COLLECTOR, MODEL CUSTOMS COLLECTORATE, HYDERABAD VS KHUDA RAHEEM, 2012 PTD-KARACHI-HIGH-COURT-SINDH 428 (2011)

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 152(2), 168 & 187---Imports and Exports (Control) Act (XXXIX of 1950), Ss.3 (1) & 156 (1) (89)---Qanun-e-Shahadat (10 of 1984), Arts. 117 & 120---Smuggled goods---Onus to prove---Shifting of onus---Report of laboratory---Customs authorities confiscated three oil tankers containing High Speed Diesel on the allegation of the same being smuggled---Report of Hydrocarbon Development Institute of Pakistan showed that Diesel confiscated was not of foreign origin, therefore, Appellate Authority and Customs, Excise and Sales Tax Appellate Tribunal concurrently set aside the order passed by Adjudication Officer---Validity---Both appellate forums had rightly found the documentary evidence produced by respondents to be correct and sufficient evidence to discharge burden of proving innocence by respondents whereas order-in-original had been set aside---Appellate forums had also rightly held that initiation of proceedings by department were based merely on suspicion, whereas there was no positive evidence or material available with customs authorities to establish the charge of smuggling against respondents---Both the appellate forums had further rightly held that since respondents discharged their initial burden by producing certain documents relating to lawful possession of seized oil as well as by producing laboratory report, which had nullified the allegation that seized High Speed Diesel oil was of foreign origin---Burden to prove, shifted upon the authorities to establish the charge of smuggling against respondents through positive evidence, which the authorities failed to do---Findings of Appellate authority and Tribunal were based on proper appreciation of facts and correct application of law---High Court declined to interfere in concurrent findings of fact by two forums below---Reference was dismissed, in circumstances.

Kamran Industries v. Collector of Customs PLD 1996 Kar. 68 ref.

Mohsin Imam for Applicant.

Nawab Mirza for Respondent.

Date of hearing: 18th October, 2011.

JUDGMENT

AQEEL AHMED ABBASI, J.---Through instant reference applications the applicant has impugned the order dated 10-11-2010, passed by the learned Member Judicial-II, Customs, Excise and Salestax Appellate Tribunal, Karachi Bench-II, Karachi, in Custom Appeal No.H-947 of 2010 whereby the appeals filed by the applicant against the order-in-appeal bearing Nos.3860 to 3865 of 2010 have been dismissed through combined order. We intend to dispose of the above three reference applications by a common judgment, as similar facts and the legal issues are involved in all the three cases, whereas the questions proposed are also common.

2.Following questions of law are said to have arisen from the order of the Appellate Tribunal:--

(i)Whether Hon'ble Appellate Tribunal has erred in law by giving undue benefit to the party/respondents without taking into consideration the true spirit of section 2(s) of the Customs Act, 1969 and the notification S.R.O.499(I)/2009 whereby the legislature has clearly ordained the adjudication authority to decide the cases under quasi judicial powers by confiscating out-rightly the vehicles used exclusively in the transportation of smuggled goods and that no option to pay fine in lieu of confiscation may be given to such vehicles?

(ii)Whether Hon'ble Appellate Tribunal has erred in law by overlooking the crucial aspect that the respondent had miserably failed to discharge his mandatory burden of proof in terms of section 187 of the Customs Act, 1969?

(iii)Whether Hon'ble Appellate Tribunal has erred in law by accepting the plea of the respondent and by ignoring the crucial aspect of the case that the documents submitted by the respondent during the adjudication proceedings were entirely fake and forged and were not supportive of his case?

(iv)Whether Hon'ble Appellate Tribunal was justified to hold the Order-in-Original dated 2-4-2010 passed by Deputy Collector as barred by time limitation nearly by 55 days without taking into consideration that the adjudicating authority had obtained extension of two months from the competent authority in terms of section 179(3) of the Customs Act, 1969 and by virtue of which it was valid upto 6-4-2010?

(v)Whether Appellate Tribunal has erred in law by heavily relying upon the judgment of Hon'ble Baluchistan High Court in the case of Collector of Customs Quetta v. Muhammad Younus in which it was held that in view of ruling of superior Courts holding that it is only at the Border of Pakistan that taking outor bringing in the goods would be an offence but more importantly overlooked the Hon'ble Supreme Court of Pakistan's judgment in the case of C.B.R. v. Al-Haj Enterprises and another whereby the Apex Court repelling the observation of Hon'ble High Court of Baluchistan held that "High Court was not supposed to enter into the factual controversy in exercise of itsjurisdictionunderArticle199oftheConstitutionandforthe important reason that no such directions could be issued to the Customs authorities not to intercept the trucks loaded with Oil or smuggled goods except at Custom House Border Chaman."

3.The brief facts of the case as recorded by the Tribunal in the impugned order are that the staff of the Hyderabad Collectorate detained oil tankers bearing registration Nos.TTA-996, TTB-343 and TTC-221 loaded with High Speed Diesel (HSP) suspected to be of Iranian origin. The quantity of HSD loaded on the aforesaid oil tankers was verified as 28500 liters, 28000 liters and 29000 liters respectively. On verification the documents submitted by the respondents were found to be faked. Therefore, the HSD and the aforesaid three oil tankers were seized for violation of the provisions of law as contained in section 2(s) read with sections 16 and 152(2) of the Customs Act, 1969 and further read with section 3(1) of the Import and Export (Control) Act, 1959 punishable under section 156(1) (89) of the Act.

4.Being aggrieved with the order passed by the Adjudicating Officer, the respondents preferred appeal before Collector (Appeals), who set aside the impugned orders and passed order for release of the impugned HSD and return of the three truck/trailers to their rightful owners. This order of the Collector (Appeals) was challenged by the applicant through Customs Appeals Nos.H-947 to H-949 of 2010 filed before the Customs, Excise and Sales Tax Appellate Tribunal Karachi Bench-II, who vide its order dated 10-11-2010 dismissed the appeals. The applicant being aggrieved and dissatisfied with the finding of the Tribunal in the instant cases has filed instant reference application before this Court and has proposed questions of law as mentioned in para-2 hereinabove for opinion of this Court.

5.It is inter alia contended by the learned counsel for the applicant that the Tribunal has erred in law and fact by allowing the appeal, in spite of fact that the applicant could not discharge the onus of proof in terms of section 187 of the Customs Act, 1969. Per learned counsel, when three trucks containing huge quantity of HSD oil were intercepted by the customs authorities on National Highway and queries were made with regard to documents relating to the purchase of the oil contained in the tankers, no plausible explanation was offered whereas fake and forged documents were produced by the respondents. Per learned counsel, since the respondents were carrying the smuggled oil, therefore, confiscation of the trucks under the circumstances was strictly in accordance with law. It has been further contended by the learned counsel that the evidence produced by the applicant, as well as the laboratory test reports, have not been properly examined by the Tribunal, as the same fully connects the respondent with the crime in terms of section 2(s) read with sections 16 and 152(2) of the Customs Act, 1969 punishable under section 156(1)(89) of the Customs Act, 1969.

6.Conversely, learned counsel for the respondent has vehemently opposed the arguments advanced by the learned counsel for the applicant and submitted that the entire case against the respondent is based on mala fides, whereas no evidence as alleged in the show cause notice issued by the customs authorities was committed by the respondent. Per learned counsel, there is concurrent finding in favour of the respondent wherein the Collector (Appeals) as well as the Tribunal after placing reliance on the documents produced, particularly test reports of two Laboratories, held that the seized oil was not foreign origin hence no charge of smuggling is made out against the respondent. It is further contended that in spite of concurrent finding against the applicant, the applicant is not releasing the confiscated trucks to the respondents and the delay in this regard has badly effected the condition of the trucks, which are rusting. Per learned counsel, the respondents being transporters for hire had no direct role in transporting the subject goods even if it was smuggled, since they had no means to know as to whether the goods were of foreign origin. While concluding the arguments learned counsel for the respondent has submitted that the impugned order passed by the Tribunal is based on concurrent finding of fact recorded on the basis of documents available on record hence cannot be agitated by the applicant through instant reference application as the scope of reference is confined only to examine the questions of law arising out of the order of the Tribunal, whereas in the instant case no question of law has arisen, which may be answered by this Court. It has been argued by the learned counsel that instant reference applications be dismissed in limine.

7.Since the learned counsel for the applicant has mainly assailed the finding of the Tribunal with regard to the offence of smuggling and the discharge of burden of proof in terms of section 187 of the Customs Act, 1969 and has not advanced any arguments on other grounds, we would therefore, by consent of the parties, answer the questions Nos.2 and 3 only which read as under:--

(ii)Whether the Appellate Tribunal has erred in law by overlooking the crucial aspect that the respondent had miserably failed to discharge his mandatory burden of proof in terms of section 187 of the Customs Act, 1969?

(iii)Whether the Appellate Tribunal has erred in law by accepting the plea of the respondent and by ignoring the crucial aspect of the case that the documents submitted by the respondent during the adjudication proceedings were entirely fake and forged and were not supportive of his case?

8.We have noted that the impugned order has been passed by the Tribunal in respect of the owners of oil tankers which were confiscated by custom authorities on the allegation of smuggling the HSD oil of foreign origin. Admittedly, these trucks were intercepted by the customs authorities near Bhirya City at National Highway on the basis of spy information and the same were detained for three days for verification. Such detention was converted into seizure and High Speed Diesel along withoil tankers were seized on the charges of violating the provision of section 2(s) read with sections 16 and 157(2) of the Customs Act, 1969 read with section 3(1) of the Import and Export Control Act, 1950 punishable under sections 156(1)(89) and 157(2) of the Customs Act, 1969. The respondent when confronted with the allegations took a plea that the Diesel Oil seized by the customs authorities is of Pakistani origin and not of foreign origin and the same is purchased from Haji Ismail of Al-Makkah Petroleum Service, which is a sales tax registered firm. Sale Certificate, voucher, material gate pass and tank dip chart, issued by Al-Makkah Petroleum Service to Haji Ismail were also produced. On the request of respondents the representative samples of seized Diesel Oil were sent to Hydrocarbon Institute of Pakistan, Karachi for Laboratory test. Accordingly, samples from each tank of seized HSD were drawn in the presence of representative of the department and claimant of HSD Oil. Hydrocarbon Development Institute of Pakistan, Karachi submitted the test report wherein it has been remarked that "samples confirm to Pakistan standard Institute specification number 344: 1977 for HSD, to the extent of tests carried out." However, the Adjudicating Officer was not satisfied with the explanation hence, passed the order-in-original, whereby HSD Oil and tankers were confiscated.

9.It may be noted that while passing the impugned order, the Adjudicating Officer did not bring any evidence on record nor produced any test report from the Laboratory which could substantiate the allegations of smuggling of the HSD oil by the respondents. We are of the view that the impugned order was based on presumptions. It has been held that since the respondents could not discharge their onus in terms of section 187 of the Customs Act, hence the alleged offence of smuggling against respondents was established. An appeal was preferred before the Collector (Appeals) against the order-in-original, who, after hearing both the parties and after perusal of the record and evidence produced, passed order-in-appeal dated 3-6-2010 wherein it has been held that since the report of HDIP Karachi suggested that confiscated oil was of Pakistani origin and not of Irani origin, therefore, the custom department was not authorized to confiscate such oil and the tankers in terms of section 168 of Customs Act, 1969. While reaching to such conclusion the Collector (Appeals)hasplacedrelianceonanidenticalcasewhereintheAppellate Tribunal vide order dated 31-7-2008 passed in a Custom Appeal No.H-116 of 2008 has held that "Though it is the case of the department that the diesel confiscated by the Anti Smuggling Squad was of foreign origin and smuggled one but they have failed to produce even a single document or evidence in support of their contention. On the contrary, the examination report issued by Hydrocarbon Development Institute of Pakistan, Karachi shows that the sample confirmed to be of Pakistan standard with exception of water." Accordingly, order-in-original was set aside with the direction to release the HSD oil and three truck/trailers to their rightful owners.

10.The order of the Collector (Appeals) was assailed by the department before the Customs, Excise and Sales Tax Appellate Tribunal Karachi Bench-II Karachi in Custom Appeals Nos.H-947, 948 and 949 of 2010. The Tribunal, vide consolidated order dated 10-11-2006, after examining the entire evidence, has maintained the order of Collector (Appeals), however, to the extent of releasing the oil tankers to the respondents.

11.It may be noted that in spite of having acknowledged the receipt of letter dated 4-3-2010 issued by Messrs Al-Makkah Petroleum Service, whereby delivery of HSD oil to the respondent was duly confirmed, the Adjudicating Officer has discarded such evidence. Similarly, the evidence produced by the respondent in the shape of sales tax invoice issued by Messrs Al-Makkah Petroleum Service, sales tax return for the relevant tax period, sale through banking channel, source of purchase of HSD oil sold by one Haji Ismail and the issuance of the voucher in respect of HSD oil, were also discarded by the Adjudicating Officer without assigning any cogent reason. Test report dated 17-12-2009 in respect of the seized oil, which confirmed it as "Pakistani standard instead of Irani" has also been discarded and mis-interpreted by the Adjudicating Officer.

12.From perusal of the order-in-appeal and the order passed by the Tribunal, it is seen that both the appellate forums have found the documentary evidence produced by the respondents to be correct and sufficient evidence to discharge the burden of proving the innocence by the respondents whereas order-in-original has been set-aside. It has been held that initiation of the proceedings by the department in the instant case was based merely on suspicion, whereas there was no positive evidence or material available with the custom authorities to establish the charge of smuggling against the respondents. It has been further held that since the respondents have discharged their initial burden by producing certain documents relating to lawful possession of the seized oil as well as by producing the lab report, which has nullified the allegation that the seized HSD oil was of Irani origin, the burden was shifted upon the department to establish the charge of smuggling against the respondents through positive evidence, which the department has failed to do in the instant case. We are of the view that the finding of the Collector (Appeals) and the Tribunal in this regard is based on proper appreciation of facts and correct application of law.

13.Reference in this regard can be made to the case of Kamran Industries v. Collector of Customs PLD 1996 Karachi 68, wherein a Division Bench of this Court, while examining the scope of burden of proof in terms of Section 187 of the Customs Act, has held as follows:--

"23. The next objection raised by the learned counsel for the respondents is that under section 187 of the Customs Act, the burden of proof was on the petitioner rather than upon the Customs Authorities to categorically disprove the allegations of misdeclaration and under-declaration levelled by the Customs Authorities. In this respect Mr. S. Tariq Ali has contended that the rulings relied upon by the petitioner counsel become inapplicable as the law has itself clearly cast the burden upon the petitioner. In order to appreciate this objection it is pertinent to scrutinize the provisions of section 187 which reads as follows:--

'187. Burden of proof as to lawful authority, etc--

When any person is alleged to have committed an offence under this Act and any question arises whether he did any act or was in possession of anything with lawful authority or under a permit, licence or other document prescribed by or under any law for the time being in force the burden of proving that he had such authority, permit, licence or other document shall lie on him.'

It appears to us that section 187 covers two situations which we state as follows:--

(a)when a person is charged with an offence under the Customs Act, the burden of proof is cast upon him to show that he had the lawful authority to commit that act;

(b)when a person is found in possession of any goods the burden of proof is cast upon him to show that he was holding such goods under some lawful authority, permission or licence, etc.

Situation (b) is not in issue in the present case, however, we feel that it provides for an eventuality where a person is found to be in possession of certain goods which fall under a prohibited category or which in an unlawful manner find place in the possession or custody of the accused. In such case the burden is upon the accused to show that he falls under some exemption or exception to hold such goods. This type of eventuality as envisaged and stated in situation (b) above is essentially a statement of the general principle of the law of evidence contained in Article 121 of the Qanun-e-Shahadat that whosoever claims to all under a preferential or exempt or excepted category must show that he fulfils that conditions to fall within that category. This obviously should not be confused with the fectum of possession for which no presumption or burden of proof has been spelt out, in view whereof the possession itself has to be proved independently by the prosecution beyond all reasonable doubt."

It has been further held as under:--

"We feel that it is due to operation of the principles of incidence of burdens of proof vis-a-vis "legal" and "evidential" burdens as discussed above that the process of shifting of burdens become possible. We have already cited the opinion of Adrian Keane and we hold that in order to determine as to which party bears the legal or evidential burden would depend on the terms of the statute, the case-law on the subject as also common sense and equity. In this case we are of the view that in the situation in issue i.e. (a) as discussed in para 23 above, section 187 casts upon the petitioner-accused only the obligation to make out a prima facie case as it is only the evidential burden which is borne upon it. Once the petitioners were to satisfy this evidential burden, the legal burden to bring home the ultimate cases lifted upon the customs authorities."

"24. It is situation (a) as stated above in para. 23 which is directly in issue in this case i.e. whether the burden of proof solely lies upon the petitioner to disprove allegations of misdeclaration and misdescription levelled by the Customs Authorities and whether the Customs Authorities are under no obligation to lead evidence and discharge any onus of proof. This part of section 187 of the Customs Act perhaps appears to be contrary to the general principle of the law of evidence contained in Article 117 of the Qanun-e-Shahadat that whosoever alleges existence of a particular fact must prove the same. There is little doubt that a special law or a particular statute can provide for a distinct regime of rules of evidence than contained in general law. In fact the law goes on as far as providing that the laws of evidence can be altered even by mutual consent and contract. See S.M. Anwar Sethi v. South British Insurance Company Ltd., (PLD 1975 Karachi 458). However, on a closer scrutiny of the provisions of section 187 and the case-law settled by our Courts on the subject it appears that in such a situation it is only the evidential and tactical burden of proof which is cast upon the accused while the legal burden to bring home the allegations remains with the prosecution. Before we dilate upon the concept of the two types of burdens of proof and explain the terms "tactical", "evidential" and "legal" burdens of proof we shall first discuss the case decided by the High Court of Sindh in Barkat Ali v. The State PLD 1973 Karachi 659. In this case the controversy revolved round section 177A of the erstwhile Sea Customs Act, 1878 which catered for a similar situation as has arisen in the present case i.e. the same provided the burden of proof upon the accused to disprove the case of the prosecution that his intentions were not to defraud the exchequer or evade any prohibition or restriction under the Act. Writing for Court Tufail Ali Abdul Rehman, CJ was of the opinion that the said presumption of burden of proof could not be drawn until the explanation of the accused was first taken into consideration. According to the learned Judge the "normal principle" was applicable i.e. that the accused was entitled to a benefit of doubt where he offered a reasonable explanation which was either acceptable or raised a doubt. In such cases the burden then shifted upon the prosecution to establish the case."

14.In view of hereinabove, we would answer the questions Nos.2 and 3 in negative against the applicant. Resultantly, the order of the Tribunal to the extent of release of the tankers to the respondents is maintained. As regards remaining questions proposed by the applicant, we are of the view that the same are questions of fact which have otherwise become redundant in view of our decision on questions Nos.2 and 3 hereinabove. The above reference applications are accordingly dismissed along with listed applications.

M.H./C-10/KReference dismissed.