PAKISTAN STATE OIL COMPANY LIMITED VS COLLECTOR OF CUSTOMS, EXCISE AND SALES TAX, 2012 PTD-SUPREME-COURT 561 (2009)

(On appeal against the judgment dated 20-3-2007 passed by High Court of Sindh at Karachi in Customs Appeals Nos.201 to 206 of 2006).

Customs Act (IV of 1969)---

----Ss.32 & 106---Constitution of Pakistan, Art. 185(3)---Mis-declaration of petroleum products to be duty free provisions and stores under S.106 of Customs Act, 1969---Charging of customs duty etc., from Pakistan Navy on supply of such products by the company---Notice under S.32 of Customs Act, 1969 issued to company for having evaded customs duty on such supply---Validity---Supreme Court granted leave to appeal to consider question whether non-payment of customs duty on such supply was intentional, lawful or same was an innocent act on account of long standing practice whereby oil supply was exempted from payment of customs duty.

Sajid Zahid Advocate Supreme Court and M.S. Khattak Advocate-on-Record for Appellants

Raja Muhammad Iqbal, Advocate Supreme Court for Respondents.

Date of hearing: 29th October, 2009.

ORDER

TASSADUQ HUSSAIN JILLANI, J.---This order shall dispose of Civil Appeals Nos.1965 to 1970 of 2007 as common questions of law and facts are involved.

2.Through these appeals the Pakistan State Oil Company Limited has challenged the judgment of the High Court of Sindh dated 20-3-2007 vide which appellant's appeals were dismissed, inter alia, on the ground that the appellant was guilty of evading the customs duty; that the notices issued by the respondent-Custom Department for the payment of the taxes in question was valid and that the appellant had been charging "the value of petroleum products inclusive of customs duty etc. from Pakistan Navy and making a wilful declaration that the supplies are duty free provisions and stores as admissible under section 106 of the Customs Act, 1969, falls under the mischief prescribed under subsections (1) and (2) of section 32 of the Customs Act."

3.Learned counsel for the appellant submitted that the learned High Court was merely seized of a legal proposition i.e. whether the notices issued to the appellant were time-barred in terms of section 32(2) of the Customs Act and the Court went beyond the context of the cases of which it was seized of in giving findings of fact to the effect that there was a wilful default or that the appellant had been charging taxes from Pakistan Navy. He added that these observations are not supported by any document on record. He lastly submitted that the non-payment of taxes for the period in question (from February 1998 to April, 2000) was a bona fide mistake relatable to incorrect interpretation of section 106 of the Customs Act and when it came to the notice of the appellant, they started paying the taxes and now the only issue is of the arrears relatable to the period referred to above. Learned counsel at the end brought to the notice of this Court that about 76 cases raising similar issues and pertaining to the same period and between the same parties are pending before the concerned Collector of Customs/Adjudicating Officer, Karachi pursuant to the remand order passed by the Customs, Excise and Sales Tax Appellate Tribunal, Karachi dated 17-1-2008 and the said order of remand was never challenged by the respondent-Department. In these circumstances, he lastly in the alternative prayed that these matters may also be remanded to the same Adjudicating Officer to be decided along with the matters of which he is already seized of, of course in the light of the law laid down by this Court.

4.Learned counsel for the respondent-Customs Department submitted that the appellant is guilty of evasion; that it was a wilful default; that the show-cause notices issued to the appellant were valid in law; that they realizing their mistake have started paying the taxes and are not claiming exemption under section 106 of the Customs Act and in view of the clear mandate of law, they are liable to pay the arrears which is the moot point in the instant appeals. He added that the notices issued were not time-barred and this Court in similar circumstances has already decided it in the case reported as Collector of Customs E & S.T. and Sales Tax v. Pakistan State Oil Company Ltd. (2005 SCMR 1636) and petitioner's petitions to seek review of the said judgment were also dismissed in the case reported as Pakistan State Oil Company Ltd. v. Collector of Customs, E&ST (Adjudication-II) and others (2006 SCMR 425).

5.Leave was granted by a Bench of this Court in terms of the order dated 26-12-2007 on the ground as follows:--

"The question which requires determination in this case is whether the notice dated 30-1-2002 issued by respondent No. 1 to the petitioner for non-payment of customs duty on the supply of oil made to Pakistan Navy Ship was intentional, lawful or that the same was an innocent act on account of long standing practices whereby oil supply was exempted from payment of customs duty. It has been submitted on behalf of the petitioner that the omission/failure of the petitioner to pay customs duty was not with the intention to evade or deferred as such it would fall under subsection (3) of section 32 of the Customs Act which at the relevant time provided six months period for issuance of show-cause notice which later on in June, 2002 was increased to three years. According to Mr. Sajid Zahid, Advocate Supreme Courtthe above show-cause notice was patently time barred but the respondent in order to bring it within time wrongly and intentionally made out a case of wilful and intentional default thereby causing grave and serious prejudice to the petitioner."

6.We have heard learned counsel for the parties and have gone through the impugned judgment.

7.On Court query as to on the bases of which document the learned High Court of Sindh in paragraph 12 of the impugned judgment, gave a finding that the appellant had been charging the value of petroleum products inclusive of custom duty from Pakistan Navy and making a wilful declaration that the supplies were duty free, learned counsel for the respondent-Customs Department submitted that the Ministry of Petroleum had fixed two oil prices, one was inclusive of the taxes and the other was without taxes and the appellant had been charging Pakistan Navy the latter price. We would not like to comment on the veracity or otherwise of the afore-referred reply as it relates to a factual aspect and only a Tribunal of plenary jurisdiction seized of the issue can decide the matter in the light of the record made available before it. So far as the question of law is concerned, the same stands decided by this Court in the two judgments to which reference has been made above but the issue mooted before this Court in these appeals cannot be conclusively decided without resolution of the factual controversy and in this context, the request of appellant's learned counsel to remand the cases to the Adjudicating Officer is not without substance particularly when between the same parties and qua the same peirod, more-than 70 matters were remanded by the Custom, Excise and Sales Tax Appellate Tribunal, Karachi vide the order dated 17-1-2008 and those are still pending. The order of remand it seems, attained finality as it was never challenged by the respondent-Department.

8.In the afore-referred circumstances, we are persuaded to allow these appeals, the impugned judgment is set aside, the appellant's appeals shall be deemed to be pending before the Adjudicating Officer who had decided the matter in the earlier round and shall be decided along with the other matters pending before it, within a period of 30 days of parties' appearance before the said Adjudicating Officer/Collector Customs (Preventive). Both the parties are directed to appear before the said Officer on 3-11-2009. It is however, made clear that the Bank guarantees got encashed by the respondent-Department shall not be refunded till the final disposal of the cases pending before the Tribunal to which reference has been made in the preceding paragraph.

S.A.K./P-1/SCOrder accordingly.