GLAXO LABORATORIES LTD., LAHORE VS COLLECTOR CUSTOMS, CENTRAL EXCISE AND SALES TAX ADJUDICATION-1, KARACHI, 2008 PTD-KARACHI-HIGH-COURT-SINDH 1539 (2008)

Customs Act (IV of 1969)---

----Ss.32(3) & 223---Notification S.R.O. 587(I)/1990, dated 7-6-1990---Misdeclaration---Time-barred show-cause notice---Exemption on import of goods---Authorities imposed penalty on importer on the ground that it had imported excess quantity than sanctioned---Plea raised by importer was that show-cause notice issued by authorities was hopelessly time- barred---Validity---It was not the case of misdeclaration or making false statements by importer but it was a case of wrong interpretation of direction given by Central Board of Revenue from time to time---Show cause notice issued after six months from 7-3-1995 was hopelessly time-barred because addition made by Central Board of Revenue in its letter dated 7-6-1997 was not made effective on the date of issuance of that letter but clearance of goods was allowed in terms of final certificate issued in favour of importer---After allowing release of raw material imported by letter dated 7-3-1995 under S.R.O. 587(I)/90 upto 30-4-1995, with further addition of certain items by letter dated 7-6-1995 in continuation of final certificate issued by Central Board of Revenue on 19-8-1996---Adjudication proceedings initiated against importer were contrary to S.223 of Customs Act, 1969, which made directives given by Central Board of Revenue a binding effect on all its subordinate functionaries---Any subsequent proceedings initiated against importer by issuance of show-cause notice was without jurisdiction and was in complete defiance of directions given by Central Board of Revenue-Order passed by authorities against importer was set aside---Reference was allowed in circumstances.

Union Sport Playing Cards Company v. Collector of Customs and another 2002 MLD 130 and Messrs Lever Brothers Pakistan Ltd. v. Customs, Sales Tax and Central Excise Appellate Tribunal 2005 PTD 2462 ref.

Aziz A. Shaikh for Applicant.

Raja Muhammad Iqbal for Respondents.

ORDER

MRS. YASMIN ABBASEY, J.---Facts leading to this Reference Application are that 51 consignments of raw materials were imported by applicant and were got cleared in 1994-96 under S.R.O. 587(I)/1990, dated 7-6-1990 against an allocation of sanction quota as per survey certificate issued by the Central Board of Revenue, on 19-8-1996. On examination of consignments in the light of survey certificate, it was found that the applicant imported excess quantity than sanctioned. That excess quantity was chargeable to duty and taxes at a standard rate. As per calculation, an amount of Rs.61,54,276 was found due against the applicant/importer. On demand duty and taxes applicant/importer declined to make payment contending that the actual requirement has yet to be clarified by the Central Board of Revenue. On 7-6-1997 such clarification was issued by the Central Board of Revenue and certain items were included in the survey certificate but still the Department was of the opinion that applicant had to pay duty and taxes, therefore, a show-cause notice was issued on 17-11-1997 under section 32(3) of the Customs Act, 1969.

Learned counsel for the applicant has challenged the issuance of show-cause notice, dated 17-11-1997 stating that goods were cleared during the period from 9-1-1997 to 25-9-1995, therefore, show-cause notice issued on 17-11-1997 after stipulated period of six months is time-barred, as at the relevant time the prescribed period for issuance of show-cause notice under section 32(3) of Act was six months.

It is contended by learned counsel for the applicant that even if the period is calculated from the date of S.R.O. 587(I)/1990 granting exemption on the import of goods on the basis of survey certificate then also show-cause notice is hopelessly time-barred. Further while clearing the goods, assessment was made and the goods were cleared up-till September, 1995. At that time neither duty nor taxes were levied on the consignments nor any demand was raised, therefore, in view of the dictum laid down by the Hon'ble Supreme Court of Pakistan in the case of Federation of Pakistan v. Ibrahim Textile Mills Ltd, notice under subsection (3) of section 34 of the Customs Act, 1969 was held to be unenforceable.

It appears that during pendency of matter before the Tribunal one Mr. Mubashir Muhammad Khan was appointed as Local Commissioner by the Tribunal by order, dated 8-11-2001. He has submitted his report on 9-12-2002. In his report, it is opined by the Commissioner that Order-in-Original issued by the Department on 22-1-1998 on the basis of the time-barred show-cause notice, is not enforceable. Further that after clarification of Central Board of Revenue vide letter, dated 7-6-1997, wherein it has allowed addition of certain items in the survey certificate issued in favour of the importer. The principle of promissory estoppel will apply in the present case.

Whereas the case of respondent is that the relevant date for the purpose of completing the period of limitation is 7-6-1997 when the items were added in the final certificate issued in favour of the petitioner, therefore, the show-cause notice issued on 17-11-1997 is within time but the argument advanced by learned counsel for the respondent does not appear to be tenable. Letter, dated 7-3-1990 reveals that when the Customs authorities were not releasing the goods imported by the applicant for want of annual capacity certificate, he approached to C.B.R. and his request was accepted. Subsequently, by letter, dated 19-8-1996 after a joint survey final certificate was issued on the basis of annual requirements of raw materials determined by the Joint Survey Team. At the same time a note was put therein that:

"Concession of raw material would not be granted retrospectively if at any stage it is found that the raw materials are manufactured locally or hit by CGO 17/94,

Concession will not be available, to the raw materials, specified in Annexure "A" to the certificate if they are not covered under S.R.O.587(I)/95, dated 7-6-1990 for any other instructions, directive or order issued by C.B.R. in this behalf."

Admittedly both the conditions reproduced above are not in the way of clearance of raw material as it was not a case of locally manufacturing of raw materials imported by the applicant. Inclusion of certain items by C.B.R. in the final certificate indicates that the addition will be deemed to be effective from the date when annual capacity in the certificate was allowed by C.B.R. on 7-3-1995. Hence under these circumstances, the facts placed by learned counsel for applicant on record that the excess quantity was cleared during the period from 9-1-1995 to 25-9-1995 and the transaction has came to an end before Notice issued under section 32(3) of the Customs Act, 1969 have force therein. If any further assistance is required the cases of Union Sport Playing Cards Company v. Collector of Customs and another (2002 MLD 130) and Messrs Lever Brothers Pakistan Ltd. v. Customs, Sales Tax and Central Excise Appellate Tribunal through Registrar and another (2005 PTD 2462) be referred.

In view of the facts as discussed above, we are of the view that it is not a case of misdeclaration of making false statements before the importer but appears to be a wrong interpretation of the direction given by C.B.R. from time to time, therefore, the show-cause notice admittedly issued after six months from 7-3-1995 is hopelessly time-barred because the addition made by C.B.R. in its letter, dated 7-6-1997 was not made effective on the date of issuance of that letter but the clearance of goods were allowed in terms of the final certificate issued in favour of the applicant.

After allowing release of raw material imported by the applicant by letter, dated 7-3-1995 under S.R.O. 587(I)/90, upto 30-4-1995, with the further addition of certain items by letter, dated 7-6-195 in continuation of final certificate issued by C.B.R. on 19-8-1996, the adjudication proceedings initiated against the applicant are in contrary to section 223 of the Customs Act, 1969, which made the directive given by C.B.R. a binding effect on all its subordinate functionaries, therefore, any subsequent proceedings initiated against the applicant by issuance of show-cause notice was without jurisdiction and was in complete defiance of the directions given by C.B.R.

In view of foregoing reasons, reference application of the applicant is allowed and the impugned order is set aside.

M.H./G-12/KReference allowed.