COLLECTOR CUSTOMS, PESHAWAR VS COLLECTOR CUSTOMS (APPEALS), PESHAWAR, 2011 PTD-CUSTOMS-APPELLATE-TRIBUNAL-PESHAWAR 2114 (2011)

(a) Customs Act (IV of 1969)---

----Ss. 174-A, 179(1), 32(3-A) & 2(b)---S.R.O. 371(I)/2002 dated 15-6-2002---Appeal to Appellate Tribunal---Appeal by the Deputy Collector of Customs---Validity---Deputy Collector of Customs was neither an aggrieved officer of Customs nor an appropriate Officer under 5.194-A of the Customs Act, 1969---Notification issued under S.2(b) of the Customs Act, 1969 did not notify said official as an appropriate officer of customs under subsection (1) of S.194-A of the Customs Act, 1969 and the show-cause notice was issued and the case was adjudicated upon by him in terms of S.179(1) of the Customs Act, 1969---Appeals purported to have been filed by the Collector as the nomenclature of the petitioner appears a Collector of Customs but not signed or verified by him instead were signed or verified either by a Deputy Collector or Assistant Collector of Customs would also be deemed not to have been filed in accordance with law---Record demonstrated that no such authorization in writing was obtained from the Collector of Customs while filing the appeal.

2006 PTD (Trib.) 1466 and 2006 SCMR 129 rel.

(b) Customs Act (IV of 1969)---

---Ss. 32(3A) & 2(b)---S.R.O. 371(I)/2002 dated 15-6-2002---S.R.O.565(I)/2006 dated 5-6-2006---False statement, error, etc.---Audit---Importer contended that customs staff who conducted the audit in terms of subsection (3A) of S.32 of the Customs Act, 1969 were not Appropriate Officers under the law in terms of S.2(b) of the Customs Act, 1969 and Notification No. S.R.O. 371(I)/2002 dated 15-6-2002; and to become the Appropriate Officer of Customs under S.2(b) of the Customs Act, 1969, the officers of Customs as defined under S.3 of the Customs Act, 1969 had to be assigned the functions for which they were appropriate officers of Customs-Department contended that audit of the unit was conducted upon a direction received from the Federal Board of Revenue and in compliance of the orders issued by the Deputy Collector of Customs with the concurrence of the Collector of Customs---Validity---Department could not produce the orders of the Board under which specific directions were conveyed by the Board to carry out the audit of the unit in respect of the imports made by them in terms of Notification No. S.R.O.565(I)/2006 dated 5-6-2006---Action of the Department for carrying out such audit should have been supported by law, which the department had failed to point out.

2006 SCMR 129 ref.

(c) Customs Act (IV of 1969)---

----Ss. 32(3A), 19, 156(1)(14)(10A)---S.R.O. 565(I)/2006 dated 5-6-2006---False statement, error, etc.---Jurisdiction of Collector of Customs to get the records, audit and stocks verified---Validity---Collector of Customs had no authority and jurisdiction to get the records of the importer-cum-manufacturer particularly when the Board had not issued any clear-cut orders empowering the Collector of Customs, to conduct the audit of the records of the manufacturer and to verify its records and when no imports had been effected within jurisdiction of the Collector of Customs---Even if the powers of conducting of audit of the importer-cum-manufacturer were assumed under the Notification No. S.R.O. 565(I)/2006 dated 5-6-2006, the Collector should have forwarded the Audit Report to the concerned Collectorate for legal action under the relevant provisions of law from where the clearance of the imported goods had been made and where record of clearance of imported goods was maintained and proper debit, credit of goods cleared was made against the authorized quantity---Initiation of action by the Department under subsection (3A) of S.32 of the Customs Act, 1969 read with Cl. (14) of S.156(1) of the Customs Act, 1969 was quite illegal because Notification No. S.R.O. 565(I)/2006 dated 5-6-2006 was issued in terms of S.19 of the Customs Act, 1969 and any violation of any of the conditions prescribed there-under were cognizable under Cl. (10A) of S.156(1) of the Customs Act, 1969 was out of question and uncalled for.

(d) Customs Act (IV of 1969)---

----Ss.179 (1), 32(3A) & 4---S.R.O. 371(I)/2002 dated 15-6-2002---Power of adjudication---Duties under normal course---Quasi judicial powers---Monetory limits---First Appellate Authority had held that Deputy Collector of Customs was not competent to adjudicate the case because as per show-cause notice, the duty and taxes were more than Rs.55 lac which exceeded the powers entrusted to him under S.179(1) of the Customs Act, 1969---Department contended that Superintendent/ Principal Appraiser were competent to issue notice under subsection (3) of S.32 of the Customs Act, 1969 and S.4 of the Customs Act, 1969 authorized the Deputy Collector of Customs to exercise all powers and discharge all duties conferred upon any officer subordinate to him; and show-cause notice issued by the senior officer and its adjudication was in accordance with law---Validity---Provisions of S.4 of the Customs Act, 1969 were applicable where there were peculiar and compelling circumstances and where the duties assigned under the Customs Act, 1969 to the words "any officer subordinate to him", appearing in the said section of law authorized the Deputy Collector of Customs to assume the duties which were being performed by him under normal course but the Deputy Collector of Customs could not assume the quasi judicial powers and jurisdiction to which they were entitled under S.179(1) of the Customs Act, 1969 or Notification No. S.R.O. 371(I)/2002 dated 15-6-2002 because while performing their duties as quasi judicial authorities they could not be termed as subordinate to the higher officers and they were quite independent in performing their official duties as adjudicating officers---Importer was not confronted to Audit Report prepared by the audit team and the show-cause notice was issued on the basis of audit report and no contravention report was submitted to the adjudicating authority---Concerned authorities must take care of such irregularities to avoid repetition in future---Appeal filed by the Collector of Customs was rejected being without any merit and Order-in-Appeal was upheld by the Appellate Tribunal.

Muhammad Hussain Superintendent Customs and Azizur Rehman, Deputy Superintendent Customs for Appellant.

Pir Alam Shah, Consultant for Respondents.

Date of hearing: 7th April, 2011.

JUDGMENT

GULAB SHAH AFRIDI, MEMBER (JUDICIAL).---Thisappeal filed by the Collector of Customs, Model Customs Collecotrate, Peshawar (herein-after called as the appellant) is against the Order-in-Appeal No.571 of 2010 dated 24-11-2010 (issued on 7-12-2010) passed by the learned Collector of Customs (Appeals), Peshawar whereby he while accepting appeal of Messrs Frontier Tech-Wood Industry, Peshawar (respondents here-in), set aside the Order-in-Original.

2. Brief facts of the case are that a team constituted for conducting audit of the industrial units availing the benefit of S.R.O.565(I)/2006 dated 5-6-2006 and reconciling their raw material recordwith subsequent consumption/production etc, while, conducting audit of the record of Messrs Frontier Tech-Wood Industry (Pvt.) Limited, Industrial Estate, Jamrud Road, Peshawar has been observed vide audit observation No.2 that theproduction data presented by the importer shows usage of doubleside impregnated sheets i.e., 827112+21648 in the manufacture of lamination of MDF having thickness of 2.3 mm and 4 mm, whereas no one has manufactured such product for sale, as double side lamination in MDF is not useful. During visit to the unit, the management failed to provide sales tax invoices to ascertain production and value addition of single/double side laminated MDF sheets. The management as such misdeclared 413556 sheets and 10824 sheets in the manufacturer of lamination of MDF having thickness of 2.3 mm. and 4 mm respectively. A quantity of 114.158 M.Ton decorative/plain papers has thus not been consumed by the management in the production of finished goods with the sole intention to evade duty and taxes resulting in short payment of Customs duty amounting to Rs.4497597, Sales Tax amounting to Rs.944495 and Advance Income. Tax' amounting to Rs.108842 (Aggregating to Rs.5550934).

After examining the observation, demand-cum-show-cause notice was served upon the importer in terms of subsection (3-A) of section 32 of the Customs Act, 1969 vide C. No. Cus/DP/Audit/ S.R.O.565/91/2009/179 dated 18-1-2010 for payment of the short paid amount indicated by the audit and subsequently, the matter was adjudicated upon by the Deputy Collector Customs (Dry Port), Peshawar who vide his Order-in-Original No.50 of 2010 dated 16-3-2010 ordered (vide Para-10) as follows:-

"10. In light of the above, the charges of evaded amount of Customs duty amounting to Rs.4,497,597 Sales Tax amounting to Rs.944,495 and Advance Income Tax amounting to Rs.108,842 (Aggregating to Rs.5,550,934) mentioned in the demand cum show-cause notice stand established and should accordingly be deposited into government treasury. The industrial concern is also ordered to deposit sales tax amounting to Rs.464,963 which they have short filed. Sales Tax Invoice Books from Serials Nos.01 to 100, 101 to 200, 201-300, 301 to 400, 401-500, 501-600, 601 to 700, 701 to 800, 801 to 900, 901 to 1000, 1001 to 1100, 1101 to 1200, 1201 to 1300, 1301 to 1400, 1401 to 1500, 1501 to 1600,1601 to 1700, 1701 to 1800, 1801 to 1900, 1901 to 2000, 2001 to 2100, 2101 to 2200, 2201 to 2300 and 2301 to 2400 are also ordered to be retained on record as a proof of the default by the unit as they have been tampered with. Sales Tax Invoice Books with Serials Nos.2601 to 2700, 3001 to 3100, 4701 to 4800, 5101 to 5200 and 6301 to 6400 which appear not be tampered are also ordered to be retained for comparison with the record tampered with. Rest of the record is ordered to be returned to the industrial unit. The retained record should be kept in safe custody with the detecting officers to produce the same before appellate forum at subsequent stages."

3. Aggrieved of the above Order-in-Original, the appellant-unit filed appeal before the Collector Customs (Appeals) who vide his Order -in-Appeal No.571 of 2010, while accepting their appeal, set aside the Order-in-Original, as mentioned in para-1 above. Hence the instant appeal filed by the Collector Customs, Peshawar on the following grounds:--

(i)that the Collector (Appeals) has extended undue benefit to the appellant (now respondent) by passing the impugned order which is not based on merit:

(ii)that the unit (appellant) have evaded duty/taxes amounting to Rs.5550934 by mis-declaring the imported goods i.e. 413556 sheets and 10824 sheets in the manufacture of lamination of MDF having thickness of 2.3 mm and 4 mm respectively. A quantity of 114.158 M. Tons decorative/plain paper has thus not been consumed by the management in the production of finished goods with the sole intention to evade duty/taxes amounting to Rs.5550934;

(iii)that the order of the adjudicating authority to deposit the evaded amount of Rs.5550934 is in accordance with law and facts of the case;

(iv)that the impugned order passed by the Appellate Authority is not based on solid grounds, hence liable to be set aside/quashed;

(v)that we reserve the right to present further arguments during the course of hearing.

4. We have heard both the parties and have gone through the record of the case carefully. The department was represented by Mr. Azizur Rehman and Pir Mushtaq, Deputy Superintendents, whereas the respondents were represented by Pir Alam Shah, Consultant, Mufti Law Association. Both sides argued their stance in detail. From submissions of the parties and perusal of the record, the following major issues came under discussion:

(i)As to whether or not the appeal filed by the department in terms of section 194-A of the Customs Act, 1969 is maintainable?

(ii)As to whether or not the Audit Team, who carried out the audit of the respondent-unit was in accordance with law?

(iii)As to whether or not the Collector of Customs, Peshawar had the jurisdiction to conduct the audit of the respondent-unit in terms of Notification No. S. R. O.565(I)/2006 dated 5-6-2006?

(iv)As to whether or not the Deputy Collector of Customs (Adjudication), Peshawar had the jurisdiction to issue show-cause notice in terms of section 179(1) of the Customs Act, 1969, read with Notification No. S. R. O).371(1)/2002 dated 15-6-2002 ?

5. After considering the view point advanced by both the parties, the above issues were thrashed out as under:--

Issue No.(i)

The Deputy Collector of Customs, MCC, Peshawar is neither an aggrieved officer of Customs nor an Appropriate Officer under section 194-A of the Customs Act, 1969 as Notification No.S.R.O.371(I)/2002 dated 15-6-2002, issued under section 2(b) of the Act (ibid) does not notify him as an appropriate officer of customs under subsection (1) of section 194-A of the Act (ibid) and the show-cause notice was issued and the case was adjudicated upon by him in terms of section 179(1) of the Act (ibid);

The learned Departmental Representative contended that under a procedure evolved in the Collectorate, necessary approval for filing of appeal is sought in each and every case from the Collector of Customs, Peshawar. Conversely, the learned Consultant maintained that approval sought from the Collector does not pacify the requirements of law as under subsection (2) of section 194-A of the Customs Act, 1969, necessary authorization in writing was mandatory for an officer not below the rank of Assistant Collector to have been obtained from the Collector of Customs who was aggrieved by the order passed by the learned Collector (Appeals). In this connection he placed reliance on judgment passed by the Customs Appellate Tribunal reported as 2006 PTD (Trib.) 1466 and august Supreme Court of Pakistan reported as PTCL 2008 CL 337 in which, it has been held that even the appeals purported to have been filed by the Collector as the nomenclature of the petitioner appears a Collector of Customs but not signed or verified by him instead were signed or verified either by a Deputy Collector or Assistant Collector of Customs would also be deemed not to have been filed in accordance with law in view of the pronouncement Made by the august Supreme Court of Pakistan. The record ma=de available to us demonstrates that no such authorization in writing was obtained from the Collector of Customs while tiling the instant appeal.

Issue No.(ii)

Section 32(3A) of the Customs Act, 1969 envisages that notwithstanding anything contained insubsection (3), whereany. duty or charge has not been erroneously refunded and this discovered as a result of an audit or examination of the documents provided by the importer at the time, the goods were imported, the person liable to pay any amount shall be served with a notice within three years of the relevant date requiring him to show cause as to why he should not pay the amount specified in the notice. The learned Departmental Representative contended that the audit of the accounts of the respondent was conducted in line with the above provisions of law and as a result it was found that the respondent had misused the facility available to him under Notification No.S.R.O.565(I)/2006 dated 5-6-2006 as he was found to have been manufacturing single side but have claimed double side lamination of MDF having thickness of 2.3 mm and 4 mm whereas., they have not manufactured such product for sale as double side lamination and its use was not useful.

The learned Consultant maintained that the respondent has already produced evidence before the Collector (Appeals) to the effect that Al-Noor Company has been producing MDF sheets double and single lamination ranging from 2.3 mm to 25 mm which evidence did not rebut by the appellant-department neither before the Collector (Appeals) nor before this Tribunal despite expiry of a considerable long period. He invited our attention to para-9 of the Order-in-Appeal under reference in which the Collector of Customs has confirmed to have been produced before him evidence to this effect that Messrs Al-Noor Company has been manufacturing MDF sheets double and single lamination ranging from 2.3 mm to 25 mm. From perusal of the record and going through the Survey Report prepared by the Survey Team to ascertain the input-output ratio, it has been noticed that the annual quantity of impregnated paper has been based on both sides and nothing with reference to single side lamination has been mentioned. The learned Collecter of Customs (Appeals), in the said para also confirmed to have been exhibited before him the articles like trolleys and trays manufactured by the respondent using double lamination which were purchased in the local market and neither at that time nor now the appellant-department could rebut the said evidence. The learned Consultant further maintained that the customs staff who conducted the audit in terms of subsection (3A) of section 32 of the Customs Act', 1969 were not appropriate officers under the said section of law in terms of section 2(b) of the Customs Act, 1969 and Notification No. S.R.O.371(I)/2002 dated 15-6-2002 issued thereunder. He placed reliance on a case decided by this Tribunal reported as PTCL 2008 CL 337, in which it has been held that to become the appropriate officer of customs under section 2(b), the officers of customs as defined under section 3 have to be assigned the functions for which they are appropriate officers of Customs. The learned Departmental Representative contended that the audit of the unit was conducted upon a direction received from the Board and in respectful compliance of the orders issued by the Deputy Collector of Customs with the concurrence of the Collector of Customs but he could not produce the orders of the Board under which specific directions were conveyed by the Board to carry out the audit of the Respondent-unit in respect of the imports made by them in terms of Notification No.S.R.O.565(I)/2006. Nevertheless, the action of the department for carrying out such audit should have beensupported by law, which the appellant-department has failed to point out. He, however, contended that the audit was conducted in terms of Notification No.S.R.O.565(I)/2006 dated 5-6-2006 which authorized the Collector of Customs to get' the records of the importer-cum -manufacturer audited and the stocks verified.

Issue No.(iii)

The respondent had imported goods under Notification No.S.R.O.565(I)/2006 dated 5-6-2006, the provisional survey certificate was issued to him by the Board as per which the respondent was allowed to import Plain Decorative Paper and Printed Decorative Paper under certain conditions as enumerated in the aforesaid Notification and the provisional survey certificate issued by the Board. As per contention of the Departmental Representative, the Collector of Customs may on its own or through the Collector of Sales Tax and Federal Excise or through another department working under Revenue Division wherever deemed necessary get the records of the importer-cum- manufacturer audited and stocks verified and during the course of audit of the respondent-unit, it was observed that the respondent manufactured the goods out of the imported goods of double lamination of 2 mm and 4 mm which were not being manufactured in Pakistan and its cosmetic use was not useful. The aspect with regard to manufacturing and utility of the goods manufactured by the respondent has been examined in the preceding paras. Now, it is to be seen as to whether or not, the Collector of Customs, Peshawar had the jurisdiction and authority to get the records of the respondent-unit audited and stocks verified. We are of the opinion that the audited of Customs, Peshawar had no authority and jurisdiction to get the records of the importer-cum-manufacturer and particularly when the Board has not issued any clear-cut orders empowering the collector of Customs, Peshawar to conduct the audit of the records of the manufacturer and to verify its records and especially when no imports have been effected within jurisdiction of the Collector Customs, Peshawar. Even if the powers of conducting of audit of the importer-cum-manufacturer were assumed under the said Notification, the Collectorate should have forwarded the Audit Report to the concerned Collectorate for legal action under the relevant provisions of law from where the clearance of the imported goods had been made and where record of clearance of the imported goods is/was maintained and proper debit, credit of the goods cleared is made against the authorized quantity. The learned Consultant contended that initiation of action by the appellant under subsection (3A) of the Customs Act, 1969 read with clause (14) of section 156(1) of the Customs Act, 1969 was quite illegal because the notification under reference was issued in terms of section 19 of the Customs Act, 1969 and any violation of any of the conditions prescribed there-under was cognizable under clause (10A) of section 156(1) of the Customs Act, 1969 in this case is out of question and uncalled for.

Issue No. (iv)

Show-Cause Notice in this case has been issued by the Deputy Collector of Customs (Adjudication), Peshawar after having been pointed out by the Audit Team in the audit report that duty and taxes amounting to more than Rs.5.5 million were allegedly evaded. The learned Consultant while defending the respondent's position contended that the show-cause notice was issued on the basis of audit report which was an irregularity on the part of the adjudicating authority and since incidence of the alleged evaded amount of duty and taxes was more than 5.5 million, it did not come within the competence and jurisdiction of the Deputy Collector (Adjudication) in terms of subsection (1) of section 179 of the Customs Act, 1969. While clarifying his view point further, he stated that subsection (3A) of section 32 of the Customs Act, 1969 does not authorize him to issue show-cause notice as subsection (4) of section 32 of the Act (ibid) empowers the appropriate officer to issue show-cause notice to the persons as is referred to in subsection (2) or subsection (3) of section 32 of the Customs Act, 1969 and not subsection (3A) of section 32 of the Act (ibid). Moreover, Notification No.S.R.O.371(I)/2002 dated 15-6-2002 also does not notify turn as appropriate officer for the purpose of issuance of show-cause notice within the meaning of subsection (3A) of section 32 of the Customs Act, 1969. Under subsection (1) of section 179 of the Customs Act, 1969, cases involving confiscation of goods or imposition of penalty are to be adjudicated upon whereasin this case neither then is an aspect of confiscation of goods nor any penalty has beep imposed. Moreover, under subsection (1) of section 179 of the Customs Act, 1969, the jurisdiction and powers of the officers of customs in terms of amount of duties and other taxes involved have been determined and under the said provisions of law, the Deputy Collector of Customs (Adjudication) can adjudicate the cases not exceeding eight hundred thousand rupees and not above thereof. The Consultant besides inviting our attention to para-13 of the order-in-appeal under reference in which the learned Collector (Appeals) has held that the Deputy Collector of Customs was not competent to adjudicate the case either under subsection (1) of section 179 of the Customs Act, 1969 or under subsection (3A) of section 32 of the Act (ibid), carries weight because as per show-cause notice, the duty and taxes in this case are more than Rs.55 lacs which exceed the powers entrusted in him under section 179(1) of the Act. He placed reliance in case reported as PLD 1971 Supreme Court 124 in which it has been held that jurisdiction mandatory condition for exercise of jurisdiction by Court, Tribunal or Authority not fulfilled---All proceedings which followed become illegal and without jurisdiction.

On the other hand, the learned Departmental Representative contended that the Superintendent/Principal Appraiser are competent to issue notice under subsection (3) of section 32 and section 4 of the Customs Act, 1969 authorizes the Deputy Collector of Customs to exercise all powers and discharge all duties conferred upon any officer subordinate to him. Hence the show-cause notice issued by the senior officer in the instant case and therefore, its adjudication is in accordance with law. Due consideration has been given to both the view points advanced by the learned Consultant and the learned Departmental Representative and we are of the considered view that contention of the former carriers weight because the provisions of Section 4 of the Customs Act, 1969 are applicable where there are peculiar and compelling circumstances and where the duties assigned under the Customs Act, 1969 to the words "any officer subordinate to him", appearing in the said section of law authorize the Deputy Collector of Customs to assume the duties which are being performed by him under normal course but the Deputy Collector Customs cannot assume the quasi judicial powers and jurisdiction to which they are entitled under section 179(1) of the Customs Act, 1969 or Notification No.S.R.O.371(I)/2002 dated 15-6-2002 because while per-forming their duties as quasi judicial authorities they cannot be termed as subordinate to the higher officers and they are quite independent in performing their official duties as adjudicating officers. Before departing the case, we would like to point out that certain irregularities such as the respondent was not 1 confronted to Audit Report when prepared by the audit team and the show-cause notice was issued on the basis of audit report and no contravention report, as was required under the law, was submitted to the adjudicating authority. The concerned authorities must take care of such irregularities to avoid-repetition in future.

6. In view of the above discussion, the instant appeal filed by the Collector off, Customs, Model Customs Collectorate, Peshawar is without any merit, is rejected and the impugned Order-in-Appeal is upheld.

C.M.A./156/Tax(Trib.)Appeal rejected.