Syed HABIB NOOR VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2011 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1300 (2010)

Customs Act (IV of 1.969)---

----Ss. 2(s), 16, 157(2) & 168---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 10---Seizure and confiscation of goods---Deputy Collector of Customs (Preventive) passed order-in-original, whereby the motorcycle parts as well as the vehicle were confiscated with option to the owner to redeem the vehicle on payment of redemption fine 50% value of the vehicle---Appeal against said order-in-original was dismissed by Collector (Appeals)---Appellate Tribunal set aside both order-in-original as well as order-in-appeal---Complaints after decision of Appellate Tribunal passed in their favour, approached Collector of Customs for release of seized goods and refund of redemption fine, but their request had been refused on the ground that the Appellate Tribunal in its order did not direct release of seized motorcycle parts---Claim of refund of redemption fine was turned down treating the same as time-barred---Despite passing second order by Appellate Tribunal, the department continued with the auction proceedings and finally, the motorcycle parts were auctioned--Department had failed to advance any plausible excuse for withholding of the redemption fine for a period of more than. two and half years after passing of the order by the Appellate Tribunal and refund to complainants---Assertion that refund claim was time-barred, lacked any legal footing---After passing of the order by Appellate Tribunal, withholding of refund of redemption fine paid by the complainants and auction of motorcycle parts, by the customs, were acts having no legal authority---Complainants were entitled to refund of the redemption fine and to receive the value of motorcycle---Recommendations were made to Federal Board of Revenue to direct relevant officials to explain as to why compensation amount be not awarded to the complainants in exercise of the powers under S.22(1) of the Establishment of Federal Tax Ombudsman Ordinance, 2000 to conduct inquiry to identify the officials/officers who in violation of order of the Appellate Tribunal withheld the refund of redemption fine and auctioned the motorcycle parts; and initiate disciplinary action against them under applicable rules; to refund redemption fine received from complainants within 7 days; officials responsible for unlawful withholding the redemption fine for over two years, be directed to explain as to why compensation could not be recovered from them and compliance be reported to the office within 45 days.?

Justice (Retd.) Muhammad Nadir Khan, Advisor (Incharge), Dealing Officer.

Asim Bajwa, Authorized Representative.

Mushtaq Shaherri, Deputy Collector MCC Preventive, Karachi Departmental Representative.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---The Complaint under reference is directed against the Customs Authorities of Customs House Karachi. It is alleged that on 28-1-2007, the Customs staff- seized vehicle bearing Registration No. KB-3024 loaded with motorcycle parts. The owner of the goods (Complainant No.2) and the owner of the vehicle (Complainant No.1) along with the vehicle and the seized goods were escorted to the Customs House, Karachi, where a case was registered under sections 2(s) and 16 read with section 157(2) of the Customs Act, 1969, (hereinafter referred to as the Act).

2. Complainant No.2 pleaded before the Customs that the motorcycle parts were purchased by him from Messrs Ashraf Autos, Karachi. He produced the cash memo. but the Customs authorities ignored the same and the matter was referred to Deputy Collector of Customs (Preventive), HQs-I, who passed the order-in-original dated 28-2-2007, whereby the motorcycle parts as well as the vehicle were confiscated, with option to the owner to redeem the vehicle on payment of redemption fine of 50% of the value of the vehicle. The above order was challenged in appeal before Collector (Appeals) Karachi, who by Order-in-Appeal dated 2-6-2007 dismissed the appeal. Afterwards, the Complainants filed an appeal before the Appellate Tribunal Bench-I, Karachi, which set aside both the order-in-original as well as order-in?-appeal vide judgment dated 29-8-2007.

3. The Complainants then approached the Collector of Customs, Model Customs Collectorate Preventive (MCC), for release of seized goods and refund of redemption fine. The request of the Complainant No.1 was refused and Complainant No.2 was paid the sale proceeds of the motorcycle parts amounting to Rs.157,192. The Complainant No.2 contended that the Customs Appellate Tribunal had passed the order for return of the motorcycle parts valuing Rs.561,100 in presence of the representative of Collector of Customs. Instead of their return to the owner in accordance with the judgment of the Appellate Tribunal, the motorcycle parts were auctioned by the Customs without giving any notice to him.

4. The Complainants in their complaints before the FTO have prayed as under:--

'it is respectfully prayed that your Honour may kindly be pleased to direct the respondent to pay the remaining balance amount of Rs.403,906 to the Complainant No. 2 also pay refund of redemption fine 50% on Vehicle sum of Rs.60,000 to the Complainant No.1 with interest at the rate of 14%.

To intervene in the matter and redress the injustice which is going to be done against Complainant/Applicant by respondent and their subordinate staff who auctioned goods of the Complainant No.2 and also unlawfully refused to issue refund of redemption fine 50% on Vehicle sum of Rs.60,000 to the Complainant No.1 and fix responsibility for extreme maladministration in this Complaint.

Compensation of Rs.500,000 for loss in business and Compensation of Rs.100,000 for cost of the Complainant and any other compensation may kindly be allowed under section 22 of the Federal Tax Ombudsman 2000."

5. The Department submitted para-wise comments/reply alleging that the Complainants were involved in smuggling of foreign-origin goods i.e. motorcycle parts from Chaman to Quetta and finally to Karachi. The cash memo. produced by the Complainant No.2 was stated to be irrelevant as it was produced at a later stage. According to the Department, the auction proceedings were carried out as per relevant provisions of the Customs Act, 1969/Auction Rules, after issuance of notice which was published in daily Jang Karachi. However, the Department did not dispute the fact that the order-in-original as well as the Order-in-Appeal of Collector (Appeals) were set aside by the Appellate Tribunal and it was directed to refund the redemption fine and to return the seized motorcycle parts. The Department pleaded that the Complainant No.2 had been paid the sale proceeds, while the application of the owner of the vehicle for refund of redemption fine being time-barred was rejected, although the said aspect of the matter was being re-examined, and if found admissible, the amount of fine would be duly refunded to him. The Department finally pleaded that the FTO Office had no jurisdiction to grant any compensation and prayed for dismissal of the complaint.

6. Copy of parawise comments/reply was supplied to the Complainant for filing of rejoinder, if any. As no rejoinder was filed, the matter was fixed for final hearing on 20-4-2010, when both parties were heard at length and the record produced by the Department was also perused. Copies of the auction proceedings were obtained and made part of the file.

7. The AR argued that as per the show-cause notice, the Customs valued the motorcycle parts for Rs.479,952, whereupon the payable total amount of duty and taxes was calculated as Rs.309,881. This meant that the market value of motorcycle parts was Rs.789,833. He further contended that the Complainant produced receipt of purchase of the seized motorcycle parts, showing that the parts were purchased for Rs.561,100. Hence auction of goods for Rs.157,194 was at a price which was unreasonably low. Moreover, motorcycle parts were auctioned on 29-6-2008, whereas the Appellate Tribunal in its order dated 8-4-2008 had already issued direction for release of the motorcycle parts. Thus the whole auction process was illegal. According to the AR, the officers of the Custom Department in defiance of the order of the Appellate Tribunal rejected his application treating it time-barred and the motorcycle parts purchased by the Complainant No.2 for Rs.561,100 were disposed of in fourth auction for Rs.157,194 causing him a loss of Rs.403,906, which he is entitled to receive, along with interest and compensation. Similarly, Complainant No.1 being wrongly deprived of redemption fine is also entitled to receive the same with compensation. The AR contended that the concerned Customs officials mis-exercised their powers and arbitrarily flouted the order of the Appellate Tribunal, and such acts tantamount to maladministration as defined under section 2(3) of the FTO Ordinance, 2000.

8. The DR contested the plea of the Complainant and argued that the motorcycle parts were smuggled goods and were rightly confiscated by the adjudicating officer i.e. Deputy Collector (Prevent) HQ-I. Also, it was after dismissal of the appeal by Collector Appeals, that auction proceedings were initiated. However, he agreed that it was in 4th auction held on 29-6-2008 that the motorcycle parts were auctioned. According to him, the auction proceedings were in consonance with the requirements of section 161(4) r/w section 201? of the Customs Act andAuction Rules (Chapter-V of S.R.O. 450(1)/2001). The Complainant has been paid the sale proceeds and he cannot claim any amount over and above the same. The DR contented that at the time of auction of the motorcycle parts on 29-6-2008, the concerned Customs Officer had no knowledge of the order dated 8-4-2008 passed by Appellate Tribunal for release of the motorcycle parts. Moreover, the Appellate Tribunal Karachi in the earlier order dated 29-8-2007 while setting aside the Order-in-Original passed by Deputy, Collector and order-in-appeal passed by Collector (Appeals) did not order release of motorcycle parts. However, the DR felt difficulty to justify withholding of refund of redemption fine paid by Complainant No.1 for release of his vehicle.

9. Submissions made by both sides have been considered. Documents available on the record as well as the documents regarding auction proceedings produced by the Department have also been examined. The record reflects that after decision dated 29-8-2007 by Appellate Tribunal, the Complainant No.1 approached the Department for refund of redemption fine and Complainant No.2 sought release of the motorcycle parts which were then available with the Department, but the Department initiated auction proceedings by issuance of a general notice which was published in daily Jang and Dawn on 21-11-2007. The request for release of the motorcycle parts was refused on the ground that the Appellate Tribunal in its order dated 29-8-2007 did not direct release of seized motorcycle parts, while the claim of refund of redemption fine was turned down treating it as time-barred. The Complainant No.2 thereafter filed application before Appellate Tribunal Karachi for issuance of order for release of the motorcycle parts. The application was allowed vide order dated 8-4-2008 which reads as under:--

"Rival parties have been heard. Case record has been examined. It is evident from the perusal of paras (5) and (6) of the order dated 29-8-2007 that there is a conflict between two paragraphs which is apparent from the face of record. The Tribunal has observed that no offence was committed by the Appellant; therefore his goods were liable to be released. It is accordingly held that the seized goods were detained and confiscated by the respondent without having any evidence to show that they were liable to be confiscated; hence the action taken by the department was illegal al) initio. The goods (Motorcycle Parts) were therefore, illegally confiscated and the same are accordingly released."

It is evident from the record that despite passing of the 2nd order by the Appellate 10. Tribunal, the Department continued with the auction proceedings, and finally, the motorcycle parts were auctioned on 29-6-2008 for Rs.157,194. It would be relevant to observe that the motorcycle parts were sold in fourth auction, whereas in first, second and third auction held on 29-11-2007, 17-1-2008 and 7-3-2008 respectively higher bids were received. Even otherwise, the auction of the motorcycle parts on 29-6-2008, almost three months after passing of the order dated 8-4-2008 by Appellate Tribunal directing the Deputy Collector Preventive to release the goods was on the face of it patently illegal. The Department's plea that the order of the Appellate Tribunal was not in the knowledge of the Assistant Collector of Customs only shows how widespread the curse of maladministration is in the Department. The Department has also failed to advance any plausible excuse for withholding of the redemption fine for a period of more than two and half years after passing of the order dated 29-8-2007 by the Appellate Tribunal for refund of the fine to the Complainant No.1. The assertion that the refund claim was tine-barred lacks any legal footing, and so it cannot be supported.

Findings:

11. After passing of the Appellate Tribunal's orders dated 29-8-2007 and 8-4-2008, withholding of the refund of the redemption fine paid by Complainant No.1, and auction on 29-6-2008 of the motorcycle parts belonging to the Complainant No.2 by the Customs were both acts having no legal authority. Consequently, the Complainant No.1 is entitled to refund of the redemption fine and Complainant No.2 to receive the value of the motorcycle parts. The cash memo. produced by the Complainant No.2 shows that the motorcycle parts were purchased for Rs.561,100. This value is supported by the record of the Department as the motorcycle parts exclusive of duty and taxes were valued for Rs.479,952 and after including duty and taxes amounting to Rs.309,881, the value of the motorcycle parts worked out to Rs.789,833. However, as the Complainant No.2 himself valued the motorcycle parts for Rs.561,100, he is entitled to receive the balance amount of Rs.403,906 as he has already received an amount of Rs.157,194 as sale proceeds. Gross maladministration in this case is writ large.

Recommendations:-

12. F.B.R. to-

(i)???????? direct the relevant officials to explain as to why compensation equal to Rs.403,906 may not be awarded to the Complainant No.2 in exercise of the powers under section 22(1) of the FTO Ordinance, 2000. They may also state whether they wish to be heard in person;

(ii)??????? conduct inquiry to identify the officials/officers who, in violation of the orders dated 29-8-2007 and 8-4-2008 of the Appellate Tribunal, withheld the refund of redemption fine and auctioned the motorcycle parts; and initiate disciplinary action against them under the applicable rules;

(iii)?????? the redemption fine received from Complainant No.1 be refunded within 7 days;

(iv)?????? the officials responsible for unlawfully withholding the redemption fine for over two years may also be directed to explain as to why compensation @ 14% per annum may not be recovered from them under section 22(1) of the FTO Ordinance, 2000. They may also stated whether they wish to be heard in person; and

(v)??????? compliance be reported to this office within 45 days.

H.B.T./105/FTO????????????????????????????????????????????????????????????????????? ??????????? Order accordingly.