PORT QASIM AUTHORITY through Secretary VS DIRECTOR GENERAL, INTELLIGENCE AND INVESTIGATION F.B.R.
2014 P T D (Trib.) 709
[Customs Appellate Tribunal]
Before Ch. Niamatullah, Chairman/Member Judicial-I and Ghulam Ahmed, Member (Technical-II)
Messrs PORT QASIM AUTHORITY through Secretary
Versus
DIRECTOR GENERAL, INTELLIGENCE AND INVESTIGATION F.B.R. and 3 others
CustomsAppealNo. K-708 of 2013,decidedon18thSeptember,2013.
(a) Pakistan Merchant Shipping Ordinance (LII of 2001)--- ----S.2(2)---"Charter"---Kinds---Three types of "Charters"---"Bareboat Charter"; "Time Charter" and "Voyage Charter".
(b) Pakistan Merchant Shipping Ordinance (LII of 2001)---
----S.2(2)---Charters: "Bareboat Charter", "Time Charter" and "Voyage Charter"---Distinction---Hiring of a whole ship without the master or crew is a "bare boat (or demise) charter"---Hiring of a services of a ship with master and crew for a period of time usually quite long is a "time charter"---Hiring of the services of a ship or part of a ship for a voyage is a "voyage charter"---Considerations for "bare boat" and "time charter" is "hire" and for a "voyage charter" is freight, much light the bill of lading---"Voyage charter" give the charterer very little control of ship only slightly more than the bill of lading holder, but much less than the "time charter" and very much less than the bare boat charterer.
(c) Customs Act (IV of 1969)---
----Ss. 9, 79 & 82---Pakistan Merchant Shipping Ordinance, (LII of 2001), S.15(c)---Merchants Shipping (Registration of Ships) Rules, 2002, R.2(1)(d)---Ship temporarily imported by Port Authority---Exemption from registry---Non-filing of goods declaration---Effect---Appellant/Port Qasim Authority temporarily imported used tugs along with all machinery and fittings without filing goods declaration within stipulated period---Customs authorities after serving show-cause notice found the appellant guilty of evading taxes and customs duties---Appellant was directed to deposit amount of evaded taxes and customs duties along with penalty through order-in-original---Contention of the appellant was that tug boats were imported on the basis of lease agreement, therefore the same were government property and exempted from customs duty and sales taxes---Validity---Tug boats were obtained on the basis of "bare boat charter" through temporary importation as evident from the invoices prepared by the Shipper favouring the appellant reading as "Tug for two years operation at Port Qasim (Temporary Import)"---Argument of appellant that the tugs were hired on the basis of "time charter" on the basis of clauses incorporated in charter did not render the Tugs as being hired on "time charter" basis as these conditions were suitably amended with the consent of the appellant for keeping entire hold on the Tugs during the period of hiring without any influence of the owner despite contrary to the definition of "time charter"---Appellant had hired the tug boats on the basis of "bare boat charter" not "time charter", therefore liable to pay customs duty and taxes---Appeal was dismissed.
(d) Customs Act (IV of 1969)---
----Ss.9, 79, 80 & 83---Goods permanently or temporarily importedinto Pakistan---Filing of goods declaration for clearance of imported goods---Pre-conditions---Imported goods could not be either taken out of the port, terminal/customs station/airports, etc. without filing of goods declaration, completion of procedure of assessment, payment of leviable customs duty and taxes thereon through the assessment order and thereafter could get issuance of clearance order, likewise filing of goods declaration for exporting goods was mandatory for exporter---Mechanism of filing goods declaration at arrival had been adopted by every country of the world and to be adhered to by the citizen---Even the goods coming from Space/Moon were also not exempted from filing of declaration.
(e) Customs Act (IV of 1969)---
----Ss.2(2), 79, 80, 83, 130 & 131---Imported goods taken out from the premises of port without clearance---Effect---Appellant imported tug boats and operated the same in the port for the entire period of charter and after completion of the period exported tug boats without following the laid down procedure for clearance---Appellant was found guilty of smuggling and directed to deposit leviable customs duty and taxes along with surcharge---Validity---Appellant wilfully and with mala fide intention deceived the laid down procedure for evading leviable customs duty and taxes on the wharfed tug boats and operated the same in the port for the entire period of charter and after completion of the period exported tug boats without following the laid down procedure for clearance---Goods/tug boats taken out of the port premises for any purpose for home consumption including operation in the port for tugging the vessel or for export after expiry of period of charter without completion of procedure given in the Customs Act, 1969 and payment of leviable customs duty and taxes was an act of "smuggling"---Appeal was dismissed.
East and West Steam Ship Co. v. Collector of Customs and others PLD 1976 SC 618 distinguished.
(f) Pakistan Merchant Shipping Ordinance (LII of 2001)---
----S.15(c)---Merchants Shipping (Registration of Ships) Rules, 2002, Rr.2(1)(d) & 7---Customs Act (IV of 1969), Ss.79 & 82---Chartered tug boats---Exemption of customs duty and taxes---Scope---Exemption from customs duty and sales tax were allowed to the tug boatspurchased or bare boat chartered by a Pakistani entity and flying Pakistani flag and to none else---Appellant chartered tug boats on bare boat basis, but failed to get those cleared from the customs and registration from the Marine Mercantile Department---Chartered tug boats in question were not Pakistani entity, unless the same were registered in Pakistan and fly Pakistani flag, the same could not be considered as Pakistanientity---Appellant was not entitled for exemption of customs duty and taxes---Appeal was dismissed.
Agha Faquir Muhammad for Appellant.
Zafar Iqbal Superintendent and Zafar Naqvi (I.O.) for Respondents.
Date of hearing: 8th July, 2013.
ORDER
GHULAM AHMED, MEMBER (TECHNICAL-II).---By this order, we intend to dispose of Customs Appeal No. K-708of2013filed bytheappellant against Order-in-Original No.324 of 2012-2013dated7-5-2013 passed by the Collector of Customs, (Adjudication-I), Karachi.
2.Brief facts of the case are as reported by the Directorate General, Intelligence and Investigation-FBR, Regional office, Karachi, that a credible information was received by them that Messrs Port Qasim Authority, Port Muhammad Bin Qasim, Karachi have temporarily imported three units of used Tugs i.e. SHARIEF PILOT, SHARIEF VERVE, AND SHARIEFALERT along with all machinery and Fittings (HS Code 8904.0000), respectively, against IGM-Index No.KPQI-419-1/ 1-9-2010, KPQI-597-1/11-12-2010 and KPQI-73-1/12-2-2011, from Messrs Global Marine Services, Sharjah, UAE, against Bills of Lading No.02046317412/1-9-2010,12584861943/8-12-2010 and 1/9-2-2011. The said Tugs were required to be cleared from the Customs by filing of proper Goods Declarations against payment of 20% duty/taxes in cash and submission of bank guarantees for remaining 80% amount, under Rule 217 of The Same State Goods Drawback notified vide Chapter XII sub-chapter-A of S.R.O. 450(I)/2001. But Messrs PQA neither filed the Goods Declarations, within stipulated period of fifteen days of arrival of the goods as per Section 79 of the Customs Act, 1969 for their clearance from the Customs nor deposited 20% duty taxes in cash and bank guarantees of remaining 80% amount of leviable duty/taxes. In order to investigate the matter, Messrs Port Qasim Authority, Karachi was required vide Directorate General's letter C.No. Appg-489DCI/Toch/ Tugs/2012/1620 dated 5-9-2012, followed by two reminders of even number dated 17-9-2012 and 4-10-2012 to supply import documents viz-a-viz Tugs Sharief Pilot, Sharief Verve and Sharief Alert but despite repeated requisitions, PQA deliberately avoided to provide the relevant documents causing unnecessary delay in finalization of the investigation. After hectic efforts, the Directorate General procured photo copies of the following documents pertaining the above mentioned three Tugs with the help of the source: PQA's letter No. PQA/Ops/OM/Customs/12, dated 25-9-2012. (i) GD No.KPQI-HC-502/28-7-2011 in respect of Tug "Sharief Pilot". (ii) GD No.KPQI-HC-631/31-8-2011 in respect of Tug "Sharief Verve". (iii) GD No.KPQI-HC-512/28-7-2011 in respect of Tug "Sharief Alert". Upon examining of the above mentioned PQA's letter, it transpired that GDs for clearance of the Tugs from the Customs were filed in July and August, 2011 through clearing agents, Messrs Pakgro Trans (Pvt.) Ltd., (CHAL No. 1295) and the Tugs were also physically examined on 23-9-2011 by the Customs examining staff who endorsed examination reports on the back of relevant Goods Declarations. As per section 79 of the Customs Act, 1969, the Goods Declarations should have been filed within fifteen days of arrival of the Tugs i.e. during September and December, 2010 and February, 2011, besides neither the GDs were got processed nor leviable duty/taxes were deposited by Messrs Port Qasim Authority,Karachiasper'relevantprovisionsofthe Customs Act, 1969. fncic'ence (sic) of leviable duty and taxes on thethree Tugs, valuing Rs.1, 176,624,144 has been worked out as Rs.230,813,786 (CD: Rs.93,178,055, ST: Rs.104,287,504, FED: Rs.2,353,249, IT: Rs.30,994,97S) which are required to be paid in cash (20%), besides default surcharge (to be calculated at the time of payment) are recoverable from Messrs Port Qasim Authority, Karachi and for remaining 80% amount iEl. Rs.360,269,301 (CD:Rs.142,146,774, ST: Rs.80,016,651, FED: Rs.9,412,992, IT: Rs.48,692,884), bank guarantees are required to be submitted by them. Thus, Messrs Port Qasim Authority, Karachi have deliberately evaded duty and taxes by neither depositing government's legitimate revenue to the tune of Rs.230,813,786 in cash (20%) nor submitted Bank Guarantees of the remaining 80% amount i.e. Rs.360,269,3011 on import of above mentioned three Tugs. Hence, Messrs Port Qasim Authority, Karachi have contravened the provisions of sections 16, 26(1)(4), 32(1) and (2), 32A read with sections 79, 80 and 82 of the Customs Act, 1969, punishable under sections 156(1) 9, 12, 14 and 14A ibid, sections 3 and 4 of the Sales Tax Act, 1990, and section 3(1) of the Imports and Exports (Control) Act, 1950, punishable under sections 156(1), (8) (14) (89) of the Customs Act, 1969, and sections 3, 3A, 7, 8 and 19 of the Federal Excise Act, 2005 and sections 33, 34 and 36 of the Sales Tax Act, 1990 and section 148(1) of the Income Tax Ordinance, 2001. In view of the aforesaid report, Show-Cause Notice was issued to Messrs PQA, Karachi for aggregate amount of Rs.591.083 million chargeable as custom duty, Sales Tax, Income Tax and surcharge/default surcharge (to be recalculated at the time of payment) with direction to explain as to why evaded amount should not be recovered from them and why penal action for violation of aforesaid detailed provisions of law may not be taken against them.
3.The Collector of Customs, Adjudication-I, Customs House Karachi, disagreed with the replies of show-cause notice therefore, passed an Order-in-Original No. 324 of 2012-13 dated 7-5-2013, reproduced as under:--
I have heard the both sides at length and examined the record as well Messrs PQA, in their written reply as well as during course of hearings, challenged the issuance of show-cause notice mainly on the ground that three tugs were imported on the basis oflease agreement with Messrs Global Marine Services and as per letter No.7(5)/2008-P&S-II dated 16-4-2013 issued to PQA by Deputy Secretary, Ports and Shipping, Islamabad, they are government property and exempt from custom duty and sales taxes under subsection (c) of section 15 of the Merchant Marine Ordinance, 2001, besides the imported tugs are exempted from customs duty, Sales Tax and Income Tax, respectively, under S.R.O.567(I)/2006 dated 5-6-2006 and S.R.O. 551(I)/2008 dated 11-6-2008. It is evident from the relevant GDs that three Tugs i.e. SHARIEF PILOT, SHARIEF VERVE AND SHARIEF ALERT along with all machinery and Fittings (HS Code 8904.0000), respectively, were temporarily imported by PQA againstIGMIndexNo. KPQI-419-1/1-9-2010,KPQI-597-1/ 11-12-2010 and KPQI-73-1/12-2-2011, under S.R.O. 450(I)/2001 dated 18-6-2001. The said Tugs were required to be cleared from the Customs by filing of proper Goods Declarations against payment of 20% duty/taxes in cash and submission of bank guarantees for remaining 80% amount, under Rule 217 of The Same State Goods Drawback notified vide Chapter XII sub-chapter-A of S.R.O.450(I)/2001, but Messrs PQA did not file the Goods Declarations, within stipulated period of fifteen days of arrival of the goods as per section 79 of the Customs Act, 1969 for their clearance from the Customs. The GDs for clearance of the Tugs from the Customs were filed on 28-7-2011 and 31-8-2011 through clearing agents, Messrs Pakgro Trans (Pvt.) Ltd., (CHAL No. 1295) and the Tugs were also physically examined on 23-9-2011 by the Customs examining staff who endorsed examination reports on the back of relevant Goods Declarations. It establishes that the Goods Declarations were not filed within fifteen days of arrival of the Tugs i.e. during September and December, 2010 and February, 2011, besides neither the GDs were got processed nor leviable duty/taxes were deposited by Messrs Port Qasim Authority, Karachi as per relevant provisions of the Customs Act, 1969. Moreover, three Tugs were brought in use by PQA without completion of GDs/out of charged by customs. The contention of Messrs PQA regarding exemption from duty/taxes under subsection (c) of section 15 of the Merchant Marine Ordinance, 2001 is incorrect. Perusal of two Agreements dated 31-8-2010 and one dated 7-1-2011, signed between Messrs PQA (Employer/Charter) and Messrs Global Marine Services (Contractor/Owners), transpires that three tugs were hired on simple charter basis (not on lease or bareboat charter basis). Hence, section 15(c) of Merchant Shipping Ordinance, 2001 is inapplicable, which is reproduced hereunder:
"15. Exemption from registry. The following ships shall be exempted from registry under this Ordinance, namely:- exempted from registry under this Ordinance, namely:--
(a) .
(b) .;and
(c) Ships belonging to Government of Pakistan except where expressly provided by notification in official Gazette."
Since the simply hired/chartered three tugs have not been purchased but temporarily imported by PQA, the same cannot be termed as Ships belonging to Government of Pakistan. Further, Ministry of Ports and Shipping is not an appropriated to declare or clarify that import duties/taxes leviable on any goods are exempted. On a reference by MCC (PQ), FBR, vide letter C.No. 1(24)Tar-II/92/44124-R dated 5-4-2013, in Para-3 thereof, has clarified that as per section 15(c) of Merchant Shipping Ordinance, 2001, ships belonging to Government of Pakistan only are exempt from registry. Similarly, as per rule 2(1)(d) of Merchants Shipping (Registration of Ships) Rules, 2002, flag State means a State whose flag a ship is entitled to fly. Further, the exemption of customs duty, salestax and income tax, respectively, under S.R.O. 567(I)/2006 dated 5-6-2006 and S.R.O. 551(I)/2008 dated 11-6-2008, was/is available only to bareboat chartered vessels/tugs/boats etc registered with Mercantile Marine Department under Rule 7 Bareboat Registry of the Ships Registration Rules, 2002 read with Merchant Shipping Ordinance, 2001. The language used in all three S.R.Os. is identical which reads as "ships and other floating crafts including tugs, dredgers, surveys vessels and other specialized crafts purchased or bareboat chartered by a Pakistani entity and flying Pakistani flag, qualify for benefits of such exemption upto years 2020. As suc/1 zero rated exemption of duty/taxes was not available to Messrs PQA. Further, on a reference by MCC (PQ), FBR, vide letter C.No. 1(24)Tar-II/92/ 44124-R dated 5-4-2013, in Para-2 thereof, has also clarified that exemption of customs duty under S.R.O. 567(I)/2006 dated 5-6-2006 and sales tax under S.R.O. 551(I)/2008 dated 11-6-2008 is not available on three tugs which were acquired by PQA on the basis of lease agreement with Messrs Global Marine Services. It is clear that until and unless any ship/tug/boat, hired on bareboat charter basis is got registered under Rule 7-Bareboat Registry, after suspension/cancellation of its original registration from the Out State, cannot fly dual flags of two states at one and same time and does not qualify for exemption of duty/taxes under aforesaid S.R.Os. Messrs PQA has failed to produce any documentary evidence with regard to such registration with MMD, hence exemption of duty/taxes under the claimed S.R.Os. is unlawful. As per Rule 7(c)(iv) of the Merchant Shipping (Registration of Ships) Rules, 2002; the master and the crew of the chartered ship etc shall have to be engaged from Pakistan, whic/1 have not been done by Messrs PQA in this case, as they have signed Agreement dated 2-4-2008 with Messrs Smit Terminals Europe BV (owners/contractors) and agreed in writing to pay Euro 20 & Euro 40, respectively, for meat and accommodation per crew member as per S.#. 27 and 28 of EIMCO SUPPLY TIME 2005(PART), which are integral part of the Agreement. This proves that the charter of the Tugs by PQA is not "bareboat charter" as they have not engaged the master and crew from Pakistan. In view of foregoing discussions vis-a-vis contention of Messrs PQA, Karachi, it is established that they have knowingly and willfully tried to evade duty and taxes by claiming inadmissible exemption of duty/taxes under the aforesaid claimed S.R.Os. I, therefore, hold that duty and taxes, demanded vide the Show-Cause Notice are payable along with surcharge/default surcharge under the relevant provisions of Customs Act, 1969, Sales Tax Act, 1990 and Income Tax Ordinance, 2001 which are to be calculated at the time of payment. The demanded amount may be recovered under section 202 of the Customs Act, 1969 read with Rules made thereunder. A penaltyofRs. 10million(rupeestenmilliononly) is also imposed upon Messrs PQA, under clause (14) of section 156(1) of the Customs Act, 1969.
4.The appellant being aggrieved and dissatisfied with the Order-in-Original No.324/2012-13 dated 7-5-2013 passed by the Collector of Customs, Adjudication-I Customs House Karachi, has filed this appeal before this Tribunal on the grounds as under:--
(a)That the impugned order is over and above the mandate/terms of the show-cause notice dated 17-1-2013 in which the appellant was called to show-cause as to why the impugned goods (Tugs) may not be confiscated and penal action warranted under the law may not be taken against them. The very show-cause notice was targeted to the owner of the tugs and not to the appellant who has acquired the services of the three tugs from their registered owners.
(b)That the impugned order is void ab initio, against the principles of natural justice and against Article 10-A of the Constitution of Islamic Republic of Pakistan as much as:-
(a)The impugned order is based on alleged telephonic conversation with Merchant Marine Department and without confronting and giving opportunity to the appellant to give comments on the same.
(b)The respondent No.3 (Adjudicating Authority) has allowed the respondent No.2 to join as a party and recorded their statement/ arguments without informing the appellant and such acts of the Adjudicating Authority did not apply the judicial mind. While holding that the appellant is owner of the tugs and has knowingly and willfully tried to evade duty and taxes by the claiming inadmissible exemption of duty and taxes.
(c)That the Collector (Adjudication-1)failedtoapplyjudicialmind when the Collector (Adjudication-1) held that the Tugs were not bare boat chartered by the appellant, but failed to appreciate that if the Tugs were not chartered on bare boat basis then the appellant has no liability to pay custom duty and other taxes.
(d)That the respondent No.1 failed to appreciate that the said tugs were hired by the appellant on time charter party for assistance and smooth flow of inward and outward movement of ships in the channel of the Port Qasim not imported by the appellant and as such there is no question of imposing import duty on the appellant in respect of the said tugs.
(e)That the respondent No.1 failed to appreciate that the said tugs foreign flag foreign going tugs employed trading were foreign flag vessels engaged for assistance and smooth flow of inward and outward movement of ships in the channel of the Port Qasim and as such they said tugs were not imported for the purpose of levying custom duties/taxes.
(f)That the respondent No.1 failed to appreciate that appellant is not the owner or the buyer or the agent or the principal of the said tugs as such no tax and/or duties and/or penalties can be imposed on the appellant.
(g)That the impugned order is void ab initio as the respondent No.1 failed to give show-cause notice to the owner [respondent No.4 herein] and/or the shipping agent of the said vessel, who were necessary and proper party.
(h)That the respondent No.1 failed to appreciate Clause 21 of the Second Schedule, Part II of the Income Tax Ordinance, 2001 which stated that ships, vessels and all floating crafts including tugs, dredgers, survey vessels and other specialized craft not registered in Pakistan and hired under any charter other than bare-boat charter shall pay tonnage tax of an amount equal to fifteen US cents per tonne of gross registered tonnage per charted voyage provided that such tax shall not exceed one US $ tone of gross registered tonnage per year.
(i)Thattherespondent No.1failedtoappreciatethatsaidtugs were not carried on any cargo vessel but sailed into the territorial waters of Pakistan under section 42 after submitting required documentsundersection43andassuchtherewasno question of goods declaration or bill of lading in respect of said tugs. Thus any bill of ladings or Goods Declarations in respect of said tugs are void ab intio and without any legal value.
(j)That the appellant was not given fair and proper trial as the appellant was not given reasonable opportunity to defend the allegations against them.
(k)That the impugned order is not a speaking order duly supported by reason showing due application of judicial mind to facts and law applicable.
(l)That the appellant is neither the owner of the said tugs, nor the person primary responsible for making Goods Declaration with the Custom nor is the person Incharge of the said tugs; and therefore the appellant is not the principal of the said tugs as defined under section 2(q)(a) and therefore not liable to any custom duty or taxes, Custom Act, 1969.
(m)That the show-cause notice has relied upon Rule 217 of the Drawback (Same State Goods) Rules, which has no application in the case of the three tugs came to PQA jurisdiction for the purpose of providing services to the appellant.
(n)That the penalty has been imposed without appreciation of facts and law, specially when the appellant is not liable to pay custom duties/taxes and therefore, no penalty can be imposed upon the appellant. The GDs were filed by the appellant on the advise/ instructions of the respondents and therefore, the appellant cannot be foisted upon with the penalty.
5.The Intelligence Officer has submitted Cross Objection to the Memo. of Appeal on behalf of the respondent which are reproduced as under:--
(i)Paras I-V relate to respondent No.3, which are incorrect and misleading based on misconception on the part of appellants about facts and law points involved in the instant case.
(ii)Paras VI - XI are incorrect and misleading. Factual position is the appellants hired/chartered three used tugs from Messrs Global Marine Services, Sharjah, UAE which were temporarily imported by them. The agreements between the owners and the appellants are simply CHARTER and NOT BAREBOAT CHARTER as the same do not fulfill the requirements of "Rule 7- Bareboat Charter Registry" of the Merchant Shipping (Registration of Ships) Rules, 2002, as the appellants did not get registered the imported tugs with MMD under Rule ?-Bareboat Registry, after suspension/cancellation of its original registration from the Out State i.e. United Arab Emirates (Annex C1 to C3 of the Appeal), therefore they cannot fly dual flags of two States i.e. UAE and Pakistan at one and same time and does not qualify for exemption of duty/taxes under aforesaid S.R.Os. The appellants have failed to produce any documentary evidence with regardtosuch registration with MMDandonlyproducedphoto copies of MMD's letter No.21 01 - 2102 of 2010-20 dated 26-10-2010, 26-4-2011 and 26-4-2011 (addressed to the shipping agents i.e. Argonaftis (Pvt.) and Seamax Shipping Co. Karachi and not to the appellants) regarding permission to operate three tugs at Port Qasim, which cannot be termed as registration of the tugs as neither their particulars are recorded in "Official Register" as defined in Rule 2(1)(g) of the Registration of Ships Rules, 2002 nor the same fulfill registration required as envisaged in Rules 5 and 7 ibid. Besides as per Rule 7(c)(iv) ibid, the master and the crew of the chartered ship etc., shall have to be engaged from Pakistan, which have been not done by the appellants, as they have signed Agreements with Messrs Smit Terminals Europe BV (owners/contractors)and agreed in writing to pay Euro 20 & Euro 40, respectively, for meal and accommodation per crew member as per S.#. 27 and 28 of BIMCO SUPPLY TIME 2005(PART-I), which are integral part of the Agreement (Annex-81 to 83 of the Appeal). This proves that the charter of three Tugs by the appellants is not "bareboat charter" as they have not engaged the master and crew from Pakistan. "Rule 7-Bareboat Charter Registry" which reproduced hereunder for ready reference".
"7. Bareboat Charter Registry:
(a)A ship on bare boat or demise charter for a period of not less than six months may be registered as a Pakistani ship in the name of persons provided that such persons fall under nay of the description given in rule-3 of these rules subject to following condition, namely: -
(i)The charterer and the operator of the ship shall be a citizen of Pakistan or a body corporate, or a legal entity as allowed to be ship owner, under Ordinance.
(ii)The principal place of business shall be maintained in Pakistan and the chartered vessels shall be operated and controlled from Pakistan.
(iii)The vessel so chartered and subsequently registered under Pakistani flag shall be classed by the classification societies, as approved and recognized by the Federal Government, and shall maintain the class during the continuation currency of registration under Pakistani flag.
(iv)The master and the crew of the ship shall be engaged form Pakistan.
(v)The ship chartered and subsequently registered, shall fly the flag of Pakistan and change the original port of registry to new port of regtstry at the stem of the ship.
(vi)The name of the vessel shall not be changed unless mutually agreed by the owner and the charterer and applied for the same with the consent of the flag state.
(vii)For bareboat charter registration under Pakistani flag, the applicant shall pay registration fees, capacity and presumptive income tax as prescribed by the Federal Government from time to time.
(viii) The charterer and the master of registered vessel under Pakistan flag shall abide by the rules and regulations with regard to safety standards, flag state control, and administration of fiscal nature, issued by the Federal Government from time to time.
(ix)The charterer shall obtain clearance from the flagging out state and the consent of the owner of the ship for registering the vessel under Pakistani flag;
(x)The charterer shall provide all the particulars of mortgages, hypothecations and encumbrances against the vessel intended to be registered under the Pakistani flag; and
(xi)The vessel intended to be registered u I h d (sic) while the vessel is in foreign ports of Pakistan. The registration may be accomplished while the vessel is in foreign ports, however, inspectors may be arranged by the competent authority to witness change of flag and completion of other necessary formalities required for bareboat registration.
(b)The registrar upon receipt of an application form a charterer of the vessel shall obtain the following documents, form the applicant, namely:-
(i)Evidence of qualification to own ship under rule-3,
(ii)Particulars of the vessel, class and nationality;
(iii)Evidence of ownership of the vessel,
(iv)Certificate of suspension of ship registry or, in case of new building, the certificate of name, builders certificate, title deeds or other documents which provide evidence of ownership,
(v)Copy of charter party with riding clauses, showing that charter terms are based on bareboat charter or bareboat charter with purchase option, Particulars of owner such as:-
(1)In case of ship owning by sole proprietor, the name and nationality of the person, name and type of the firm, address of registered business place, with telephones, telexes, facsimile, and e-mail, etc.
(2)In case of ship owing by partnership, the name and nationality of managing partner, other partners, name, address and type of the firm, registered place of business along with particulars of communication media, or
(3)In case of limited company incorporated or corporation; the name and nationality of managing director, other directors, registered principal place of business of the company, name and business place of managers particulars of communication media etc.
(vi)An undertaking or affidavit form owners entitled to sign for the company stating that they have agreed or have no objection to register the vessel by the charterer at their home port for a period as specified in the charter party.
(vii) Consent or administrative order from the administration of the flag state, indicating that vessel's registered rights shall remain suspended for the period, the ship is under the register of the charterer homeport.
(viii) And undertaking from the applicant, stating that the vessel during currency of the register under Pakistan flag shall not fly any other flag except of Pakistan.
(ix)A statement officially issued by the administration of the flag state, showing mortgage deeds, hypothecations and other encumbrances or interests against the vessel intended to be registered.
(x)An undertaking from owners, charterer and operators stating that the registrar shall be informed about the changes of ownership judicial sale of the vessel alterations, conversions, if any, in the ship during the currency of the registration under Pakistan flag, and
(xi)Copies of all statutory and other certificates of the vessel, valid for at least three months, ensuring that the vessel intended to be registered under these rules is seaworthy and classed under the approved classification society.
(b)The registrar may if he considers necessary, demand such other documents to verify the information given by the applicant as may deem fit and appropriate.
(c)Theregistrar,onhisbeingsatisfiedthattherequirementfor temporary registry of a bareboat charter have been substantially complied with, shall issue certificate of registryand inform the flagging out state about the status of theregistry.
(d)The registrar shall ensure that vessels port of registry is properly painted or embossed at the stern of the ship while flying the flag of Pakistan.
(e)The registrar may, if deems necessary and circumstances so arise, make an advance registry of a bareboat chartered vessel where a vessel is due to be delivered from shipyard, or to change hands at a time outside normal working days (during holiday) such advance registry shall be valid for maximum period of one week, thereafter, if not registered properly, shall stand cancelled or revoked automatically.
(f)Pakistani Missions abroad may, if the circumstance so arises, issue provisional registry or provisional certificate of nationality to bareboat chartered vessels upon receipt of instructions from the registrar of ships.
(g)The ship registered under bareboat charter, shall be de-registered at any time on the request of a charterer or upon expiry of the bareboat charter party whichever is earlier, the charterer shall satisfy the competent authority that circumstances so exist which are beyond their control to mature is terms of contract.
(h)The registrar may grant certificate of registry with such restrictions or endorsements as he may think fit.
The competent authority may de-register or suspend the registration of a bareboat chartered vessel, if on receipt of information if it is satisfied that registration of the vessel was based upon incorrect or insufficient information, or if at any time the charterer fails to satisfy the conditions laid down in these rules."
Further, under section 15(c) of Merchant Shipping Ordinance, 2001, Ships belonging to Government of Pakistan except where expressly provided by notification in official Gazette" are exempted from registry under the said Ordinance and the hired and temporarily imported tugs by the appellants cannot be termed as Ships/vessels of Government of Pakistan as the same are not expressly notified in official Gazette.
(iii)Paras XII-XIV relates to respondent No.3 which are incorrect and misleading. Factual position is that after hearing all sides and affording full opportunity to the appellants to substantiate their contention, respondent No.3 has passed just, lawful and speaking order, applying judicial mind and taking into consideration all facts and law points of the instant case.
(iv)Paras XV- XVII are incorrect and misleading. Factual and legal position is the appellants temporarily imported three used tugs from Messrs Global Marine Services, Sharjah, UAE under Rule 217 The Duty Drawback (The Same State Goods) notified vide S.R.O. 450(I)/2001 dated 18-6-2001, claiming the exemption of customs duty and sales tax, respectively, under S.R.O. 567(I)/2006 dated 5-6-2006 and S.R.O. 551(I)/2008 dated 11-6-2008. Rule-217 which is reproduced hereunder:
"217. Where the importer so elects temporary import of construction machinery imported for approved projects in Pakistan, may be allowed subject to the conditions that:--
(a)the importer shall pay, 20% of the duty, taxes and surcharges involved at the time of clearance, and shall also furnish a bank guarantee, for an amount equivalent to 80% of the amount of customs duty, sales tax, surcharges involved, and additional surcharge at the rate of fourteen per cent per annum on the amount of guarantee, and the bank shall guarantee payment of full or part of the said amount and additional surcharge as and when demanded by the Collector of Customs;
(b)in case the construction machinery is required to be retained for a further period, the importer shall, before the completion of each year from the date of importation, pay in cash further 115th of the duty, sales tax, surcharges and the additional surcharge on that amount form the date of guarantee and may get his guarantee reduced accordingly,
(c)on completion of five years from the date of importation or on exportation of the machinery to the satisfaction of the Collector, the guarantee shall be discharged if no amount or additional surcharge remains payable by the party, and
(d)if the goods are not exported to the satisfaction of the Collector, this shall constitute an offence in terms of clauses 10-A and 11 of the Table given below subsection (1) of section 156 of the Customs Act, 1969 (IV of 1969).
Further, the exemption of customs duty and sales tax, respectively, under S.R.O. 567(I)/2006 dated 5-6-2006 and S.R.O. 551(I)/2008 dated 11-6-2008 was/is available only to bareboat chartered vessels/tugs/boats etc registered with Mercantile Marine Department under Rule 7 -Bareboat Registry of the Ships Registration Rules, 2002 read with Merchant Shipping Ordinance, 2001. The language used in the above S.R.Os. is identical which reads as "ships and other floating crafts including tugs, dredgers, surveys vessels and other specialized crafts purchased or bareboat chartered by a Pakistani entity and flying Pakistani flag, qualify for benefits of such exemption upto years 2020. As such zero rated exemption of duty/taxes was not available to the appellants. Further, on a referencebyMCC(PO),FBR,videletter C. No. 1(24)Tar-II/92/44124-R dated 5-4-2013(Annex-I), in Para-2 thereof, has also clarified that clarified that exemption of customs duty under S.R.O. 567(I)/2006 dated 5-6-2006 and sales tax under S.R.O. 551(I)/2008 dated 11-6-2008 is not available on three tugs which were acquired by the appellants on the basis of lease agreement with Messrs Global Marine Services. It is clear that until and unless any ship/tug/boat, hired on bareboat charter basis is not got registered under Rule 7-Bareboat Registry, after suspension/cancellation of its original registration from the Out State, cannot fly dual flags of two states at one and same time and does not qualify for exemption of duty/taxes under aforesaid S.R.Os. The appellants have failed to produce any documentary evidence with regard to such registration with MMD, hence exemption of duty/taxes under the claimed S.R.Os. is not available to them.
6.Rival parties heard and case records perused. Prior to framing issues, it is appropriate to elaborate, the type of charter under the International Maritime and Admiralty law, it contain definition ofthree types of Charter inter alia:
Bareboat (or Demise) Charter:
A bareboat charter (some time called a "Net Charter") is a lease of a ship to a Charterer, who becomes owner ad-hoc (or owner pro-hac-vice or beneficial owner); he point the Master and Crew, pays and control them. Because some National Law require that the Master (and even the Officers) of Ship flying its flag be nationals of that country, the Master and Crew may be appointed by the owner but still be under the control and direction under the Charterer, who pays them their emoluments. In such a case, the charter party is best describe as by"demise".
Time Charter
A time Charter party is a contract for the lease and hire of the services of a ship for a period of time. The Master in the Crew are supplied and paid by the Ship owner, remaining his servant. Bunkers are usually paid for by the time Charterer. The time Charterer has "no right of property in, or to possession of the vessel". Nor is there hire of the ship but only hire of its services, and so there is no real "re-delivery". A time Charter may be for a period of time or for a single voyage.
Voyage Charter
Under this voyage Charter party give more control of the ship and cargo to the ship owner then does a time charter. Usually it is for a single voyage but it may be for more, in which case it is a consecutive "voyage charter party". There are also "Quantity Contracts" often known as "Tonnage Contract", providing for a define quantity of goods to be carried in several voyages, but not necessarily consecutively, during a stipulated period.
Voyage charters may even be "intermittent", but such a contract must very clearly specify when the vessel is to be presented, in order to avoid ambiguity.
A voyage charter party has many of the characteristics of the contract of carriage, since it normally provide for the carriage of a good of a single shipper from one place of his choosing to another. Consequently, single voyage charter party are "treated as contracts for the carriage of the goods", in Rome Convention on the Law applicable to Contractual obligations.
7.To further differentiate the three types of charter it is further added that "the hiring of a whole ship without the master or crew is a bareboat (or demise) charter; the hiring of a services of a ship with master and crew for a period of time usually quite long is a time charter, while the hiring of the services of a ship or part of a ship for a voyage is a voyage charter. The consideration for bareboat and time charter is "hire" and for a voyage charter is "freight", much like the bill of lading. Infact, the voyage charter give the charterer very little control of the ship only slightly more than the bill of lading holder, but much less than the time charterer and very much less than the bareboat charterer.
8.The Tribunal on the basis of the above definition now frame the following issues:--
(i)Whether the appellant entered with the shipper for hiring of the three tug boats on the basis of time charter or otherwise?
(ii)Whether it is mandatory to file good declaration under section 82 of the Customs Act, 1969 after unloading or filing of the goods declaration?
(iii)Whether filing of Goods Declaration for Home Consumption is precondition for obtaining clearance under section 79 of the Customs Act, 1969 for the purpose of assessment under section 80 for levy of duty and taxes and allowing of clearance under section 83 ibid for the goods imported "permanently" or "temporarily"into Pakistan under any condition?
(iv)Whether any goods/article etc. can be exported out of Pakistan without filing goods declaration for export under clause (a) of section 131(I) of the Customs Act, 1969 and assessment under clause (c) ibid and having permission of the appropriate Customs Officer under the provision of section 130 ibid?
(v)Whether benefit of Duty and Sales Tax under Notification No. S.R.O 567(I)/2006 dated 5-6-2006 and S.R.O No. 551(I)/ 2008 dated 11-6-2008 is available to the appellant in the given circumstances of the case?
(vi)Whether the respondent correctly extended the benefit of Rule 217 of Sub-Chapter (1) of Chapter XII of Customs Rules, 2001 meant for "construction machinery" ?
9.That as regard to issue No. (i) upon examination of the contract executed by the appellant with the Global Marine Services Sharjah, UAE dated 31-8-2010 and 7-1-2011 for hiring of 'Tug Boats' namely "Sharief Alert", "Sharief Pilot" and "Sharief Verve", it is observed that "these were chartered for 2 years (+/- 30 days) from the date the boats entered Pakistan Port (Muhammad Bin Qasim)" and through Clauses 27 and 28 it was agreed upon that "the Charterer (PQA) shall pay to the Crew US$ 10 per Man/Meal and US$ 20 Man/Bunk for accommodation during the period of charter". Whereas clause 32 read as "Owner shall be responsible to pay 6% Income Tax only; any other taxes/charges will be the responsibility of the charter. Any increment in Taxes/charges or introduction of new taxes whatsoever after the submission of the bill will be to the account of the charterer". The languages of these Clauses proved without any ambiguity that these Tug Boats were obtained on the basis of Bare Boat Charter through temporary Importation as evident from the invoices prepared by the Shipper and available in the Memo. of Appeal favouring the appellant reading as "Tugs for 2 years operation at Port Qasim (Temporary Import)". The argument of the learned Advocate of the appellant that the tugs were hired on the basis of "Time Charter" on the basis of Clauses 27 and 28 does not render the Tugs as being hired on Time Charter basis as these condition were suitably amended with the consent of the appellant for keeping entire hold on the Tugs during the period of hiring without any influence of the owner despite contrary to the definition of Time Charter. We therefore hold that the Tug Boats hired by the appellant were on the basis of Bare Boat Charter not Time Charter. The issue No. (i) is answered in negative.
10.That as regarding issue No. (ii), section 82 of the Custom Act, 1969 expresses with clarity that in case if any goods not cleared or warehoused or transshipped or exported or removed from the port within 20 days after unloading or filing of goods declaration of their arrival at a Customs Station or within such extended period not exceeding 10 days, an Officer not below rank of Assistant Collector may allow, and such goods may, after the due notice given to the owner if his address could be ascertained or after due notice to the carrier shipping or Custom agent, custodian of the goods as the case may be, if his address could not be ascertained may be sold in auction or taken into custody by Customs and be removed from the Port for Auction under the orders of the Assistant Collector. In the instant case no goods declaration by the appellantwerefileddespitearrivaloftheTugboatson1-9-2010,11-12-2010 and 12-2-2011, which also fall within the ambit of goods as held by Hon'ble Supreme Court of Pakistan in the case of East and West Steam Ship Co v. Collector of Customs and others reported at Judgment PLD 1976 Supreme Court 618, at Port Muhammad Bin Qasim/MCC of Port Muhammad Bin Qasim, docking of the Tug boats on the berths is tantamount to Unloading, failed to file Goods Declaration within the stipulated period or even the extended period instead filed on 28-7-2011 and 31-8-2011 vide GD Nos. KPQI-HC-502, KPQI-HC-512 and KPQI-HC-631 against Tugs "Sharief Pilot", "Sharief Alert" and "Sharief Verve" respectively. Astonishingly no contravention was prepared for the said act for penalizing the appellant under the respective Clauses of the Provision of section 156(1) of the Customs Act, 1969 insteadthe respondent No. 2 served a notice dated 19-1-2011 under section 26 of Customs Act, 1969 for the supply of import documents and through letter dated 1-4-2011 and 28-6-2011 asked the appellant to file good declaration, this was not warranted, that the respondent No. 2 was duty bound to follow the expression of Section 82 ibid in letter and spirit, beside the said act is tantamount to giving a special treatment to the appellant as against the other importers, proceeding against them is invariably carried out in case of delay in filing Goods Declaration or clearance of the goods. This tantamount to discrimination which is barred under Articles 4 and 25 of the Constitution of the Islamic Republic of Pakistan. The High Court of Sindh in its reported judgment 2002 PTD 976 held that "vacating the show-cause notice in one case and taking action against another person in similar situation, is amount to discrimination which is hit by Article 25". In reported judgment 2002 SCMR 312 and 2009 PTD 1507 the Hon'ble Superior Courts"there exist no power to target incidence of tax in such a way that similarly placed person be dealt not only this similarly, but discriminatingly". Whereas, in reported judgment 2005 SCMR 492 the Hon'ble Supreme Court held that "A facility allowed to some one and denied to other is discrimination". The Apex Court further held in reported judgment 2010 SCMR 431 that:--
"Doctrine of equality, as contained in Art. 25 of the constitution, enshrine golden rules of Islam and states that every citizen, no matter how high so ever, must be accorded equal treatment with similarly situated persons---State may classify persons and objects for the purpose of legislation and make laws applicable only to persons or objects withinaclass---In fact all legislations involve some kind of classification whereby some people acquire rights or suffer disabilities whereas others do not---What however, is prohibited under principle of reasonable classification, is legislation favouring some within a class and unduly burdening others---Basic rule for exercise of such discretion and reasonable classification is that all persons laced in similar circumstances must be treated alike and reasonable classification must be based on reasonable grounds in given set of circumstances but the same in any case must not offend spirit of Art. 25 of the Constitution."
The special treatment given to the appellant is against the principles enshrined in Articles 4 and 25 of the Constitution of Pakistan and violates the principle of law settled by the Superior Court in further judgment reported as 1990 SCMR 1072, 1990 SCMR 1059, 1975 SCMR 352, PLD 1995 SC 396, 1998 SCMR 1404, PLD 1997 SC 582, PLD 1997 SC 334 and 1997 SCMR 1874. The issue No. (ii) is answered in affirmative.
11.That as regard to issues Nos. (iii) & (iv), reproduction of sections 79, 80, 83, 130 and 131 is beneficial for determination of these questions:
"Section 79---Declaration and assessment for home consumption or warehousing:---'{(1) The owner of any imported goods shall make entry of such goods for home consumption or warehousing or for any other approved purposes, within fifteen days of the arrival of the goods, by,--
(a)Filing of a true declaration of goods, giving therein complete and correct particulars of such goods, duly supported by commercial invoice, bill of lading or airway bill, packing list or any other documents required for clearance of such goods in such from and manner as the board may prescribe; and.
(b)Assessing and paying his liability of duty, taxes and other charges thereon, in case of a registered user of the Customs computerized System. [Provided that if, in case of used goods, before filing of goods declaration, the owner makes a request to an officer of customs not below the rank of an Additional Collector that the is unable, for want of full information, to make a correct and complete declaration of the goods, then such officer subject to such conditions as he may deem fit, may permit the owner to examine the goods and thereafter make entry of such goods by filing an goods declaration after having assessed and paid his liabilities of duties, taxes and other charges.
Providing further that no goods declaration shall be filed prior to ten days of the expected time of arrival of the vessel.]
(2)if an officer, not below the rank of Additional Collector of Customs, is satisfied that he rate of customs duty is not adversely affected and that there was no intention to defraud, he may, in exceptional circumstances and for reasons to be recorded in writing, permit, substitution of a goods declaration for home consumption for a goods declaration for warehousing or vice versa.
(3)An officer of customs, not below the rank of assistant Collector of Customs, may in case of goods requiring immediate release allow release thereof prior to presentation of a goods declaration subject to such condition and restriction as may be prescribed by the Board.]
"Section 80---Checking of goods declaration by theCustoms.---(1) on the receipt of goods declaration under section 79, an officer of customs shall satisfy himself regarding the correctness of the particulars of imports, including declaration assessment, and in case of the customs computerized system payment of duty, taxes and other charges thereon.
(2)An officer of customs may examine any goods that he may deem necessary at any time after the import of the goods into the country and may requisition relevant documents as and when and in the manner deemed appropriate, during or after release of the goods by customs,
(3)if during the checking of goods declaration, it is found that any statement in such declaration or documents or any information so furnished is not correct in respect of any matter relating to the assessment, the goods shall without prejudice to any other action which may be taken under this Act, be reassessed toduty.
(4)in case of the customs computerized system, goods may be examined only on the basis of computerized selectivity criteria.
(5)the Collector may, however, either condone the examination or defertheexaminationofimportedgoodsorclassofgoodsandcauseittobeperformedatadesignatedplacedashedeemsfit and proper either on the request of the importer or otherwise.
"Section 83----Clearance for home consumption.---(1) when the owner of any goods entered for home consumption and assessed under section 80 or 81 has paid the import duty and other charges, if any, in respect of the same the appropriate officer, if he is satisfied that the import of the goods is not prohibited or in breach of any restriction or conditions applying to the import of such goods, may make an order for the clearance of the same:
Provided that, at customs stations where the customs computerized system is operational the system may clear the goods through system generated clearance documents.
(2)Where the owner fails to pay import duty and other charges within 3[ten] days from the date on which the same has been assessed under sections 80, 80A or 81, he shall be liable to pay surcharge at the rate of [KIBOR] plus three per cent] on import duty and other charges payable on such goods]
Section 130: No goods to be loaded on a conveyance till entry outwards or permission granted.---No goods other than passengers' baggage or mail bags or ballast urgently required for a vessel's safety shall be loaded or water borne to be loaded on a conveyance at a place in a customs station approved for the purpose under clause (b) of section 10 untill an order under section 50 in respect of the conveyance has been given or permission in this behalf in writing has been granted by the appropriate officer.
Section 131 Clearance for exportation.---(I) No goods shall be loaded for exportation until:
(a)The owner any goods to be exported has made a declaration in such form and manner as prescribed by the Board, by filing a goods declaration to Customs containing correct and complete particulars of his goods, and assessed and paid his liability of duty, taxes and other charges, if any,
(b)Theclaimofdutydrawback,ifany,hasbeencalculatedand reflected in the declaration filed for export throughPACCS.
(c)Customs has, on the receipt of goods declaration under clause (a) satisfied itself regarding the correctness of the particulars of export including declaration, assessment and payment of duty and taxes and other charges and verified the admissibility of the duty drawback claimed as specified in clause (b) and
(d)The appropriate officer has permitted passenger's baggage or mailbags,tobeexportednotwithstandingclauses(a), (b)and (c)
(2)If any goods or class of goods imported and lying within the port area are intended to be exported by its owner, the Collector may allow the export subject to the condition as the Board may, from time to time notify:
Provided that the Board may in the case of any customs station or wharf, by notification in the official Gazette, and subject to such restrictions and conditions, if any as it thinks fit, exempt any specified goods or class of goods or any specified person or class of persons, from all or any of the provisions of this section.
Provided further that the Collector, where Customs Computerized System has not been introduced for reasons to be recorded in writing may cause the examination of goods or any class of goods or goods belonging to a particular exporter or class of exporters at a designated place as he deems fit and proper.}
12.It is felt appropriate to elaborate the mechanism of import and export under the regime of "One Customs" through respective Collectorate. In the said system the importer/exporter files online goods declaration with the Collectorate which check the declaration and cross match those with the file manifest by the shipping company and if the declaration is correct, approves goods declaration of import under section 79(1) of the Customs Act, 1969 goods declaration for export under clause (a) of section and 131(1) ibid. In case of any discrepancy or contravention under section 82 of the Customs Act, 1969 PRAL transmit message with the pointation of the discrepancy and contravention of section 82, the clearing agent thereafter remove those discrepancy and retransmit goods declaration for affixation of number. Whereas, in case of section 82, approached the Deputy Collector of the Import Section of the Collectorate for condonation of delay or completion of adjudication proceeding. After obtaining the appropriate order of the adjudicating authority the clearing agent again transmit the goods declaration and in case of imposition of penalty pays that first and submit copy of the duty billwith the import section, which enter the said effect in the system. Consequent to which the clearing agent of the importer obtains the print out of the good declaration containing number of the good declaration and nominated Appraiser for assessment and examiner for examination by the FBR,after logging in FBR and affix on the said print out stamp of his company and so the signature.
13.Thereafter, the official of the clearing agent approach the nominated officer by the FBR posted in the respected group of MCC of Appraisement/PMBQ/Preventive with the print out of the good declaration annexed with respective L/C if available, invoice, B/L etc., who either complete the assessment outrightly under section 80 of the Customs Act, 1969 if he found the declaration and the annexed documents as correct. Whereas, in case of any doubt endorse an examination order on the reverse of original goods declaration and after obtaining approval on that, refer the goods declaration to the shed staff, which after conduction of the examination endorsed the report answering the queries made in the examination order on original and duplicate good declaration and sign that and so by the Principal Appraiser Shed and in rare cases of the respective Assistant/Deputy Collector and re-route the said goods declaration to the group, where the designated Appraiser complete the assessment in case the examination report answer the declaration under section 80 of the Customs Act, 1969 for levy of duty and taxes. In case the examination report is contrary to the declaration, a file is opened for the purpose of ITC or misdeclaration purpose. Upon completion of assessment by the nominated Appraiser on the basis of declaration or on the basis of adjudication order if any, the group calculate the payable duty and taxes and endorsed the said fact on the face of good declaration, the clearing agent of the importer deposit the amount of duty and taxes in National Bank and thereafter approach the Principal Appraiser for obtaining order of the clearance under section 83 of the Customs Act, 1969, in case the Principal Appraiser has not allowed clearance of the goods declaration at the time of assessment. The clearing agent after completion of the said procedure approach the respective Wharf of the Ports and obtain delivery on the basis of delivery order issued by the shipping company.
14.That in regards to the Goods Declaration for export, upon minute and scrupulous study of the provision of section 131 of the Customs Act, 1969, it is clear that the owner of any goods to be exported has to make a declaration in the Goods Declaration for export under clause (a) of subsection (1) of section 131 and transmit that onlineand that declaration should be containing correct and complete particulars of his goods. Like the Goods Declaration for export, the clearing agent obtains print out of the goods declaration and after affixing his company stamp and his signature, approach the respective wharf of MCC of Export and get his good declaration registered for examination. The nominated officer of the customs after conducting physical examination of the goods endorse the examination report in case the goods are in accordance with the declaration and in case the goods are not in accordance with the declaration, open file for preparation of contravention for the issuance of show-cause notice under section 180 of the Customs Act, 1969 by the competent officer empowered under section 179 of the Customs Act, 1969. In the cases where the goods were found as per declaration, the nominated officer while confirming the declaration in the endorsed examination report also completes the assessment of the consignment in terms of clause (c) of section 131 of the Customs Act, 1969 and refer the Goods Declaration to Principal Appraiser with the remarks "shipment may be allowed". The Principal Appraiseruponreceiptofgooddeclarationallows the shipment,onthestrengthofwhichtheSPOofMCCofPreventiveallowsloadingof the consignment on the vessel. Consequent to which the consignmentis loaded on the vessel in terms of section 130 of the Customs Act, 1969.
15.From the above analysis it is abundantly clear that no goods can either be taken out of the port, terminal/customs stations/airports etc. notified under section 9 of the Customs Act, 1969 without filing of Goods declaration under section 79(1) of the Customs Act, 1969 and completion of procedure of assessment under section 80 and payment of leviable duty and taxes thereon through the said assessment order and thereafter issuance of clearance order under section 83 ibid. by the competent Officer of the Customs. likewise for exporting any goods/article it is mandatory for the exporter/person to file Goods Declaration for export under Clause (a) of section 131(1) of the Customs Act, 1969 and completion of remaining procedure in under Section 131 and clearance under section 130 ibid. the plea taken by the appellant advocate that in the case of Tug Boat chartered by the appellant filing of Goods Declaration at the time of arrival of those at the port and for export after completion of period of charter is not warranted under the respective Provisions referred herein above of the Act are not desired is without any substance and based on mis-conception by virtue of the fact that it is in negation of the expression of sections 79(1), 80, 83, 130 and 131 of the Customs Act, 1969. It is not out of place to add here that the said mechanism has been adopted by every country of the continent of the World and to be adhered upon by the citizen and the field formation. Eventhegoodscoming from Space/Moonarealsonotexemptedfrom filing of declaration and to substantiate the said fact reference is made to the voyage of Apollo 11, which landed on the Moon with 11 Crew and collected from there, Moon Rock, Moon Dust and other Lunar Sampleforinvestigation/analysis.AftercompletionoftheirjourneythecrewlandeddowninPacificOceanon 24-7-1969andthefirstthing theydiduponreachingtheHonoluluAirportinHawaii,theyfiledcustomsdeclarationforthecollectedsampleforallowofclearance of those, the image of the declaration so filed is pasted here-in-below:--
16.Irrespective of the discussed above factual and legal position, the learned Advocate of the appellant has relied uponthe order of the Hon'ble Supreme Court of Pakistan in the case of East and West Steam Ship Co v. Collector of Customs and others reported at Judgment PLD 1976 Supreme Court 618, wherein it was heldthat "It was debated in the High Court that what will happen to foreign ships which carry goods and persons to a Customs-port in Pakistan. The answer is very simple. It is not 'imported' as after discharging goods and persons it leaves the custom port. It is not registered under the Registration of Ships Act, 1841, nor does it fly the national flag." The Bench with utmost respect regret to observe that the learned Advocate has not gone through the preceding and subsequent paras of the order, which controverts the arguments of the learned Advocate of the appellant,instead support the opinion of the Bench. In the said judgment their Lordship of the Larger Bench observed in clear termsthat:--
"Mr A.K. Brohi laid stress on the words 'for home consumption' and for warehousing. It was said that a vessel is not consumed and nor can it be wharfed. But there remains the clause 'or for any other approved purpose'. When a sea-going vessel is imported it is for the approved purpose of carrying goods and persons from port to port. Assuming that the last clause did not apply to a vessel, even then a bill of entry can be filed without mentioning that it is for home consumption or for wharfing or for any other purpose. The object of filing of Bill of entry is to furnish necessary particulars so the to furnish necessary importation documents so that the value of the vessel and the custom duty payable on it may be assessed. In case of ordinary goods the owner cannot receive the goods unless he had paid the duty(if any). In the case of vessel it will not be allowed to leave the port or given clearance unless the duty assessed on it is paid.
It was debated in the High Court that what will happen to foreign ships which carry goods and persons to a Customs-port in Pakistan. The answer is very simple. It is not 'imported' as after discharging goods and persons it leaves the custom port. It is not registered under the Registration of Ships Act,1841, nor does it fly the national flag.
The Honourable High Court has relied on a foreign decision in Algoma Central Railway Co. V. the King(1)( wrongly cited as West Lancashire Rural District Council V. The Lancashire & Yorkshire Railway Company) (2). Mr. A.K. Brohi distinguished this judgment on the ground that duty under the Canadian law was payable on the entry of the vessel in the registration the Canadian Law was payable on the entry of the vessel in the registration Book and not in the manner provided for in our Sea Customs Act. This judgment is however relevant on the point that 'ships' are 'goods' and that a ship is imported into a country. At page 481 of the report their Lordships of the Privy council have observed:
"Several difficulties have been suggested. In the first place, it is said that ships are not 'goods'. It is not necessary to refer to or discuss the language of the Canadian Customs Act, because the Customs Tariff, 1897, itself places 'ships in the schedule or lists of 'goods' subject to duty. Secondly it is also argued that ships could not be 'imported' into a country. It is not easy to understand that argument; this ship was brought into Canada. Nothing more can be required to satisfy the word 'Imported'."
Another point urged before the Honourable High Court was that the Sea Customs Act does not lay down the procedure for assessment and collection of customs duty on a vessel. The learned Judges were seemingly impressed by the argument and said: "we would, while upholding the levy of custom duty on the vessels leave the matter of the recovery thereof to the authorities concerned to be made in accordance with the law". We do not agree with the opinion expressed by the learned Judges. Therate of duty is prescribed in the Tariff Act. The appellants are under the sea Customs Act required to file Bill of Entry which will include all necessary particulars for fixing the value of the vessels and assessment of duty therein. This function is to be performed under the Sea Customs Act by the customs authorities and unless the duty is paid they can decline to give port clearance under section 64 of the Sea Customs Act. In the case of default there are other provisions in the Act for recovery of the unpaid duty.
In arriving at the conclusion that the appellant had imported dutiable vessels into Pakistan the learned Judges relied also on the provisions of the Imports and Exports (Control) Act, 1950. Mr A.K. Brohi had a cavil against this line of reasoning. It was contended by the him that the Provisions of another Statue could not be imported into the sea Customs Act for the purpose of determining whether a vessel is imported as a 'goods'. We agree with the learned Counsel but even if no help is derived from the Imports and Exports (Control) Act, it is obvious that the two vessels in question were imported and became dutiable when they first entered the customs port of Karachi.
We according find no merit in any of the contentions raised in support of the appeals and dismiss them with costs.
We therefore hold that taking out of the port premises any goods including Tug Boat (goods) for any purpose for home consumption including operation in the port for tugging the vessel or for export after expiry of period of charter without completion of procedure given in the Act and payment of leviable duty and taxes under the respective Heading of the Customs Tariff is an act of smuggling as defined in Clause (i) of section 2(s) of the Customs Act, 1969. The appellant willfully and with mala fide intention deceived the laid down procedure under sections 79(1), 80, 83, 130 and 131 of the Customs Act, 1969 for evading the leviable duty and taxes on the wharfed tug boats and operated those in the port for the entire period of charter and after completion of the period exported those without following the laid down procedure, rendering its act illegal and an act of smuggling, which it should had avoided as it is an authority established by the Government of Pakistan, Ministry of Communication under Port Qasim Authority Act, 1973. The issues Nos. (iii and iv) are answered in negative.
17.That as regard issue No. (v), it is beneficial to reproduced verbatim of Serial No. 40 of Table 1 Notification No. 567(I)/2006 dated 5-6-2006 and Serial No. 5 of Notification No. S.R.O. 551(I)/2008 dated 11-6-2008.
| 40 | 8901.1000 8901.2000 8901.3000 8901.9000 8902.0000 8904.0000 8905.1000 8905.2000 8905.9000 8906.1000 8906.9000 8907.9000 | Ships and other floating crafts including tugs, dredgers, survey vessels and other specialized crafts purchased or bare boat chartered by a Pakistani entity and flying Pakistani flag. | 0% | The exemption shall be available up to the year 2020, subject to the condition that the ships and crafts are used for the purpose for which they were procured and in case such ships and crafts are used for demolition purposes, full customs duties and other charges applicable to ships and crafts purchased for demolition purposes shall be chargeable. |
| 5 | Ships of gross tonnage less than 15 LDT and all floating crafts including, tugs, dredgers, survey vessels and other specialized crafts purchased or bare boat chartered by a Pakistani entity and flying the Pakistani flag except the ships or crafts which are designated or adapted for use for recreation or pleasure purpose. | Imports and supply, thereof up to the year 2020 subject to the condition that the said ships or crafts are used only for the purpose for which they were procured and in case such ships or crafts are used for demolition purpose within a period of five years of their acquisition sales tax applicable to such ships purchased for demolition purposes shall be charge-able. |
18.Upon going through Serial Nos. 40 and 5 the exemption from Duty and Sales Tax are allowed to the Tugs purchased or bare boat chartered by a Pakistani entity and flying Pakistani flag and to none else. In the instant case the appellant chartered tug boat on bare boat basis, but restrained from getting those cleared from the customs and registration from the Marine Mercantile Department under "Rule 7 - Bare Boat Chartered Registry" of the Merchant Shipping (Registration of Ship) Rules, 2002, rendering these not Pakistan entity. Unless the Chartered tug boat is registered in Pakistan and fly Pakistani flag, those cannot be considered as Pakistani entity. The appellant instead operated those "without registry. The Advocate of the appellant while annexing letter of the Marine Mercantile Department marked as Annexure C1 to C3 at pages 34-43 of the Memo of Appeal has tried to misguide the Bench. Those letter are simply permission of operating in the port of the chartered tug boat as a foreign entity not of Pakistani. The mode and manner for obtaining registry with the Marine Mercantile Department is an importer on the basis of the documents approaches Marine Mercantile Department through an application for provisional registration of the boat subject to final registration after clearance from the Customs Department. The importer after obtaining the provisional registration certificate files good declaration with the Customs under section 79(I) of theCustomsAct,1969 for home consumption.Whichonthestrength of those" documents including provisional registration certificate issued by MMD complete the assessment under section 80 of the CustomsAct,1969 and after payment of leviabledutyandtaxesthereon pass clearance order under section 83 ibid. the importer thereafter approach once again to the Marine Mercantile Department withthecopyofgooddeclarationconfirmingassessment,paymentof duty and taxes and clearance order which accordingly after scrutinizingofthedocumentsissuesfinalregistrationcertificate.Such boats are considered as registered in Pakistan and fly Pakistani flag,forfurtherclarityoftheopinion,theBenchpasteasamplecopiesofprovisionalandfinalregistrationoftugboathere-in-below.
We therefore hold,thatnoexemptionofcustomdutyandsales tax is available under Serial Nos. 40 and 5 of the Notification No.567(I)/2006 dated 5-6-2006 and Notification No. S.R.O. 551(I)/2008 dated 11-6-2008 to the appellant. The issue No. (v) is answered in negative.
19.That as regard issue No (vi), the Rule 217 of Sub-Chapter 1 of Chapter XII of Custom Rules, 2001 is specifically for the purpose of export and for the temporary import of construction machinery imported for approved project in Pakistan. The impugned tug boat cannot be considered as construction machinery by any stretch of imagination and neither these are for any approved project in Pakistan, instead the tug boats are for towing the ships and towing means to draw or pull along behind, whereas construction means the process, the arrangement and building. Rendering the boats excluded from Rule 217 ibid. therefore extending benefit of payment of duty in cash @ 20% and balance 80% through bank guarantee by the respondents is without any lawful authority as the same is nullity in the provision of Rule 217 ibid., and the appellant is liable to pay full duty in cash. The issue no (vi) is answered in negative.
20.In view of the foregoing the appeal is dismissed being without any substance in factual and legal aspect.
JJK/187/Tax(Trib.)Appeal dismissed.