SAEED SHINWARI LTD., AFGHANISTAN VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2011 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 2427 (2011)

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

----Ss.32, 129 & 156(1)(14)(64)---Afghan Transit Trade Agreement, 1965---Public Notice No.16/2000(A) dated 30-09-2000---Untrue statement, error, etc. ---Afghan Transit Trade Invoices were filed declaring the goods ails `white paper'---On physical examination, goods were found to be `ctarette paper' meant for use in manufacturing of cigarettes, not white% paper meant for writing purposes---Description of cigarette paper wags declared in GDs and omission in Afghan Transit Trade Invoices constituted an offence in terms of S.32 and S.129 of the Customs Act, 1969, punishable under Cls.(14) and (64) of S.156(1) of the Customs' Act, 1969---Validity---Contention of Department that omission disqualified the goods for transit was not maintainable---Customs at the Port had explained that "these consignments were not subject to examination by the selectivity criteria of the computer system at the port of entry, but, 'all the consignments were examined at the port of exit"-Such explanation was not plausible because, while allowing transit, GDs and Afghan Transit Trade Invoices were simultaneously filed in accordance with the requirements of Public Notice No.16/2000(A) dated 30-9-2000---Data entry operator was required to feed all the particulars of the GDs and Afghan Transit Trade Invoices, and make the required corrections, if any---In case of discrepancy, the documents were returned to the Clearing Agent for necessary corrections---Appraisement staff in the Customs House and the Customs examination staff at the port were similarly required to identify discrepancies, if any---Failure of the Customs at the Port to identify the discrepancy involved in the material particulars of transit goods through all stages of Customs process reflected neglect and inefficiency on their part.

Writ Petition No.443 of 2000 rel.

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

----Ss.32, 129 & 156(1)(14)(64)---Afghan Transit Trade Agreement, 1965---Untrue statement, error, etc.---Cigarette paper---Omission of such paper in the Afghan Transit Trade Invoices but declared in GDs---Detention of goods by the Customs Authorities with the perception that there was no cigarette industry in Afghanistan to justify import of cigarette paper---Validity---Notwithstanding the fact that evidence supporting existence or otherwise of cigarette industry in Afghanistan was a mixed question---Collector's action to detain cigarette paper was un-maintainable and inconsistent with the practice in Customs House---Detention of cigarette paper was unlawful unless it was excluded from the scope of Afghan Transit through a Gazette Notification---Instructions of Federal Board of Revenue and. Ministry of Commerce endorsing Collector's suggestion not to allow transit of cigarette paper could not be lawfully pressed into service---Maladministration on the part of Customs was established---Federal Tax Ombudsman recommended that Federal Board of Revenue to direct Collector Customs to allow transit of the goods after getting the description in the Afghan Transit Trade Invoices appropriately amended; to call upon the Clearing Agent to show cause why action should not be taken against him for the omission of description of cigarette paper in Afghan Transit Trade Invoices and to initiate disciplinary action against the relevant Customs staff at the Port and boarder for their negligence and inefficiency.

Writ Petition No.1681 of 1998 rel.

Yasin Tahir, Senior Advisor Dealing Officer.

Ishtiaq Ahmad Authorized Representative.

Zubair Shah, DC Customs, Peshawar Departmental Representative.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE (FEDERAL TAX OMBUDSMAN). ---Messrs Saeed Shinwari Ltd., Jalalabad, Afghanistan, filed complaint under section 10 of the FTO Ordinance, 2000, againstdetention of two consignments each containing 5760 rolls of paper used in the packing of tooth picks and cigarettes. The consignments were allowed transit through Pakistan by Customs at Karachi vide Goods Declarations (GD) No.14907 dated 27-11-2010 and 16571 dated 7-12-2010. The goods were transported by NLC and off loaded at Amangarh, Nowshera, as per prevalent procedure, for reloading for onward transport to Afghanistan. However, reloading of the goods was denied by the Customs authorities at Amangarh on the pretext that documentary evidence was required to prove that cigarette industry existed in Afghanistan to justify import of cigarette paper. The complainant furnished a letter dated 26-12-2010 from Nangarhar Chamber of Commerce confirming existence of cigarette industry in Afghanistan to the Customs authorities, but to no avail.

2. The complainant served a legal notice dated 3-3-2011 on the Collector Customs, Peshawar, against unlawful detention of goods. As no reply to the legal notice was received, he preferred a complaint before the Hon'ble FTO.

3. The complaint was referred for comments to the Secretary Revenue Division in terms of section 10(4) of the FTO Ordinance, 2000. In response, the Collector of Customs, Peshawar, filed parawise comments wherein he stated that the complainant had filed Afghan Transit Trade Invoices (ATTIs) as required under the Afghan Transit Trade Agreement, 1965, declaring the goods as 'white paper'. On physical examination, the goods were found to be 'cigarette paper' meant for use in the manufacture of cigarettes, not white paper meant for writing purposes. As cigarette paper was not declared in ATTIs, it did not qualify as' bona fide transit goods. Furthermore, declaration of description of cigarette paper in the GDs and omission thereof in the ATTIs constituted an offence in terms of section 32 and section 129 of the Customs Act, 1969 (the Act), punishable under clauses (14) and (64) of sections 156(1) ibid.

4. The Collector controverted the allegation of detention of goods without any written Detention Memo. issued by the Customs. According to him, it was merely a case of deferment on account of the complainant's failure to provide evidence of existence of cigarette industry in Afghanistan. The responsibility of delay devolved solely on the complainant for his failure to initiate any request for amendment of description. However, the Collector's reply was silent on the Customs' failure to reply to the legal notice. Nor did it comment on the Nangarhar Chamber's letter confirming existence of cigarette industry in Afghanistan.

5. The Collector's parawise comments also referred to advice sought from F.B.R. vide letter dated 24-12-2010. The F.B.R., in turn consulted the Ministry of Commerce and communicated the following decision vide letter C.No.3(1)L&P/04-A dated 7-4-2011:--

" .Ministry of Commerce vide U.O.No.15(I)/2007-AP-11 has. endorsed the action taken by the Collector of Customs, Peshawar. However, an option of allowing the clearance of the subject consignment to authorized cigarette manufacturers in Pakistan may be considered keeping in view the relevant provisions of, law/regulations."

In response to above, decision, the Collector wrote back to F.B.R. vide Letter No.Cus-TF5.NLC/FTO/Cig/ATTI-16571/2011/4933 dated 30-4-2011, 'that Afghan Transit goods cleared under the ATTA, 1965 are meant for Afghanistan and cannot be locally disposed of unless the goods are confiscated through adjudication order'. Thereafter, the matter rested there.

6. During the hearing, the complaint was examined in the light of the written and verbal submissions of the parties and the documents on record. The main issues involved in this case are as follows:

(i)Whether any misdeclaration of description was committed by the complainant which disqualified the goods for transit?

(ii)Whether the complainant failed to fulfill the Customs requirement of amendment of description in ATT Invoices?

(iii)Whether the complainant failed to provide evidence of existence of cigarette industry in Afghanistan?

(iv)Whether the Customs were empowered under the law and the Afghanistan Transit Trade Agreement, 1965, to 'defer' permission for transport of goods in transit to Afghanistan?

7. As regards misdeclaration of description, the DR contended that the goods were differently described in the GDs and the ATTIs the Complainant presented to Customs at Karachi. Whereas the specific description declared in the ATTIs was 'white paper', it was 'cigarette paper' in the GDs as per the commercial invoices pertaining to these imports. The ATTIs being the legal documents as prescribed under the Afghan Transit Agreement, 1965, the correct and complete specific description of goods was required in the ATTIs. As there was material difference in the description of goods in the ATTIs and the GDs, the Customs advised the Complainant's representative to apply for amendment of description in ATTIs. According to the DR, such a correction was necessary for Customs record and also, to forestall the chances of misuse of transit through manipulation of description. He contended that experience had shown that some of the goods in transit, which were pilfered, replaced, or diverted to Pakistani markets were imported under misdeclared description.

8. The DR further stated that the Customs were under obligation to ensure genuineness of transit trade. According to him, there were only two control mechanisms available to the Customs: (i) complete. and correct specific description of transit goods in ATTIs and GDs and (ii) physical examination of goods to match the declarations in the aforesaid documents. If transit goods were found not to have been correctly, completely and specifically described in the ATTIs and GDs, the import would, prima facie, become doubtful. He contended that the phenomenon of misuse of Afghan Transit for smuggling of goods into Pakistan was too big to be ignored. "The Customs action in the case under reference was therefore justified and lawful", he said.

9. According to the DR, there was no indication in the import documents that the paper under reference was meant for packing of tooth picks. The complainant's contention that it was also meant for packing of tooth picks was not only an afterthought, but a lame excuse to justify import of cigarette paper in the garb of transit subsequently to be diverted to Pakistani market where cigarette industry was well established and cigarette paper was in good demand.

10. Controverting the DR's contentions; the AR contended that the description was correctly and fully made in the GDs on the basis of which the Customs at Karachi had allowed transit of the goods. According to him, the description-related discrepancy, if any, should have been pointed out by Customs at Karachi and the Clearing Agent there would have rectified it. Likewise, had the Customs at Peshawar pointed it out to the complainant's representative, he too would have rectified it. But no such omission was indicated during the detention period, or even after the service of legal notice. However, he expressed his readiness to amend the description, if permitted by the Customs authorities at Peshawar.

11. The AR further contended that there was no motive behind the omission to mention 'cigarette paper' in the ATTIs because the full and specific description had been given in the Customs GDs. According to him, the possible motive behind such a discrepancy in the description of goods in transit could be en-route pilferage, replacement or diversion. However, nothing of the sort happened in this case as the goods reached Amangarh intact without any en route manipulation. As to the transport of goods from Amangarh to Torkham, this happens under proper Customs escort. Therefore, no ill motive could be assigned to the impugned omission.

12. Responding to the question why the item description at serial 42 of the GDs (cigarette paper) was not made in the ATTIs, the AR attributed the omission to inadvertence on the part of the Clearing Agent. He cited the Peshawar High Court's judgment in Writ Petition No.443 of 2000 in which the Hon'ble Court held that retention of 150 cartons of Defeo Fenis medicine for laboratory test on suspicion of misdeclaration by Peshawar Customs was illegal. The AR also provided documentary evidence of previous imports of cigarette paper by the same Afghan importer, and their transit to Afghanistan.

13. The Custom House has also confirmed their practice vide letter No.SI/Misc/Office-22/2011-TG dated 6-7-2011:-.

"If the description is declared on GD correctly but not mentioned on ATTIs then it is required to be rectified (corrected) as per actual description, in the ATTIs as per Public Notice 16/2000 (A) dated 30-9-2000."

The Customs contention in the parawise comments that the omission disqualified the goods for transit is therefore not maintainable. The Customs at Karachi have also explained in their letter referred to in para 13 supra that `these consignments were not subject to examination by the selectivity criteria of the computer system (PRAL) at the port of entry, but, all the consignments were examined at the port of exit'. This explanation is not plausible because, while allowing transit, GDs and ATTIs are simultaneously filed in accordance with the requirements of Public Notice No.16/2000(A) dated the 30-9-2000. The Data Entry Operator is required to feed all the particulars of the GDs. and ATTIs, and make the required corrections, if any. In case of a discrepancy, the documents are returned to the Clearing Agent for necessary corrections. The appraisement staff in the Custom House and the Customs examina tion staff at the port are similarly required to identify discrepancies, if any. Failure of the Customs at Karachi to identify the discrepancy involved in the material particulars of transit goods through all stages of Customs process reflects neglect and inefficiency on their part.

14. The second issue related to why the complainant failed to fulfill the Customs requirement of applying for amendment of description of goods in ATTIs. There is nothing on record to show that the Customs at Peshawar ever advised the complainant or his representative to get the description amended. The Customs even did not make a mention of this aspect while seeking confirmation of detention of goods from the F.B.R. vide their letter No..Cus-TFS/NLC/21/2010/11325 dated 24-12-2010. The Collector Peshawar had informed the FBR vide his aforesaid letter as follows:--

"Inquiries have revealed that there exists no cigarette industry in Afghanistan and obviously, the subject cigarette paper is a basic raw material used in the manufacture of cigarettes. As per Ministry of Commerce, Islamabad S.R.O. 151(I)/2004 dated 10-3-2004, cigarillos and cigarettes of tobacco or of tobacco substitutes are prohibited in transit to Afghanistan and si1'ice cigarette paper is a basic raw material used in the manufacture of cigarettes, hence taking a lead from this prohibition, this Collectorate is of the view that cigarette paper should also be not allowed in transit to Afghanistan and specifically when no such industry exists there. Accordingly, this Collectorate has detained the instant consignment. Board is accordingly requested to confirm the course of action taken by this Collectorate."

15. It is obvious that the reason for detention of goods by the Customs authorities at Peshawar was not the omission in description but their perception that there was no cigarette industry in Afghanistan to justify import of cigarette paper.

16. The next issue is whether the complainant failed to provide evidence of existence of cigarette industry in Afghanistan to justify import of cigarette paper into Afghanistan. When the AR produced a copy of letter dated 26-12-2010 by Nangarhar Chamber of Commerce confirming existence of cigarette industry in Afghanistan, the DR did not deny that a copy of this letter was available in the relevant file of Peshawar Collectorate. If the Customs were in doubt, they should have got its genuineness confirmed by Nangarhar Chamber through the Afghan Trade Commissioner, Peshawar. During the hearing, the AR also produced a letter by the Afghan Trade Commissioner at Peshawar confirming existence of cigarette industry in Herat and Kabul Provinces. The DR, however, produced a letter from Pakistan's Commercial Counselor in Kabul; reporting non-existence of cigarette industry in Afghanistan as the Afghanistan Trade and Statistical Year Book did not indicate export of cigarettes from Afghanistan. Notwithstanding the fact that evidence supporting existence or otherwise of cigarette industry in Afghanistan was mixed, the Custom House, Karachi informed vide their letter referred to in para 13 supra as follows:--

"(i) It is informed that import of cigarette paper in transit to Afghanistan is permissible as it is not included in the negative D list notified by the Ministry of Commerce vide S.R.O. 151(I)/2004 dated 10-3-2004. The import of cigarette paper in Afghanistan is reflected vide table below:--

The Collector Peshawar's action to detain the cigarette paper under reference was thus unmaintainable and inconsistent with the practice in Custom House, Karachi.

17. The fourth issue is regarding the Customs empowerment to defer permission to transport the goods in transit to Afghanistan. The DR contended that as F.B.R., and Ministry of Commerce had duly endorsed detention of goods disallowing transit, the Customs action was justified. The AR, however, cited the judgment of Peshawar High Court in Writ Petition No.1681 of 1998 wherein detention of cigarette paper was held unlawful unless it was excluded from the scope of Afghan Transit through a Gazette Notification. The instructions of F.B.R. and Ministry of Commerce received vide F.B.R. letter C.No.03(1)L&P/04-A dated 7-4-2011 and communicating Ministry of Commerce's endorsement of the Collector's suggestion in this case not to allow transit of cigarette paper could not therefore be lawfully pressed into service.

Findings:

18. In view of the foregoing discussion, maladministration on the part of the Customs at Peshawar is established in terms of section 2(3)(ii) of the FTO Ordinance, 2000.

Recommendations:

19. F.B.R. to-

(i)direct Collector Customs Peshawar to allow transit of the goods after getting the description in the ATTIS appropriately amended;

(ii)call upon the clearing agent in Karachi to show cause why action should not be taken against him for the omission of description of cigarette paper in ATTIS;

(iii)initiate disciplinary action against' the relevant Customs staff at Karachi and Peshawar for their neglect and inefficiency; and

(iv)report compliance within 30 days.

C.M.A./202/FTOOrder accordingly.