MUHAMMAD ARSHAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2010 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 132 (2009)

Customs Act (IV of 1969)---

----Ss.161, 187, 201 & 215---Customs Rules, 2001, R.71---Establish ment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9, 10, 11, 14(8) & 22---Review of decision of Federal Tax Ombudsman---Application for---Applicant had sought review of an earlier decision of Federal Tax Ombudsman on his complaint wherein Federal Tax Ombudsman had decided not to intervene in the matter as the question whether diesel oil in question was smuggled or not was sub judice before the Customs Appellate Tribunal at that time---Despite clear, and solid documentary evidence received by the customs department that diesel oil under reference was not smuggled at all, the anti-smuggling staff of customs department issued a show-cause notice for confiscation of the goods rather than bringing the investigation to its logical conclusion by withdrawing the case---Customs department while handling the case had grossly violated the prescribed customs law and procedure by selling the diesel oil without fulfilling mandatory requirement of serving due notice to the owner or his agent under S.201(1) of Customs Act, 1969 and non releasing of the driver under S.161(10) of the Customs Act, 1969 after receiving conclusive evidence that diesel oil in question belonged to Pakistan Sate Oil---Case, in circumstances turned out to be a painful example of misuse of powers by the customs functionaries---Applicant/complainant had prayed that earlier judgment of Federal Tax Ombudsman could be reviewed to the effect, that (i) department could be directed to pay the full cost of diesel oil, plus repair charges of the oil tanker; (ii) S.H.O. concerned along with other personnel of the raiding party could be recommended for disciplinary action for violating the mandatory provisions of law; (iii) that any other compensation could be allowed under S.22 of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Customs department having miserably failed to discharge their obligations under the law for which the applicant/complainant suffered hugely and inexcusably, recommendations were made to the effect; that (i) that sale proceed on account of sale of diesel oil be paid to the applicant within specified period; (ii) Officers responsible for extreme maladministration in the case be directed to show-cause notice accordingly---S. H.O. concerned was being separately referred to Provincial Police Officer for taking appropriate disciplinary action.

Asad Arif, Advisor, F.T.O's, Regional Office Karachi (Dealing Officer).

Muhammad Iqbal Riaz Authorized Representative.

Imdad Ali Jokhio, Assistant Collector, Customs Departmental Representative.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---Mr. Muhammad Arshad filed an application dated 12th June, 2008 seeking review of an earlier decision of Honourable Federal Tax Ombudsman dated 12-5-2008 on his Complaint No.204-K of 2008 dated 29-1-2008. In that Complaint, the FTO had decided not to intervene in the matter as the question whether diesel oil in question was smuggled or not was sub judice before the Customs Appellate Tribunal at that time. After the Customs Appellate Tribunal's verdict, dated 31-7-2008, confirming Collector (Appeals) decision that the diesel oil under reference was not smuggled one, the cause of aforesaid refrain has vanished. Hence the application under reference has been entertained for review.

2. Background facts of the case are that, on 17-4-2007, driver Riaz son of Abdul Sattar Khan of Keamari Karachi was transporting 23546 litres of diesel oil belonging to PSO by oil tanker No. BUA 6800 owned by Mr. Muhammad Arshad, the applicant, from Boslcor Oil Refinery at Hub Chowki, Baluchistan to PSO oil depot at Daulatpur, Naushero Feroze, Sindh under PSO's Transshipment Advice No.0460944 dated 10-4-2007 and calibration chart duly signed by Inspector, Weights and Measures, Government of Sindh. While passing through Hyderabad Bypass on 17th April, 2007, the oil tanker was intercepted by a police party comprising Police Inspector Sikandar Ali Bhatti and A.S.-I. Waris Hangoro along with other staff of Baldia Police Station Hyderabad, statedly on suspicion of smuggling. After detaining the driver, the oil tanker and its payload of diesel oil for eight days from 17th to 24th April, 2007, S.H.O. Baldia Police Station, Hyderabad handed over the detained driver and the, oil tanker to Hyderabad Customs.

3. Although there was no prima facie evidence to establish the charge of smuggling, the Customs anti-smuggling staff lodged an F.I.R. on 24-4-2007 at 20 hours against driver Riaz and seized the oil tanker and the diesel oil loaded on it. They got a sample of seized diesel oil drawn, though without the mandatory presence of the owner, and sent it for laboratory test by the Hydrocarbon Development Institute of Pakistan, Karachi vide letter dated 8-5-2007. The said Institute issued its Test-Report on 16-5-2007 confirming the conformity of diesel oil to Pakistan standard with some deviation of water content. In the meanwhile, Incharge Pakistan State Oil Company Ltd's oil depot at Daulatpur, Naushero Feroze, Sindh, confirmed on 8-5-2007 that the diesel oil dispatched by PSO from Bosicor oil refinery at Hub Chowki, Baluchistan was undoubtedly meant for PSO's Daulatpur depot as was already stated by driver Riaz.

4. Despite clear and solid documentary evidence received by Hyderabad Customs as early as 8-5-2007 that the diesel oil under reference was not snuggled at all and was meant for PSO oil depot at Daulatpur, the anti-smuggling staff of Hyderabad Customs issued a show-cause notice dated 4-6-2007 for confiscation of the goods rather than bringing the investigation to its logical conclusion by withdrawing the case.

5. The Hyderabad Customs while handling this case grossly violated the prescribed Customs law and procedure. Selling the diesel oil without fulfilling mandatory requirement of serving due notice to the owner or his agent under section 201(1) ibid and non-release of the driver under section 161(10) ibid after receiving conclusive evidence that the diesel oil belonged to PSO are examples at point. Besides, PSO's Transshipment Advice was proof of legitimacy of the goods under section 187 of the Customs Act, 1969. All this was unjustifiably and unlawfully ignored by Hyderabad Customs, which also committed the gross impropriety of selling the diesel oil at throw away 1/3rd of its normal market price to the Canteen Stores Department (CSD) on 7-11-2007. The adjudicating officer's observation in the Order-in-Original that nobody came forward to claim the ownership of diesel oil is not only factually incorrect but also misleading because the documents and information provided by PSO's Daulatpur oil depot, had clearly confirmed that the oil belonged to PSO and Mr. Ejaz Ahmad Awan, Advocate had filed a written reply to the show-cause notice.

6. The Collector Appeals on 5-1-2008 accepted the appeal against the Order-in-Original and held that Hyderabad Customs had no documentary evidence to prove that the goods were smuggled. The Collector Customs, however, still chose to file an appeal under section 194-A against the Order-in-Appeal before Customs Appellate Tribunal, Karachi. This appeal was equally forcefully rejected by the aforesaid Tribunal vide their order dated 31-7-2008. Under these circumstances, this case turns out to be a painful example of misuse of powers by the Customs functionaries.

7. Before, the Tribunal gave its verdict on 31-7-2008, the complainant Mr. Arshad, filed an application before the Honourable FTO for review of his earlier decision in complaint No.204-K of 2008. His main submissions were as under:-.

(i) That the complaint was against the behaviour of S.H.O. Police Station Baldia, Hyderabad who illegally kept the driver of the oil tanker along with oil tanker in his custody and on protest the driver and the oil tanker with 23546 liter of diesel oil valued at Rs.880,500 was handed over to the Customs Authority.

(ii) That S.H.O. along with other members of the police who kept the driver in wrongful confinement is guilty of maladministra tion and punishable under the law.

(iii) That the diesel oil sale is in violation of section 25 and Customs Rules, 2001 whereby fixation of reserve price was mandatory and sale of seized products at lower price .than the fair market price, by the Customs Authorities, was prohibited.

(iv) That the department had no right to sell the diesel oil till the final decision of the Court as it was not in the prohibited list of the F.B.R.

(v) That the Customs Authority Hyderabad violated the mandatory provisions of section 201 to be read with Customs Rules, 2001 and section 215 of the Customs Act, 1969 regarding the mode of service of notice to the custodian of the oil tanker who stepped in the shoes of the owner of the oil (by virtue of power of attorney dated 1-12-2007).

(vi) That the damage to oil tanker during the riots on the eve of assassination of Mst. Benazir Bhutto involving loss of Rs.500,000 is payable by the Customs Authority Hyderabad to the complainant.

(vii) That the complainant suffered due to violation of provisions of sections 201, 215 and 25 of the Customs Act, 1969 to be read with Customs Rules, 2001. to the extent of Rs.880,500 on account of payment of cost of diesel oil claimed by Messrs Malik Safdar and Brothers, the carriage contactors of Pakistan State Oil, and a further sum of Rs.500,000 on account of repair of the oil tanker which was burnt while it was in the custody of the Customs Authority.

(viii) That the violation of provisions of sections 201, 215 and 25 of the Customs Act, 1969 read with Customs Rules, 2001 by the Customs Authorities and the S.H.U. Police. Station Baldia, Hyderabad who violated the statutory provisions of section 161 of the Customs Act, 1969 remain in the field in the presence of favourable judgment by the Collector (Appeals). The violation of the mandatory provisions of law falls in the ambit of maladministration under section 2(3) of the Federal Tax Ombudsman Ordinance, 2000."

8. In the light of above submissions, the complainant prayed that the earlier FTO judgment dated 12-5-2008 may be reviewed under section 14(8) of the Federal Tax Ombudsman Ordinance, 2000 and also that: --

(i) The department may be directed to pay the full cost of diesel oil Rs.880,500 plus repair charges of the oil tanker.

(ii) The S.H.O. Police Station Baldia, Hyderabad along with other personnel of the raiding party may be recommended for disciplinary action for violating the mandatory provisions of the law.

(iii) Any other compensation may kindly be allowed under section 22 of the Federal Tax Ombudsman Ordinance, 2000.

9. The review petition was referred to the Revenue Division for comments and the reply of Hyderabad Customs is as follows:

(i) The review application is liable to be dismissed in limine as the complainant has not been able to point out any error or any material fact which was apparent on the record and escaped the notice of the Honourable Federal Tax Ombudsman, while deciding the Complaint No.C-204K of 2008, which is in principle a mandatory requirement for the review of the findings already given. The principle laid down by higher' Courts that "The Court will not review findings of fact which findings were recorded after hearing full arguments and on a consideration of the entire evidence and the reasons given by the High Court, there being no allegation that any material fact which was apparent on the record escaped the notice of the Court. (A. Ali v. I. Ali) PLD 1956 FC. 50. As such there has not been pointed out any mistake or material fact which remained un-noticed by the Honourable Federal Tax Ombudsman, therefore, the review application does not have the merit for any review, hence is liable to be dismissed.

(ii) The diesel oil being perishable/hazardous and inflammable goods has been sold in accordance with the provisions of Rule 71 of Chapter V of the Customs Rules, 2001.

"71. Auction perishable/hazardous goods.---Notwithstanding the provisions of these rules, the Deputy Collector or the Assistant Collector (Auction) after obtaining approval of the Collector may sell the perishable/hazardous goods through private offers or open auction at any time on the request of the person under whose possession/control these goods are lying. The approval of sale/bid in such cases shall invariably be obtained from Collector."

(iii) There is no facility for the storage of petroleum products in the Customs Warehouse, Hyderabad. Moreover, the Customs Warehouse containing seized and confiscated goods as well as the offices and the residential accommodations of the employees are located in the same premises where the oil loaded tanker was parked. To avoid any unforeseen incidence, the seized diesel oil after obtaining the approval of the Collector of Customs, was sold to the Canteen Stores Department (Ministry of Defence) Rawalpindi, in the light of Central Board of Revenue (now FBR's) directives issued under C.No.4/14/AS-2002. Vol-I dated 27th November, 2004. Hence, there is no deviation from the Customs Rules on the part of department and the sale was in accordance with the law, and no maladministration was committed.

(iv) The diesel oil was disposed of to a Government organization in accordance with law and no violation of Customs Act, 1969 or the Customs Rules, 2001, has been made. The repair of the slightly damaged oil tanker involves a negligible amount. In fact, disposal of diesel oil saved this Customs House from the irreparable loss.

(v) The complainant did not come forward during the entire proceedings of the case before the Adjudicating Authority to claim the ownership of the seized goods. Therefore, in the given situation, the notice under section 201 of the Customs Act, 1969 was placed on the notice board on 12-9-2007 as per the provisions of section 215(b) ibid.

(vi) It has been admitted by the complainant here that the oil tanker was damaged during the riots in the wake of assassination of Mst. Benazir Bhutto as against his previous claim that the department had burnt his oil tanker. The oil tanker was damaged slightly due to an accident, and was quite road worthy and in w running condition which was evidently taken away by the complainant in driven condition which can be confirmed from the complainant's receipt of the oil tanker bearing his signature on delivery order dated 5-1-2008.

(vii) Issue of compensation has been raised without any legal footing and proper justification.

10. The FTO Secretariat's views on the points made by Hyderabad Customs are as follows:--

(i) As Honourable FTO had refrained from making any recommendations in complaint No.204-K of 2008 due to the sub juuice status or the matter at that time, therefore, Hyderabad Custom's view that the review petition is liable to be dismissed in limine is untenable. The non-smuggled status of this diesel oil under reference attained finality after the decision of the Appellate Tribunal upholding the decision of Collector (Appeals). Therefore, it would now be appropriate and lawful for FTO to conclude his findings/recommendations on the complaint of maladministration under reference.

(ii) the propriety of selling diesel oil at 1/3rd of its normal market price needs to be carefully scrutinized. Besides, auctioning goods without mandatory notice to the, owner under section 201(1) read with 215(a) of the Customs Act, 1969 (IV of 1969) is tantamount to serious maladministration.

(iii) The language of the sale notice dated 12-9-2007 creates a misleading perception as if the goods had already been confiscated which was not the case at all at the time of their sale to Canteen Stores Department (CSD).

(iv) The view that the owner of goods did not appear before Hyderabad Customs during the entire proceedings of the case under reference is not valid because the owner, Mr. Arshad, had given power of attorney to driver Riaz on 1-12-2007 who had been in constant contact with Hyderabad Customs personally or through his Advocate. It is therefore factually incorrect to say that the owner did not appear before Hyderabad Customs during the entire proceedings of the case under reference.

(v) It is also wrong to state that nobody came forward to claim ownership of the diesel oil. As a matter of fact, there was conclusive documentary evidence available with Hyderabad Customs that the diesel oil ' belonged to PSO, which had recovered its full cost from the carriage contractors for non-delivery of oil at the oil depot, Daulatpur. The Carriage Contractors had, in turn, received the full cost of non-delivered diesel oil from Mr. Arshad, the owner of the oil tanker. Therefore, the ownership of diesel oil rested with Mr. Arshad who was duly represented by driver Riaz, who was his attorney, and his Advocate.

(vi) The contention of Hyderabad Customs in their comments on the Review Petition that the container was `slightly damaged' is contradictory to their earlier report of rioting filed in the Site Police Station Hyderabad which stated that the oil tanker was `half burnt'. It is obvious that `slight damage' and `half, burnt' are poles apart in their meaning. Therefore, the misstatement involved in contradictory reporting of facts also involves maladministration.

(vii) The claim of compensation is lawful as the loss due to unlawful detention of goods and the driver by Hyderabad Customs despite availability of sufficient documentary proof that the goods were not smuggled is established beyond any shadow of doubt. It may not be out of place to mention that section 216 protects only lawful acts of Customs officials; it does not at all protect any blatant illegalities committed by them as in this case.

(viii) The FTO is fully empowered under section 9 of the FTO Ordinance, 2000 to entertain the request of the applicant to conclude his findings in Complaint No.204-K of 2008 dated 29-1-2008 and make recommendations about the maladministration involved in this case.

11. In the back drop of the points raised and prayer made in the review petition and the parawise comments received from Hyderabad Customs through the Revenue Division, the Federal Tax Ombudsman heard the parties on 22-7-2009 at FTO's Regional Office, Karachi. Advocate Muhammad Iqbal Riaz appeared as the Authorized Representative of Mr. Arshad, the petitioner in this case. Hyderabad Customs was represented by Assistant Collector Mr. Imdad Ali Jokhio. The Departmental Representative briefly repeated the justifications of their actions explained in parawise comments submitted by Hyderabad Customs. His main reasoning was that since the oil originated from Hub, Baluchistan, it was sufficient in the ordinary course to conclude that it was being smuggled into Sindh. This argument obviously suffered from rationality deficit as how could mere transport of any goods from Baluchistan, prima facie, constitute sufficient evidence of their being smuggled. Besides, the Hyderabad. Customs had ample evidence with them in early May, 2007 that the diesel oil belonged to PSO and was being transported from Bosicor Oil Refinery at Hub Chowki, Baluchistan, to PSO'supcountry oil depot at Daulatpur, Naushero Feroze, Sindh. How could the goods be treated as smuggled in the presence of conclusive evidence available in the form of report of PSO's Daulatpur depot?

12. The 'DR (Customs) was also asked to explain why Hyderabad Customs violated the express provisions of the Customs Act, 1969 (e.g. the sale of diesel oil without giving mandatory notice to the owner of the goods). His-response that due notice of sale was given by affixing it on the Notice Board of Custom House, Hyderabad, was indeed very funny. When asked that affixing notice on the Notice Board was option of the last resort, to be used only if the address of the owner could not be determined, as prescribed under section 201(1) of the Customs Act, 1969 read with section 215(a) ibid, whereas in this case the home address of driver Riaz who was attorney of Mr. Arshad was available on Customs record and thus known to Customs Anti-Smuggling Squad, Hyderabad, the DR could not give any plausible explanation.

13. From the replies given by the DR, the adamance of Hyderabad Customs to stick to a patently irrational and factually incorrect position becomes all too obvious. One wonders how anti-smuggling powers under the Customs Act, 1969 are being exercised by a team of officers who are not only so ignorant of their legal obligations under the relevant provisions of the law and procedure but also lack the necessary capacity to accept even incontrovertible documentary evidence which subsequently fully convinced the Collector (Appeals) and the Appellate Tribunal, that the diesel oil under reference was a legitimate local product and not a smuggled item. Why should they be gullible enough to unquestioningly believe the verbal information provided by S.H.O. of Baldia Police Station Hyderabad?

14. Indeed, if Anti-smuggling powers are assigned to such a gullible and incompetent team of Customs officers like the Deputy Superintendent (Customs) who made the seizure on the unsubstantiated information of S.H.O. Baldia Police Station Hyderabad, the Assistant Collector, Anti-smuggling, Hyderabad, who authorized the Deputy Superintendent to make the seizure without necessary evidence, the Additional Collector who issued the show-cause notice and decided to confiscate the seized diesel oil as a smuggled commodity ignoring the conclusive evidence supplied by PSO's oil depot at 'Daulatpur, and, finally, the Collector of Customs, Hyderabad, who filed an unjustifiable appeal before the Customs Appellate Tribunal, against a fair, just and self-speaking order made by Collector (Appeals), the outcome cannot be any different from the one we are dealing with in this complaint.

15. The unfortunate incidents involved in this case i.e. arrest of the innocent driver, the seizure of legitimate diesel oil belonging to PSO, sale of diesel oil at throwaway price, burning of the oil tanker and available wastage of official time, energy and resources could all have been easily averted if the driver's statement of facts had been given due consideration by Hyderabad Customs, if the test report of diesel oil showing conformity to Pakistan standards had been correctly comprehended and if the conclusive evidence provided by PSO's Daulatpur depot as early as 8th May, 2007 i.e. within a fortnight from the handing over of the case by Hyderabad Police to Hyderabad Customs, had been given due consideration. Indeed, the Hyderabad Customs miserably failed to discharge their obligations under the law for which the complainant suffered hugely and inexcusably.

16. In view of the above findings, the following recommendations are made:

(i) The sale proceeds of Rs.340,100 on account of sale of diesel oil be paid to the complainant within 15 days of the receipt of this order;

(ii) Mr. Abdul Jabbar Solangi, the then Deputy Superintendent Customs, Mr. Mamoon. Moazam, the then Assistant Collector Customs Anti-smuggling, Mr. Zahid Hussain Bhayo, the then Additional Collector Customs and Mr. Jalaluddin Shah, the then Collector Customs responsible for extreme maladministration in this case be directed to show-cause, within 15 days, as to why:--

(a) compensation in terms of section 22 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000, for the claimed balance amount of Rs.540,400, along with repair charges of Rs.500,000 and a compensation of Rs.500,000 for loss of business for illegal detention of the oil tanker may not be E awarded to the complainant;

(b) Rs.100,000 may not be awarded as compensation for loss of earnings to driver Zahid; and

(c) disciplinary proceedings under the Removal from Service (Special Powers) Ordinance, 2000 may not be recommended against them.

(iii) They may also state whether they wish to be heard in person.

(iv) Compliance be reported within 30 days after implementation of these recommendations.

17. The case of S.H.O. Police, Sikandar Ali Bhatti and A.S.-I. Waris Hangoro of Baldia Police Station, Hyderabad, is being separately referred to Provincial Police Officer, Sindh for taking appropriate disciplinary action.

H.B.T./136/F.T.O.Order accordingly.