A.S. STEEL, KARACHI VS COLLECTOR OF CUSTOM (APPEALS), KARACHI, 2011 PTD-CUSTOMS-APPELLATE-TRIBUNAL-KARACHI 2205 (2011)

Customs Act (IV of 1969)---

----Ss. 25, 79, 168, 179, 181 & 194-A---S. R.O. 487(I)/2007, dated 9-6-2007---Determination of value of imported goods---Misdeclaration of description of goods---Confiscation of goods---Option to pay fine in lieu of confiscated goods---Importers declared imported goods as "Silicon Electrical Sheet" under PCT heading 7225.1900 leviable to zero per cent customs duty in terms of S. 79(1) of Customs Act, 1969---Scrutiny report revealed altogether different items as "Electrolytic Tin Plate" classified under PCT heading 7210.1210 liable to 20% customs duty---Additional Collector of Customs, passed order-in-original for confiscation of offending goods with an option to the importers to redeem the goods on payment of leviable duties and taxes as well as redemption fine of 50% of the offending values of the goods and also imposed penalty of Rs.100,000 upon the. importers---Said order-in- original had been upheld by Collector (Appeals)---Validity---Present was a clear cut case of misdeclaration of description, where 'Electrolytic Tin Plate' in secondary quality was declared as 'Silicon Electric Sheet'---Option given to the importers in order-in-original to redeem the goods on payment of all leviable duty and taxes as well as redemption fine of 50% of offending value .of goods, was against the provisions of the relevant S.R.O. 487(1)/2007 dated 9-6-2007---Redemption fine was to be worked out with reference to the duty and taxes attempted to be evaded and not the duty and taxes leviable on the whole consignment---Adjudicating officer could not order outright confiscation with an option to redeem the goods against 100%, fine of value of the consignment---Redemption fine was to be imposed on customs value and would be over and above the customs duties, other taxes and penalties imposed under relevant law---Customs value for the purpose of imposition of redemption fine was not the value declared or ascertained in terms of S.25 of Customs Act, 1969 but was the amount of duty and other taxes involved in respect of offending goods as incorporated in S.179 of the Act---Appellate Tribunal ordered, in circumstances, that redemption fine could be worked out in respect of duties and taxes attempted to be evaded; or more appropriately on the amount of duty and taxes leviable on the offending goods---Orders passed by the forums below were modified by appellate Tribunal to that extent in circumstances.

Messrs Weave and Knit (Pvt.) Ltd., Karachi v. Additional Collector of Customs (Adjudication) Karachi 2004 PTD 2981 rel.

Asim Munir Bajwa for Appellant.

Ghulam Yasin, Appraising Officer for Respondent.

Date of hearing: 7th February, 2011.

ORDER

MUHAMMAD ARSHAD, MEMBER (TECHNICAL-II).---By this common order, we will dispose off Customs Appeals Nos.K-236 of 2008 and 1168/2010 (Old No.K-235/08), filed by the appellants against Order-in-Appeals Nos.1013-1014 dated 17-4-2008, passed by the Collector of Customs, Sales Tax and Federal Excise, (Appeals), Karachi, having identical facts and law are involved.

2. Brief facts of the case are that the appellants declared Silicon Electrical Steel Sheet under PCT heading 7225.1900 leviable to zero percent custom duty in terms of section 79(1) of the Customs Act, 1969. Scrutiny of G.D. and examination report revealed altogether different items-Electrolytic Tin Plate classifiable under PCT heading 7210.1210 liable to 20% Custom Duty.

3. Adjudication proceedings were initiated and the Additional Collector of Custom, Karachi passed the order-in-original for confiscation of the offending goods, with an option to the importers to redeem the same on payment of leviable duties and taxes as well as redemption fine of 50% of the offending values of the goods and imposed penalty ofRs.100,000 to the importer.

4. The order-in-original was challenged before the learned Collector (Appeals) who also dismissed the appeal. Hence the instant appeal before this forum on the following grounds incorporated in the memo of appeal:

(i)That the orders are passed against the facts and law.

(ii)That according to the contents of show-cause notice and impugned order-in-original the subject consignment during scrutiny of Good Declaration was subjected to physic examination upon examination, the imported goods were allegedly found to "Electrolyte Tinplate in sheet packed in bundle one side liquor coating of secondary quality".

(iii)That the perusal of the show-cause notice show; that the respondent was not served with show-cause notice within the limited time of two months as required by section 168 (2) of the Customs Act, 1969. In this case the goods were detained vide C.R. No. 1-HC-430433 elated 26-10-2007. Title show-cause notice shows its transmission date as 24-12-2007 at about 12.00 a.m. whereas information about tile creation of show-cause notice shows the date as 24-12-2007 at 8-15 p.m., meaning thereby that the show-cause notice was not transmitted on 24-12-2007. The respondent came to know about the issuance of show-cause notice on 2-1-2008, therefore the show-cause notice was served on 2-1-2008 under the provision of section 25 of the Customs Act, 1969. Therefore the show-cause notice is barred by time under the Provisions of the Customs Act, 1969 as held by the Superior Courts.

(iv)That the appellants purchased the item as Silicon Electrical Steel Sheet. After receipt of information that steel sheets are one side liquor coated. The liquor coating represents the coating of Silicon Steel Sheets and have no concern with the description of Tin Plates. The appellants accordingly, paid the customs duty in accordance with applicable rate of duty sales tax 15% and Income Tax @ 5% in accordance with the description which was informed by our supplier.

(v)That it is an admitted position that the goods are Secondary Quality which can be of any steel. The actual description can only be verified after physical inspection which the appellants were unable to do at the port of shipment as opened a Letter of Credit for the goods which were offered by the supplier. There is no means rea of any misdeclaration of the respondent in this respect.

(vi)That even otherwise it is an admitted position that in case of import of silicon steel sheets, the goods are tested and released against posted dated cheques for differential amount of taxes for the alleged ascertained description and declared by the importers. The samples are tested by the A.Q. Khan Laboratory and assessed/re-assed to duty and taxes in accordance with the test report. In a similar case, the adjudication orders were passed for GP/CRC/HRC sheets alleged to be examined by the custom staff and on the request of the importer the learned Collector of custom passed interim order to send samples for test. The samples were sent to test and found to be. "silicon steel sheets" instead of ascertained description of HRC/CRC/GP Steel sheets. In the case of appellants the learned respondent have not complied with the practice in vogue and deprived the appellants to their legal right.

(vii)That the orders passed by the learned respondents have relied upon the examinations report retrieved from custom department without invoking the provisions of section 79(1) of the Custom Act, 1969. The goods were examined by the Custom Authorities keeping in view of the fact being not accepted a quashed statement under the provisions of section 32 of the Custom Act, 1969. The learned respondent should have given option to avail the facility, as provided under the provision of section 79(I) of Custom Act, 1969, before conducting examination if the custom authorities were not satisfied with the statement given at the time of filing of GD and payment is made in advance due to system problem. Reliance is placed upon Rule No. 438 read with Rule No. 433 of Custom Rules 2001, as amended vide S.R.O. 704(1)/2007, dated 14-7-2007.

"Rule 438.---Assessment by customs authorities where any declaration has been filed under Rule 433 or additional documents have been submitted under Rule 437, the customs shall satisfy itself as to their correctness including its value, classification, claim of exemption, payment of, duties and taxes, and may re-assess the goods during or after clearance."

5. The departmental representative supported the impugned orders for the reasons stated therein.

6. Arguments heard. Case record examined. A scrutiny of the case record indicates that this is a clear cut case of mis-declaration of description where Electrolytic tin plat sheet in secondary quality was declared as silicon steel-sheet under PCT heading 7225.1900 with zero duty percent duty @US$ 0.4040/kg. The actual PCT for the found description is PCT heading 7210.1210 attracting 20% customs duty and the assessable unit value being US$ 0.5810/kg. In the last para of order -in-original option has been given to the appellant to redeem the goods on payment of all leviable duty and taxes as well as a redemption fine of 50% of the offending value of the goods. This is against the provisions of the relevant S.R.O. 487(I)/2007 dated 9-6-2007. This is not inconformity with the judgment of Honourable Sindh High Court Karachi in a case of Messrs Weave and Knit (Pvt.) Ltd. Karachi v. Additional Collector of Customs (Adjudication) Karachi reported as 2004 PTD 2981. In above cited case decided by the honourable Court the Adjudicating Officer ordered for outright confiscation of the consignment with an option to redeem the goods against 100% fine of the value of the consignment as per S.R.O. 1347(I)/98 dated 17-12-1998. The issue before the Honourable High Court was:

"Whether the learned Adjudication Officer as well as the learned Appellate Tribunal Customs, Sales Tax and Central Excise was justified in omitting note that as per S.R.O. 1374(I)/1998, dated 17-12-1998 the 100% redemption fine provided therein is to be worked out with reference to the duties and taxes attempting to be evaded and not the duties and taxes leviable on the whole consignment?"

7. The honourable High Court in this case observed that so far as this issue is concerned it is answered in the terms that the redemption fine is to be worked out with reference to the duty and taxes attempted to be evaded and not the duty and taxes leviable on the whole consignment, inter alia, the honourable High Court also did not agree with the order -in-original whereby the Adjudicating Officer ordered for outright consignment' with an option to redeem the goods against 100% fine of the value of the consignment as per S.R.O.1374(I)/1998 dated 17-12-1998. This order of the honourable High Court has attained finality as it was never appealed against by the respondent department in the honourable Apex Court.

In order to comprehend the issue fully reference is made to section 181 of the Customs Act, 1969 which reads as under:--

181. Option to pay fine in lieu of confiscated goods.---Whenever an order for the confiscation of goods is passed under this Act, the officer passing the order may give the owner of the goods an option to pay in lieu of the confiscation of the goods such fine as the officer thinks fit¹⁹[:]

²⁰[Provided that the Board may, by an order, specify the goods or class of goods where such option shall not be given:

Provided further that the Board may, by an order, fix the amount of fine which, in lieu of confiscation, shall be imposed on any goods or class of goods imported in violation of the provisions of section 15 or of a notification issued under section 16, or any other law, for the time being in force.]

Explanation.---Any fine in lieu of confiscation of goods imposed under this section shall be in addition to any duty and charges payable in respect of such goods, and of any penalty that might have been imposed in addition to the confiscation of goods.

8. The above section does not specify the amount or value on the basis of which the owner of the goods may be given an option to pay in lieu of the confiscation of the goods such fine as the officer thinks fit. However, the second proviso of section 181 refers to the amount of fine which the Board may fix through issuance of an order. The minimum pitch of redemption fine in respect of confiscated goods has time and again been specified by Federal Board of Revenue through issuance of various S.R.Os under section 181 of the Customs Act period wise. All these S.R.Os. invariably state in Column 3 to Table appended with these S.R.Os. that redemption fine is to be imposed on customs value and shall c be over and above the customs duties other taxes and penalties imposed under the relevant law. The customs value for purposes of imposition of redemption fine is not the value declared or ascertained in terms of section 25 of the Customs Act, 1969 but is the amount of duty and other taxes involved in respect of offending goods as incorporated in section 179 ibid. regarding power of adjudication and which determines the monetary jurisdiction limit of different officers of customs. The relevant extract of subsection (1) of section 179 of the Customs Act, 1969 is reproduced as under:--

"179. Power of adjudication.---[(1) Subject to subsection (2), in cases involving confiscation of goods or imposition of penalty under this Act or the rules made thereunder, the jurisdiction and powers of the Officers of Customs in terms of amount of duties and other taxes involved, excluding the conveyance, shall be as follows:

9. Keeping in view the above discussion and judgment of the Honourable High Court of Sindh reported as 2004 PTD 2981 it is hereby ordered that redemption fine may be worked out in respect of duties and taxes attempted to be evaded or more appropriately on the amount of duty and taxes leviable on the offending goods. The orders passed by the forums below are modified to this extent only and the appeal is disposed off in the above terms.

C.M.A./199/Tax(Trib.)Order accordingl