COLLECTOR OF CUSTOMS, KARACHI VS POWER ELECTRONIC PAKISTAN (PVT.) LTD., LAHORE, 2011 PTD-KARACHI-HIGH-COURT-SINDH 2837 (2010)

Customs Act (IV of 1969)---

----Ss. 19, 25, 32 & 196---Determination of customs value of goods---Misdeclaration---Exemption---Reference application---Respondents had imported Automatic Circuit Breakers having voltage of 15 KV and '1eclared the same under PCT Heading 8536.2010 and claimed exemption---Department contended that said goods fell under PCT Heading 8535.2110, on which rate of customs duty was 20% and that the importers had deliberately misdeclared the PCT Code---Comparison of two PCT Headings in dispute, had shown that those could be misinterpreted, and on the basis of such misinterpretation, the goods in question could be declared under any of the two PCT Headings---Alleged misdeclaration was proved to be not intentional and deliberate and said Headings could fall within the ambit of exemption---If claim of exemption in good faith was dis-allowed, penal action could not be taken for the lesser payment of taxes---Decision of Appellate Tribunal on the point was unexceptionable and no interference was called for by the High Court.

State Cement Corporation of Pakistan v. Collector of Customs and others 2002 MLD 180 rel.

Ghulam Haider Shaikh along with M. Ilyas Ehsan for Applicants.

Junaid Ghaffar and Darvesh K. Mandhan for Respondents.

ORDER

This Special Custom's Reference Application has been filed against the order of the Tribunal dated 20-6-2009 in Customs Appeal No.K-376 of 2009, whereby number of questions said to be arisen from the order of the learned Tribunal have been proposed.

After hearing the learned counsel we are of the view that the controversy in question revolves round to only one point i.e. whether the Tribunal was justified in deleting the penalty levied for alleged misdeclaration. As far as the questions proposed are concerned in view of the above observation they appears to be of academic interest only and may be considered in appropriate cases as this Court has always been reluctant to answer the question for academic purpose only. We will, therefore, reframe the question to read as under:--

"Whether the Tribunal was justified in deleting the penalty levied by the present applicant for alleged misdeclaration?

The brief facts of the case are that the respondents had imported Automatic Circuit Breakers, having voltage of 15KV and had declared the same under PCT Heading 8536.2020 and had also claimed exemption under Serial 21 of the S.R.O. 575(I)/2006 dated 5th June, 2006. The applicants were of the opinion that the respondents had deliberately misdeclared the PCT Code, which according to them fell under PCT Heading 8535.2110 on which, rate of Customs duty was 20% against 05% in respect of item- falling under PCT Heading 8536.2020 and the respondents were also not entitled to exemption, therefore, issued show-cause notice, classified the goods under PCT Heading 8535.2110 and also levied penalty of Rs.650,000.

The respondents appealed before the Collector of Customs (Appeals), which appeal was rejected, against which they filed an Appeal before the Appellate Tribunal and the Tribunal held that the appellants will not be entitled to the exemption in terms of Serial 21 of S.R.O. 575(I)/2006 and in respect of this decision of the Tribunal the respondents have not filed appeal but the Tribunal has held that in respect of the declaration under the alleged wrong PCT Code and claim of exemption penalty cannot be levied on the appellants and, therefore, extinguished the penalty of Rs.650,000.

We have heard Mr. Ghulam Haider Shaikh, learned counsel for the applicant, assisted by Mr. Ilyas Ehsan, the representative of the applicant and Mr. Junaid Ghaffar and have examined the records of the case including the impugned order with their assistance.

A comparison of two PCT Headings, which are in dispute, show that they can be misinterpreted and on the basis of such misinterpretation the goods in question can be declared under any of these PCT Headings and, therefore, we are of the opinion that it has been proved that the alleged misdeclaration was not intentional and deliberate. As far as the claim of exemption is concerned we are of the opinion that they may fall within the ambit of such exemption and it is a settled law that claim of exemption in good faith if it is dis-allowed then penal action cannot be taken for the lesser payment of taxes due to the claim of such exemption.

The learned Tribunal has relied on a judgment of this Court in State Cement Corporation of Pakistan v. Collector of Customs and others (2002 MLD 180) and has reproduced the following extract from that judgment: -

"The above decision, therefore, seems to be of no help to the respondents as in the instant case no mis-declaration of facts has been alleged. In fact Raja Muhammad Iqbal placed before us a copy of a bill of entry filed by the appellant wherein the rate of duty of 30% was declared but concessionary rate in terms of S.R.O. No.286 was claimed. In the circumstances, we are clearly of the opinion that no conscious misdeclaration of fact can be attributed to the appellant and no conclusion having been alleged the short payment can only be attributed to a misconstruction or error in the interpretation of the relevant notification. The provisions of section 32(3) of the Customs Act would therefore, be clearly attracted in shortfall in the duty could have only been recovered within time specified in section 32(3) of the Customs Act."

We are in respectful agreement with the above judgment and once again observe that the judgment is on the basis of a settled law as to the proposal that penalty cannot be levied when exemption is claimed in goodfaith. We are, therefore, of the opinion that the decision of the. Tribunal on this point is unexceptionable and no interference is called from this Court. We, therefore, answer the reframed question in affirmative in favour of the respondents and against the applicant.

This Special Customs Reference Application is disposed of in the above matter.

H.B.T./C-9/K????????????????????????????????????????????????????????????????????????? Application dismissed.