R.M. GULISTAN ENGINEERING AND CONSTRUCTORS (PVT.) LTD. VS COLLECTOR OF CUSTOMS (APPEALS), 2014 PTD-CUSTOMS-APPELLATE-TRIBUNAL-KARACHI 76 (2013)

2014 P T D (Trib.) 76

[Customs Appellate Tribunal, Karachi]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Ghulam Ahmed, Member (Technical-II)

R.M. GULISTAN ENGINEERING AND CONSTRUCTORS (PVT.) LTD. through Chief Executive

Versus

COLLECTOR OF CUSTOMS (APPEALS) and another

Customs Appeal No.K-230 of 2013, decided on 19/09/2013.

(a) Words and phrases---

----"Plant"---Definition.

Collector of Customs (Appraisement) Karachi and others v. Fauji Fertilizer Co. Ltd. PLD 2005 SC 577 rel.

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

----S.32----"plant" and "other appliances"---What includes---Plant in combination with other appliances in the business effectuated and perpetuated the trade commerce in question---Induction or introduction of plant should be deemed to be such that they were placed in a position for service or use in the business---Catalyst, Epoxy Grout, especiality paints, dump trucks, fiber cans, roving bobbins, drawings, designs charts, pre-fabricated building structures, PVC Conduit pipes, Housing Electrical Wiring, etc. imported either for initial installation, balancing, modernization, replacement or expansion were either equipment or a part of the plant.

DG. Khan Cement Company Ltd. v. Deputy Collector of Customs, Appraisement, Group-VII, Custom House, Karachi 2003 PTD 986; Aisha Steel Mills Ltd. v. Federation of Pakistan and others 2011 PTD 569; Moro Textile Mills Ltd. v. Central Board of Revenue 2007 PTD 60 and Scientific Engineering House (Pvt.) Ltd., v. Commission of Income Tax AIR 1986 SC 388 fol.

(c) Words and phrases---

----"Equipment"---Definition.

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

----S. 32---General Clauses Act (X of 1897), S.24-A---Recovery of short levied customs duties---Non-speaking adjudication orders---Natural justice, principles of---Scope---Appellant was charged for mis-declaration---Contention of the appellant was that impugned order, in-original was illegal as the same was non-speaking and did not address all the issues put forth by him---Validity---Impugned order by the Adjudication Officer suffered from want of application of mind to the various submissions made before them at length by appellant---Respondent was not enjoined to fully dilate upon the legal and factual issues raised and agitated before him by the appellant, therefore impugned orders so issued by adjudicating authorities had not considered as "speaking orders"---Sketchy, slip-shod and unreasoned judicial order was not sustainable under law---Judicial order must be a "speaking order" reflecting the application of judicial mind by court to issues and point of controversy involved in the case.

2005 PTD 2566; PLD 1959 SC 272; PLD 1970 SC 158, 173; 1994 SCMR 1014 and 2009 SCMR 1407 rel.

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

----Ss. 32 (3) & 32(3A)---Recovery of short levied customs duties---Time barred show-cause notice---Scope---Show-cause notice was issued after an expiry of three years from the date of clearance of consignments---Time prescribed for re-opening of case on the basis of scrutiny of the record of tax-payers on the basis of post clearance audit was three years---Show-cause notice issued beyond the period of limitation as stipulated in the relevant statute was time-barred---Inordinate delay in issuing show-cause notice could not be ignored and factum of delay being a mandatory requirement of law had to be strictly implemented which otherwise make the demand without jurisdiction being issued beyondtheperiodoflimitation---Orderspassedonthebasisoftime barred show-cause notice were set aside---Appeal was allowed.

2009 SCMR 1126; 2002 MLD 180; 2003 PTD 1354; 2003 PTD 1797; 2008 PTD 578; 2009 PTD 762; 2009 PTD (Trib.) 107; (2010) 109 Taxation 221; 2011 PTD (Trib) 79; 2011 PTD (Trib) 987; 2011 PTD (Trib) 1010; 2011 PTD (Trib) 146; PTCL 2012 CL 47; Collector of Customs (Preventive) Karachi v. (sic) 2011 SCMR 1279; Federation of Pakistan v. Messrs Ibrahim Textile Mills (Pvt.) Ltd., 1992 SCMR 1898; 2011 PTD 2220 andMessrs Cargilll Pakistan Seeds (Pvt.) Ltd. v. Customs, Excise and Sales Tax Appellate Tribunal Lahore 2004 PTD 26 rel.

(f) Interpretation of statutes---

----Amendment in statute---Scope---Amendment in any statute, notification or an executive order would be deemed to take effect prospectively and not retrospectively.

2005 SCMR 492; PLD 2001 SC 340 and 1984 PTD 216 rel.

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

----S. 32---Mis-declaration---Show-cause notice---Pre-requisites---Short assessed duty, recovery of---Scope---Before issuing show-cause notice on account of mis-declaration, the customs authorities were bound to determine mens rea---Show-cause notice could not be issued without proving any guilty intention, knowledge, mens-rea on the part of maker of statement---In the present case, element of mens rea was not visible and guilty intention was not proved, therefore provisions of S.32 of Customs Act, 1969 could not be invoked.

Omalsons Corporation v. The Deputy Collector of Customs (Adjudication) Karachi 2002 PTD (Trib.) 3053; Moon International v. Collector of Customs (Appraisement) Lahore 2001 PTD 2097 = 2001 SCMR 1376; Union Sport Playing Card Co. v. Collector 2002 YLR 2651; Al-Hamd Edible Oil Ltd. v. Collector 2003 PTD 552; A.R. Hosiery v. Collector of Customs (Export) 2004 PTD 2977; Ibrahim Textile Mills Ltd. v. F.O.P. PLD 1989 Lah. 47; Central Board of Revenue v. Jalil Sheep Co. 1987 SCMR 630; State Cement Corporation v. G.O.P.C.A. 43 of 1999 and Cargil Pakistan Seeds (Pvt.) v. Tribunal 2004 PTD 26 rel.

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

----Ss. 32(2) & 32(3A)---Mis-declaration---Show-cause notice---Pre-requisites---Short assessed duty, recovery of---Requirements of law to be adhered to by the Authority issuing show-cause notice---Scope---Defective show-cause notice---Effect---Contention of the appellant importer was that respondent customs authorities invoked two different penal provisions of law simultaneously as stated in the show-cause notice---Both the penal provisions of law were separate and required different implications, therefore the show-cause notice was defective consequently the order-in-original passed on the basis of the same was also illegal---Validity---Where show-cause notice was defective, all subsequent proceedings would be void including the appellate orders---Respondent had invoked two different penal provisions of law simultaneously in the show-cause notice, which reflected a stereo-type and mechanically worded approach without due application of judicial mind---Both the penal provisions of law were separately defined having different implications of law and circumstances---Respondents were required to invoke only relevant provision of law applicable to the facts and merits of the case in the show-cause notice, which in the present case to the contrary had vitiated the whole proceedings---Authority issuing a show-cause notice had required to make out a case in the show-cause notice itself as to under which provision of Act, the case had followed---Respondent was under obligation to incorporate the grounds and reasons in the show-cause notice very clearly and explicitly---Impugned orders followed by defective show-cause notice were set aside---Appeal was allowed.

Messrs Kamran Industries v. Collector of Customs PLD 1996 Kar. 68 and DG Khan Cement Co. Lahore v. Collector of Customs, Sales and Central Excise Multan 2003 PTD 1797 rel.

Mansab Ali Amir and 3 others's case PLD 1971 SC 124 ref.

(i) Administration of justice---

----If the statute enacts that certain action shall be taken in a certain manner and in no other manner, such requirement was absolute and non-compliance will invalidate the whole.

Messrs Khyber Electric Lamp MFG Company Ltd.'s case 2001 SCMR 838; PLD 1995 Kar. 687; PLD 1975 SC 331; PLD 1971 SC 197 and PLD 1973 SC 236 rel.

(j) Jurisdiction---

----Question of jurisdiction in forum is always considered to be very important and no order passed by a Court or a forum having no jurisdiction, even it is found to be correct on merits, is not sustainable---Jurisdiction of a Court lays down a foundation stone and no sooner the question of jurisdiction is determined in negative, whole edifice of such defective proceedings is bound to crumble down---If the mandatory condition of exercising of jurisdiction by a Court, Tribunal or Authority is not fulfilled then the entire proceedings become illegal and suffer from want of jurisdiction---Any order passed in continuation of such proceedings equally suffers from want of jurisdiction.

Khyber Tractors (Pvt.) Ltd.v. Government of Pakistan PLD 2005 SC 842 rel.

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

----Ss. 32, 79, & 223---Incorrect classification of PCT heading in goods declaration---Charge of mis-declaration---Show-cause notice---Scope---Appellant imported a consignment and while submitting goods declaration, classified the goods in PCT heading, which was not attracted to subject goods---Customs authorities charged the appellant for mis-declaration and directed the payment of short levied customs duty along with penalty---Contention of the appellant was that he filed goods declaration in good faith and correctly provided all the relevant details required for clearance of such goods---Details provided by appellantwerenot false, therefore appellantcouldnotbeproceededon account of mis-declaration, merely for invoking incorrect PCT heading---Validity---Determination of appropriate PCT heading or an incorrect claim to PCT heading would not constitute an advertant, intentional and deliberate act of mis-declaration---Tax payer had declared all other material particulars correctly in all commercial and customs documents including the goods declaration and such incorrect claim to PCT was always construed to be in good faith---Incorrect claim to PCT heading whether under self automation clearance system or otherwise would not constitute an act of mis-declaration---Importer had declared all the material particulars viz description, value, quantity or weight, origin, etc. in commercial and customs documents including goods declaration presented to customs authorities---Appellant could not be charged for mis-declaration, in circumstances---Impugned order in original and appellate order were set aside---Appeal was allowed.

Collector of Customs Karachi v. Messrs Power Electronic Pakistan (Pvt.) Ltd. Lahore 2011 PTD 2837 rel.

Muhammad Arif Moton and Muhammad Adnan Moton for Appellants.

Ghulam Yasin P.A. for Respondent.

ORDER

MUHAMMAD NADEEM QURESHI, MEMBER (JUDICIAL-I).--We intend to dispose of the instant appeal filed by MessrsR.M Gulistan Engineering and Constructors (Pvt.) Ltd., against the Order-in-Appeal No.7001 of 2012 dated 23-1-2013 passed by the Collector of Customs (Appeals) Karachi, against the Order-in-Original No. 110 of 2012 dated 29-5-2012 passed by the Additional Collector Model Customs Collectorate of PaCCS, Customs House, Karachi.

2.Brief facts of the case as stated in the impugned order are that the Directorate of Post Clearance Audit (PCA), Lahore reported vide Contravention Report C. No. (Case No. 2/2011) PCA/LHR/Audit-C/148/2011/667 dated 25-11-2011, that in order to check the application of value determined by the Director General of Customs Valuation Karachi, vide Valuation Ruling N.S.No.25-A-29 dated 21-5-2007, Directorate of Post Clearance Audit, Lahore conducted audit of PaCCS data of import clearances of "Seamless Pipe/Tubes classified under HS Code 7304. It was observed that the appellants got assessed/cleared their goods under the above said H.S. Code at lower customs value than the value determined by the Director General Valuation Karachi under section 25A of the Customs Act, 1969. Therefore, an audit observation was issued to the respondents advising therein to deposit the short paid amount of duty and taxes, vide C.No.PCA/NLHR/C/44/15/2010/1439 dated 12-8-2010, in term of Para 1 (iii) (c) of CGO 03 of 2009, dated 13-6-2009. The appellants vide letter bearing reference No.RMG/ PCA/2010/980 dated 18-9-2010, appellants that they had imported "Ductile Cast Iron Pipes" which were correctly classifiable under H.S. Code 7303.0000 and not Seamless Steel Pipes or Iron Steel Pipes (H.S. Code 7304). They also provided copies of import documents. The reply of the appellants was examined in the light of documents provided by the respondents. It emerged that while valuation ruling No.25-A-29 dated 21-5-2007 was not applicable to their imported goods, however, exemption of Customs duty and Sales Tax under S.R.O. 575(I)/2006 dated 5-6-2006 was claimed and extended to their imported goods unlawfully, which caused huge loss to the national exchequer. Accordingly revised Audit observation No. 2 was issued to the appellants vide C.No.PCA/LHRIC/48/2010/1984 dated 3-11-2010, in which they were intimated that they had wrongly got cleared/assessed their imported goods i.e. Ductile Cast Iron Pipes, under PCT heading 7304.3900, attracting lower rate of Customs duty instead of appropriate PCT heading 7308.0000, and also Availed exemption of Customs duty, and Sales Tax against Serial No. 6 of the S.R.O. 575(I)/2006, dated 5-6-2006 unlawfully by treating their goods as machinery and equipment, despite fact that their goods do not fall within the ambit of machinery and equipment. The appellants vide their faxed letter dated 9-12-2010 and subsequently vide letter No.EMG/AC/PCN2011/1611 dated 31-1-2011 requested for the withdrawal of audit observation on the following grounds:---

(i)To avail the S.R.O. 575(I)/2006 dated 5-6-2006, under Serial No.6 as machinery and equipment for initial installation, balancing, modernization, replacement or extension of Desalination Plant, Coal Firing System, Gas processing plants, they imported Ductile Cast Iron pipes and fittings classifiable under H.S Code 7303.0000 and not Seamless Steel Pipes Tubes falling under H. S. Code 7304.2900.

(ii)The S.R.O. states in the preamble that import of machinery, equipment and other capital goods imported as PLANT for setting up of new industrial unit, provided the imports are made against valid contract (s) or L/C (s).

(iii)The same S.R.O. under the heading explanation further clarifies that Capital goods mean any plant, machinery, equipment, spares and accessories, classified under Chapters 84 and 85 or any other chapter of the Pakistan Customs Tariff, required for,- Manufacturer or production of any goods are entitled for the benefits as envisaged under S.R.O. 575(I)/06.

(v)In the case of Desalination plant, various types of pipes and fittings are the essential components accessories to set up any plant related to Oil, Gas or any other liquid without the use of pipes is simply inconceivable to set up any such plant.

(vi)An attempt to exclude pipes/ fittings from the scope of S.R.O. 575(I)/06 will be total negation of the policy of the legislature as envisaged in the S.R.O.

(vii)The importers also objected on the jurisdiction of PCA, Lahore. The contentions of the respondents viz a viz documents submitted by them were examined which led to conclude as under;

(I)They have imported four consignments consisting of Ductile cast iron pipes and fittings from China bearing CRN Nos. (i) I-HC-198818; dated 27-2-2007, (ii) I-HC-242380 dated 16-4-2007, (iii) I-HC-437769 dated 1-11-2007 and (iv) I-HC-605886 dated 10-4-2008.

(II)Despite the fact that the goods were classifiable under HS.7303.0000 and the same H.S. Code was duly mentioned on the import documents but they wrongly claimed assessment under HS.7304.

(III)GD No. 198818 dated 27-2-2007 Benefit of S.R.O. 575(I)/2006 dated 5-6-2006 Sr. Nos.24 and 26 granted wrongly on itemNos. 1-5 of the GD only while benefit on the rest of the item of GD was not granted.

(IV)GD No.242380 dated 16-4-2007

Ductile cast iron pipe appearing at Sr. Nos.1, 15 and 28 of the GD assessed under HS code 7304.3900 @ 15% CD instead of HS code 7303.0000 attracting CD @ 20%. Benefit of S.R.O. 575 (l)/2006 dated 5-6-2006 Sr. No.6 extended wrongly on item Nos. 1-26

(V)GD No. 437768 dated 1-11-2007

Benefit of S.R.O. 575(I)/2006 dated 5-6-2006 Sr.No.6 and Sr.No.1(J) was granted wrongly on item Nos.1 and 2 of the GD respectively only.

(VI)GD No. 605886 dated 10-4-2008

Ductile cast iron pipes were assessed under HS code 7304.3900 CD @ 15% instead of HS code 7303.0000 CD @ 20%. Benefit of S.R.O.575(I)/2006 dated 5-6-2006 Sr.No.6 was ended wrongly. Freight Charges amounting to Rs.6,930,565 were not included in the customs value which should have been added as per section 25(2) of the Customs Act, 1969.

The appellants were then requested to deposit the short paid amount of duty and taxes. Finally Syed Hafeez Ahmed, appeared on the behalf of appellants and reiterated the following arguments in their defense:--

(a)That the Directorate is not authorized to raise audit observation in respect of transactions effected from Karachi.

(b)That the goods consisting mainly pipes and fittings were correctly granted benefit of Sr. No.(6) to S.R.O. 575(I)/06 dated 5-6-2006.

(c)That their earlier replies on the issue may also be considered while disposing of the matter.

Whereasintermofpara. l(iii) (c) of C.G.O.3 of 2009dated13-6-2009 the Director General PCA, Islamabad is authorized to assign any audit to any Directorate and in this case special authorization was granted to conduct audit of the appellants by the DG, PCA to Director PCA, Lahore vide order dated 6-10-2010. It is evident that the appellants with the active connivance of appraisement staff of MCC, PaCCS, Customs House, Karachi, knowingly and deliberately had got assessed/ cleared their imported goods i.e. Ductile Cast iron pipes and fittings classifiable under PCT heading 7303.0000, against PCT heading 7304.3900 at lower rate of Customs duty along with inadmissible benefit of Serial No.1 (J) and 6 of S.R.O.575(I)/2006 dated 5-6-2006, despite the fact that the impugned goods do not fall within the ambit of machinery and equipment; and even freight charges were also not included in the Customs value for assessment of duty and taxes. Thus the appellants willfully, intentionally and knowingly evaded duty and taxes to the tune of Rs.2, 33, 35,392, (Customs duty Rs. 10417619, Sales Tax Rs.11531519, and Income Tax Rs. 1316948, Federal excise duty Rs. 69306), by contravening the relevant provisions of law.

3.The Adjudication Officer held that the charges against the appellant had been established. The operative part of the impugned order as under:--

"I have examined record of the case, written replies of the respondents, and comments of the Department. It has been alleged that the respondents imported "Ductile Cast Iron Pipes" got assessed/cleared these under PCT Heading 7304.3900, and availed exemption of Customs Duty and Sales Tax against Serial No. 1(J) and 6 of Notification No. S.R.O. 575(I)/2006,dated5-6-2006 by treating the impugned goods as machinery and equipment whereas, the impugned good squarely fall under PCT Heading 7303.0000 and exemption of Customs Duty and Sales Tax is not leviable. The respondents have denied the allegation. The contended that the subject case, being past and closed transactions cannot be subject of roving inquiry by the department. The departmental representative argued that the case has been instituted on the basis of misdeclaration of description, value and quantity of the impugned goods by the respondents. The respondents were required to file true/correct declaration under section 79(1) which they failed. The impugned goods were undervalued and Valuation Ruling was not applied. The arguments of the departmental representative has standing in the eyes of law. Scrutiny of case record indicates that the respondents availed inadmissible benefit of S.R.O.575(I)/2006 dated 6-6-2006 on the basis declaring impugned goods under HS Code 7304.3700, whereas, the impugned goods are appropriately classifiable under HS Code 7303.0000. The charge, therefore, stands established. Accordingly, the demand of Rs. 2,33,35,392, (Customs duty Rs. 1,04,17,619, Sales Tax, Rs. 1,15,31,519 and Income Tax Rs. 13,16,948 , Federal Excise duty Rs. 69,306), is in order and the respondents are ordered to pay the same along with default surcharge payable under the provision of the Sales Tax Act, 1990. Further, a penalty of Rs. 100,000 is also imposed on the respondents under clause 14 of section 156(1) of the Customs Act, 1969."

4.Dis-satisfied with the Order-in-Original the appellant filed an appeal before the Collector (Appeals), Karachi, who vide Order-in-Appeal hold the order of the adjudicating officer and rejected the said appeal.

5.Being aggrieved and dis-satisfied with the impugned orders the appellant filed the instant appeal before this Tribunal on the grounds incorporated in the Memo. of Appeal.

6.On the date of hearing Mr. Muhammad Arif Moton along with Mr. Muhammad Adnan Moton, Advocates, appeared on behalf of the appellant while Mr. Ghulam Yasin, P.A, appeared on behalf of the respondents. Mr. Muhammad Arif Moton, Advocate On the date of hearing Mr. Muhammad Arif Moton, learned Counsel for the appellant reiterated the ground of the appeal, specifically placed and emphasized on the following points:--

(i) The subject imported goods are Ductile Cast Iron Pipes and Fittings classified under H.S Code 7303.0000. The appellants correctly declared their description as Ductile Cast Iron Pipes in all the Commercial Import Documents including Letter of Credit, Bill of Lading, Commercial Invoice, Packing List and Goods Declarations submitted to Respondent Collectorate at the time of clearance of goods. No misdeclaration whatsoever was committed by the appellants with reference to "Material Particulars" that is Description, Quantity, Origin, Value etc. Only PCT Heading 7304.2900 meant for Seamless Steel Pipes was inadvertently claimed in respect of the subject Ductile Cast Iron Pipes classifiable under PCT Heading 7303.0000 due to both commodities having a similar generic description of Pipes. The subject clearance though being under automated clearance system still does not attract mischief of misdeclaration within the ambit of section 32(1)(2) of the Customs Act, 1969 as contended by respondents throughout earlier proceedings before forums below since in this case Show-Cause Notice dated 29-12-2011 has beenissuedonthebasisofContraventionReportdated25-11-2011 issued by Appraiser Directorate of Post Clearance Audit Lahore on the basis of Audit of the appellants and where specific section 32(3A) of the Customs Act, 1969 is solely applicable in conjunction with section 32(1) ibid for purpose of issuance of Show-Cause Notice. As such the Show-Cause Notice dated 29-12-2011 in terms of the relevant section 32(3A) of the Customs Act, 1969 is hopelessly time barred being issued beyond the stipulated period of three years. Reliance is placed on the judgment of the Honourable Supreme Court of Pakistan in the case of Collector of Customs(Preventive), Karachi v. Messrs Pakistan State Oil reported as 2011 PTD 2220 "wherein the Honourable Supreme Court has observed that such an Ordinate Delay could not be ignored where a specific period had been provided under section 32(3) of the Customs Act, 1969".

(b)Reliance is also placed upon the judgment of the Honourable Supreme Court of Pakistan in the case of Messrs Dewan Cement Limited v. Collector of Customs and Sales Tax and another reported as 2009 SCMR 1126 wherein their lordships have observed:

"There is nothing on record to demonstrate any such misdeclaration, false information or collusion. In the circumstances, we are very clear in our mind that indeed the levy of the duty in question was by reason of misconstruction of law, which squarely brings the case within the ambit of Rule 10(1) of the Rules in which even the show-cause notices are time barred. Since we have reached that the same are time-barred, hence we do not feel the necessity of discussing the merits of the case. Consequently, these petitions are converted into appeals and allowed. The impugned judgments passed by the learned High Court as well as by the forums below are set aside and the show-cause notices are vacated."

(c)Reliance is placed upon the judgment of the Honourable High Court of Sindh at Karachi in Special Customs Reference Application No.466 of 2011 dated 20-12-2012 in the case of Messrs Sarwar International and Messrs Telecard Limited v. Additional Collector of Customs MCC, Preventive, AFU and others held in Para 11 of the order which is reproduced below:-

"However, since admittedly, the show-cause notice has been issued after a lapse of about four years i.e. beyond the period of limitation of three years as provided under subsection (3) of section 32 of the Customs Act, the said provisions could not be invoked in the case of present applicant. We are of the view that the show-cause notice issued by the respondent in the instant case falls within subsection (3) of section 32 of the Customs Act, 1969. The notice has been issued after a period of more than four years and as such the show-cause notice is barred by limitation. The said notice is held to be void and of subsequent proceedings in pursuance thereto are also held to be void and without any legal authority".

(ii)The subject Show-Cause Notice dated 29-10-2011 is defective being issued simultaneously under sections 32(2) and 32(3A) of the Customs Act,1969. Where Show-Cause Notice is defective all the subsequent proceedings culminating therefrom also becomes defective, unlawful , corium non judice and hence ab intio null and void. Reliance is placed in the case of Messrs Kamran Industries v. Collector of Customs reported as PLD 1996 Karachi 68 where under the Honourable High Court of Sindh at Karachi has held that :-

"Where show-cause notice is defective all subsequent proceedings will be void including the appellate orders. Therefore, show-cause notices should not be issued mechanically, but should exhibit a proper application of mind by the issuing authority."

(iii)The Director Post Clearance Audit Lahore had no jurisdiction to conduct Audit for clearances of imported consignments of the appellants pertaining to Model Customs Collectorate of PACCS Custom House, Karachi in terms of Para 1 clause (iii) (a) of C.G.O III of 2009 dated 13-6-2009 since under the aforesaid C.G.O prior special authorization needed to be procured from Director General PCA Islamabad in the first place. In this case the Audit observation was issued by Deputy Director Post Clearance Audit Lahore on 12-8-2010 whereas the special authorization was issued by the Director General Post Clearance Audit on 16-10-2012 much after the issuance of the Audit Observation. This fact has been incorporated in the Para 3 of the Show-Cause Notice dated 29-12-2011 issued by the Respondent Collectorate. Hence, all the proceedings conducted by the office of Director Post Clearance Audit Lahore are without jurisdiction, corium non judice and hence ab initio null and void.

(iv)First Audit Observation was issued by Deputy Director Post Clearance Audit Lahore on 12-8-2010 in respect of under valuation and the second Audit Observation dated 3-11-2010on thebasisofwhichthesubjectcontraventionreportdated25-11-2011 is based was issued on 3-11-2010. This tantamount to conducting a roving and fishing inquiry with an object of procuring some objectionable material against the appellant and which vitiates all proceedings based on such inquiry in terms of theJudgment of the Honourable Supreme Court of Pakistan in the case of Assistant Director Intelligence and Investigation v. Messrs B.R. Herman PLD 1992 SC 485.

(v)In this case the goods were assessed to duty and taxes and out of charged within the meaning of sections 80 and 83 of the Customs Act, 1969. The Assessment stood finalized. The case since initiated by Director Post Clearance Audit Lahore, only sections 32(3A) of Customs Act, 1969 was applicable for reopening of Assessment on basis of Audit of appellants record for which powers have been given to Director General, Director, Additional Director and Deputy Director or Assistant Director of Directorate General Post Clearance Audit as per Serial Nos. 1, 2, 3 and 4 of S.R.O. 500(I)/2009 dated 13-6-2009. The Collector of Model Customs Collectorate of PACCS Custom House, Karachi was therefore competent to reopen this case on the basis of a contravention report initiated, prepared as well as signed by any of the aforesaid authorized officers of Directorate General Post Clearance Audit in view of the provisions of section 195 of the Customs Act, 1969. Therefore, theofficerwhoissuedthesubject show-cause noticedated29-12-2011 and adjudicate this case did not have jurisdiction to do in as much as he was not empowered under section 195 of the Customs Act, 1969 to reopen the assessment. Only a Collector can reopen assessment made under the above mentioned provisions of law. The above stated legal position has been reiterated by the superior judicial fora a number of times. For example in the case reported as 2009 PTD 246.

(vi)The impugned Order-in-Appeal No. 7001/2012 dated 23-1-2013 is hopelessly time barred being issued after 221 days of the filing of the subject Appeal on 16-6-2012 before respondent No.1 Collector of Customs (Appeals) Karachi. In other words it is time barred by (101) days being issued after a expiry of stipulated limit 120 days from the date of filing of Appeal. The impugned Order in Appeal is therefore without jurisdiction and hence abinitio null and void as per umpteen number of judgments of Honourable Apex Court and Superior Judicial Fora. This contention of the appellant is also supported by the Ratio decidendi settled by the Honourable Supreme Court of Pakistan in Nagina Silk Mills Lyallpur v. The Income Tax Officer and the Income Tax Appellate Tribunal reported as PLD 1963 SC 322.

(vii)The appellants at this juncture may submit that the impugned Order-in-Original No.110 of 2012 dated 29-5-2012 passed by the officer of original jurisdiction is unlawful and illegal in as much as it is a non-speaking order and a sketchy order not addressing all the issues put forth by the appellants before him. In this case a detailed and exhaustive reply illustrating various factual and legal issues with the help of relevant provisions of the statute of Customs and Customs General Orders were placed before respondent No.1. Orders of the quasi judicial authorities and the judgments of the Superior Courts including High Courts and Supreme were submitted before respondent No.1. All these statutes and case-law were not considered by respondent No.1. Therefore, the impugned Order-in-Original No. 110 of 2012 dated 29-5-2012 is a void order in terms of the judgment of the Honourable Lahore High Court in the case of National Bottlers reported as 1994 CLC 2181 wherein it was ruled that orders passed by the authorities were not only laconic and sketchy but there was no application of mind.

(viii) The incorrect claim to PCT even other under self automated customs clearance system is not tantamount to misdeclaration within the ambit of mischief of section 32 of the Customs Act, 1969 if all other particulars including description, value, quantity, origin, etc are correctly declared in all the Commercial Documents viz letter of credit, commercial invoice, packing list, bill of lading etc. At best it could be termed as a difference of opinion since no factual aspect is being concealed in any of the documents presented before the Customs.

(ix)The subject goods consisting mainly of Ductile Cast Iron Pipes imported for cogent desalination plant for Pakistan Defence Officer Housing Authority Karachi by the appellants in terms of Contract Agreements bearing C.A. No.DHA/CA/D&C/54/2006 and C.A. No. DHA/CA/D& C/55/2006 (WS) dated 29-6-2006. The relevant S.R.O. 575(I)/2006 dated 5-6-2006 exempted Plant, Machinery, Equipment and Apparatus including Capital Goods specified in Column (2) of the table appended to the aforesaid S.R.O. from Customs Duty and Sales Tax.The condition regarding the goods being locally manufactured was not applicable to the subject goods since they fall in respect of Serial No.6 of the Table to the aforesaid S.R.O.

7.No cross objections under subsection (4) of the Customs Act, 1969 were submitted by the department. However, Mr. Ghulam Yasin, Principal Appraiser appeared on behalf of the respondents and supported the orders of respondents Nos.1 and 2 as correct in fact and law and stated that the impugned goods are not entitled to the benefit of S.R.O.575(I)/2006 dated 5-6-2006, since the same are not in conformity with the letter and spirit of the notification. In addition the provisions of section 32 of the Customs Act have been correctly invoked by the Department and further referred the Para-7 of the Order-in-Appeal where the verbal and written submissions were considered by the Collector (Appeal) and placed his observation specifically along with the other part of the Order-in-Appeal and retreated the same.

8.After the scrutiny of the record of the case as well as the grounds mentioned in the Memo of Appeal and subsequent oral arguments placed by both the parties before the Tribunal, we prefer to frame the following questions of law for the purpose to arrive at a logical conclusion in the light of legal provisions and case-laws:---

(i)Whether the impugned Order-in-Appeal No. 7001 of 2012 dated 23-1-2013 passed by the Collector is time barred under section 193-A (3) of the Customs Act, 1969 and Order-in-Original No.110 of 2012 is sketchy, non-speaking and passed without addressing the replies of Show-Cause Notice and arguments placed thereon?

(ii)Whether the show-cause notice is time barred, being issued beyond the period of limitation of (3) years as stipulated in section 32(3A) of the Customs Act, 1969 and also defective, void ab initio being issued under section 32(2) simultaneously, under separately defined subsections (2) and (3A) of section 32 of the Customs Act, 1969?

(iii)Whether Audit observation dated 12-8-2010 was beyond jurisdiction of Deputy Director Post Clearance Audit Lahore in terms of clauses (iii) (c) of sub-heading functional /territorial ofCGO 3 of 2009 dated 13-6-2009, since authorization from Director General Post Clearance Audit Islamabad was subsequently accorded on 6-10-2010 as incorporated in Para (3) of the Show-Cause Notice?

(iv)Whether the Contravention report dated 25-11-2011 on the basis of Audit under section 32(1)(2) of the Customs Act, 1969 is defective in material particulars due to non insertion ofrelevant subsection (3A) of section 32 and also without jurisdiction being issued by an unauthorized officer in terms of Serial No. 6 of titleappendedto S.R.O. 500(I)/2009 dated 13-6-2009?

(v)Whether the goods imported i.e. "Ductile Cast Iron Pipes" are admissible for exemption of duty and Sales Tax under S.R.O. 575(I)/2006 dated 5-6-2006 or otherwise caused misdeclaration?

9.Before addressing the above questions, we also prefer to place the definition of "Plant" as incorporated in the judgment of the honorable Supreme Court in the case of Collector of Customs (Appraisement) Karachi and others v. Fauji Fertilizer Co. Ltd. reported as PLD 2005 Supreme Court 577 is reproduced below:-

"Within comparatively recent years the language has been enriched by a new use of the old word 'Plant', and in its newer usage the term means an operating unit, and refers to organized physical equipment which will produce a desired result. When the word is used in this sense with reference to manufacturing, mercantile, or industrial establishments, it has a wider significance than when it is used in its primary sense. As used with reference to manufacturing, mercantile, or industrial establishments, the word 'plant' is defined as meaning the whole machinery and apparatus employed in carrying on a trade or mechanical business; property owned or used in carrying on some trade or business, the fixtures, machinery, tools, apparatus, appliances, etc. necessary to carry on any trade or mechanical business, or any mechanical operation or process; the machinery, apparatus, fixtures, etc., employed in carrying on a trade or a mechanical or other industrial business, as an electric light plant, a fishing plant, etc. the tools, machinery, apparatus, and fixtures as used in a particular business, that which is necessary to the conduct of any trade or mechanical business often including the building business or undertaking a set of machines, tools etc., necessary to conduct a mechanical and grounds, or in case of a railroad, the rolling stock but not including material or product; everything other than supplies and stock in trade necessary and requisite to the carrying on of a business; whether apparatus is used by a businessman for carrying on his business, not his stock in trade which he buys or makes for sale, but all goods and chattels, fixed and movable, live or dead, whichhe keeps for permanent equipment is his business, a workshop or other apparatus complete, as a bicycle plant "

10.If the plant in combination with other appliances in the business effectuates and perpetuates the trade commerce in question, then such induction or introduction of such a plant should be deemed to be such that they are placed in a position for service or use in the business. In the light of what has been mentioned hereinabove, we are of the considered view that Catalyst, Epoxy Grout and Specialty Paints being integral part of the 'Plant and Machinery' shall be exempted from Customs Duty and Sales Tax pursuant to the provisions as contained in S.R.O. 515(I)/89 dated 3-6-1989 and S.R.O. 959(I)/89 dated 23-9-1989 being the relevant S.R.Os".

11.The above definition of plant has also been followed in the case of DG Khan Cement Company Limited v. Deputy Collector of Customs, Appraisement, Group-VII, Custom House, Karachi reported as 2003 PTD 986 and Aisha Steel Mills Ltd. v. Federation of Pakistan and others reported as 2011 PTD 569. In the case of DG Khan Cement the Honourable High Court of Sindh at Karachi has adjudged that the Dump Trucks imported by the appellant fall within the preview of plant and machinery as contemplated in the relevant S.R.O. and discuss the basic purpose and scope of the exemption/concessionary S.R.O. issued by the Federal Government with intention of boosting industrialization, manufacturing business and trade activities and while interpreting such notifications this intention should always be kept in view.

12.In the case of Moro Textile Mills Ltd. v. Central Board of Revenue reported as 2007 PTD 60 it has been observed by the Honourable High Court after examining the meaning of the word "machine" and "machinery" came to the same conclusion that Fiber Cans and Roving bobbins not only fall within the definition of machinery but also are covered under the component parts of machinery. That in the case of Scientific Engineering House (Pvt.) Ltd., v. Commissioner of Income Tax AIR 1986 SC 388 the Indian Supreme Court held that documents received in the shape of drawings, designs, charts, plans, processing data and other literature would constitute books and fall within the definition of the term " plant".That in the case of Aisha Steel Mills Ltd. v. Federation of Pakistan reported as 2011 PTD 569 the Honourable High Court of Sindh referring to the judgments quoted supra held that the prefabricated factory buildings and sheds imported by the petitioner in that case fall within the definition of Plant, Equipment, Machinery and Capital goods and therefore qualify for exemption/ concession prescribed under S.R.O. 575(I)/2006 dated 5-6-2006. The relevant portion from the aforesaid judgment of the Honourable Sindh High Court is reproduced below:--

"From a perusal of the above cases specially from the extract of the judgment in the case of D.G. Khan Cement ( quoted supra) it is seen that the word " plant" even encompasses real estate and includes lands and buildings only subject to the qualification that while ground occupied by a factory or mill, or even that part adjoining a factory and used for office or warehouses, may be treated as part of the plant but a large tract of land many miles from the plant proper which is used for raising raw material for the factory ordinarily will not be considered a part of the plant."

13.From the above discussion about the interpretation of Serial Nos. 21 and 34 of the S.R.O. 575(I)/2006 and the relevant extracts from the judgments relied on by the learned counsel there is no doubt left in our minds that the prefabricated factory buildings and sheds imported by the petitioners fall within the definition of plant, equipment, machinery and capital goods and therefore qualify for exemption/concession prescribed under S.R.O. 575(I)/2006 dated 5-6-2006.

14.Further clarify in the controversy raised it is essential to discuss here the definition of term "Equipment" from the renowned international dictionaries:--

"Equipment: Furnishings, or outfit for the required purposes. Whatever is needed in equipping; the articles comprised in an outfit; equipage."

Dictionary of Taxation and Corporate Laws:

"Equipment: The conduit pipes manufactured by the assessee are meant to be used for holding the cables through which the electricity actually flows. It is thus apparent that the conduit pipes are required, so that the electricity may be properly transmitted through the cables used in it. Viewed in this light it is obvious that the conduit pipes are manufactured by the assessee are to be considered as equipment for the transmission of electricity.

The articles or implements used for a specific purpose or activity (exp. Business operation). Under UCC, equipment includes goods if

(1)the goods are used in or brought for a business enterprise (including farming or a profession) or by a debtor that is a non profit organization or a governmental sub-division or agency, and

(2)the goods are not inventory, farm products, or consumer goods.

S.B. Sarkar's Words and Phrases of Excise and Customs:

"Equipment: Things required in equipping; articles used or required for a particular purpose; apparatus.

(3)One or more assemblies capable of performing a complete function.

A set of tools etc .

Filter bags made in the Sugar Factory by cutting and stitching cloth for fitting as an important part of the filtration equipment were held to be equipment.

[Notification No.217/86-CE-Explanation]

Gwalior Sugar Co v. Collector 1992 (59) ELT 482 (Tribunal)"

15.Now, we will address the Question No.(i), it is an admitted position that the subject Appeal was filed before Collector of Customs (Appeals), Karachi on 16-6-2012. The impugned Order-in-Appeal 7001/2012 was issued on 23-1-2013 that is after an expiry of (221) days from the date of filing of Appeal before Collector of Customs (Appeals) Karachi. Since the limitation period in terms of subsection (3) to section 193-A of the Customs Act, 1969 is (120) days, thus the impugned Order-in-Appeal is clearly time barred. In so many words referred to legal position that once limitation has started to run and had come to end the assesse has acquired vested rights of escapement of assessment by lapse of time. Reliance is also placed on the Judgment of the Honourable Islamabad High Court in the case of MessrsPakistan Ordinance Factories (POF) Wah, Cantt v. Collector of Customs, Sales Tax and Central Excise (Adjudication) Islamabad and others reported as 2012 PTD 1016. The relevant extract is reproduced below:--

"Any provision which brings penal consequences is required to be invoked or exercised within the limit prescribed by the statute itself. This is an admitted fact that impugned order-in-original was passed with a delay of 313 days and no reasonable justification has been shown, on the contrary, it demonstrates that authorities proceed in the matter in a mechanical fashion. It is well settled law, with the mandate of dictums of the apex Court that Government Department cannot be put at higher pedestal, when it comes to limitation. The executive functionaries, quasi and non-quasi judicial forums/tribunals are supposed to follow the mandate of law and perform their duties, exercise their jurisdiction and execute their authority within the period provided by law."

"The exception of un-reasonable delay can be evaded if the statute does not prescribe the time period/limit in which act has to be performed. The honourable Supreme Court through different authoritative pronouncements has held time and again thatinefficiency, slackness, incompetence and inaction on the part of the executive functionaries or persons on the helm of affairs itself is no ground to ignore the command of law of performing any act within the stipulated period, therefore, we answer the question No.1 in negative by holding that Appellate Tribunal was not justified in conforming the Order-in-Original No.2 of 2004 passed by the Collector (Adjudication)".

16.Once limitation period expires the order or assessment becomes time barred is also supported by various judgments of the superior judicial fora reported as 2009 SCMR 1126, 2002 MLD 180, 2003 PTD 1354, 2003 PTD 1797, 2008 PTD 578, 2009 PTD 762, 2009 PTD (Trib.) 107, (2010) 109 Taxation 221, 2011 PTD (Trib) 79, 2011 PTD (Trib) 987, 2011 PTD (Trib) 1010, 2011 PTD (Trib) 146 and PTCL 2012 CL 47. We would also like to observe that the most significant corner stone among the three corner stones of the principles of natural justice is that the adjudicating officer shall pass a speaking order, which is one of the exhilarating principles of the whole concept, around which the principles of natural justice revolve. An order by the adjudicating officer must be based upon, sound, cogent and plausible reasons and he should reflect his true inner process of thought, through introspection. In fact, recorded reasons are the essence of a speaking order. However, we are constrained to be dragged to make an irresistible observation that the impugned order by the Adjudicating Officer suffer from want of application of mind, to the various submissions made before them at length by the appellant. He has not enjoined to fully dilate upon the legal and factual issues raised and agitated before him by the appellant. If such submissions were not dilated upon in accordance with law, the orders so issued by the adjudicating authorities cannot be considered as speaking orders, which is an essential requirement of natural justice. Even otherwise, sketchy, slip-shod and unreasoned judicial order is not sustainable under law. A Judicial order must be a speaking order reflecting the application of judicial mind by court to issues and point of controversy involved in the case as is mandatory under section 24-A of General Clauses Act of 1897. Any non speaking order cannot be called a " quasi Judicial order" within the parameters set up by law as decided by Apex Court in reported cases as 2005 PTD 2566, PLD 1959 SC 272, PLD 1970 SC 158, 173, 1994 SCMR 1014 and 2009 SCMR 1407.As such question No.(i) is answered in the affirmative.

17.As regards question No.(ii) relating to the Show-Cause Notice dated 29-12-2011 being time barred is concerned, it is observed that the subject consignments were cleared vide GD # 198818 dated 27-2-2007, GD# 242380 dated 16-4-2007, GD# 437768 dated 1-11-2007 and GD # 605886 dated 10-4-2008 whereas the subject Show-Cause Notice was issued on 29-12-2011 that is after an expiry of (3) years from the date of the clearance of these consignments. The stipulated time limit mentioned in the relevant subsection (3A)of section 32 of the Customs Act, 1969 in cases reopened on the basis of scrutiny of the record of the tax payers on the basis of post clearance audit is (3) years. Hence, the subject Show-Cause Notice dated 29-12-2011 time barred being issued beyond the period of limitation as stipulated in the relevant statute.In our view, such an inordinate delay cannot be ignored where a specific period of (3) years has been provided under section 32(3A) of the Customs Act, 1969 and the factum of delay being a mandatory requirement of law has to be strictly implemented which otherwise makes the demand without jurisdictionbeingissuedbeyond the period of limitation. Thesub-section (3A) of section 32 of the Customs Act, 1969 prescribe a limitation at the relevant time when the incident occurred of (3) three years. Since the time period of (5) five years is only applicable in cases made out only after the amendment made in the aforesaid subsection in terms of the Finance Act, 2011. The Honourable Supreme Court of Pakistan in cases titled Collector of Customs (Preventive) Karachi v. (sic) (2011 SCMR 1279), Federation of Pakistan v. Messrs Ibrahim Textile Mills (Pvt.), Limited (1992 SCMR 1898 and 2011 PTD 2220) and Messrs Cargill Pakistan Seeds (Pvt.) Limited v. Customs, Excise and Sales Tax Appellate Tribunal Lahore (2004 PTD 26) that a Show-Cause Notice is to be issued within the prescribed period of limitation. Therefore, after the expiry of the same the transaction carried out becomes a past and closed transaction and therefore the amendment made after the expiry of the original period of limitation cannot be applied. Section 24 of General Clauses Act, 1897 stipulates that any amendment in any statute, notification or an executive order would be deemed to take effect prospectively and not retrospectively as held by the Superior Judicial Fora vide judgments reported as 2005 SCMR 492, PLD 2001 SC 340, 1984 PTD 216. Accordingly, the impugned Show-Cause Notice dated 29-12-2011 is held to be barred by limitation. The Show-Cause Notice dated 29-10-2011 being issued under section 32(1) and (2) of the Customs Act, 1969 is defective carries weight since the subject casemade out by the Directorate General Post Clearance Audit squarely falls under section 32 (3A) of the Customs Act, 1969. The insertion of subsections (1) and (2) of section 32 of the Customs Act, 1969 in this case is not relevant where the show-cause notice has been issued after scrutiny of audit of accounts of the taxpayer by any means other than examination of the documents provided by the tax payer at the time the goods were imported. Since it is a case of goods cleared the penal provisions of sections 32(1) and 32(2) cannot be invoked in absence of strong evidence of mens-rea and misdeclaration in description, value, quantity, origin etc. More so section 32 deals in cases where there is established collusion and where action against the delinquent staff/officers has been taken by the department. In other words the charge alleged against the appellant of misdeclaration under sections 32(1), 32(2) and 32(A) is also uncalled for and unwarranted due to the facts and circumstances of the case. So, in order to bring an act, or action within the framework of the words 'false' as used in section 32 of the Act, the act shouldeither be conscious wrong, or culpable negligence and should be untrue either knowingly or negligently. [Omalsons Corporation v. The Deputy Collector of Customs (Adjudication) Karachi 2002 PTD (Trib.) 3053]. Mala fide and mens-rea are necessary ingredients for committing an offence, including that of smuggling. [Moon International v. Collector of Customs (Appraisement) Lahore 2001 PTD 2097 = 2001 SCMR 1376]. There are two questions which need to be addressed before invoking section 32 of the Customs Act, 1969, for misdeclaration (a) whether mens-rea which is essential element for the purpose of subsection (1) of section 32 has been proved and (b) whether a demand for short recovery can be made under the provisions of subsection (2) of section 32, without proving any guilty intention, knowledge, mens-rea on the part of the maker of the statement. If element of mens-rea is not visible and guilty intention is not proved then provisions of section 32 cannot be invoked as held in the reported judgments of Union Sport Playing Card Co v. Collector 2002 YLR 2651, Al-Hamd Edible Oil Limited v. Collector 2003 PTD 552 and A.R. Hosiery v. Collector of Customs (Export) 2004 PTD 2977. This celebrated principle of law in customs jurisprudence that mis-declaration charges under section 32 of the Customs Act, 1969, shall not be invoked has now been well settled in large number of cases, i.e. Ibrahim Textile Mills Ltd. v. F.O.P. PLD 1989 Lahore 47, Central Board of Revenue v.Jalil Sheep Co. 1987 SCMR 630, State Cement Corporation v. G.O.P. C.A.43 of 1999 and Cargill Pakistan Seeds (Pvt.) v. Tribunal 2004 PTD 26. Last but not the least in the case of Messrs Kamran Industries v. Collector of Customs reported as PLD 1996 Karachi 68 where under the Honourable High Court of Sindh at Karachi has held that " Where show-cause notice is defective all subsequent proceedings will be void including the appellate orders. Therefore, show-cause notices should not be issued mechanically, but should exhibit a proper application of mind by the issuing authority."Invoking of two different penal provisions of law mainly sections 32(2) and 32(3A) along with section 32(1) simultaneously in the show-cause notice dated 29-12-2011 in itself reflect a stereo-type and mechanically worded approach with due application of judicial mind since both provisions are separately defined having different implications of law and circumstances. It is settled law that only relevant provision of law applicable to the facts and merits of the case need to be invoked in the show-cause notice which in a case to the contrary vitiates the whole proceedings. The show-cause notice since issued in pursuance of the Audit of the records of the appellants could only have been issued under section 32(1) and section 32(3A) of the Customs Act, 1969. This view has been taken by the Honourable Lahore High Court in the case of DG Khan Cement Co. Lahore v. Collector of Customs, Sales and Central Excise Multan reported as 2003 PTD 1797. The relevant extract is that, "Authority issuing a show-cause notice would have to make out a case in the show-cause notice itself as to under which provision of act, the case followed have to incorporate the grounds and reasons in the show-cause notice very clearly and explicitly so that it could be ascertained that show-cause notice fall under section 36(1) or 36(2) of the Sales Tax Act, 1990. Failure on the part of authority issuing show-cause notice in this behalf would render the same invalid and illegal." As such question No.(ii) is answered in the affirmative.

18.As regards question No.(iii) as to whether the issuance of Audit Observation dated 12-8-2010 including the subsequent proceedings conducted by Director Post Clearance Audit Lahore were without prior authorization from Director General Post Clearance Audit Islamabad and hence without jurisdiction in terms of Customs General Order No. 3 of 2009 dated 13-6-2009. It is observed that this factual position asserted by the appellants is clearly evident from Paras. 1 and 3 of the Show-Cause Notice dated 29-12-2011. The relevant portions being as under:--

"Therefore, an audit observation was issued to the importers advising them to deposit the short paid amount of duty and taxes,videC. No. PCA/NLHR/C/44/ 15/2010/1439dated12-8-2010, in term of Para 1 (iii) (c) of CGO 03 of 2009 dated 13-6-2009."

"Whereasintermpara. 1(iii)(c)ofC.G.O.3of2009 dated 13-6-2009 the Director General PCA, Islamabad is authorized to assign any audit to any Directorate and in this case special authorizationwasgrantedtoconductauditoftheimportersbytheDG, PCA to Director PCA,Lahorevideorderdated6-10-2010."

A plain reading of the above extracts from the Show-Cause Notice dated 29-12-2011 in unequivocal terms shows that authorization from Director General Post Clearance Audit Islamabad was accorded on 6-10-2010 subsequent to the initiation of the Audit Proceedings by the office of Director Post Clearance Audit Lahore which is a blatant violation of the relevant provision of Clause iii (c) of sub-heading functional/ territorial jurisdiction. The relevant extract is as follows:-

(a)In case of the goods imported into or exported from Pakistan and cleared from any of the Customs Collectorate in Karachi, Hyderabad, Gawadar and Quetta the functions of post clearance audit shall be performed by the Director, Post Clearance Audit (South), Karachi.

(b)In case of the goods imported into or exported from Pakistan and cleared from any of the Customs Collectorates in Lahore, Rawalpindi, Multan, Faisalabad, Sialkot (Sambrial) and Peshawar the functions of post clearance audit shall be performed by the Director, Post Clearance audit shall be performed by the Director, Post Clearance Audit (North), Lahore.

(c)The Board or the Director General, Post Clearance Audit, may assign the audit of any importer or exporter or a class of importers or exporters to any Directorate of Post Clearance Audit, as deemed appropriate.

In view of the above the Audit proceedings conducted by the officers of Directorate of Post Clearance Audit Lahore are without jurisdiction and hence null and void ab initio. In case of Mansab Ali Amir and 3 others's case reported as PLD 1971 SC 124, it has been observed by the honourable Supreme Court as:-

"It is an elementary principle of law that if a mandatory condition for the exercise of jurisdiction by a Court, Tribunal or authority is not fulfilled, then the entire proceedings which follow become illegal and suffers from want of jurisdiction. Any order passed in continuation of these proceedings in appeal or revisions equally suffer from illegality and are without jurisdiction."

Originally, the order was passed by Principal Appraiser Custom so the order passed by the said functionaries, can only be reopened by Collector of Customs while exercising the jurisdiction under section 195 of the Customs Act. Learned counsel appearing on behalf of the respondent department submitted that the order passed by Deputy Collector is strictly in accordance with law. The learned counsel, when asked to refer any law or citation in support of their contention, the learned counsel could not cite any provision of law which empowers the Deputy Collector to reopen the matter passed by Principal Appraiser (Customs). The language of section 195 of the Act is sufficient to understand that the Collector Customs can only revise the order, if any illegality or irregularity is committed by Principal Appraiser (Customs) or its subordinate and obviously the order passed by Deputy Collector is without jurisdiction. In these circumstances, the order impugned herein, is declared illegal, unlawful and without lawful authority. The Superior judiciary has always maintained that a thing required by law to be done in a certain manner as prescribed by law is to be done accordingly. Reliance is placed in reported case of MessrsKhyber Electric Lamp MFG Company Ltd.'s case, 2001 SCMR 838 and Messrs Atta Muhammad Qurershi's case PLD 1971 SC 61 which stipulates "If the statute enacts that certain action shall be taken in a certain manner and in no other manner, it has been held that the requirements are absolute and that negate to attend them will invalidate the whole procedure." As such the order passed by the officer of original jurisdiction and subsequent proceedings are without jurisdiction and nullity in the eyes of law as categorically held by superior courts of law in the cases reported as PLD 1995 Kar 687, PLD 1975 SC 331, PLD 1971 SC 197 and PLD 1973 SC 236. As such Question No.(iii) is answered in the affirmative.

19.As regards question No.(iv), a plain reading of the Contravention Report dated 25-11-2011 prepared by the officer of Directorate of Post Clearance Audit Lahore indicates that Column No.7 of its preamble mentions sections 32(1) and (2) of the Customs Act, 1969 under the heading provisions of law contravened. The case has solely been made on the basis of audit conducted by Directorate of Post Clearance Audit Lahore and should have mandatorily included the relevant subsection 32(3A) of the Customs Act, 1969 since the case has been reopened on the basis of Audit of the appellants conducted by Directorate of Post Clearance Audit Lahore. The contravention report is therefore deficient in material particularthat is insertion of relevant section 32(3A) ibid which is not mentioned anywhere in the whole contravention report. As such the Contravention Report is defective and hence null and void and the whole proceedings based upon such a defective Contravention Report are also of no legal value. As the Contravention Report dated 25-11-2011 has not been signed by the authorized officer, it is observed from a plain reading of the relevant S.R.O. 500(I)/2009 dated 13-6-2009 that the officers of the Post Clearance Audit who have been appointed to be the officer of Customs and to exercise the powers and discharge duties of the officers of Customs and who may be assigned the functions of the appropriate officer under section 32are senior officers of the Directorate General Post Clearance Audit appearing at Serial Nos. 1,2, 3 and 4 of the table appended to the aforesaid S.R.O.namely Director General, Director, Additional Director, Deputy Director or Assistant Director. On the contrary in this case the Contravention Report dated 25-11-2011 in terms of section 32 of the Customs Act, 1969 has been initiated and signed by an Appraising Officer who has not been entrusted with legal mandate to institute cases under section 32 of the Customs Act, 1969. The proper exercise of jurisdiction is always derived from a legislative mandate rather it is a sine qua non, a condition precedent. The above position is also supported by Customs General Order No. 13/2002 dated 4th July 2002 regarding Procedure for Assessment/Classification of Plant and Machinery. Para (i) (b) of the aforesaid Customs General Order (CGO) states as under:--

"(b) . It is not unusual in case of project imports to import plant and machinery in unassembled/disassembled form by way of partial shipments from different sources. It is not only incorrect but undesirable to classify individual shipments separately with disregard to intent and purpose of whole machinery. It is therefore advisable that the components of a machinery whether presented together or separately, be classified under one heading appropriate to the machinery unless specifically excluded under Chapter Notes."

The Contravention Report dated 25-11-2011 is defective on the following counts:-

(a)That the relevant section 32(3A) of the Customs Act, 1969 along with section 32(1) ibidhas not been invoked by Directorate of Post Clearance Audit Lahore instead section 32(2) of the Customs Act, 1969 has been invoked therein which makes the Contravention Report dated 25-11-2011 defective being deficient in "material particulars". The insertion of section 32(3A) is a mandatory requirement of the Customs Act, 1969 in the Contravention Report and which makes the Contravention Report dated 25-11-2011 unlawful being without legislative mandate and jurisdiction.

(b)That the Appraising Office Mr. Muhammad Imranof the office of Directorate of Post Clearance Audit Lahore has initiated and signed the subject contravention report dated 25-11-2011 for contravention of provisions of section 32(1)(2) of the Customs Act, 1969 in utter violation of the S.R.O.500 (I)/2009 dated 13-6-2009 since the aforesaid S.R.O.at Serial No.6 of the Table appended to the S.R.O.500(I)/2009 dated 13-6-2009 empowers an Appraiser to exercise the powers and discharge duties of the officers of Customs relating to provisions of the Customs Act, 1969 pertaining to sections 25.26.26A, 26B,91,92, 161,168,169 and 171. The powers to initiate and make out cases under sections 32, 32A and 32B have only been assigned to senior officers appearing in Serial Nos.1 to 4 of the table to the aforesaid S.R.O. As such all the proceedings and actions initiated by adjudicating authorities upon contravention report dated 25-11-2011 given by officer not authorized to do so would becompletely coreum non judice, ab initio and void. Similar would be the outcome of subsequent orders based upon such unlawful adjudication proceedings. This has been held by the Customs, Excise and Sales Tax Appellate Tribunal while deciding cases of Sales Tax in their orders reported as 2009 PTD (Trib.) 2074 and 2009 PTD (Trib.) 500. Reliance is also placed on the judgments of the Superior Judicial Fora reported as PLD 1995 Karachi 587, PLD 1972 SC 271 and PLD 1997 Lahore 1.

In addition to the above, a perusal of the item description of the goods as mentioned in all the Commercial Import Documents including the Goods Declaration that the goods imported being Ductile Cast Iron Pipes were Project specific meant exclusively for use in the project of Pakistan Defence Officers Housing Authority, Karachi and for which a letter dated 24-10-2007 addressed Collector Model Customs Collectorate Custom House, Karachi was also produced along with Pakistan Engineering Council Licence at the time of the subject import. As such the subject goods also being meant for the expansion of the existing cogent Desalination Plant squarely fall within the meaning of Equipment asmentionedatSerialNo. 6ofrelevantS.R.O.575(I)/2006dated5-6-2006. We get the strength from the judgment authored by Mr. Justice Iftikhar Muhammad Chaudhery, in the case Khyber Tractors (Pvt.) Ltd. v. Government of Pakistan published in PLD 2005 SC 482, while observing the issue of jurisdiction. It has been observed that the question of jurisdiction in form is always considered to be very important and no order passed by a court or a forum having no jurisdiction, even if it is found to be correct on merits, is not sustainable. The Jurisdiction of a court lays down a foundation stone for jurisdiction or as quasi judicial functions to exercise its powers/authority and no sooner the question of jurisdiction is determined in negative. The whole edifice of such defective proceedings is bound to crumble down. It is also an elementary principle of law that if the mandatory condition for exercising of jurisdiction by a Court, Tribunal or authority is not fulfill then the entire proceeding are follow become illegal and suffers from want of jurisdiction. Any order passed in continuation of these proceedings in built or revision equally suffers from illegalities and are without jurisdiction. It is one of the mandatory requirement if the statute enacts with certain action shall be taken in certain manner and courts are required to do justice between the parties in accordance with the provisions of law, as the litigant who approach the court for the relief is bound to substitute with the procedure had been adopted by him in accordance with law. As such question No.(iv) is answered in affirmative.

20.As regards question No. (v) as to whether the goods imported i.e. Ductile Cast Iron Pipes are admissible for exemption of date and Sales Tax under S.R.O. 575(I)/2006 or otherwise caused misdeclaration is tantamount to misdeclaration within the ambit of mischief of section 32 of the Customs Act, 1969, a careful study of section 32 in juxtaposition with section 79 ibid is deemed appropriate to interpret and comprehend the matter in its true perspective. The provisions incorporated in clause (a) to subsection (1) of section 79 of the Customs Act, 1969 make it incumbent upon the owner of the goods to file a true declaration of goods, giving therein complete and correct particulars of such goods, duly supported by CommercialInvoice, Bill of Lading or Airway Bill, packing list or any other document required for clearance of such goods in such form and manner as the Board may prescribe. The correct particulars inter alia include the factual material details which are known to the owner of the goods or his agent. Such material particulars mainly consist of description of goods, its transaction value, quantity or weight, origin etc. These particulars being factual and incorporated in various commercial documents are in the knowledge of the owner of the goods. Any misstatement in respect of these particulars would constitute an act of misdeclaration within the ambit of section 32 of the Customs Act, 1969 if the same are submitted knowingly or having reason to believe that such document or statement is false. In this case the appellants has per documents on record have correctly declared the description, value, quantity and origin of the goods to the Customs Authorities. These material particulars since jotted down in all the Commercial Documents if misdeclared by the owner of the goods would attract the mischief of misdeclaration within the ambit of section 32 of the Customs Act,1969. On, the contrary the matter of classification of any particular goods under the most appropriate heading of Pakistan Customs Tariff is more of an academic issue rather being a statement of an incontrovertible fact. It is common knowledge that controversies crop up in respect of PCT Classification of diversified merchandise before Customs Authorities as matter of routine on daily basis. The matter of classification when disputed is referred to Classification Committee, Classification Centre, Federal Board of Revenue Islamabad or even to International Customs Organization. In view of the volatility of determination of appropriate PCT Heading, an incorrect claim to PCT Heading may not constitute an advertent, intentional and deliberate act of misdeclaration when the tax payer has declared all other material particulars correct in all commercial and customs documents including the Goods Declaration and such incorrect claim to PCT is always construed to be in good faith. This view is fortified by the judgment of the (a) Honourable Sindh High Court in the case of Collector of Customs Karachi v. Messrs Power Electronic Pakistan (Pvt.) Ltd., Lahore reported as 2011 PTD 2837. The relevant extract is as under:--

"A comparison of two PCT Headings, which are in dispute, shows 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 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 disallowed then penal action cannot be taken for the lesser payment of taxes due to the claim of such exemption."

(a)Another judgment of the Honourable Sindh High at Karachi in the case of Collector of Customs v. Shaikh Shakeel Ahmed reported as 2011 PTD 495 also supports the aforesaid view. Relevant extract is as under:--

"It is a settled law that in cases where a wrong interpretation of a section is made and tax or duty has been short paid due to misconstruction or misinterpretation of the relevant law in good faith such shortfall cannot be termed as misdeclaration and will thereforenot be liable to levy of penalty."

In view of the above an incorrect claim to PCT Heading whether under self automation clearance system or otherwise may not constitute an act of misdeclaration in terms of section 32 of the Customs Act, 1969 read with section 79 ibid when the importer has declared all the material particulars viz description, value, quantity or weight, origin etc in all Commercial and Customs documents including Goods Declaration presented to the Customs Authorities. The subject "Duetile Cast Iron Pipes" qualify for exemption under concessionary S.R.O. 575(I)/2006 dated 5-6-2006, the Advocate of the appellants in the memo. of the Appeal as well as his verbal arguments put forth before this forum and observations made in above Paras Nos. 9, 10,11,12, 13 and 14 of this order to bring home the arguments of exemption of Customs Duty and Taxes with the help of judgments of the Honourable Apex Court, High Courts and definition of word Plant, Machinery and Equipment from authoritative dictionaries.As per these various judgments Catalyst, Epoxy Grout, especiality paints, dump trucks, fiber cans, roving bobbins, drawings, designs charts, pre-fabricated building structures, PVC Conduit Pipes, Housing Electrical Wiring etc imported either for initial installation, balancing, modernization, replacement or expansion have been adjudged to beeither equipment or a part of the plant. As such question No. (v) is answered accordingly in above terms, in affirmative.

21.To what has been stated/discussed and observed herein above, particularly the interpretation of law and legal preposition discussed in the light of prescribed law and observations made thereon, we hold that, the appellant had been implicated unnecessarily in the case despite not warranted under the invoked provisions of Customs Act, 1969, by the Directorate of Post Clearance Audit (PCA), Lahore and penalized through impugned orders passed during the hierarchy of Customs, as such being suffering from grave legal infirmities are declared to be illegal, null and void and hereby set-aside, after allowing the appeal accordingly.

22.Order passed accordingly with no cost.

JJK/170/Tax(Trib.)Order accordingly.