MUSHTAQ AHMAD KHAN VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1555 (2005)

Customs Act (IV of 1969)---

----Ss.201, 216, 217 & 169(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---S.R.O. 739(I) of 1999, dated 12-6-1999----Customs General Order (1 of 1997), dated 12-6-1997---Procedure for sale of goods and application of sale proceeds---Redemption fine---Adjudicating Officer (Additional Collector) ordered outright confiscation of truck, which was upheld by Collector of Customs---Appellate Tribunal ordered release of truck on payment of duty and taxes and redemption fine---Complainant approached the concerned authorities for release of truck as ordered by the Appellate Tribunal but department did not release the vehicle on the ground that it had been auctioned before the receipt of Appellate Tribunal's order---Refund of sale proceeds of truck was demanded after deduction of duty and taxes but to no, avail---High Court directed the department to refund sales proceeds of auctioned vehicle after deducting duty, taxes and fine as ordered by the Appellate Tribunal---At the time of seizure the department had shown the value of truck as Rs.20 lac (market price) in the `seizure' document but the vehicle was sold in auction at a low price for (Rs.10,63,000) without associating the complainant with auction proceedings---Additional Collector refunded an amount of Rs.547,408 after deducting duty, taxes and redemption fine---Complainant contended that redemption fine could not be deducted from the auction proceeds because the goods having 'been auctioned were not available for redemption---Validity---Vehicle being nine years old at the time of auction was required to be assessed/appraised by the department in terms of provisions of Customs General Order (1 of 1997), dated 12-6-1997 keeping in view the condition of vehicle---As the vehicle was old and used the department had to appraise it on its physical condition---No `maladministration' was observed on this account nor can `maladministration' be attributed to the department for their refusal to refund the redemption fine in the first instance for they were acting at the time in accordance with High Court's order passed in the complainant's own case directing the department to return the sale proceeds after deduction of duty, taxes and fine---It was a different matter that the department had now, on their own, agreed to remitting the redemption fine in deference to High Court and Tribunal's judgments in some other cases---High Court had allowed the complainant the cost of petition and their was no provisions in the Customs Act, 1969 permitting payment of `interest' being sought by the complainant---Federal Tax Ombudsman declined to award cost of litigation and compensation---Complainant would get relief by way of repayment of redemption fine and the department agreed during the complaint proceedings to remit the same---Department will remit the amount of redemption fine to the complainant within one month.

Muhammad Aslam Kalia v. Customs (Lahore High Court's ruling dated 9-10-2002) and Customs Appeal No.188/LB of 2002 (C.No.779 of 2002) rel.

Muhammad Akbar, Advisor (Dealing Officer).

Abdul Bari Rashid for the Complainant.

Rashid Munir, A.C. Dryport, Multan for Respondents.

DECISION/FINDINGS

JUSTICE (RETD.) MUNIR A. SHEIKH (FEDERAL TAX OMBUDSMAN).----Facts of the complaint are that having seized complainant's validly registered truck (Model 1990) the Multan Customs instituted a criminal case against him. As the complainant did not contest the case the Special Judge (Customs) imposed a fine of Rs.5000 on him vide order dated 6-2-1999. However, after issuing a show-cause notice, the adjudicating officer (Additional Collector) ordered outright confiscation of the truck vide his order dated 16-2-1999, which was upheld by Collector of Customs, Central Excise and Sales Tax (Appeals), Lahore. The Customs, Excise and Sales Tax Appellate Tribunal, Lahore, before whom the complainant had appealed against Collector of Appeals' order, was partly accepted vide judgment dated 9-8-1999. The Tribunal ordered release of the truck on payment of duty and taxes and redemption fine equal to 10% of the value of truck. The complainant then approached the concerned Assistant Collector vide application dated 21-8-1999 for release of truck as ordered by the tribunal but he did not release the vehicle on the ground that it had been auctioned before receipt of Appellate Tribunal's orders. There being no alternative, the complainant demanded through a legal notice refund of sale proceeds of his truck after deduction of duty and taxes but to no avail. The complainant then filed a writ petition in the Lahore High Court, Multan Bench. The Court vide its judgment dated 5-4-2000 directed the respondents to refund sale proceeds of auctioned vehicle after deducting duty, taxes and fine as previously ordered by the Tribunal. The complainant again approached the respondents for obtaining sale proceeds but the respondents did not oblige. Instead, they filed civil petition for leave to appeal (C.P.L.A. No.890-L of 2000) in the Supreme Court of Pakistan against High Court's judgment dated 5-4-2000 but the petition was dismissed vide Court's order dated 3-11-2004. On dismissal of petition for leave to appeal, the Deputy Collector of Customs sanctioned refund of sale proceeds amounting to Rs.547,408 after deducting duty, taxes and fine vide order, dated 27-12-2004. The complainant had purchased the truck for. Rs.8 lacs and he had also spent Rs.7 lac on its repairs and replacement of parts. At the time of seizure the respondents had shown the value of truck as Rs.20 lacs (market price) in the `seizure' documents. They, however, sold it in auction at a low price (for Rs.10,63,000), without associating the complainant with auction proceedings, to a person of their own choice. As per appellate tribunal's judgment dated 9-8-1999 the truck was to be released to the complainant if he approached the respondents before 31-8-1999. The complainant did approach the authorities on 21-8-1999 for release of vehicle as was evident from respondents' letter dated 3-9-1999 but to no avail. The auction of the subject vehicle and refusal to remit sale proceeds amounted to `maladministration' on the part of the respondents. Although the Federal Government had already announced general amnesty scheme for release of such vehicle S.R.O.747(I) of 1999 dated 12-6-1999 on payment of taxes and fine equal to 10% of the value but the respondents auctioned the truck haphazardly depriving the complainant of his lawful property. Again while remitting the sale proceeds to the complainant respondents also deducted redemption fine of Rs.48,899 despite the fact that the vehicle was not physically available for redemption. Initially, the Appellate Tribunal ordered conditional release of the vehicle. Subsequently, the High Court directed the respondents to remit sale proceeds after necessary deductions. The respondents did not implement Courts' decisions and unnecessarily dragged the complainant into protracted litigation by filing civil petition in the Supreme Court of Pakistan. While trying to obtain release of his vehicle or payment of the sale proceeds the complainant had incurred during last five years huge expenditure by way of travelling expenses, boarding, lodging, professional charges of advocates, expenses for filing appeal, revision, besides suffering mental agony. It is pleaded that while declaring the actions of the respondents as perverse, arbitrary, unjust, unreasonable and biased the complainant be awarded cost of litigation and compensation together with any other relief deemed fit.

2. In reply, the respondents have submitted that the complainant's contention that the vehicle was validly registered was wrong. It was registered on fake documents. At the time of seizure the owner had produced an auction voucher issued by the Ordnance Unit (CMT and SD Workshop), Quetta, but, on verification, it was found that no such unit existed in Quetta. The vehicle was auctioned on 3-2-1999 as the Collector (Appeals), Lahore, had, vide Order No.185 of 1999, dated 30-4-1999, had rejected complainant's appeal. In response to complainant's request for refund of sale proceeds, the Additional Collector, vide his Order-in-Original No.21 of 2000 dated 12-2-2000, had ruled that the complainant was not entitled to refund of sale proceeds under section 201 of the Customs Act, 1969, especially when the vehicle in question had been confiscated. The vehicle was auctioned before the Appellate Tribunal passed its order. As the goods were outrightly confiscated the provisions of section 201 of the Customs Act, 1969 were not attracted. The aforesaid section stipulated that goods other than confiscated goods were to be sold after due notice to the owner by public auction. Hence, complainant's request for refund of sale proceeds was rejected as inadmissible. The complainant had filed a writ petition in Lahore High Court, Multan Bench. The respondents appealed against High Court's order dated 5-4-2000 in the Supreme Court of Pakistan. Complainant's contention that the vehicle was sold at a low price to a person of department's choice was baseless. It was sold to the highest bidder in open auction after notifying the same in newspapers. While the vehicle was auctioned on 3-5-1999 the amnesty scheme was announced later. The complainant's contention, therefore, for release of vehicle under the amnesty scheme was baseless. The Appellate Tribunal vide its judgment dated 9-8-1999 had ordered release of the vehicle on payment of duty and taxes plus 10% redemption fine. Hence deduction of redemption fine, duty and taxes from the sale proceeds was in accordance with tribunal's order. The Department had the right to file appeal before the Supreme Court. As soon as the Honourable Court's judgment was received the complainant was refunded the amount of sale proceeds after deduction of duty/taxes and redemption fine. According to the provisions of section 216 of the Customs Act, 1969, no compensation for loss of or injury to goods was admissible to owner of goods unless it was proved that such loss or injury had occurred, while the goods were in the custody of the Customs Department, due to neglect or wilful act on the part of officer of Customs. The vehicle was auctioned, after adopting all legal formalities, to the highest bidder for Rs.10,63,000 which was higher than its `reserve price', duly assessed by the appraising staff. After Supreme Court's judgment sale proceeds amounting to Rs.547,408 were refunded to the complainant after deduction duty, taxes and fine. The claim for payment of cost of litigation and compensation was baseless. The complaint may be rejected.

3. During the hearing, the A.R. reiterated the arguments advanced in the written complaint. He emphasized that (i) the respondents had auctioned the vehicle on 3-5-1999 pending decision of the case by the Appellate Tribunal without associating the complainant with auction proceedings, and (ii) although the Appellate Tribunal had, vide its judgment dated 9-8-1999, ordered release of the vehicle on payment of duty and taxes plus 10% redemption fine giving benefit of amnesty scheme launched under S.R.O.739(I) of 1999, dated 12-6-1999 the respondents, despite complainant's request dated 1-9-1999, refused delivery of the vehicle. They also did not remit the sale proceeds. The Honourable High Court vide its judgment dated 5-4-2000 while ordering payment of sale proceeds after deduction of duty/taxes and redemption fine, as previously ordered by the Appellate Tribunal, also observed that it was unfortunate that the petitioner had to come to the Court for implementation of Tribunal's order. Even so, the Department did not remit sale proceeds to the complainant, instead they went to the Supreme Court which vide its order dated 3-11-2004 did not grant them leave to appeal. Later, the Additional Collector vide his order dated 27-12-2004 refunded to the complainant an amount of Rs.547,408, after deducting duty, taxes and redemption fine. He contended that redemption fine of C Rs.48,899 could not be deducted from the auction proceeds because the goods having been auctioned were not available for redemption. He pleaded that the respondents should refund the amount of redemption fine already deducted from the sale proceeds. In support of his connection he cited Lahore High Court's ruling dated 9-10-2002 (Muhammad Aslam Kalia v. Customs) that the goods having been auctioned the department could only retain duty and taxes and not the redemption fine because the goods were not available for redemption. He also cited Customs, Excise and Sales Tax Appellate Tribunal's judgment dated 13-1-2004 (Customs Appeal No.188/LB of 2002 (C.No.779 of 2002), that since the goods had been auctioned and were not available the department could not deduct the redemption fine before remitting sale proceeds to the affected party. Referring to provisions of section 201 of the Customs Act, 1969 the A.R. submitted that though the respondents were required to give notice to the complainant before auctioning the goods no such notice was given. As the respondents did not release the goods or remit the sale proceeds the complainant had to go to the High Court, which involved further loss of time and money. Again the department unnecessarily filed appeal against High Court's judgment in the Supreme Court of Pakistan on 22-4-2000. Although High Court's order dated 5-4-2000 was in the field and no stay was operative yet the respondents did not implement the Court's decision. The Supreme Court finally decided the matter vide its order dated 3-11-2004. The respondents engaged them in unnecessary litigation. Refund, he stated, was issued on 27-12-2004 after a long delay, which amounted to `maladministration'. He submitted that it was rather strange that if someone owed duty, taxes etc., to the department they would send recovery notices to the defaulters but when it came to returning the proceeds to the complainant the respondents were reluctant to do so. The truck, he stated, was detained in 1998 and the sale proceeds were given on 27-12-2004 after a long time period of detention. They should pay full sale proceeds along with interest from the date of Tribunal's order. Asked as to whether there was any provision in the Customs Act for payment of such interest he admitted that there was none. The A.R. further submitted that the vehicle was valued at Rs.15 lac (C&F) and Rs.20 lac (market value) in the seizure report but was sold for Rs.10,63,000 in auction with which the complainant was not associated. The Customs Department indulged in favoritism and sold the vehicle to somebody of their own choice. Sale proceeds should have been returned on the basis of price of Rs.20 lac as shown in the seizure report.

4. The D.R. submitted that, in addition to duty and taxes, the department also deducted redemption fine from the overall sale proceeds. The balance amount after necessary deductions was paid to the complainant vide refund order dated 27-12-2004 as per direction of the High Court. Redemption fine could not be paid back, especially when the complainant had not agitated the matter before the High. Court. He further submitted that auction notice was given and served on the complainant. Asked to produce necessary evidence for record he stated that he would produce the same if another date of hearing was notified. He was also asked to show the appraisement sheet disclosing how the vehicle was appraised/evaluated for auction. The D.R. cited section 216 of the Customs Act, 1969 to show that in order to claim any compensation for the goods lost or damaged during customs custody the owner of the goods had to prove that the damage or loss had occurred due to gross negligence or wilful act of Customs Officer. The complainant had failed to prove any such loss/damage. He also submitted that according to section 217 of the Customs Act, 1969 no suit could be brought against the customs department for acts taken in good faith. As to the Additional Collector's order dated 12-2-2000 rejecting the request of the complainant the D.R. explained that at that time as the goads stood confiscated no refund could be given, especially when Appellate Tribunal's decision had not yet arrived. He denied the allegation that the goods were sold for a low price submitting that the old truck was properly evaluated and sold in open auction without favouring anyone, as alleged. He argued that the complainant could not prove that the goods were sold at a low price to a man of departments own choice. The auctioneer did not belong to the Customs Department. He being an independent person sold the goods for a price better than the reserved price of the vehicle. At this stage the D.R. was asked to ascertain department's reaction to the possibility of repayment of redemption fine, originally deduction from the sale proceeds, in view of Lahore High Court's judgment dated 9-10-2002 (Muhammad Aslam Kalia v. Customs) and Appellate Tribunal's judgment dated 13-1-2004 (Customs Appeal No.188/LB of 2002 (C.No.779 of 2002)) and intimate it at the next date of hearing. He submitted that he would do that after consulting the Department.

5. At the next hearing, the D.R. submitted that the Department had not filed any appeal against Lahore High Court's order dated 9-10-2002 (Muhammad Aslam Kalia v. Customs). The aforesaid judgment, he stated, had, therefore, attained finality. He added that although, the respondents had deducted redemption fine from sale proceeds in keeping with Honourable High Court's judgment in the complainant's own case the Department, in deference to the High Court's judgment, dated 9-10-2002 and Tribunal's judgment dated 13-1-2004, would be willing to pay back the amount of redemption fine previously deducted from the sale proceeds remitted to the complainant. On the question of valuation of the subject vehicle, he submitted, that it was an old and used vehicle, without accessories and was, therefore, assessed as per its physical condition in terms of sub-clause (iv) of C.G.O. 1 of 1997, dated 12-6-1997 (on record). According to the aforesaid C.G.O., he stated, the value of damaged and very old (more than six years old model) had to be appraised keeping in view the actual physical condition. He added that the seizure report showed only `estimated' value. The reserve price was fixed at Rs.945,000 but it was sold in open auction for Rs.10,63,000 after adherence to auction procedure. On a question, he disclosed that it was sold to one Muhammad Jamil of Rawalpindi. He vehemently denied that he was a person of department's choice. He further added that contrary to complainant's contention that no auction notice was given to him the auction notice dated 22-3-1999 was dispatched to the complainant at the given address through registered post. As evidence, he placed on record the postal receipt along with a copy of the notice. The notice, he pointed out, had not been received back which also confirmed that the complainant had received it. The A.R., however, denied receipt of the registered letter containing notice of auction. The A.R. added that while the department was willing to refund the amount of redemption fine originally deducted by them from sale proceeds remitted to the complainant, the valuation of the truck and its auction was carried out in accordance with the above mentioned C.G.O. and the auction procedure in force. Pointing out a discrepancy the A.R. submitted that while the truck was auctioned on 3-5-1999 the respondents in para. 5 of their comments (on record) stated that auction took place on 3-2-1999 after Collector of Appeals' order dated 30-4-1999, which could not be just. The D.R. submitted that the vehicle was auctioned as it had been confiscated. He further added that the department could auction the vehicle in terms of subsection (4) of section 169 of the Customs Act, 1969. The D.R. argued that the complainant had not at any stage during the proceedings of the case agitated the value aspect; adding that agitating it now was nothing but an afterthought.

6. The arguments of the parties and record of the case have been considered and examined. The case record shows that the Additional Collector vide his Order No.20 of 1999, dated 16-2-1999 confiscated the vehicle out-rightly. Complainant's appeal before the Collector of Appeals failed. On second appeal, the Appellate Tribunal, while holding vide its order dated 9-8-1999 that the vehicle was covered under S.R.O.739(I) of 1999 dated 12-6-1999, ordered its release on payment of duty and taxes plus 10% redemption fine before 31-8-1999. As the respondents did not implement the tribunal's order the complainant filed a writ petition in the High Court (Multan Bench). The High Court while ordering that the sale proceeds be remitted to the complainant after deduction of duty, taxes and fine as held by the Appellate Tribunal observed that the respondents could not be allowed to avoid the implementation of the order of the Tribunal in one guise or the other and that it was unfortunate that the petitioner had to file a constitutional petition in order to get the order of Tribunal implemented. It may be mentioned that the Honourable Court also allowed the petitioner the cost of the petition. Against High Court's order the department filed Civil Petition No.890-L of 2000 in the Supreme Court of Pakistan on 22-4-2004. The Supreme Court declined leave to appeal vide its order dated 3-11-2004. Subsequently, a refund order was issued by the Additional Collector for an amount of Rs.547,480 after deducting duty, taxes and redemption fine from the sale proceeds. Originally, the respondents took the position that they had deducted the redemption fine from the sale proceeds in accordance with the High Court's order. At the second date of hearing, however, the D.R. submitted that in deference to the Lahore High Court and Tribunal's judgments in other cases that redemption fine could not be charged when the goods had been auctioned the Department was willing to remit the redemption fine, originally deducted from sale proceeds remitted to the complainant. The complainant's grievance on that account would, therefore, stand redressed. The complainant could not substantiate the allegation that the vehicle in question had been sold at a low price to a person of department's own choice with evidence. It is also observed that the respondents had issued a notice under registered cover (against proper receipt) notifying the date of auction to the complainant but the complainant did not join the auction proceedings. The vehicle (Model 1990) being nine years old at the time of auction was required to be assessed/appraised by the respondents in terms of the provisions of C.G.O. No.1 of 1997, dated 14-12-1997 keeping in view of the condition of the vehicle. The respondents contend that they did exactly that and placed on record the assessment sheet showing that the value of old truck (Model 1990, without accessories) was taken at Rs.5 lac for levy of duty and taxes. As the subject truck was old and used the respondents had to appraise it on its physical condition in terms of the aforementioned S.R.O. No `maladministration' is observed on this account nor can `maladministration' be attributed to the respondents for their refusal to refund the redemption fine in the first instance for they were acting at that time in accordance with High Court's order passed in the complainant's own case directing the respondents to return the sale proceeds after deduction of duty, taxes and fine. It is a different matter that the respondents have now, on their own agreed to remitting the redemption fine in deference to High Court and Tribunal's judgments in some other cases cited by the complainant.

7. In view of the foregoing position, and considering that (i) the Honourable High Court had in its judgment dated 5-4-2000 allowed the complainant the cost of petition and (ii) there was no provisions in the Customs Act, 1969 permitting payment of `interest' (by way of compensation) being sought by the complainant, it is not possible for this forum to award cost, of litigation and compensation. The complainant would, however, get relief by way of repayment of redemption fine, as the D.R. agreed during the complaint proceedings to remit the same. The respondents will, therefore, remit the amount of redemption fine to the complainant as undertaken by the D. R., within one month.

8. The complaint is disposed of subject to observation made above.

C.M.A./440/FTOOrder accordingly.