T.M. ENTERPRISES through Authorized Attorney VS DIRECTOR, INTELLIGENCE AND INVESTIGATION, KARACHI, 2010 PTD-KARACHI-HIGH-COURT-SINDH 1411 (2010)

Customs Act (IV of 1969)---

----Ss.32, 156 (I)(14) & 194-B (3)---False declaration---Fictitious Bills of Entries---Applicant was a clearing agent who was alleged to have removed liquor from Bonded Warehouse on the basis of fake record---Appellate authority had specifically observed that as a shipping agent, applicant was required to complete transaction by delivering goods at the port for which no plausible explanation was given by him---Appellate authority had also observed that had there been a fraudulent act comprising of two-three bills then it could be inferred that the same was not in the knowledge of applicant but such act of deceit was spread over a span of number of years and applicant could not claim itself to be unaware about such act---Appellate Tribunal also came to the conclusion that applicant did not furnish any material/evidence to divulge itself from charges levelled upon it---Appellate Tribunal further observed that Clearing Agent played an important role in not only in-bonding of goods but also ex-bonding of the same and no goods could be ex-bonded without the aid of Clearing Agent---Appellate Tribunal also observed that applicant had miserably failed to prove itself in absence of any adequate material/evidence, oblivious and unconcerned with the occurrence and affirmed the action of authorities---Validity---Findings recorded in criminal proceedings were not binding or relevant in deciding reference applications which were decided on the basis of preponderance of evidence---Report of Handwriting Expert was not before High Court and decision referred by applicant had no relevancy with the facts---High Court affirmed penalty imposed under relevant provision of law upon applicant---Reference application was dismissed in circumstances.

Shahi Carpet (Pvt.) Ltd. v. Commissioner of Wealth Tax 2003 PTD 1377; Muhammad Sadequan v. Collector of Customs, Karachi 2006 PTD 2742; Government of Pakistan through Secretary v. Muhammad Ahmed Qureshi and others PTD 2002 CL 579 and Amjad Pervez and others v. Additional Collector, Customs 2005 PTD 1817 ref.

Ghulam Rasool v. Muhammad Waris Bismil 1995 SCMR 500 rel.

M. Junaid Ghaffar for Applicants.

Mohsin Imam for Respondent.

ORDER

IRFAN SAADAT KHAN, J.---These Special Customs Reference Applications (SCRAs) have been filed against the order passed by the Special Customs and Sales Tax Appellate Tribunal (STAT) dated 31-12-2008, by the following questions of law:-

(1) Whether in the facts and circumstances of the case the Customs Tribunal was justified in upholding the order in original and order in appeal against the applicant without any adverse or incriminating evidence being on record?

(2) Whether in the facts and circumstances of the case the Customs Tribunal was justified in upholding the order-in-appeal against the applicant despite the admitted fact that the alleged Bills of Entry were never filed by the applicant and the signatures of the applicant were forged as per report of the Hand Writing Expert in the challan submitted before the Special Judge Customs and Taxation in Criminal Proceedings?

(3) Whether in the facts and circumstance of the case the Customs Tribunal was justified in upholding the order-in-appeal despite the fact that the applicant is a State witness and has duly recorded its statement under section 164 Cr.P.C. in criminal proceedings pending before the Special Judge Customs and Taxation?

(4) Whether in the facts and circumstances of the case the order of Customs Tribunal is based on complete misreading of facts and evidence as admittedly the respondents did not press the case against the applicant at the time of hearing and was subsequently allowed to file written arguments after the hearing of the case and whether such an attempt does not amount to miscarriage of by justice by the Tribunal?

(5) Whether in the facts and circumstances of the case Customs Tribunal has erred in upholding the order-in-appeal despite the fact there is neither allegation nor any finding specifically against the applicant in the order-in-original and the order-in appeal?

AMENDED/ADDITIONAL QUESTIONS OF LAW

(6) Whether in the facts and circumstance of the case the Customs Tribunal was justified in upholding the order-in-original and order-in-appeal even though it is an admitted position that the applicant did not file any document/Goods Declaration so as to attract the provisions of section 32 of the Customs Act, 1969 warranting imposition of penalty in terms of Clause 14 of section 156(1) of the Customs Act, 1969?

(7) Whether in the facts and circumstance of the case the Customs Tribunal was justified in upholding the order-in-appeal despite the admitted fact that Goods Declaration with the name of the appellant used in alleged offence were forged/faked by the Bonded Warehouse owner/importer and hence could not be termed as a false declaration by the appellant within the contemplation of section 32 of the Customs Act, 1969?

2. Mr. Junaid Ghaffar, Advocate, learned counsel appeared on behalf of the applicant and submitted that the three authorities below were not justified in dragging the applicant in respect of the illegal removal of goods from diplomatic bonded warehouse, which was done by Messrs Lakhani and Company and the applicant have no role to play in the said illegality committed by the said company. He further submitted that the alleged bogus bills of entries do not contain the signatures of the applicant, moreover, even the hand writing expert has affirmed that the signatures embossed on the said fake bills of entry do not belong to the applicant. Learned counsel further submitted that the three authorities below have 'miserably failed to appreciate the facts and the evidence on record that the applicant had never filed any shipping bill or other documents before the Customs Authorities for the release of the said banned items and the conclusion drawn by the three authorities below is based on mere whims, conjectures and surmises only. He submitted that the erroneous conclusion drawn by the three authorities below gives rise to a question of law. He further submitted that the penalty imposed on .the applicant at 100% is exorbitantly high. He also read out the provisions of section 32 and various clauses of sub-section (1) of section 156 of the Customs Act, 1969 (the Act) to substantiate his claim that the applicant neither had violated any law nor the provisions of law under which they had been hauled up in the penal provisions. In support of his arguments he has relied upon the decisions of Shahi Carpet (Pvt.) Ltd. v. Commissioner of Wealth Tax (2003 PTD 1377) and the decision in the case reported as Muhammad Sadequan v. Collector of Customs Karachi (2006 PTD 2742). In the end learned counsel submitted that the Customs Officials and the STAT have erred in falsely implicating the applicant in the fraud played by Messrs. Lakhani and Company and requested that the present SCRAs be allowed by setting aside the orders passed by the three authorities below.

3. Mr. S. Mohsin Imam, Advocate, learned counsel representing the Department, supported the orders passed by the three authorities below and submitted that no question of law is arising out of the order passed by the STAT. As per the learned counsel, the Additional Collector (A.C) and Collector of Customs (COC), have passed the orders on the basis of facts and evidence available on the record. He further pointed out that the applicant had miserably failed to adduce any evidence in support of his claim to disassociate himself from the alleged fraud committed by Messrs Lakhani and Company. The learned counsel further submitted that Messrs Lakhani and Company and the applicant are hand in gloves with each other and it is hardly believable that the applicant has no role to play in the said illegal removal of the said banned items from bonded warehouse. He further submitted that the case .against the applicant is based on the facts and evidence hence no reference lies against these questions of facts under .the provision of section 196 of the Act. In the end he submitted that the present applications, being misconceived, are liable to be dismissed in limine.

4. So far as the imposition of penalty is concerned, learned counsel has relied upon a decision reported as Government of Pakistan through Secretary v. Muhammad Ahmad Qureshi and others 2002 SCMR 1527 and submitted that as by the action of, the applicant a colossal loss of revenue has occurred hence no relief whatsoever is warranted in the present SCRAs.

5. We have heard both the learned counsel and have also perused the record and the case-laws cited before us.

6. Briefly stated that the Directorate-General Intelligence and Investigation, Karachi received an information that certain goods have illegally been removed from Diplomatic Bonded Warehouse, Karachi. The Customs' staff discovered that Messrs Lakhani and Company had misappropriated a huge quantity of liquor imported into their diplomatic bonded warehouse through 26 in-bond bills of entry. As per the Customs Officials Messrs Lakhani and Company had shown that the aforesaid alcoholic drinks had been supplied as `ship stores' to the outgoing vessel through 960 ex-bond bills of entry through their clearing agent Messrs T.M. Enterprises, who is the applicant in the present SCRAs. During the course of investigation it was established that no supplies were ever made to any ship but the impugned goods/alcoholic drinks, which are a banned item had been misappropriated by Messrs Lakhani and Company in connivance with present applicant. The said misappropriation caused a huge revenue loss of Rs.3.40 Million to the exchequer beside violating a number of provisions of law. Subsequently, all the shipping bills filed in this regard for clearance of the above banned items were found to be fake as no record showing actual export except manifestation of dummy bills in PRAL computer could be traced. The Export Collectorate also confirmed that no such shipping bills actually existed and these shipping bills were never processed. It would not be out of place to mention that even the shipping companies have denied purchase of such goods from the said diplomatic bonded warehouse for their ships. Show-cause notice thereafter was issued to the applicant by the A.C., hearing of the case was then fixed for a number of times but the applicant chooses neither to appear in the case nor to submits his explanation/defence in this regard. The A.C. then after thorough investigation observed that the charges levelled on the applicant stands established on the basis of the inquiries conducted by the Customs officials and in view of the continuous silence on the part of the applicant. The learned A.C. further observed that by illegally removing the said goods from the bonded warehouse, the applicant has committed a serious offence, hence the said learned A.C. not only directed to recover the amount of duties and taxes evaded by the present applicant but also imposed a penalty equivalent to 100% of the amount of the duty and taxes evaded by the offender.

7. Appeals thereafter were filed by the applicant before the COC, who also vide his order dated 2-6-2007, dismissed the same by observing that charges levelled against the applicant were duly proved and this is not a case of fraud taking place in respect of a few bills rather the fraudulent act spread over a number of years comprising of hundreds of shipping bills. The learned COC further observed that the applicant played an important and key role in perpetuating fraud and causing heavy damage to the Exchequer by evading legally due duties and taxes. Appeals thereafter were filed before the STAT, which also after thrashing out and minutely examining the facts of the case observed that the applicant has miserably failed to substantiate with cogent material and evidence that they had not committed any illegality. The STAT after examining the case in logical and sequential manner came to the conclusion that the applicant had produced no evidence to substantiate that they were not engaged in the fraud committed in getting the banned item released/cleared. The learned STAT further observed that the present applicant had played an important and active role in ex-bonding/ clearance of the banned goods and do not deserve any leniency in this regard, hence their appeals were rejected.

8. We have observed that the process of ex-bonding the banned items was going on since the last couple of years but the moment Lakhani and Co., was caught red -handed both the applicant and Lakhani and Co. started leveling charges upon each other and proving themselves to be innocent. No reply was given by the applicant in respect of the proceedings before the A.C. who, after thorough investigation, came to the conclusion that these banned items have illegally been removed from the wherehouse on the pretext of supplying the same as "ship stores" whereas these banned items were illegally misappropriated which position was duly accepted by the applicant during the investigation phase. Even the learned counsel appearing before us mainly argued his case on deletion of penalty amount. The COC has specifically observed that as a shipping agent the applicant was required to complete the transaction by delivering the goods at the port for which no plausible explanation was given by the applicant. The COC also observed that had there been a fraudulent act comprising of two-three bills then it could be inferred that the same was not in the knowledge of the applicant but this act of deceit was spread over a span of a number of years and how could the applicant claim itself to be unaware about such act. The STAT also cam to the conclusion that the applicant has not furnished any material/evidence to divulge itself from the charges levelled upon it. The STAT thereafter observed that clearing agent plays an important role in not only in-bonding of the goods but also ex-bonding of the same and no goods could be ex-bonded without the aid of the clearing agent, who plays an important role in such affairs. The STAT has further observed that as the applicant has miserably failed to prove itself in absence of any adequate material/evidence, oblivious and unconcerned with the entire episode hence affirmed the action of the authorities. The decision relied upon by the learned counsel 2000 PTD 1377 is entirely on a different footing as in this decision the applicant attacked the conclusion drawn from a set of facts to be a question of law while the learned Bench after examining the same in detail reached to the conclusion that the findings reached by the authorities are finding of facts and on those findings no other conclusion is possible.

9. We also were able to lay our hands on a reported decision in the case of Amjad Pervez and others v. Additional Collector, Customs (2005 PTD 1817) wherein under identical circumstances the Hon'ble Lahore Court held as under:

"Bills of entries were not in the name of appellants and appellants had claimed that they were an agent of the importer of goods, but they failed to place on record any document indicating any agency between appellants and alleged owner/ importer of said goods. It could not, in circumstances be said appellants were the agent of importer. Appellants did not place on record any document to show that they were bona fide purchasers of goods in question. No question of law was involved in the appeals and impugned judgment was neither against the weight of material placed on record nor was violative of any provision of Customs Act, 1969. Appeals having no merits, were dismissed in circumstance."

10. Hence, in the light of the above uncontroverted facts and the above referred reported decision we find no merit in the present SCRAs which are hereby dismissed in limine.

11. Now, coming to the second limb of the argument of Mr. Junaid Ghaffar regarding imposition of penalty under various clauses of subsection (1) of section 156 of the Customs Act, 1969, the learned counsel has relied on the decision referred above in support of his contention. In the decision 2006 PTD 2742 the penalty imposed was remitted on the ground that the Department failed to show the admission of guilt by the applicant, whereas in the present case the report of the Investigating Officer clearly stipulates that the applicant has not only conceded the guilt but has also identified Mr. Riaz Malik, the main culprit, upon whose instructions he filed the bills of entries pertaining to the imports made by Lakhani and Co. The findings recorded in criminal proceedings are not binding or relevant in deciding the present reference application which are to be decided on the basis of preponderance of evidence. We are guided in this regard by the decision given by the Hon'ble Supreme Court of Pakistan in the case Ghulam Rasool v. Muhammad Waris Bismil (1995 SCMR 500) wherein the Hon'ble apex Court observed as under:

"Suffice it to observe that the finding of a criminal Court is not binding or even relevant for adjudicating a civil dispute before a Civil Court, which is to be decided on the basis of preponderance of evidence."

Moreover, the report of the Handwriting Expert is also before us. The decision referred to by the learned counsel for the respondent 2002 SCMR 1527 has no relevance with the facts of the case. Hence in view of the above recorded facts the imposition of penalty under the relevant provision of the law is also hereby affirmed.

12. After hearing learned counsel for both parties at length on 22-2-2010, we have dismissed the present R.A. and above are the detailed reasons for the same.

M.H./T-5/KApplication dismissed.