder to the adverse remarks made by the respondents against him as well as regarding the status of his licence as a Clearing Agent. He averred that the F.I.R. under reference had been filed against him in 1994 but no challan could be filed till date. Besides, the respondent had enclosed with his comments only a copy of application moved by his Surety in the Court for return of the surety documents. In fact the licence had been provisionally restored on 25th September, 2003 to be kept under observation for six months. He further submitted that licence of Clearing Agency was given to him after 1994. It was suspended about a year ago for alleged commitment of fraud in two consignments. Both have been decided against the department. He has referred top the decision of Federal Tax Ombudsman in Complaint No.69-K/2003 in this regard. The complainant submitted that the attempt at his character assassination on infructuous grounds by the respondent was yet another proof of their mala fide intents and purposes. Complainant's track record, on the other hand in helping discovery of embezzlement of pay orders and their fraudulent encashment as well as in the identifications of ongoing racket of clearance of miscellaneous goods consignments was sufficient to prove his bona fide.

17. The allegations and counter allegations were thoroughly investigated. It was found that complainant's licence was suspended vide Circular No.APPG/LA/I-34/94 dated 10-5-2002 on the basis of allegations made against him in following three cases:

(i) Show-Cause Notice No.285 Adj-I/2002 dated 24-4-2002

The Custom, Excise and Sales Tax Appellate Tribunal vide order in Appeal No.K-731/02 dated 11-7-2002 decided that complainant's client/importer did not make any misdeclaration and remanded the case to the Collector (Appraisement) with direction that;

"Goods be examined 100%;

Request of the appellant for amending the bill of entry be examined by a competent officer in terms of section 205 of the Custom Act, 1969;

Assessment proceedings be finalized by an appropriate officer without accepting an outside influence in terms of section 80 of the Custom Act, 1969."

(ii) Contravention Report No.SI/Misc/46/2002-AIB dated 18-4-2002

The Collector Adjudication vide Order-in-Original No.51 dated 26-10-2002 has held:

"The charges levelled in the show-cause notice are admitted as well as established beyond the shadow of doubt. The offending goods are confiscated in terms of clause (1.4) of section 156(1) of the Custom Act, 1969. However, the importers are allowed to get the same redmeed on payment of fine equal to 100% amount of duties and taxes sought to be evaded besides payment of duty and taxes leviable thereon in terms of section 181 of the Custom Act, 1969 read with S.R.O.1374(I)/98 dated 17-12-1998. A penalty of Rs.100,000 (rupees one hundred thousand) each is imposed on the importers and the clearing agents in terms of clause (14) of section 156(1) of the Custom Act, 1969."

(iii) Contravention Report No.S1/Misc/37/2002-AIB dated 16-5-2002

The Collector Adjudication vide Order-in-Original No.95 dated 26-10-2002 has held:--

"The case is prima facie, an attempt to smuggle the goods in the garb of waste paper, which turned cold due to repeated cases intercepted by various agencies, during the immediate past. The Clearing Agent filed the bill of entry on the basis of commercial invoice, declaring faithfully the description and also warning the Customs authorities to go for 100% examination. No collusion or mala fide can therefore be attributed to Clearing Agent. He is exonerated accordingly. The bill of entry in this case was manifested with glaring difference between IGM, B/L and the description on bill of entry; fault apparently lies with Customer Service Centre for which Collector may take appropriate action to rule out such recurrences."

18. As noted in Para. 16 supra complainant's licence had already been provisionally restored on 25-9-2003 and he is currently under observation till 29-3-2004. The reasons offered by the respondents in support of their plea to dismiss the complaint on account of complainant's alleged adverse record could riot be supported with valid evidence.

19. Similarly the allegation about destruction of record by the Collectorate was not proved in the case of embezzlement by the staff of the Guarantee Cell of Custom House, Karachi and the NBP Branch through fraudulent entries of pay orders. The case is pending in Customs Court and it is sub judice. The F.I.R. in the case is based on 26 misused Pay Orders detected by the Audit on the basis of one transaction caught red-handed through the help of the complainant.

20. The respondents admitted that information provided by the complainant about alleged irregularities in clearance of import consignment of miscellaneous goods by appraisement staff in the commonly known "Sadruddin cases" had been given due cognizance. Respondent, have produced copies of F.I.R. dated 18-11-2002 for alleged violation of sections 2(s), 16, 32(1) & (2), 79 and 192 punishable under clauses (89) and (90) .of section 156(1) of Custom Act, 1969 lodged against proprietor of Messrs MAK Enterprises as well as Sadruddin and others where Mr. Nihar Khan was the Appraising Officer, F.I.R. dated 20-11-2002 also for the allegations supra lodged against owner of Messrs Sharjeel Enterprises as well as Sadruddin and others where Mr. Nihar Khan was Appraising Officer; F.I.R. dated 25-11-2002 on account of violation of same sections as noted above lodged against owner of Messrs Rafay Enterprises as well as Sadruddin and others where Mr. Muhammad Ashraf Khan was the Examining Officer and F.I.R. dated 14-1-2003 for violation of aforementioned sections lodged against owner of Messrs. Classic Gift Centre as well as Sadruddin and others where Mr. Anwar Zaib was the Appraising Officer. However, charge-sheets have been issued only to Mr. Ahmed Nawaz, Principal Appraiser Group-VI and Mr. Nihar Khan, Appraiser Group-VI only by July 7, 2003.

21. There is evidence of alleged of bias against the complainant in the actions of the respondents in the consignments handled by the complainant. Such actions are mala fide because these are in retaliation of complaints made by the complainant to the higher authorities in the Collectorate as well as in the C.B.R. There is evidence of inattention and delay, as well, in pursuing the case ibid in the Customs Court as well as in issuing charge-sheets and conducting enquiries against tax employees involved in the cases of evasion of duty on clearance of consignments of miscellaneous goods ibid. Biased action, inattention and delay are included in the definition of maladministration under section 2(3) of Ordinance XXXV of 2000.

22. It is recommended

(i) That Member Customs, C.S.R. ensures proper representation of the Department in the case ibid pending in Custom Court.

(ii) That Member Custom, C.B.R. ensures that all tax employees named in F.I.R's. in case of violations of provisions of law supra are issued charge-sheets promptly and proper enquiries are held against them in right earnest till the logical conclusion of the legal process.

(iii) Bimonthly progress of compliance of recommendation supra be submitted till conclusion of cases.

C.M.A./102/F.T.O.Order accordingly.