SUGI (PVT.) LTD. VS COLLECTOR OF CUSTOMS
2011 P T D 2839
2011 P T D 2839
[Lahore High Court]
Before Muhammad Khalid Mehmood Khan, J
Messrs SUGI (PVT.) LTD. through duly Authorized Regional Manager
Versus
COLLECTOR OF CUSTOMS, and 2 others
Writ Petition No.13486 of 2011, decided on 22/07/2011.
(a) Customs Act (IV of 1969)---
----Ss. 13(3)(4) & 193---Customs Rules, 2001, Rr.239, 240, 345(2) & 356---Constitution of Pakistan, Art.199---Constitutional petition---Licence for private bonded warehouse of the petitioner company, was cancelled after expiry of its period by authorities---Petitioner, pending appeal against order of cancellation of licence, moved application for removal of goods under R.356 of Customs, Rules, 2001 but authorities refused to grant the same without Bank guarantee---Validity---Under provisions of S.13(3) of Customs Act, 1969, Collector of Customs, no doubt enjoyed the power for cancellation of licence for infringement of any condition laid down in the licence; or in case of any violation of any provision of the Customs Act, 1969, or any rule framed thereunder, but there was a provision that cancellation could be done after providing opportunityof show-cause notice to the licencee against the proposed cancellation---Suspension of licence was regulated under S.13(4) of Customs Act, 1969, which had provided that the Collector had the power to suspend the licence in case the proceedings were pending under S.13(3) of Customs Act, but no said proceedings for cancellation were pending against the petitioner under S.13(3) of Customs Act, 1969---Impugned order had shown that no reasons had been given about the suspension of the licence---Every functionary of the government was duty bound to act strictly in accordance with law and not in arbitrary or perfunctory manner---Goods available in the bonded warehouse were perishable and an illegal act or delay in disposal of such goods, could cause financial loss to the petitioner---Petitioner, no doubt was bound to adhere to law and in case any violation had been committed, authorities were within their jurisdiction to initiate action, but such action should not be beyond law---Impugned suspension order had shown that it was without reasons and it seemed that the Collector while passing the order had not applied his mind---Order in question was set aside by High Court and was declared to be without lawful authority.
(b) Customs Act (IV of 1969)---
----S. 100---Customs Rules, 2001, R.356---Constitution of Pakistan, Art.199---Constitutional petition---Transfer of goods from one warehousing station to another---Imposition of condition of furnishing bank guarantee by department---Validity---Under provisions of S.100 of Customs Act, 1969, if the owner intended to transfer any goods from the warehouse he had to apply to the Collector of Customs and the Collector could permit said transfer in such form and manner as the bond could prescribe---Petitioner, in the present case did not request for ex-bonding the goods, but only asked for stacking in-bond goods to another bonded warehouse on same terms and conditions, which were applicable to the present bond---Reasons for transferring the goods to other bonded house were evident, as the operation of the wharehouse had been suspended---Petitioner having not asked for ex-bonding the goods, duties/taxes would not be leviable for such transfer---Duties and taxes leviable, would be payable when the goods were requested to be ex-bonded as per terms of import or in-bonding---Petitioner was not manufacturer and not intended to export the goods sought to be transferred---Goods were only finished goods saleable at Duty Free Shops and petitioner was liable to pay duty and taxes according to ex-bonding procedure---Rule 356(1) of Customs Rules, 2001 was applicable to petitioner's case as the goods were not in the process of ex-bonding, nor were in the process of sale, and the Collector could allow said transfer against indemnity bond as per Appendix-VII---Deputy Collector (Bonds) had misinterpreted the law while imposing the condition of bank guarantee for refusing to transfer of goods from one wherehouse to another bond---Appeal against order-in-original being pending disposal before competent forum, High Court could not interfere in the appellate jurisdiction of the department.
Shezada Mazhar for Petitioner.
Sarfraz Ahmad Cheema for Respondents.
ORDER
MUHAMMAD KHALID MEHMOOD KHAN, J.---The petitioner is a private limited company and was granted a private Bond Warehouse vide permission No.02/LHR/007 in the year 2007 for a period of one year, the said license remained in continuance on year to year basis and last validity of license was expired on 19-2-2011; the petitioner is operating the Duty Free. Shop outlets at Land Customs Station, Wagha and Wagha Railway Station; on 3-12-2010 respondent No.3 suspended the petitioner's license; after the expiry of 2-months respondent. No.2 issued a show-cause-notice on 2-2-2011 mentioning number of allegations; petitioner replied to the show-cause-notice and ultimately order-in-original was passed on 19-5-2011. The petitioner filed an appeal there-against which is pending disposal.
2. Petitioner moved an application before the competent authority for renewal of his license as usual, during the pendency of renewal application, petitioner requested the respondent under Rule 356 of Customs Rules, 2001 for transfer of goods which are perishable items to other bond but respondent refused to grant permission without providing the bank guarantee; through the present petition petitioner has challenged suspension of order dated 3-12-2010.
3. Notices were issued to respondents; they appeared and filed report and parawise comments claiming that petitioner has failed to avail statutory remedy under section 193 of Custom Act, 1969; petitioner has not approached this Court with clean hands; after audit a number of irregularities were found and petitioner was found to evade government taxes amounting to Rs.62,393,534, order in original has been passed and as such no relief can be provided to petitioner. It is further asserted that without providing the bank guarantee, petitioner could not be allowed to transfer the goods from one bound to other.
4. Learned counsel for petitioner submits that against order-in-?original dated 19-5-2011 the petitioner has filed an appeal which is pending disposal and the said order-in-original is not the subject-matter of present petition; the petitioner has assailed the order of suspension of license dated 3-12-2010 as no appeal is provided thereagainst. Learned counsel submits that under section 13(4) of Customs Act, 1969, a license can only be suspended when any proceedings for cancellation of license is pending. Admittedly, no proceedings for cancellation of petitioner's license were pending when the order of suspension was passed. The order dated 3-12-2010 is without hearing the petitioner; under Rule 345(2) of Customs Act, it is mandatory on the authority to issue show-cause notice within period of one week providing the grounds of suspension. Learned counsel submits that admittedly in this case no show-cause notice is issued till today and as such the order dated 3-12-2010 is without lawful authority. Learned counsel further submits that order dated 19-3-2011 providing the bank guarantee is without lawful authority; the petitioner is not asking for ex-bonding the goods; only requested for transferring the goods to other bonded warehouse as the goods are perishable items and till the resolution of dispute, the goods will lost its value. He further submits that under Rule 356 of Customs Rules, 2001, transfer of goods from one bond to other bond could be allowed on submission of indemnity bond. He further submits that the taxes and duties could be levied at the time of ex-bonding the goods which is not the petitioner's case. Lastly adds that license of private warehouse only be cancelled after providing opportunity of hearing and issuance of show-cause-notice before cancellation which is lacking in this case.
5. Learned counsel for respondent submits that a notice is not necessary for cancellation of license of bond, the redressal of petitioner's grievance is available under section 193 of Customs Act and as such the present petition is not maintainable. Learned counsel further submits that huge amount of duty and taxes was evaded as is evident from order-in?-original and as such petitioner has not approached this Court with clean hands; however, he admits that the petitioner's appeal is pending disposal against order-in-original.
6. Heard, record perused.
7. Sections 13(3) and (4) of Customs Act, 1969 provides as under:--
"Section 13.
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??????????? (2) ???????????????
(3) A license granted under this section may be cancelled by the Collector of Customs for infringement of any condition laid down in the license or for any violation of any of the provisions of this Act or any rules made there-under, after the licensee has been given proper opportunity of showing cause against the proposed cancellation.
(3) Pending consideration whether a license be cancelled under subsection (3), the Collector of Customs may suspend the license."
8. The perusal of section 13(3) shows that Collector of Customs is enjoying the powers for cancellation of license for infringement of any condition laid down in the license or in case of any violation of any provision of the Customs Act, 1969 or any rule framed thereunder but there is a provision that cancellation can be done after providing opportunity of show-cause notice to the licensee against the proposed cancellation.
9. The suspension of license is regulated under section 13(4) of Customs Act which provides that the Collector has the power to suspend the license in case the proceedings are pending under section 13(3) of Customs Act. Order dated 3-12-2010 shows that no proceedings for cancellation were pending against the petitioner under section 13(3) of the Customs Act and the respondent proceeded to pass the order in the following manner:--
"The In-bonding and Ex-bonding of Messrs Sugi (Pvt.) Ltd., 218-Ferozepur Road, Lahore holding Private Bonded Warehouse licence No.02/LHR/2007 is hereby suspended till further orders."
10. The impugned order shows that no reasons have been given about the suspension. Admittedly no proceedings for cancellation in terms of section 13(3) of Customs Act were pending against the petitioner and as such suspension of license could not be ordered. Further, if this action was taken against the petitioner without issuing any show-cause-notice, at least the collector customs was bound to give reasons for the said suspension. No doubt the license could be withdrawn or cancelled in case of any violation of the terms of the license but in this case no violation has been alleged nor any proceedings for cancellation were pending as on 3-12-2010 when the suspension order of license was passed.
11. Rules 239 and 240 of the Customs Rules, 2001 provide as under:--
"(239) Cancellation of licence.---The licence may be cancelled by the Collector of Customs on conviction of the licensee for any offence under the Act or non- utilization of the licence, or for violation of any of the conditions specified in the licence or on the request, in writing by the licensee,
(240) Suspension of licence.
(1) Pending consideration whether a licence be cancelled under rule 4, the Collector of Customs may suspend the licence if he is of the opinion that it is expedient to do so and for the reasons to be recorded in writing, therefore by him.
(2) In a case referred in sub-rule (1) the reasons to show cause shall be communicated to the licensee within twenty four hours of such suspension."
12. The matter of cancellation of private bond came up for consideration before a Division Bench of Sindh High Court and it was opined as under:--
"(239) Cancellation of licence.---The licence may be cancelled by the Collector of Customs on conviction of the licensee for any offence under the Act or non-utilization of the licence, or for violation of any of the conditions specified in the licence or on the request, in writing by the licensee.
(240) Suspension of licence.
(1) Pending consideration whether a licence be cancelled under rule 4, the Collector of Customs may suspend the licence if he is of the opinion that it is expedient to do so and for the reasons to be recorded in writing, therefore by him.
(2) In a case referred in sub-rule (1) the reasons to show cause shall be communicated to the licensee within twenty four hours of such suspension.
A perusal of subsection (4) of section 13 above, shows that the Collector of Customs is empowered to suspend the licence pending consideration whether a licence be cancelled under subsection (3) of section 13. A bare perusal of subsection (3) of section 13, shows that a licence granted by the Collector of Customs under section 13 may be cancelled for infringement of any conditions laid down in the licence or for any violation of any of the provisions of the Customs Act or any rules made thereunder, after the licensee has been given proper opportunity and showing cause against the proposed cancellation. It means that the proceedings to consider cancellation of licence granted under section 13 of the Customs Act, is to commence with the issuance of show-cause notice to the licensee against the proposed cancellation. Thus, the condition precedent for exercise of jurisdiction under subsection (4) of section 13 is that there should be a pending proceeding for the consideration of the cancellation of licence. The expression pending consideration connotes the commencement of the proceedings and until it is concluded. The expression 'pending consideration' further denotes the period between which cognizance is taken of a matter/issue by an Authority competent in law to pass an order. If an authority competent in law to pass an order has not performed an act which is sine qua non for passing an order of initiation of proceedings in that behalf the proceedings shall not be deemed to be pending. The condition precedent for initiation of proceedings for the cancellation of licence is the issuance of show cause notice and the licence can be suspended during the proceedings pending consideration whether a licence be cancelled or not.
Under sub-rule (1) of rule 240, the Collector of Customs may suspend the licence if he is of the opinion that it is expedient to do so and for reasons to be recorded in writing therefore, by him. Thus, pending proceedings for cancellation of licence under section 13(3) of the Customs Act, read with rule 239 of the Customs Rules, 2001, if the Collector of Customs thinks it expedient to do so, may suspend the licence but before exercising such power he has to record his opinion containing the reasons to do so meaning thereby, that an objectivity is to be demonstrated in exercising this power of the' suspension of licence. Under sub-rule (2)of rule 240; the Collector of Customsis required to communicate the reasons recorded by him for suspension of licence calling upon the licensee to show cause against such order. The reasons recorded as required sub-rule (1) of rule 240 are to be communicated to the licensee within twenty four hours of such suspension.
A cumulative reading of the provisions contained in sub-sections (3) and (4) of section 13 of the Customs Act, 1969 and rules 239 and 240 of the Customs Rules, 2001, leads to the conclusion that the power of Collector of Customs to suspend the licence granted under section 13 of the Customs Act, 1969, is circumscribed with the following conditions:-
(1)??? A proceeding considering the cancellation of licence under subsection (3) of section 13 must be pending, meaning thereby that a show-cause notice for proposed cancellation is duly served on the licensee.
(2)??? During the pendency of proceedings for the cancellation of licence as explained above, the Collector of Customs is of the opinion that it is expedient to suspend the licence.
(3)??? The opinion is to be recorded in writing by the Collector of Customs himself and not by any subordinate or any superior official:
(4)??? The opinion so recorded should reflect the application of mind by the Collector of Customs himself which is indicated by the expression "the reasons to be recorded in writing, therefore, by him' (underlining is mine) appearing in sub-rule (1) of rule 240. The opinion must contain the reasons for entertaining such view.
(5)??? The reasons contained in the opinion recorded by the Collector of Customs himself under sub-rule (1) of the rule 240 shall be communicated to the licensee within twenty four hours of such suspension."
13. The above said law, rules and discussion prove that the petitioner's licence was suspended when no proceedings for cancellation were pending before the Collector in terms of section 13(3) of Customs Act. Further no reasons were given for passing the order of suspension of license. It is the duty of every functionary of the government to act strictly in accordance with law and not in arbitrary or perfunctory manner. Valuable rights of the parties are attached with the commercial transaction, admittedly the goods available in the bond are perishable and an illegal act and delay in disposal may cause financial loss to a businessman. The businessman no doubt is bound to adhere to law and in case any violation has been committed, the respondent/Collector is within its jurisdiction to initiate action but his action should not be beyond law. The perusal of suspension order shows that it is without reasons and it seems that the Collector while passing the order has not applied his mind.
14. The second grievance of learned counsel for petitioner is that the respondent has wrongly imposed condition for transferring the in bonding goods to some other bond subject to furnishing bank guarantee equal to leviable duty/tax in terms of section 100 of Customs Act, 1969.
15. Section 100 of Customs Act, 1969 provides as under:-
"100. Power to remove goods from one warehousing station to another.---(1) Any owner [or a manufacturer-cum-exporter duly authorized by such owner in respect] of goods, warehoused at any warehousing station may, within the period of their warehousing under section 98, remove the same for the purpose of warehousing them at any other warehousing station.
(2) When any owner [or a manufacturer-cum-exporter duly authorized by such owner] desires to remove any goods for such purpose, he shall apply to the Collector of Customs in such form and manner as the Board may prescribed stating therein the particulars of the goods to be removed and the name of the customs station to which they are to be removed."
16. Section 100 of Customs Act provides that in case the owner intends to remove any good from warehouse he has to apply to the Collector of Customs and the Collector of Customs may permit the said removal/transfer in such form and manner as the bond may prescribe stating therein the particulars of the goods to be removed and the name of custom station to which they are to be removed. The petitioner's application shows that they intend, to transfer the goods to any other custom bond sanctioned by the respondent to petitioner. The particulars are available with the customs officer as when the goods were in-bonded these were according to in-bond bill of entry. At present, the petitioner is not requesting for ex-bonding the goods, they are only asking for stacking the in-bond goods to other bonded warehouse on same terms and conditions which are applicable to present bond. The reasons for transferring the goods to other bond are evident, as the operation of present bond has been suspended. The petitioner is not asking for ex-bonding the goods and as such the duties/taxes will not be leviable for the transfer of goods. The duties and taxes leviable will be payable when the goods are requested to be ex-bonded as per the terms of import or in bonding.
17. Rule 356 of Customs Rules, 2001 provides as under:--
"356. Bond to bond transfer.--(1) The bond to bond transfer of warehoused goods may be allowed by the Collector against an indemnity bond as set out in Appendix-VII to this chapter on submission of an application, by the licensee, as set out in Appendix-V to this chapter.
(2) The transfer, in respect of manufacturing bond, of input goods for getting the same processed in another manufacturing bond or in any other unit located in the Export Processing Zone may be allowed by the Collector.
(3) In respect of a manufacturing bond, a licensee shall be allowed by the Collector to sell the warehoused goods to another licensee within the validity period of the seller subject to such extension as the Collector may allow from the date of importation or purchase.
(4) A licensee of a manufacturing bond, purchasing the input goods, shall consume the same within the remaining period of consumption subject to such extension as the Collector may allow from the date of original importation or as extended from time to time.
Explanation.---For the purpose of this rule, the expression "warehoused goods" includes the goods manufactured from input goods by the seller under bond, whether in semi processed, processed, semi finished or finished state, which are used by a licensee purchasing such goods for the manufacture of a product for export under this chapter."
18. The petitioner is admittedly not manufacturer and does not intend to export the goods sought to be transferred. The goods are only finish goods saleable at Duty Free Shops and the petitioner is liable to pay duty and taxes according to ex-bonding procedure. Rule 356(1) is applicable to the petitioner's case as the goods are not in the process of ex-bonding nor are in the process of sale but the only request of petitioner is for the tr4nster of goods from one bond to other bond and the Collector may allow the said transfer 'against indemnity bond as is Appendix-VII.
19. The Deputy Collector Bonds has misinterpreted the law while imposing the condition of bank guarantee for refusing to transfer of goods from one bond to other bond.
20. As the appeal against order-in-original is pending disposal before a competent forum and as such this Court cannot, interfere in the appellate jurisdiction of respondent in its constitutional jurisdiction to the extent of pending appeal against order-in-original. This petition is only restricted to the extent of suspension of license of private bond and imposition of bank guarantee for transfer of goods from bond to bond.
21. As there is no appeal provided in the statute against order passed under section 13(3)(4) of Customs Act, 1969 and as such this petition is maintainable and this Court has the power to set aside or affirm the order impugned. The upshot of the above said discussion is that the impugned order dated 3-12-2010 and 19-3-2011 are hereby set aside and are declared without lawful authority:
22. This petition succeeds and is allowed.
H.B.T./S-144/L??????????????????????????????????????????????????????????????????????????????????? Petition allowed.