AMIR MUHAMMAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2011 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1205 (2010)

(a) Establishment of Office of-the Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----Ss.14(8) & 10(3)---Powers of the Federal Tax Ombudsman--Review-Close of complaint for non-prosecution-Review application for reconsideration of decision---Review application was admitted by the Federal Tax Ombudsman for investigation under S.10(3) read with S.14(8) of the Establishment of Office of the Federal Tax Ombudsman Ordinance (XXXV of 2000).

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

----Ss.168, 171, 216 & 217---Establishment of Office of the Federal Tax Ombudsman Ordinance (XXXV of 2000)---Seizure of things liable to confiscation----Inspector Customs Anti-smuggling intercepted the vehicle on the suspicion of smuggling---Sales tax invoices issued by the supplier were shown and it was contended that goods were not being smuggled from non-tariff area but were being legitimately transported from his business premises under proper documentation in terms of sales tax invoices---Documentary evidence provided by the owner on the spot was rejected and goods were seized along with the vehicle and the recovery memos. were issued for the seizure of goods and vehicle---Validity---Complainants were involved by the Customs Anti-smuggling staff in a false case of smuggling for corrupt motives---"Information" was also concocted after the event to lend credence to the falsehood involved in the case---Allegation of corrupt motives behind such seizure stood established---Customs supervisory management not reviewing such cases and indulgence of Customs staff in such acts with impunity was highly undesirable as such acts of commission and omission constituted maladministration of a serious nature under S.2(3)(i) and (ii) of the Establishment of Office of the Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended that Federal Board of revenue to fix responsibility and proceed against the Customs officials responsible for the misconduct and maladministration in the case that concerned Inspector of Customs Anti-smuggling; be asked to show cause within 15 days as to why a compensation of Rs.50,000 may not be awarded to the driver of the vehicle for his loss of business, as admissible under S.22 of the Establishment of Office of the Federal Tax Ombudsman Ordinance, 2000; that in order to obviate the chances of false information and false informers, suitable checks and balances be incorporated in the Reward Rules of Federal Board of Revenue and that the findings in the present case be widely circulated to warn the potential wrong-doers against commission of such blatant acts of abuse of power, high-handedness and dishonesty.

Yasir Tahir, Senior Advisor, Dealing Officer.

Amir Muhammad and Fazal Elahi, Authorized Representative.

M. Jamil, Law Officer Customs and Zafar Ali, Inspector Customs, Departmental Representative.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---Mr. Amir Muhammad and Mr. Bilal Khan of Peshawar filed an application for review of Hon'ble FTO's Findings in Complaint No.1 of 2009. The facts in brief are that the Complainants had filed a joint Complaint No.1 of 2009 on 23-12-2008 alleging unjustified and unlawful seizure of their goods by the Customs Anti-smuggling staff of Peshawar Customs for corrupt motives. The Complaint was admitted for hearing. One of the Complainants, Mr. Amir Muhammad, appeared along with his Advocate in the FTO Secretariat, Islamabad on the first date of hearing i.e. 3-2-2009 and sought 15 days adjournment to enable them to prepare well for the hearing. His request for adjournment was granted. On the next date of hearing on 18-2-2009, the Complainants neither appeared nor sought further adjournment. The investigation of the Complaint was therefore closed for non-prosecution and the decision was accordingly issued intimating the parties of the closure of the Complaint.

2. Subsequently, the Complainants filed a joint Review Application No.22 of 2009 dated 12-8-2009 under section 14(8) of the FTO Ordinance, 2000 for reconsideration of the decision to close the Complaint for non-prosecution. Their Review Application was admitted for investigation under section 10(3) read with section 14(8) ibid.

3. Facts of the Complaint in brief are that Mr. Amir Muhammad purchased two consignments of 12203 kg and 2500 kg (total 14703 kg) BOPP wrapping and packing film @ Rs.74.326/kg from Faisalabad against two sales tax invoices Nos.147 and 148, both dated 7-6-2008 issued by the suppliers. He brought the purchased goods from Faisalabad to the premises of his sales tax registered business concern, namely Messrs Khattack Pack, Industrial Estate, Jamrud Road, Peshawar. However, within a couple of days, 60 rolls of 2397.9 kg were sold by the Complainant to one Mr. Saifullah in Faisalabad @ Rs.85/kg. The owner prepared two sales tax Invoices. Nos.99 and 100 both dated 12-6-2008 for a quantity of 1970 kgs and 427.9 kgs (total 2397.9 kg) respectively. While transporting the goods from his business premises via Jamrud Road to Peshawar City by Hyundai Shahzore vehicle No.J-9828, Mr. Zafar Ali, Inspector Customs Anti-smuggling intercepted the vehicle at 12-30 p.m. on 12-6-2008 on the suspicion of smuggling. Mr. Amir Muhammad inter alia showed him the sales tax Invoice No.147 dated 7-6-2008 issued by the suppliers in Faisalabad namely Messrs Noorani Sons. He also statedly showed sales tax invoices Nos.99 and 100 both dated 12-6-2008 issued by Messrs Khattack Pack of Industrial Estate, Jamrud Road, Peshawar. He informed the Customs that the goods were not being smuggled from non-tariff area but were being legitimately transported from his business premises of the Industrial Estate, Peshawar (tariff area) under proper documentation in terms of the sales tax invoices. The Customs Inspector then talked on his mobile phone to his Deputy Superintendent, Mr. Muhammad Naeem. After this tele-conversation, the Customs Inspector demanded Rs.5,000 as bribe for release of the intercepted consignment. He also demanded fixation of a monthly payment of bribe to avoid Customs interception in future. The owner declined the illegal demand. As a result, the Customs Inspector rejected the documentary evidence provided by the owner on the spot and brought the vehicle to the Customs House, Peshawar. There, he seized the goods along with the vehicle and issued the Recovery Memos. dated 12-6-2008 for the seizure of the goods and the vehicle. The vehicle was subsequently released against sureties.

4. The explanation of the Customs Inspector for treating the goods as smuggled as mentioned in the Seizure Report and the Show-cause notice is as under:

(i)An information had been received by the Assistant Collector Anti-Smuggling that the aforesaid goods would be smuggled by vehicle Hyundai Shahzore bearing Peshawar Registration No.J9828 from non-tariff area to tariff area via Jamrud Road;

(ii)Acting upon the aforesaid information, the Customs Mobile Squad-II of Anti-smuggling Division, Peshawar, was directed to keep strict vigil on Jamrud Routes/University Road, Peshawar;

(iii)Accordingly, the aforesaid vehicle was intercepted at 12-30 p.m. on 12-6-2008 on the Jamrud Road, Peshawar carrying sixty rolls (2397.9/kg) of BOPP Film (Type-PY-20);

(iv)On the spot, the owner and the driver of the vehicle failed to produce any documentary proof in support of legal import/lawful possession of the smuggled goods. The goods were accordingly brought to the Customs House, Peshawar, along with the vehicle for completing the seizure formalities like issuance of mandatory notices such as recovery memo, etc. under Section 171 of the Customs Act, 1969;

(v)Subsequently, sales tax Invoice No.147 dated 7-6-2008 and No.99 dated 12-6-2008 were shown by the owner in evidence of the lawful import/legal possession of the goods. The evidence was regarded bogus and therefore, no need was felt for its verification;

(vi)Since the date of manufacture shown on the rolls had been shown as 4-6-2008 and the origin had not been described, it meant that the goods were not a local product but smuggled; and

(vii)The quick shuttling of goods from Faisalabad to Peshawar and back again to Faisalabad at a substantially higher price also provided reason to believe that the goods were smuggled.

5. In his parawise comments on the Complainants' written rebuttal of the Show-cause notice issued by the Assistant Collector, the seizing Inspector admitted that the owner had produced sales tax invoices on the spot at the time of Customs interception. This admission is duly reproduced in the Order-in-Original No.263 of 2008 dated 5-9-2008, as under:--

"On the spot two sales tax Invoices No.147 dated 7-6-2008 and No.99 dated 12-6-2008 were produced."

6. In their para-wise comments on the Complaint No.1 of 2009 which is the subject-matter of review here, the Customs authorities submitted new explanations for the seizure as under:

(i)the Complainant produced sales tax Invoices No.147 dated 7-6-2008 and Invoice No.99 dated 12-6-2008 which were considered suspect in the absence of import Bill of Entry because the consignment was loaded in a vehicle coming from non-tariff area;

(ii)the evidence of sales tax payment through bank was not provided at the time of seizure;

(iii)in the absence of any legal documents, the goods were seized in terms of section 168 of the Customs Act, 1969; and

(iv)all the actions taken by the Customs were according to law. Moreover, sections 216 and 217 of the Customs Act, 1969 provide protection to the actions taken by Customs officials in the discharge and performance of official duty in a lawful manner.

7. A perusal of the respective positions of the Customs and the Complainants clearly indicates highhandedness, arbitrariness and a wilful abuse of power by the Customs authorities, inter alia, because of following reasons:

(i)Although the owner had shown on the spot the sales tax invoices issued by Messrs Khattack Pack, located in the tariff area i.e. the Industrial Estate, Jamrud Road, Peshawar, yet, the Customs Inspector arbitrarily and wilfully stated in his seizure report that the goods were being transported from the non-tariff area without first verifying the statement of the owner. The obvious appropriate course for the Customs Inspector was to verify the facts stated by the owner at the time of interception before forming any opinion on this aspect of the case. He should have visited the business premises of Messrs Khattack Pack, verified the remaining stock of these goods and compared them with the intercepted goods to find out the truth or falsehood of the owners statements and documents. As he did not undertake the requisite verification, the statement of the Customs Inspector in the Seizure Report that the goods were being transported from the non-tariff area was thus wilfully false. Not only that, this wrong and baseless conclusion was twice built into the show-cause notices issued firstly by the Assistant Collector and secondly by the Collector after reopening the case. This is a blatant misuse of authority and official powers against a taxpayer;

(ii)The Customs Inspector had no apparent justification to term the goods as smuggled without undertaking necessary verification after the owner informed him that the goods had been purchased from Messrs Noorani Sons, Faisalabad, in evidence of which their sales tax Invoice No.147 dated 7-6-2008 was shown on the spot. The Customs Inspector, however, summarily rejected this evidence as bogus. It is also disturbing to note that the owner provided evidence to prove that he Chad purchased the goods locally from Faisalabad but the Customs Inspector continued blaming the goods to be smuggled without any evidence to back up his assertion except for the so-called 'secret' information;

(iii)It has been stated by the Customs in the parawise comments that the goods were seized on suspicion of smuggling because the owner could not produce the Bill of Entry to prove legal import of goods and that the evidence of sales tax payment through bank was not provided at the time of seizure. Both these arguments obviously suffer from rationality deficit because the Complainant never claimed import of the goods and the question of payment of sales tax through bank did not arise in this case because the goods were purchased on 7-6-2008 and the payment of sales tax in the bank was to be made by the 15th of the next month under the sales tax law. The reason why even Collector Customs chose to endorse such an absurd argument while forwarding para-wise comments on Complaint No.1 of 2009 before the FTO invits a deeper probe. Was this an attempt to deceive the FTO investigation or to find some kind of justification for an obviously unjustified seizure?

(iv)The seizing officer summarily rejected the need for verifications of the documentary evidence produced by the owner. As a matter of fact, it was the 'verification' which was the key to reaching the truth in this case. When the Assistant Collector Anti-smuggling, who handled the original adjudication, did undertake the requisite verification from Faisalabad, he was able to confirm the veracity of the owners statements and documentary evidence. Convinced of the legitimacy of the goods through the verification by RTO Faisalabad, the Assistant Collector quashed the proceedings and released the goods. The Collector Customs, however, recalled the case record and reopened the Assistant Collector's order-in-original in exercise of his powers under section 195 of the Customs Act, 1969 to re-examine the legality and propriety of the aforesaid release. The Collector also undertook some verification from Faisalabad and got convinced of the legality and propriety of the order of the Assistant Collector to release the goods except non-mention of the release of the sureties of the vehicle, which the Collector allowed in his order-in-original dated 21-11-2008.

8. It is evident that had the seizing officer undertaken the necessary verification, which was his paramount obligation, the Complainants would have been saved the hassle, the agony and the ignominy defending the charge of smuggling, besides logs of their business, goodwill and reputation which they evidently suffered for five-and-a-half-month of Customs proceedings and detention of goods. As a matter of fact, the Customs Inspector committed several serious acts of maladministration like misstating that the vehicle was coming from non-tariff area; that the goods were smuggled ones; summarily declaring the evidence as bogus; rejecting the need for verification of evidence; misstating that the Complainants had not produced, on the spot, any documentary or other evidence to prove lawful possession of the goods; and fabricating the date of manufacture shown on the Rolls. All this raises serious questions about his capacity to adequately handle anti-smuggling operations.

9. The Customs Inspector committed another major injustice to right away seize the goods despite the evidence of lawful possession Produced on the spot by the owner. He could had initially detained the goods under section 17 of the Customs Act, 1969, pending verification of statements made and evidence produced by the owners on interception of the goods. Had the owner's statements and evidence failed the test of verification, the goods could be seized under section 168 of the Act. As he did not take the legal course, the matter took five and a half months instead of possibly five and a half days to resolve. He is, 'therefore, solely responsible for the various acts of maladministration involved in this case. Besides, the failure of the supervisory management to see and rectify obvious misstatements and mishandling involved in this case is also a serious matter for the F.B.R. to look into. The senior Customs officials should not have issued show-cause notices without competently and efficiently evaluating the legality and propriety of the Seizure Report. More importantly, the Collector Customs should have first evaluated the Seizure Report before reopening the case, especially when he was reopening a miserably flawed Seizure Report, which was so adjudged at the initial adjudication stage. There was indeed no justification for reopening the case in routine. Not even the deficiency in the order-in-original for non-mentioning the release of sureties of the vehicle justified the reopening because it could be done by issuing a corrigendum of the order-in-original. Reopening the case by the Collector Customs was therefore simply undesirable.

10. As the allegations of smuggling levelled by the Customs Anti-smuggling staff against the Complainant had serious business and personal implications for the Complainants, and so were the charges of bribery and corruption levelled by the Complainants extremely damaging for the Customs Anti-smuggling staff responsible for the seizure in this case, it was decided to invite all concerned including the Customs officials who seized the goods, the Assistant Collector Anti-smuggling who adjudicated the case and the Collector of Customs who reopened the case, to attend the final hearing on 31-12-2009. The Customs team headed by the Collector was confronted with the facts of the case. The Collector explained that due to lack of reliable evidence to substantiate the case, both the original adjudicating officer and he himself closed the case as unsubstantiated; the goods were accordingly released and the Complainants were absolved of the charges in the Seizure Report and the Show-Cause Notices. Thus, justice was done to the Complainants. He was asked how could he call this as justice when it took the Customs over 5-1/2 months to restore the goods to the Complainants.

11. It was also observed that the seizing staff undesirably conducted themselves in this case either due to the 'information' which was stated to have been received through the Assistant Collector Anti-smuggling or because of corrupt motive of the seizing staff. Therefore, the factum of "information' had to be properly scrutinized before reaching any conclusion about the corrupt motive. The Customs were asked whether they had registered the 'information' according to the prescribed procedure, before the interception. They replied in the affirmative and produced the Information Register. It transpired that the information stated to have been received in advance had been recorded at 1300 hours on 12-6-2008 whereas the seizure had already been effected at 12-30 p.m. i.e. half an hour after the interception of the goods. It was thus obvious that the Customs staff had not received any advance information; they had rather concocted it with specifics of vehicle No. etc. after the event to justify the seizure which they knew was not otherwise justifiable. Therefore, the allegation of bribery as the motive gets a lot of credence in this case. It also speaks volumes how false information and fake informers are fabricated and dishonestly attributed to supervisory officers to appease them. Why the Assistant Collector Customs Anti-smuggling to whom the information was falsely attributed did not reject such an attribution should also be a matter of concern for the top management of F.B.R.

12. The Collector was also asked why he did not review the legality and propriety of the Seizure Report especially when the case had already failed at the adjudication stage, he agreed that it would have been appropriate to do so before reopening the order-in-original. He was then asked as to whether there was any mechanism in the Custom House, Peshawar, to review such miserably handled cases. The Collector admitted that there was no arrangement for systemic review of such cases. He, however, promised to institute an effective mechanism for such a review on regular basis to forestall the chances of similar acts of gross maladministration in future. He was also asked to take disciplinary action against the seizing staff for their mischief and maladministration in this case. It was also obvious the such staff was not suitable to handle anti-smuggling responsibilities of the Customs Department. The Collector promised to take suitable disciplinary action against those responsible for the maladministration involved in this case.

13. The investigation by the FTO in this case was completed in the last hearing held on 31-12-2009. While the Recommendations in this case were under preparation, a letter was received from one of the Complainants, Mr. Amir Muhammad, stating that he was no more interested to pursue his complaint and, therefore, he wanted to withdraw the complaint unconditionally. Notwithstanding that the Complaint had been filed jointly by the Complainants, it was a bizarre request when the investigation had been completed and the charges levelled in the Complaint against the Customs staff conclusively established. Such an attempt is obviously under pressure from the concerned Customs officials, and is aimed at saving them from the possible consequences of gross maladministration that they committed in this case.

Findings:

14. The facts and circumstances of this case clearly prove that the Complainants' were involved by the Customs Anti-smuggling staff in a false case of smuggling for corrupt motives. The 'information' was also concocted after the event to lend credence to the falsehood involved in this case. The allegation of corrupt motives behind this seizure stands established. Non-review by the Customs supervisory management of such cases and indulgence of Customs staff in such acts with impunity is also highly undesirable as these acts of commission and omission constitute maladministration of a serious nature under sections 2(3)(i) and (ii) of the FTO Ordinance, 2000.

Recommendations:

15. In view of the foregoing facts, the following recommendations are made:

(i)F.B.R. to fix responsibility and proceed against the Customs officials responsible for the misconduct and maladministration in this case;

(ii)Mr. Zafar Ali, Inspector Customs Anti-smuggling, to show cause within 15 days why a compensation of Rs.50,000 may not be awarded to the driver of the vehicle for his loss of business, as admissible under section 22 of the FTO Ordinance;

(iii)In order to obviate the chances of false information and false informers, suitable checks and balances be incorporated in the Reward Rules of F.B.R.; and

(iv)The findings in this case be widely circulated to warn he potential wrong-doers against commission of such blatant acts of abuse of power, high-handedness and dishonesty.

16. Compliance be reported with in 30 days.

C.M.A./34/FTOOrder accordingly.