PACK-N-MOVE VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2011 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1214 (2010)

Customs Act (IV of 1969)---

----Ss. 32, 32-A & 156(1)(14)(14-A)(45)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3)(i), 9 & 10---Misdeclaration and fiscal fraud---Imposition of penalty---Complainant/Customs Clearing and Forwarding Agent, had complained that Additional Collector through ex parte orders-in-original imposed penalty of Rs.1,50,000 on him without serving upon him any show-cause notice and affording him opportunity of hearing---Importer had filed three G.Ds. through complainant, who was Clearing Agent of the importer---Importer claimed on the basis of exemption certificate, exemption of duty and taxes, which certificates, on scrutiny were found to be false and forged---Show-cause notices were issued to the importer---Importer alone was charged and the complainant was not alleged to be involved in the crime---Besides the complainant was not called upon to submit reply to the show-cause notice issued to the importer---When the complainant was not made party and was not called upon to furnish reply, his adjudication was against the principles of justice---Orders-in-original did not specify any role played by the complainant in preparation of forged documents---Nothing was on the record to show that complainant was benefited---Imposition of penalty on complainant in terms of S.156(1)(14)(14-A) & (45) of the Customs Act, 1969, was improper, unjust and contrary to law, rules and regulations---Without affording opportunity of hearing to the complainant and without specifying his role in the offences alleged to have been committed, the imposition of fine/penalty on him tantamounted to maladministration as defined in Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Ombudsman recommended that Federal Board of Revenue would ensure that the Collector of Customs, exercising powers under S.195 of Customs Act, 1969 would examine the legality and propriety of the proceedings conducted by Additional Collector; and report compliance, within 30 days.

2002 YLR 2651; 2003 PTD 795 and 2003 PTD (Trib.) 2264 ref.

Justice (Retd.) M. Nadir Khan, Advisor, Dealing Officer Abdul Qadir Syed, Authorized Representative.

Naveed Abbas, Assistant Collector, Departmental Representative.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---The Complainant is Customs Clearing and Forwarding Agent. The grievance he has agitated in the complaint is about imposition of penalties of Rs.150,000 in three Cases Nos.10840 of 2010, 10847 of 2010 and 10849 of 2010. According to the complainant, neither show-cause notices were served on him nor opportunity of hearing was afforded and ex parte Orders-in-Original were passed which too were not communicated. It was only on receiving notice for recovery of penalty that the complainant came to know about issuance of Orders -in-Original. The complainant pleads that without serving of show-cause notices ex parte proceedings drawn by the Department were illegal, and amounting to maladministration as defined under the FTO Ordinance, 2000.

2. The notice of the complaint was issued to the Secretary Revenue Division, Government of Pakistan; in response Assistant Collector (Group-III) filed parawise comments wherein it was stated that Messrs Raees-ul-Ahrar filed three GDs through their Clearing Agent Messrs Pack-N-Move (Complainant). Exemption of duty and taxes was claimedon the basis of exemption certificates which on scrutiny were found to be fake and forged. Accordingly, show-cause notices were issued. After receiving of reply and affording of opportunity of hearing, Orders-in-Original dated 1-4-2010 were passed against which the complainant did not avail the remedy of appeal provided under the Customs Act. The Department pleaded that as the GDs were filed electronically, therefore show-cause notices as well as Orders-in-Original were electronically transmitted to the importer as well as the Complainant. According to theDepartment, as it was a case of gross misdeclaration/fraud on the part ofthe complainant, the adjudication proceedings were deliberately avoided. The Department pleaded that imposition of the fine was in accordance with the provision of the Customs Act and no case of maladministration was made out.

3. The Complainant was provided copy of parawise comments, but he did not opt to file any rejoinder. The matter was fixed for hearing on 6-10-2010 when Mr. Abdul Qadir Syed, Advocate, appeared for the Complainant, and the Department was represented by Naveed Abbass, Assistant Collector.

4. During arguments the parties supported the averments of their pleadings. The Department filed computer print-out of the show-cause notices and Orders-in-Original. It was pleaded that the electronic communication was regarded as deemed to have been served. The learned AR without disputing the plea of the learned DR contended that the I.D. on which the communication was made was of the importer which could not be accessed by the Complainant. Besides, in the show-cause notice the importer was shown as respondent and he was called upon to meet the allegations. The Complainant was not charged for any offence or violation of law.

5. Subsequent to the date of hearing, the complainant filed written arguments on 8-10-2010 wherein he supported his case and relied on the judgment of Hon'ble High Court of Lahore (2000 YLR 2651); Findings/Decision of the Hon'ble FTO (2003 PTD 795); and Order passed by Customs, Excise and Sales Tax Appellate Tribunal, Lahore (2003 PTD (Trib.) 2264). The complainant in his written arguments reiterating the averments of the complaint added that neither the show-cause' notices nor the Orders-in-Original stated the role of the complainant. The Department without assigning any reason imposed personal penalty on the complainant who actedas Clearing Agent of the importer. According to the complainant, the imposition of fine on him was against the law.

6. Submissions made by the parties have been considered and documents available on record perused minutely. It is evident that in theshow-cause notices Raees-ul-Ahrar, the importer, was made respondent,and after narration of the facts, the Department came up with following plea:-

"Importer has therefore committed an offence by filing fake, forged made up documents/particulars of the case besides making an attempt to clear imported goods without payment of any duty and taxes leviable thereon, besides filing forged information to the electronic system of PaCCS, wilfully and with mala fide intention and have attempted to defraud the Government from its legitimate revenue amounting to Rs.1203369. Considering the, available data of similar kind of goods in terms of section 25 of the Customs Act, 1969 and Rule 107 (a) of the Customs Rules, 2001, the determined value of the offending goods come to Rs.19,37,513.

The importers have therefore contravened the provision of sections 79(1), 32(1), 32(2), and (32-A) of the Customs Act, 1969, section 33 of Sales Tax Act, section 148 of Income Tax Ordinance 2001 and punishable under Clauses (14), (14(A)) and (45) of section 156(1) of Customs Act, 1969, Clause (11(c)) of section 33 of Sales Tax Act, 1990, section 148 of Income Tax Ordinance 2001.

Therefore, the importer is hereby called upon to show cause as to why the goods imported in violation of aforesaid provisions of law should not be confiscated and penal action should not be taken against him under the aforesaid provisions of law. Written reply to this show-cause notice should reach this office by or before 11-4-2009 at 11-00 a.m. Hearing in this case has been fixed on 11-4-2009 Collector to defend the charges leveled against him. If no reply to the show-cause notice is received within the specified date or no one appears for hearing then it will be presumed that the importers have nothing to submit in Defence and do not wish to contest the charges, and the case will be decided ex parte on its merits on the basis of record available."

7. The above contents of show-cause notices clearly reflect that the importer alone was charged and the complainant was not alleged to be involved in the crime. Besides, the complainant was not called upon to submit reply to the show-cause notices. In such view of the matter when the complainant was not made respondent and was not called upon to furnish reply, his adjudication was against the principles of justice.

8. Adverting to the Orders-in-Original, these do not specify any role played by the complainant in preparation of forged documents. Nor do they reflect that the complainant at the time of submission of the documents had knowledge that the same were fake/forged. There is nothing on the record to show that the complainant was to be undue benefited. In such circumstances without specifying the role of the Complainant and his involvement in the crime, the imposition of penalty in terms of clauses (14) and (14-A) of section 156(1) of the Act was improper, unjust and contrary to law, rules and regulations. For such a view, reliance can be placed on the judgment of Hon'ble Lahore High Court reported in 2002 YLR 2651, wherein it had been held that the agent liable for the acts of commission and omission on the part of the importer would require a clear finding based upon legally acceptable evidence of his being active and conscious party to the manipulation. It had been further held that where in normal course of his business, the Clearing Agent filed bill based upon documents and information provided by the importer, the Clearing Agent could not be held to be privy to any illegal arrangement which the importer might have devised or had in his mind. Their lordships further observed that where it was not shown that the agent was directly or indirectly a beneficiary of evasion of taxes, the imposition of penalty on the agent was unjustified.

9. The Hon'ble FTO in a case having somewhat similar facts and circumstances, in Findings/Decision reported in 2003 PTD 795, had also observed that proper show-cause notice stating the facts of the case, the offence committed and the evidence on which offence was based should have been issued to the Clearing Agent before imposing a penalty on him. In absence thereof, the decision to impose penalty is held to be arbitrary and without lawful authority, clearly amounting to maladministration.

Findings:

10. Without affording opportunity of hearing to the complainant and without specifying his role in the offence(s) alleged to have been committed, the imposition of fine/penalty on him is tantamount to maladministration, as defined under the FTO Ordinance, 2000.

Recommendations:

11. F.B.R. to

(i)ensure that the Collector of Customs, exercising powers under section 195 of the Customs Act, examines the legality and propriety of the proceedings conducted by the Additional Collector, as per law; and

(ii)report compliance within 30 days.

H.B.T./101/FTOOrder accordingly.