S.T. ENTERPRISES through Proprietor VS FEDERATION OF PAKISTAN through Secretary, (Revenue Division/FBR), Islamabad, 2009 PTD-LAHORE-HIGH-COURT-LAHORE 467 (2008)

Toyo International Motorcycle v. Federation of Pakistan through Secretary, (Revenue Division) Central Board of Revenue, Islamabad and 3 others 2008 PTD 1494; 2006 PTD 2237; Pooran Lal v. Director of Inspection (Investigation) (1974) 93 ITR 505 (S.C.) and L.R. Gupta v. Union of India (1992) 194 ITR 32 (Delhi) ref.

Mian Abdul Ghaffar for Appellant.

Ch. Muhammad Zafar Iqbal and Sarfraz Ahmad Cheema for Respondent.

JUDGMENT

KHAWAJA FAROOQ SAEED, J.---This judgment will dispose of Writ Petitions Nos.15767, 15768, 15769, 15770, 15771, 15772, 15773, 15774, 15775 and 15776 of 2008 as the common questions of law and facts are involved in these writ petitions.

2. Brief facts of the case in Writ Petition No.15767 of 2008 are that the petitioner imported consignment of PVC Pipes and Fittings from Turkey for a particular unit @ US$ 764.00 per Metric Ton and sought clearance vide various G.D numbers. The declaration was found to be correct to the extent of description, quantity, weight and classification of the goods. However, the transactional value was not accepted and the goods were assessed at US$ 890.00 per Metric Ton on the basis of Karachi Data and other evidence pertaining to clearance of identical goods in terms of subsection (5) of section 25 of the Customs Act, 1969. It was a final assessment, as such, the petitioner paid duty and taxes and the goods were declared out of charge.

3. The petitioner later was served with a show-cause notice dated 12-6-2008 confronting that as per the information of the Department, there was a Valuation Advice dated 18-5-2007 in the field determining the value of above goods at US$ 1650 per Metric Ton, while the petitioner on the basis of Karachi Data and other evidence in connivance with his customs clearing agent paid the duty and has contravened the provision of subsections (1)(2) & (3-A) of section 32 which is further punishable under Clause 14 of subsection (1) of section 156 of the Customs Act, 1969.

4. The petitioner replied that the said Valuation Advice has not validly been issued as per law laid down by this court in "Toyo International Motorcycle v. Federation of Pakistan through Secretary (Revenue Division) Central Board of Revenue, Islamabad and 3 others" (2008 PTD 1494), hence the same cannot be applied. The reply, however, was that the said Valuation Advice holds field and until it is reviewed under section 25-D of the Customs Act, 1969, or set aside by a competent court, it remains applicable. However, the decision given by the Hon'ble High Court of Sindh at Karachi was not applicable because in that case subsection 32(3) was invoked while in the present case sections 32(1)(2) and (3-A) were invoked and, thus, the petitioner will pay the evaded amount mentioned in the show-cause notice.

5. The arguments from the petitioner's side remained that since section 32(B) in the case of subsections (1)(2) has to be on the basis of the parameters, the customs department has not understood in its true prospective. It was a case of past and closed transaction which could not be re-opened on the basis of valuation ruling which is a separate document from the proceedings and was not a part of record at the time of making the original assessment.

6. Section 32 applies where some one makes or causes to make or signs or causes to deliver to an officer of customs any declaration, notice, certificate and other documents whatsoever. This obviously means it only speaks of a document which has been signed by him or which he has caused to sign or makes any statement to any question which he has reason to believe that such document and statement is false in any material particular, he shall be guilty of an offence under this section (Emphasis Added).

7. As is obvious from the above discussion, section 32 is a penal clause. It completely speaks of a declaration, notice, certificate or other document or a statement given by the petitioner on the basis of which a consignment is released. In the show-cause notice when the Deputy Collector speaks of the appraisement it only states that some importer with the active connivance of their clearing agents are evading the government dues by getting their items assessed at a very low rate.

8. The show cause notice says that the record relating to PVC Pipes and Fitting was retrieved from C.F.S. Dryport, Lahore, wherein, it was observed that Messrs World Wide Trading Corporation imported a consignment of PPRC Pipe and fitting from Turkey and filed G.D. The said item was assessed @ US$ 0.890/Kg, whereas, the same should have been assessed @ US$ 1.65/Kg. This way, the authorities are discussing total assessment and value determined by their staff and it has got nothing to do with the statement filed by the petitioner in terms of G.D etc. or any other document, statement etc.

9. This court, therefore, does not agree with the learned Legal Advisor that the declaration in terms of G.D. etc. being at a very low rate, section 32 is fully applicable. If the authorities were to proceed with regard thereto, it should have been done at the time of making the assessment originally. After the assessment has become out of charge invoking the provision of section 32 on the basis of another ruling apparently does not find any support from the above language.

10. Section 32 has already been appreciated in various judgments including Writ Petition No.8400 of 2008 delivered by this Court on 28-7-2008 as well by the Sindh High Court. The relevant part of the said judgment passed in Writ Petition No.8400 of 2008 is as follows:--

"Section 32 also is not being understood in its true spirit. One must understand that it has been inserted to correct an error, modify an assessment and to recover the refund issued inadvertently. This obviously means review or correction of the error in a finalized matter. Once a consignment is out of charge after due consideration of relevant facts it becomes a past and closed transaction to the extent of its value etc. The same, therefore, should not be invoked only on the basis of the mere estimate gosips personal whims or feelings that the value could have been enhanced or it could fetch more taxes etc. The opening of an appraisement for the purposes of re-valuation of an earlier estimate or adopted figure would require `reason to believe' and not `reasons to suspect'. For example, if one subsequently, finds that the description of the imported goods was different, H.S. Code applied was wrong as a result of mis representing or the number of items mentioned in GD and accepted by the Department incorrect etc., nobody will have any objection on the application of provisions of section 32. However, if one feels that more revenue could have been generated and thus invokes the provision of section 32, this court will not agree to the said understanding. In this case, reference to the judgment reported as 2006 PTD 2237 is quite relevant. The valuation ruling cannot be considered a piece of evidence unless the same is based upon sound footings. However, on the basis of a valuation ruling, the provisions of section 32 cannot be invoked. This court, therefore, agrees with the petitioner that the notices issued in 'these cases are not lawful. Since the process which the learned legal advisor has proposed for the petitioner to adopt is quite lengthy and writ petition is an expeditious and immediate remedy the same is hereby allowed."

11. Coming to the show-cause notice as well as the valuation ruling on the basis of which the said show-cause notice dated 12-6-2008 has been issued. In first para. of the said show-cause notice, the D.C. (AIB) speaks of a valuation advice issued by the Director, Directorate General of Customs Valuation dated 18-5-2007 and in the second para speaks of the tax evasion of the government dues by getting the items assessed at very low value. It further states that from retrieval of record of the present writ petition in respect of GD No.3248 dated 16-11-2007, it appears that the same was assessed @ US$ 0.890/Kg, whereas, the same should have been assessed @ US$ 1.65/Kg FOB plus 1% insurance as per valuation for PPR pipes and fittings. It is on the basis of this observation in the closing part of the second para. that the calculation of the total difference of the value has been made and has been proposed under section 32 which is punishable under clause 14 of section 32(14)(1).

12. This court has already discussed the requirements of section 32 in the upper part and have partly given observation in the earlier writ petition, the relevant para, wherefrom has also been reproduced.

However, in order to clarify the situation in detail, section 32(1)(2)(3) is reproduced as under:

"Section 32 [False] statement, error, etc.,---

(1) if any person, in connection with any matter of customs,-

(a) makes or signs or causes to be made or signed, or delivers or causes to be delivered to an officer of customs any declaration, notice, certificate or other document whatsoever, or

(b) makes any statement in answer to any question put to him by an officer of customs which he is required by or under this Act to answer, [knowing or having reason to believe that such document or statement is false] in any material particular, he shall be guilty of an offence under this section.

(2) Where, by reason of any such document or statement as aforesaid or by reason of some collusion, any duty or charge has not been levied or has been short levied or has been erroneously refunded, the person liable to pay any amount on that account shall be served with a notice within [five] years of the relevant date, requiring him to show cause why he should not pay the amount specified in the notice.

(3) Where, by reason of any inadvertence, error or misconstruction, any duty or charge has not been levied or has been short-levied or has been erroneously refunded, the person liable to pay any amount on that account shall be served with a notice within [three years] of the relevant date requiring him to show cause why he should not pay the amount specified in the notice.

[Provided that if the recoverable amount in a case is less than one hundred rupees, the Customs authorities shall not initiate the aforesaid action.]"

13. The plain reading of the above in the light of the golden principle of remaining within the language of law, gives a very clear impression. The provision applies on a person who in connection with any matter of customs, makes or signs or causes to be' made or sign, or delivers or causes to be delivered to an officer of customs any declaration, notice, certificate or other document in any form or gives a statement in reply to a question before the Customs Authorities knowingly and intentionally having the reasons to believe that such document or statement is false in any material particular, he shall be guilty of an offence under this section.

14. In fact the para reproduced above froth the mentioned writ petition has rightly detailed the requirement of its invocation. Moreover, the language of this section can only be applied on the basis of the document delivered, furnished by the importer or the statement given by him before the Customs Authorities. Whether a valuation advice in any form can be considered as a document furnished by him or a reply in answer to a query raised by the Customs Authorities by the importer, does not need much to discuss. One may argue that the said valuation ruling having been prepared under section 25 by virtue of section 25-A subsection (2) is an applicable customs value for assessment of the relevant imported and exported goods, but, whether the same can be used subsequently after the consignment is out of charge by applying section 32 apparently does not, find support from the aforementioned language.

15. Section 32 does not speak of ignorance of the applicable value at all. It is totally in relation to the document furnished by the importer as well as the statement given by him. The matter does not end there. Section 32(1)(b) further adds that knowingly or having reason to believe that such document or statement is false in any material particular. These words make the requirements as more stringent and difficult to apply contrary to the said requirement. The show-cause notice very clearly indicates that neither any effort has been made to determine falsehood of the documents nor any of the statement given by the petitioner is proved to be as falsely given.

16. Still further, the said- subsection (b) of section 32(1) through addition of phrase "in any material particular" totally shuts the doors of gosips, estimate, surmises or apprehensions. The phrase "reason to believe" and later "in any material particular" cannot give room to any vague estimate howsoever strong it may be. It only applies if the documents are furnished or the statements have been given knowingly that the same are wrong and incorrect.

17. The term "reason to believe" has been defined in a long line of the judgments. In (1974) 93 ITR 505 (SC) re: Pooran Lal v. Director of Inspection (Investigation), the phrase has been defined as follows:--

"that the accident that undisclosed property was found on a search might not be a jurisdiction for the authorization of search, if, in fact there has been no grounds for entertaining reasonable belief. But finding of assets as expected by the Director of Inspection the information received by him would at least support the view that the authority concerned had reliable information on which he could entertain the necessary belief."

Further in (1992) 194 ITR 32 (Delhi), ref: "L.R. Gupta v. Union of India" it speaks as follows:--

"When any information is received on the basis of which an appropriate authority may form a reasonable belief that action under section 132(1) is called for, then the correctness or veracity of that information should be carefully and thoroughly examined".

18. Regarding the phrase "material particular" this again is very restrictive. The term "material" used here means `pertaining to the subject matter' while `particular' is synonymous to accurate, appropriate, definite, detailed, distinct;` exact etc. The phrase, therefore, can only be used where definite and positive belief can be established with regard to the submission of the incorrect documents or wrong statement. The valuation ruling on the basis of which said show-cause notice has been issued on 18-5-2007 does not come up to the said parameters in any form.

19. Notwithstanding the fact that whether a wrong document or a wrong statement was knowingly furnished or given respectively, even otherwise, referred valuation ruling lacks the parameters fixed in section 25 in its true spirit. However, the same is definitely an improved version from the earlier similar rulings seen by this court. Furthermore, law has also been slightly modified to cover the indolence in preparing such valuation advices, hence, no comments are further given.

20. Restricting our discussion to section 32, this court does not have any doubt in its mind that before invoking the provision of section 32 the prime responsibility of the competent authority is to establish that the document furnished and the statement given by the importers or his representative are wrong and that it was well within his knowledge. The application of section 32 directly without establishing incorrectness of the document available on the record with evidence is beyond the scope and power of the concerned authorities.

21. Valuation ruling especially in the manner that they are being prepared are still estimates and if the same are not followed at the time of earlier appraisement, it cannot be used against an importer which has already appraised and has been made out of charge by the Customs Authorities.

22. In this view of the matter, the present writ petition is also allowed and the show-cause notice and consequent proceedings are held to be as without lawful authority and are set aside.

M.B.A./S-12/LPetition allowed.