MKB ENTERPRISES (PVT.) LIMITED VS FEDERATION OF PAKISTAN through Secretary Revenue Division (F.B.R.), 2014 PTD-KARACHI-HIGH-COURT-SINDH 1159 (2014)

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

----Ss. 32(1), (2), 32A, 79, 80, 156(1), (14), (14A), 168 & 219---Customs Rules, 2001, Rr.300, 305, 307A, 307-E & 307-G---Constitution of Pakistan, Art.199---Constitutional petition---Violation of concession granted under Duty and Tax Remission for Export (DTRE)---Input imported goods stored at station (Karachi) other than of manufacturing one (Peshawar)---Seizure of input goods---Lodging of F.I.R.---Scope---Petitioner/importer was manufacturer of plastic mats and for such manufacturing and export, he was granted various DTRE approvals for acquiring input goods (Polypropylene, polyester yarn and pigment/master batch)---Customs authorities found the importer/ manufacturer (petitioner) involved in the illegal disposal/selling of the imported input goods in local market in violation of DTRE rules---Customs authorities seized the input goods in question stored in a warehouse at a station (Karachi) other than of the station of manufacturing (Peshawar) and lodged F.I.R. against the importer/ manufacturer (petitioner)---Petitioner/manufacturer challenged the validity of actions of Customs authorities---Validity---Consignment imported for exclusive use in manufacturing of export goods, could be kept and stored in a warehouse locally, only as a matter of convenience and not for any other purposes---Importer/manufacturer (petitioner) had failed to satisfy as to why the goods were kept and stored in a local godown for a long period after its clearance---Exporter had been given an extended period of utilization and consumption of input goods with a view to facilitate him to first acquire input goods, then manufacture it, and then export it for foreign exchange earnings, but such facility could not be allowed to be used as a tool, not to utilize and or consume the input goods timely---Importer/manufacturer (petitioner) was required to show its bona fide by having intimated the Regulatory Collector regarding such storage of goods at Karachi (other station) though temporarily---Any grant of exemption or deferment of payment of duty and taxes was an incentive based on relationship of mutual trust and such trust must not be betrayed---Although, the importer/manufacturer (petitioner), under the rules was not required to give any information to the Regulatory Collector, but it was obligatory upon him to inform the Regulatory Collector regarding storage of goods and the indirect transportation of the input goods to the manufacturing premises---F.I.R. transpired that godown keeper had given incriminating evidence against the petitioner/importer, whereby the storage and local disposal of the goods in question had been disclosed to the investigating agency---Conduct of the petitioner was also not in accordance with the normal procedure in vogue, which a normal manufacturing concern was needed to evolve---Goods imported and acquired for consumption at Peshawar had been stored at warehouse in Karachi, for a much longer period than expected normally---Petitioner had failed to controvert the statements and the record provided by the warehouse keeper to Customs authorities regarding storage as well as sale of the goods in question---Constitutional petition was dismissed.

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

----Ss. 32 (1), (2), 32A, 79, 80, 156(1), (14), (14A), 168 & 219---Customs Rules, 2001, Rr.300, 305, 307A, 307-E & 307-G---S.R.O. 886(I)/2012 dated 18-7-2012---Constitution of Pakistan, Art.199---Constitutional petition---Violation of concession granted under Duty and Tax Remission for Export (DTRE)---Input imported goods were seized/confiscated and F.I.R. was lodged by the Customs intelligence officials instead of Regulatory Collector---Effect---Contention of the petitioner/manufacturer was that under the DTRE scheme Regulatory Collector was the only lawful authority to initiate any action, therefore the impugned actions were coram non judice---Validity---Rule 307-A of DTRE Rules had provided concession to exporters and independent provisions of R. 307-E of DTRE Rules had also been incorporated to take care of a situation wherein such concession was misused---DTRE Rules had not overriding effect entirely to the exclusion of the Customs Act, 1969, including the specific provisions for recovery of duty and taxes---Merely the fact that DTRE Rules had been provided that the Regulatory Collector would conduct audit and monitor the conduct of the person to whom a DTRE concession was accorded, would not mean to confer, even the jurisdiction of adjudication which otherwise in case of any alleged misuse of the DTRE concession happened or taken place in the territorial jurisdiction of any Collectorate other than the Regulatory Collector was being regulated independently under S.R.O. 886(I)/2012 dated 18-7-2012---Rule 307-E (4) of DTRE Rules had also been provided that any violation of the provisions by a DTRE user, should be reported to the adjudication officer of competent jurisdiction, therefore, even under the DTRE Rules, the Regulatory Collector could not assume the role of an adjudicating officer by itself, and had to refer the same to an adjudicating authority in terms of the S.R.O. 886(I)/2012 dated 18-7-2012---Goods in question were cleared from the Collectorarte at Karachi, were stored in a private godown at the same station, therefore the Customs officials at Karachi would have jurisdiction to see that as to whether the goods being sold in the market were infact goods which ought to have been stored in Peshawar, and whether, the goods being sold were actually duty paid goods or not---Action initiated by the Customs officials was within their jurisdiction---Constitutional petition was dismissed.

(c) Interpretation of statutes---

----Rules must yield to the Act and not vice versa.

Zain A. Jatoi for Appellant.

S. Mohsin Imam Wasti D.A.G. for Respondent No.1.

Kashif Nazeer for Respondents Nos. 2 and 3.

Date hearing: 28th January 2014.

ORDER

MUHAMMAD JUNAID GHAFFAR, J.---Through instant petition the petitioner has sought the following prayers:--

"(a)Declare that F.I.R. dated 22-4-2013 is patently illegal and unlawful having been lodged without jurisdiction and to pass an order for quashment of the same;

(b)Declare that the action of the third and the second respondents of seizing the petitioner's 375.25 Metric Tons (15,010 bags) of Polypropylene from a private Godown is illegal and to direct them to release the same forthwith;

(c)Declare any/all action(s) against the petitioner that may be or may have been taken by the respondents consequent upon the F.I.R. viz. issuance of seizure and contravention reports, blocking of the petitioner's NTN/User-ID; to be as patently illegal and unlawful being without jurisdiction;

(d)Restrain the respondents from taking any/all action(s) against the petitioner including issuance of seizure and contravention reports, blocking of the petitioner's NTN/User-ID; and impeding the clearance of the petitioner's import/export consignments;

(e)Grant any other/further/better/alternate relief this honorable Court deems fit and proper in the circumstances of the petition; and

(f)Award costs of the proceedings to the petitioner."

2.Briefly, the facts of the instant petition are that the petitioner is engaged in the manufacturing of plastic mats and has been granted duty and tax remission approvals ("DTRE") for the import of Polypropylene, Polyester Yarn and Pigment/Master Batch as input goods which have been allowed to be imported without payment of duties and taxes by the Model Customs Collectorate of Peshawar. Precisely, three DTRE approvals dated 13-10-2010, 13-2-2012 and 8-1-2013 for various quantities of the above mentioned input goods have been issued in favour of the petitioner. It is stated that the petitioner has been importing and acquiring input goods since long, and in the past, after manufacturing and export of goods, the Model Customs Collectorate of Peshawar has discharged various security instruments submitted at the time of obtaining the DTRE approvals vide letters dated 10-8-2011, 7-9-2012 and 5-4-2013. Through instant petition the petitioner is aggrieved by the actions of respondents Nos. 2 and 3 whereby after seizure of 375.25 Metric Tons (151010 bags) of Polypropylene, F.I.R. bearing No. Appg-533/DCI/WeBOC/F.I.R./2013 dated 22-4-2013 has been registered, in which it has been alleged that the petitioner is involved in the illegaldisposal of the imported input goods namely Polypropylene in violation oftheDTRERulesbetweentheperiod starting from 4-10-2012to16-4-2013 and it has been further alleged that out of 885 Metric Tons (35,400 bags), the petitioner has illegally disposed of 509.75 Metric Tons (20390 bags) and the remaining 375.25 Metric Tons (15010 bags) have been seized on the basis of the said F.I.R. wherein violations of sections 32(1) & (2), 32A, 79, 80 and 219 of the Customs Act, 1969 ("the Act") read with sections 3 and 6 of the Sales Tax Act, 1990 further read with Section 148 of the Income Tax Ordinance, 2001 and the DTRE Rules have been alleged, being punishable under section (14) and (14A) of Section 156(1) of the Customs Act, 1969 read with sections 33, 34 and 36 of the Sales Tax Act, 1990. The petitioner has primarily challenged the jurisdiction and the authority of the respondents Nos. 2 and 3 (Director/Investigation officer of Directorate of Intelligence and Investigation, Karachi) to lodge the F.I.R. and to seize the goods stored in a private Godown in Karachi.

3.Mr. Zain A. Jatoi, Advocate for the petitioner, contended that the respondents Nos. 2 and 3 have no lawful authority under DTRE Scheme to initiate any such action against the petitioner and it is only the regulatory Collector (in this case Collector of Customs, Peshawar) who has the jurisdiction to initiate any action in terms of Rules 307A, E and G of the Customs Rules, 2001. Learned Counsel further contended that insofar as the scheme of DTRE is concerned, there is no concept of any prosecution under the Rules, and the input goods acquired under this scheme are to be dealt with strictly in terms of the said rules and not otherwise. Learned Counsel further contended that DTRE approvals granted to the petitioner are valid and for obtaining such approvals, the petitioner has already furnished indemnity bond and postdated cheques to secure the amount of duties and taxes for a period of 30 months in terms of Rule 300(2)(a) ibid. Learned counsel further submitted that without prejudice, if any misuse of the DTRE scheme as alleged has taken place, even then, it is only the Regulatory Collectorate which is authorized to conduct audit, and thereafter proceed further in accordance with the said rules. The learned Counsel further contended that the impugned action of registration of F.I.R. as well as seizure of the goods lying in the warehouse at Karachi is illegal, void and hence liable to be quashed/set aside.

4.On the other hand, Mr. Kashif Nazeer learned counsel for respondents Nos. 2 and 3 contended that the petitioner is involved in the illegal sale of the input goods acquired under the DTRE scheme; hence, has misused the said facility. Learned counsel contended that the respondents Nos. 2 and3 have the authority and jurisdiction to intervene, in respect of such goods which are either stored, or are being sold in the local market, therefore the seizure of the goods in question as well as the registration of the F.I.R. is within the jurisdiction and the authority of respondent No.2, hence justifiable. Learned counsel referred to S.R.O. 486(I)/2007 dated 9-6-2007 and contended that in view of this Notification, the respondents Nos. 2 and 3 are fully authorized to take cognizance in such matters. Learned Counsel further submitted that the petitioner has been unable to satisfy its conduct, that as to why the input goods cleared from the Collectorate of Customs at Karachi, have been stored in a warehouse within Karachi, whereas, the manufacturing facility of the petitioner is at Peshawar, and further that as to why the goods were being sold in the open market although, they were acquired as input goods to be exclusively used under the DTRE Scheme. Learned Counsel also submitted that such conduct of the petitioner is in violation of various provisions of the Act, including sections32 and 32A, therefore the impugned action initiated by respondents Nos.2 and 3 is justifiable, and within the four corners of law. Learned counsel further submitted that in terms of S.R.O. 486(I)/2007 dated 9-6-2007 the respondents Nos. 2 and 3 have been vested with various powers of the Act including the powers under section 168, wherein, the respondents Nos. 2 and 3 are authorized to seize any goods which are liable to confiscation. Learned Counsel further contended that since the goods in the instant matter were liable to be confiscated for violation of the provisions of the Act including sections 32 and 32A ibid, as such they have been correctly and lawfully seized by the respondents Nos. 2 and 3. Learned Counsel also contended that prosecution of a case and the adjudication of the same are both distinct and different actions being independent of each other, therefore the criminal proceedings have been initiated before the Special Judge, Customs and Taxation whereas the adjudication proceedings have been initiated through a show cause notice dated 15-6-2013 which has already been issued to the petitioner, but, because of filing of the instant petition, the same has not been adjudicated upon as yet. Learned counsel also referred to the provisions of subsection (2) of section 80 of the Act, and contended that this fully authorizes and allows the respondents Nos. 2 and 3 to even examine such goods which have been out of charged and released by the respective Customs Authorities. Learned counsel also contended that even filing a mere wrong statement before any of the Customs Officers amounts to mis-declaration within the contemplation of sections 32 and 32A of the Act, therefore proceedings of mis-declaration can be initiated in such matters. Learned counsel further submitted that in so far as the applicability of the Rules and the authority of the Regulatory Collector is concerned, the same is only in respect of formal procedure of acquiring input goods and manufacturing and export of output goods. Thus, according to the learned counsel the same were not applicable in the instant matter, wherein serious allegations of selling of goods in the local market, acquired without payment of duties and taxes has been alleged against the petitioner, therefore the provisions of the Act as mentioned in the F.I.R. would be applicable in the instant matter and will prevail over the DTRE rules.

5.We have heard all the learned counsel and have perused the record with their assistance. Since a short controversy is involved, at the joint request of the parties we had agreed to decide the instant petition at Katcha peshi stage.

6.It appears that the petitioner is registered as a manufacturer under the Sales Tax Act, 1990 and has its manufacturing facilities located within the jurisdiction of Model Customs Collectorate at Peshawar. The petitioner claims to be a manufacturer of plastic mats and for such manufacturing and its export exclusively, the petitioner on his application, has been granted various DTRE approvals for acquiring input goods namely Polypropylene, Polyester Yarn and Pigment/Master Batch. Such DTRE approvals are in respect of different quantities to be imported by the petitioner, and further the petitioner has also submitted indemnity bonds along with postdated cheques for the amount of duties and taxes which are supposed to be suspended in terms of the DTRE Rules. The DTRE Rules have been notified under Chapter XII sub-chapter (7) vide Rules 296 to 307-H of the Customs Rules, 2001, notified vide S.R.O. 450(I)/2001 dated 18-6-2001. The rules which are relevant in the instant matter areRules 300, 305, 307A, 307E, 307G and accordingly are reproduced for reference:-

"300. Grant of DTRE approval.---(1) On the basis of DTRE application, a Regulatory Collector, if he is satisfied with the bona fides of the DTRE applicant, shall grant DTRE approval and each such approval shall be fed into [Customs Computerized System] over the web in the format as given in Appendix II.

(2)The amounts suspended by the Regulatory Collector in respect of leviable customs-duties, excise duty, sales tax and withholding tax shall be secured [for a period of thirty months] against,--

(a)indemnity bond along with the postdated cheque from a direct and indirect exporter;

(b)bank guarantee from a commercial exporter; and

(c)corporate guarantee from exporters in the corporate sector,

(3)The Regulatory Collector may, at the time of granting DTRE approval,--

(a)verify the manufacturing facility of DTRE applicant through inspection and determine the production capacity of such facility by physical survey, in addition to verifying the business turnover from the sales tax profile or other available records of such DTRE applicant to ensure that quantity of the input goods applied for commensurates with the actual production and business capacity of such applicant; and]

(b)consult the records of Input-Output Coefficient Organization for identical or similar output goods if available to ensure that the input-output ratios and wastages as claimed by the DTRE applicant are as per industry standards.

(4)Where an existing DTRE approval does not cater to the quantitative or other requirements of a contract or supply order due to any valid reasons, the Regulatory Collector may suitably amend the existing DTRE approval.

(5)Where an exporter proves to the satisfaction of the Regulatory Collector that export under a separate contract cannot be arranged out of his regular production due to valid reasons, past export performance as well as contract-based DTRE approval may be granted concurrently for the output goods of the same or different description.

(6)Where the indirect exporter is granted DTRE approval on the basis of contract or order entered with a direct exporter or commercial exporter, the entitlement of the direct exporter or commercial exporter to duty suspension under this sub-chapter in respect of his export contract or order with a foreign buyer shall proportionately be reduced to the extent of entitlement of the indirect exporter.

(7)No DTRE application shall be rejected without affording opportunity of being heard to the DTRE applicant.

(8)The Regulatory Collector shall endorse a copy of the DTRE Approval to Director, Input Output Coefficient Organization (IOCO), Karachi.]

305. Utilization of input goods.---The input goods acquired under this sub-chapter shall be utilized in the manufacture and export of output goods within [twelve] months from the date of approval of DTRE application]:

307A. Unaccounted for un-exported goods.---(1) If a DTRE user fails to account for the duty and tax free acquired input goods, or he fails to account for his finished goods manufactured therefrom or he fails to account for his un-exported same-state-goods [or he fails to consume the duty and tax free acquired input goods in export in full except wastage, if not covered under valid extension], he shall be liable to pay duties and taxes including additional duties or additional tax and penalties leviable on such goods under the relevant Acts or the Ordinance.

(2)Notwithstanding sub-rule (1), a DTRE user may with the permission of the Regulatory Collector dispose of the input goods or output goods within the prescribed utilization period in the following manner, namely:-

(a)return to person who had supplied the input goods;

(b)sale, by a DTRE user to another DTRE user for export;

(c)local sale on payment of [duties and taxes leviable at the time of such sale] and on production of no objection certificate from the Ministry of Commerce in case input goods are banned or restricted for import[:]

[Provided that the permission favour local sale of input goods as specified in this clause shall be granted by regulatory Collector in case of DTRE user's inability to manufacture and export output goods for reasons beyond his control:]

(d)Destruction after approval of the Regulatory Collector if goods are not fit for consumption or sale with remission of duty and taxes; and

(e)local sale of B-grade products, factory rejects or wastage on payment of leviable duties and taxes and subject to the provisions of the prevalent Import PolicyOrder:

Provided [further] that where any of the above option is allowed, the Regulatory Collector shall reduce equivalent quantity of output goods or input goods as the case may be, by feeding them into [Customs Computerized System] as per Appendix II.

307E. DTRE audit.---(1) The liability of a DTRE user to pay duty and taxes under a security instrument furnished by him under this sub-chapter, shall not be discharged unless post-exportation audit is carried out and completed satisfactory within a period of [three] months after the period specified in rule 305 or after filing of reconciliation statement under rule 307D, whichever is earlier.

(2)Audit under this sub-chapter shall be a combined or consolidated audit for DTRE and other taxable activities, if any, and shall cover all the duties and taxes for which the security instrument has been furnished.

(3)In case of commercial exporter holding a DTRE approval for same-state-goods, the Regulatory Collector may discharge the security instrument if such exporter, on the basis of purchase and export documents in his possession, proves that the goods acquired by him against such approval have been exported in full.

(4)Where as a result of post-exportation audit, there arises any discrepancy, irregularity or any violation of the provisions of this sub-chapter or any other law applicable in this behalf by the DTRE user, the same shall be reported to the adjudication officer of competent jurisdiction.

307G. Miscellaneous.---(1) An officer authorized by the Regulatory Collector shall have free access to any place where goods covered under a DTRE approval issued by such Collector, are stored, processed or manufactured or otherwise dealt with and to the records, documents and information relating to such goods.

(2)All liabilities or dues as and if payable or outstanding under any of the provisions of this sub-chapter shall be finally ascertained and recovered by the Regulatory Collector. (Emphasis supplied)

7.According to the learned counsel for petitioner on the basis of the above rules and in view of these special procedure/rules, the other provisions of the Act would not be applicable, therefore it is only the Regulatory Collector (i.e. Peshawar Collectorate) which has the authority and power to conduct audit and to determine as to whether the input goods acquired under the DTRE Scheme have been consumed and exported or not. In fact this is the only controversy which needs to be decided by us i.e. as to whether, if a person acquires input goods under the DTRE Scheme, then, in case of any violation of the concession granted under the DTRE scheme, the action which is required, is to be taken under the rules as aforesaid, or the other enabling provisions of the Act would have any applicability in the matter. The aforesaid rules have been issued under the provisions and powers conferred by section 219 of the Act to the Federal Board of Revenue ("FBR") and it would be advantageous to reproduce the provisions of Section 219 of the Act, for a better understanding of the controversy:--

"219 Power to make rules.---(1) The Board may, by notification in the official Gazette, make rules for carrying out the purposes of this Act [including for charging of fees for processing the customs documents and preparation of copies thereof]

(2)Withoutprejudice to the generality of the foregoing provision, rules may be made on matter enumerated in the [Third Schedule].

(3)No rules relating to matters enumerated at items 19 and 22 of the [Third Schedule] shall be made without previous approval of the [Federal Government] in writing.

(4)All rules under this section shall, as soon as may be, be laid at the table of the National Assembly.

(5)All such rules for the time being in force shall be collected, arranged, and published at intervals not exceeding two years and shall be sold to the public at a reasonable price."

8.From the perusal of the above provision, it could be seen that the DTRE rules have been issued by FBR under section 219 of the Act for carrying out the purposes of the Act, and is an enabling or supplementing provision to facilitate the implementation of the various provisions of the Act. On further perusal of the DTRE rules, it is noticed that in Rule 305 it has been provided that the input goods acquired under this sub-chapter shall be utilized in manufacturing and export of output goods within 12 months from the date of approval of the DTRE application. Whereas, in terms of rule 300 sub-rule (2), it is mandatory for a person while seeking approval under the DTRE scheme to secure the amount of leviable duties and taxes through postdated cheques for a period of 30 months. This clearly means that though a security for such purposes shall be valid for a period of 30 months, but the consumption, utilization and export of the input goods is required to be executed within a period of 12 months from the date of DTRE approval. In so far as the three DTRE approvals filed along with the Memo. of Petition as annexure C, C-1 & C-2 are concerned, two out of the three, dated

13-10-2010 and 13-2-2012, though being valid in terms of Rule 302, stood expired, in so far as the utilization, manufacture and export of goods is concerned at the time, the F.I.R. was registered. The DTRE approval dated 13-10-2010 was for a quantity of 2000 Metric Tons of Polypropylene, and the other dated 13-2-2012 was for 1488.916 Metric Tons of polypropylene. Further the petitioner has also failed to place any reconciliation statement in terms of Rule 307D with regard to the two approvals, period of utilization of which stood expired at the time of registration of F.I.R.

9.From the perusal of F.I.R. in the instant matter, it transpires that a quantity of approximately 885 Metric Tons was imported by the petitioner in nine different consignments, and all such consignments were cleared from Karachi Collectorate without payment of duties and taxes under the aforesaid DTRE approvals, and first of such consignment was cleared on 4-10-2012 and the last one was cleared on 16-4-2013. It is an admitted position that when the goods were seized by the respondents Nos. 2 and 3 at a private Godown namely Hamza Godown located at Plot No. F-569, SITE Area, Karachi the goods were stored therein by the petitioner, and such storage of goods has not been denied and it has only been contended that the storage of the goods was as a matter of convenience for the petitioner, and for the fact that transportation of containers stuffed with goods directly from the port area to Peshawar is more expensive, then to have them stored locally in a Godown in loose condition in Karachi, and then send them to Peshawar in part shipments as and when required. Though, we have not deeply appreciated the merits of the case, as it is only a legal question which has been raised and argued on behalf of the petitioner, but we may observe that to us it does not appeal that the consignment cleared in the month of October 2012, which has been imported for its exclusive use in the manufacturing of export goods, could be kept and stored in a warehouse locally, only as a matter of convenience, and not for any other purposes. Further, the petitioner has not been able to argue or satisfy or rather has not chosen to satisfy us on this vital aspect of the case with any sound reasoning that as to why, the goods were kept and stored in a local Godown for such a long period. It must be noted that the intention behind giving an extended period for utilization and consumption of input goods, is a matter of facilitating the exporter and such facilitation is to give the exporter a longer period so as to enable him to first acquire the input goods, then manufacture it, and then export it for the benefit of the Country in the shape of foreign exchange earnings. But, in turn, this cannot be allowed to be used as a tool, not to utilize and or consume the input goods timely. We may add, that the petitioner was at least required to show its bona fide by having intimated the regulatory Collector regarding such storage of goods at Karachi, though temporarily, which the petitioner has failed to do so, nor has any supporting acknowledgment been brought on record from the regulatory Collector in this regard. It must be appreciated that any grant of exemption or deferment of payment of duty and taxes is an incentive based on relationship of mutual trust and such trust must not be betrayed. There can be an argument that the petitioner, under the rules was not required to give any such intimation to the Regulatory Collector, but to show its bona fide and to avoid any situation like the one in hand, it was obligatory upon the petitioner to inform the Regulatory Collector regarding such storage of goods and the indirect transportation of the input goods to the manufacturing premises. However, this does not end here, as in the instant matter; the petitioner has even failed to respond with regard to local sales of the goods as alleged. We are of the view, that, if the petitioner had been able to satisfactorily reply in this context, there could have been an arguable case made out by the petitioner, and the plea of convenience in the transportation of goods may have carried some weight, though subject to the availability of the entire quantity of goods so cleared under DTRE approval, but even this has not been done and the petitioner has failed to substantiate its case on this account as well.

10.On further perusal of the F.I.R., it also transpires that the Godown Keeper has given very incriminating evidence against the petitioner, whereby the storage and local disposal of the goods in question has been disclosed to the investigating agency. Therefore insofar as the conduct of the petitioner is concerned, the same does not appear to be in accordance with the normal procedure in vogue andwhich a normal manufacturing concern needs to evolve. The conduct of the petitioner is an exception, whereby the goods imported and acquired for consumption at Peshawar have been stored at a warehouse in Karachi, for a much longer period than expected normally. Even if we are to assume that it was done as a matter of convenience, even then, the petitioner has not been able to controvert the statements and the record provided by the warehouse keepers to the respondents Nos. 2 and 3 regarding storage as well as sale of the goods in question.

11.Insofar as the contention of the petitioner with regard to the applicability of the DTRE Rules entirely and exclusively as against the other provisions of the Act is concerned, we have gone through all these provisions, and are of the view, that in terms of Rule 307A it has been provided that if a DTRE user fails to account for such input goods, he shall be liable to pay duties and taxes including additional duties and additional taxes and penalties leviable on such goods under the relevant Act or the Ordinance. The Act has been defined under Rule 296(b) as Customs Act, Federal Excise and Sales Tax Act, and the Ordinance has been defined under Rule 296-K as the Income Tax Ordinance, 2001. This contention of the learned Counsel for petitioner does not appear to be a correct interpretation, as the recovery of any alleged short levy cannot be done under the rules issued in terms of section 219 of the Act. There are specific provisions for recovery of duty and taxes and of initiating penal action against a person, who has, for some reason been found to be involved in the evasion of duties and taxes. The purpose of Rule 307A is only for the fact that a concession has been provided to exporters through and under the DTRE Rules, and within these rules an independent provision has also been incorporated to take care of a situation wherein such concession is misused. However, this would not mean that these rules will have an overriding effect, entirely to the exclusion of the Act, including the specific provisions for recovery of duty and taxes. It is a settled law that rules must yield to the Act and not vice versa. Merely for the fact, that under these rules it has been provided that the Regulatory Collector will conduct audit and monitor the conduct of the person to whom a DTRE concession has been accorded, would not mean to confer, even the jurisdiction of adjudication which otherwise, at present is being regulated independently under S.R.O. 886(I)/2012 dated 18-7-2012 and so also for the fact that if an alleged misuse of the concession so accorded, happens or takes place in the territorial jurisdiction of any Collectorate other than the regulatory Collector. Further in terms of rule 307E (4), it has also been provided that any violation of the provisions of this chapter by a DTRE user, shall be reported to the adjudication officer of competent jurisdiction, therefore, even under the DTRE rules the regulatory Collector cannot assume the role of an adjudicating officer by itself, and has to refer it to an adjudicating authority in terms of the above S.R.O. Therefore, when in this case admittedly the goods were cleared from the Collectorate at Karachi; were stored in a private Godown at Karachi and allegedly were being sold from the same Godown in Karachi; the respondents Nos. 2 and 3 will have jurisdiction to see that as to whether the goods being sold in the market were in fact goods which ought to have been stored in Peshawar, and whether, the goods being sold are actually duty paid goods or not. Once the respondents Nos. 2 and 3 intercepted such goods, and alleged that the goods are not duty paid, the onus immediately shifts on to the petitioner, for satisfying that the goods are the one of which the duty has been paid. As discussed earlier, the petitioner has not argued its case on the merits of the case and has not been able to satisfy, as to why these goods which were stored at Karachi as a matter of convenience were being sold in Karachi, as alleged in the F.I.R., and the show cause notice issued subsequently. Therefore the respondents Nos. 2 and 3 would be justifiable to come to the conclusion that such goods are liable to confiscation. Once the respondents Nos. 2 and 3arrives at such a conclusion it can immediately invoke the provision of Section 168 of the Act and thereafter proceed accordingly for seizure, registration of F.I.R. and or preparation of a contravention report for issuance of a show cause notice by the competent adjudicating authority as the case may be. Therefore, we are of the opinion that in view of the peculiar facts of this case, the action initiated by the respondents Nos. 2 and 3 was within their jurisdiction as provided for under the Act and S.R.O.486(I)/2007 dated 9-6-2007. Consequently, the instant petition does not merit any consideration and is accordingly hereby dismissed with all pending applications. However, the petitioner may approach the concerned adjudication authority for adjudication of the case on the basis of the show cause notice already issued and placed on record. The adjudicating authority is directed to decide the matter preferably, within a period of 30 days from the date when this order is placed before it by the petitioner. Such adjudication, be done without being influenced with the observations made hereinabove and after affording proper and adequate opportunity to the petitioner to put up its case. Insofar as the criminal proceedings are concerned, the learned Special Judge (Customs and Taxation), Karachi, has already taken cognizance of the same, which may continue in accordance with law and the petitioner is at liberty to seek further remedy as deemed fit.

12.The instant petition stands dismissed.

JJK/M-46/SindhPetition dismissed.