KHATRI BROTHERS VS FEDERATION OF PAKISTAN, 2014 PTD-KARACHI-HIGH-COURT-SINDH 966 (2014)

Customs Act (IV of 1969)---

----Ss.156 & 180---Customs Rules, 2001, R.103---Constitution of Pakistan, Art. 199---Constitutional petition---Restoration of customs license---Penalty, imposition of---Petitioner was licensed customs house agent and his license was suspended on the allegation of filing forged and fabricated shipping bills and attempt to obtain export rebate/duty draw back on the goods which were never exported---Authorities imposed penalty for a sum of Rs.500,000 and license was restored subject to payment of penalty---Validity---No power under R.103(2) of Customs Rules, 2001, was conferred upon Licensing Authority to impose penalty for violation of any of Licensing Rules, as penalty could not be imposed through and under the Rules---Penalty was only permissible once adjudicating authority, after proper show-cause notice, with specific allegations and alleged violations of relevant provisions of Customs Act, 1969, punishable under S.156(1) of Customs Act, 1969, passed order after following requirement as contemplated under S.180 of Customs Act, 1969---None of such actions had been followed and penalty was imposed while exercising jurisdiction under altogether irrelevant provision/rule and petitioner had been penalized without any lawful authority---Imposition of penalty on petitioner was without any lawful authority and jurisdiction conferred upon licensing Authority and the same could not be sustained and was set aside---High Court directed the authorities to restore license of petitioner and order-in-original and order-in-appeal were set side---Petition was allowed accordingly.

Ghulam Hyder Shaikh for Petitioner.

Muhammad Sarfraz Ali Metlo for Respondents Nos.2 and 3.

Date of hearing: 17th January, 2014.

JUDGMENT

MUHAMMAD JUNAID GHAFFAR, J.---Through instant petition the petitioner has challenged order-in-original dated 7-11-2006 passed by the Deputy Collector, Licensing Authority (Appraisement) and order-in-appeal dated 27-12-2007 passed by the Collector of Customs Appraisement, Karachi and has sought the following relief(s):-

(a)Declare that the impugned orders passed by the respondents Nos.2 and 3 in Order-in-Original No.APPG/LA/1-85/93 (part II) dated 2-11-2007 and Order-in-Appeal No.APPG/LA/1-85/93 (part II) dated 27-12-2007, are illegal, without jurisdiction and set aside the same.

(b)Direct the respondents Nos.2 and 3 for restoration of Custom Agent License by remitting penalty of Rs.5 lacs to save the petitioner from injustice alone to the petitioner,

(c)Grant any other relief deemed just and appropriate in the circumstances of the case".

2.Briefly, the facts germane for the disposal of the instant petition are that the petitioner is a Licensed Customs House Agent having been granted License No.1617. It is stated that some Un-known persons used the name of the petitioner and its Goods Declarations ("G.D") and filed forged and fabricated export shipping bills and attempted to obtain export rebate/duty drawback on the goods which were in fact never exported. Subsequently an F.I.R. was also lodged by the respondents Nos.2 and 3 against the petitioner. Thereafter, the Licensing Authority issued a Show-Cause Notice dated 19-10-2006 to the petitioner under Chapter VIII of Customs Rules, 2001, and the Deputy Collector of Customs, Licensing Authority (Appraisement) passed the impugned order-in-original dated 7-11-2006 by observing as under:--

"I have gone through the case record, written and verbal submissions of the representative of the Clearing Agent, and is of the considered opinion that Clearing Agent Messrs Khatri Brothers, Karachi (CHAL No.1617) has attempted to claim duty drawback without export of goods which is evident from the record obtained from different quarters. This act of Customs Agent comes in purview of misconduct which is punishable under Chapter VIII of Customs Rules, 2001. I, therefore, impose a penalty of Rs.500,000 (Rupees Five Lac only) upon Messrs Khatri Brothers, Karachi (CHAL No.1617) which they should deposit in the treasury 15 days of the issuance of this order. The Custom House Agent License No.1617 is restored subject to payment of penalty of Rs.5,00,000 and till the finalization of the case by the Custom Court". (emphasis supplied)

3.Thereafter, the petitioner preferred an appeal under the Licensing Rules before the Collector of Customs of (Appraisement) and the said appeal was also dismissed vide order dated 27-12-2007. The learned Collector of Customs while dismissing the appeal observed as follows:--

"The investigation conducted into the case reveals that no goods were physically exported and an attempt to obtain huge amount in the shape of duty drawback was made on the basis of fake/forged documents. The appellant Muhammad Ashraf, Proprietor of Messrs Khatri Brothers, prima facie, paved way through 'Goods Declarations' filed thereof and which bears forged signatures of Customs staff and fake examination report thereof. In view of the aforesaid facts, it is established that the appellant Muhammad Ashraf connived in filing illegal duty drawback claim. Their plan for filing further 'Goods Declarations' and duty drawback claims was frustrated when the department detected forgery committed by the appellant by affixing fake signatures of concerned Customs staff. The case was decided by the Licensing Authority on the basis of facts enumerated in the F.I.R. and recommendations made by the Collectorate of Customs, Export. That the impugned order is correct in law and facts as enumerated above". (emphasis supplied)

4.The instant petition, after issuance of pre-admission notice to the respondents was dismissed by this Court vide order dated 12-8-2009 on the statement made at bar by the learned counsel for the petitioner that though an alternate remedy was available to the petitioner in the shape of an appeal before the Tribunal, but the same was not availed as it ran out of limitation. Subsequently, the petitioner filed an application bearing C.M.A. No.8804 of 2009 for review of the order dated 12-8-2009 and contended that in fact no appeal was provided under the Customs Act, 1969 ("the Act"), against the Order impugned in the instant petition and therefore the Order of dismissal of the instant petition may be recalled. This Court vide order dated 21-12-2009 reviewed its Order dated 12-8-2009 by observing that the Order under review was passed on mistaken admission made by the learned counsel for the petitioner that the petitioner will avail the remedy of appeal before the Tribunal, which in fact was not available either in terms of section 193 or section 194-A of the Act, therefore, the instant petition is to be decided on its own merits.

5.Mr. Ghulam Hyder Sheikh, learned counsel for the petitioner contended that the order-in-original dated 7-11-2006 was passed by imposing a penalty of Rs.500,000 on the petitioner, and the license of the petitioner which was under suspension was restored subject to payment of this penalty and till the finalization of the case by the Customs Court in respect of F.I.R. which was also registered against the petitioner. The learned counsel appearing on behalf of the petitioner has contended that Special Judge, (Customs and Taxation) vide judgment dated 4-2-2013 has acquitted the petitioner and has held that the prosecution has miserably failed to substantiate the charge against the petitioner, despite sufficient chances given to the prosecution for producing the evidence. Learned counsel further submitted that since the case made out before Licensing Authority under the Custom Agents Licensing Rules, 2001, was primarily based on the registration of the F.I.R., hence once the petitioner has been acquitted in the said F.I.R., the impugned order-in-original and the order-in-appeal could not be sustained. In view of these submissions, the learned counsel for the petitioner contended that the Orders dated 7-11-2006 and 27-12-2007 are liable to be set aside by allowing the instant petition.

6.Conversely, Mr. Muhammad Sarfaraz Ali Metlo, learned counsel appearing for respondents Nos.2 and 3 contended that the criminal case registered against the petitioner was required to be decided entirely on its own merits on the basis of evidence available with the prosecution and has no bearing in so far as the orders impugned in the instant petition are concerned which have been passed on the adjudication side of the case. Learned counsel submitted that in fact the petitioner was involved in the alleged attempt to obtain duty drawback claims on the basis of fake GD's / shipping bills purportedly prepared by the petitioner. Learned counsel further contended that such act of the petitioner was in violation of Rules 103 (ii) & (iii) of the Customs Rules, 2001 as contained in Chapter VIII, and therefore the Order passed by the Licensing Authority dated 7-11-2006 was in accordance with law. Per learned counsel even otherwise the petitioner had failed to notify the change of address to the appropriate authority and such act of the petitioner was in violation of the Licensing Rules. Learned counsel specifically referred to page-4 of the judgment dated 4-2-2013 passed by the Special Judge (Custom and Taxation) Karachi and contended that even otherwise the learned Special Judge, Custom and Taxation has failed to appreciate the evidence of PW 5 namely Saleem Lodhi and per learned counsel the judgment of the said Court is of no assistance in the instant matter. Learned counsel further submitted that the respondents have already challenged the said judgment before this Court through Special Custom Acquittal Appeal No.1 of 2013, in which notices have been issued and is presently pending, therefore the instant petition is liable to be dismissed.

7.We have heard both the learned counsel and have perused the relevant record with their assistance. By consent the instant petition was taken up for disposal at Katcha Peshi stage.

8.It appears that after lodging of the F.I.R. as stated above, the license issued to the petitioner was put under suspension and thereafter a Show-Cause Notice dated 19-10-2006 was issued under Chapter-VIII of the Customs Rules, 2001 notified vide S.R.O. 450(I)/2001 dated 18-6-2001 wherein it was alleged that the conduct of the petitioner tantamount to unsatisfactory and unfaithful behaviour, hence falls under "Misconduct" as defined under Rule 103 (i), (ii) & (iii) of the said rules. Thereafter the order-in-original dated 7-11-2006 was passed against the petitioner and the License of the petitioner was ordered to be restored subject to payment of penalty of Rs.500,000.00 and till the finalization of the case by the Customs Court. It would be advantageous to reproduce the relevant provisions of the Customs Rules, 2001 as discussed in the impugned Order which are as under;

Rule 103. "Action in case of violations.---(1)The Licensing Authority may, by order, suspend or revoke a licence for any of the following reasons namely:-

(i)breach by the licensee of any provision of these rules;

(ii)negligence, dilatoriness or inefficiency of the licensee in the discharge of his obligations as such,

(iii)unsatisfactory conduct or unfaithful behaviour of the licensee as regard the Custom House, Station, Port or as the case may be, Customs-Airport regulations or officer or in relation to any person who has entrusted him with any business pertaining to the Customs House, Station, Port or Airport;

(iv)-------------

(v)-------------

(vi)-------------

(vii)-------------

(viii)-------------

(ix)-------------

(2) While passing orders under sub-rule (1), The Licensing Authority may also direct forfeiture of the security deposited by the licensee under rule 95(2), in addition to any penalty to which he may be liable under the Act or any other law for the time being in force;

Provided that Appeal against an order made under this rule 103 shall, within three months from the date of communication of such order, lie to the Collector of Customs and shall be accompanied by a certified copy of such order.

104. Action upon conviction.---(1) The licence shall stand revoked if the licensee or any partner of a licensed firm commits any act of insolvency or is convicted by a Court of Law for any offence punishable under the Act, or for an offence involving moral turpitude or misappropriation of property or breach of trust under the Pakistan Penal Code.

(2)In the case of revocation of a licence under sub-rule (1), the Licensing Authority may, after issuing show-cause notice to the licensee, forfeit the whole or part of the security deposited by the licensee under the Rule 95(2) for the settlement of any customs-duty, penalty or any other charges due from him.

(3)The Licensing Authority may, in cases where immediate action is considered necessary against a licensee, suspend his licence forthwith pending final action under rule 103".

9.We have noticed that the order-in-original dated 7-11-2006 passed by the Deputy Collector of Customs (Licensing Authority) as reproduced in para-2 above, does not state as to under what provisions of law, the penalty was imposed on the petitioner. The order-in-original has merely referred to Chapter VIII of Customs Rules, 2001 and nothing else. There is no specific mention as to which rule or sub-rule has been violated by the petitioner and under what rule the penalty had been imposed. Though we are clear in our minds that the Licensing Authority while proceeding under the Licensing Rules does not enjoy any power or jurisdiction to invoke any penal clauses of section 156(1) of the Act, nonetheless, even otherwise, none have been invoked in the Show-Cause Notice or in the order-in-original. We are afraid that in so far as the Customs Rules, 2001 are concerned, there is no provision in these rules to impose any penalty on the Licensee for the alleged violation of any of these rules. The Licensing Authority may by an order, either suspend or revoke the license of the licensee, for the alleged violation of any of the sub-rules of Rule 103 after issuance of a Show-Cause Notice. These rules nowhere empower or authorize the Licensing Authority to restore the license which is under suspension, conditionally, by imposing a penalty and that too without any reference to violation of a specific rule or any other provision and or clause of section 156(1) of the Customs Act, 1969. The Licensing Authority under Rule 103(1) of the said rules could either suspend or revoke the License and under sub-rule (2) of Rule 103 on such revocation, can also order for forfeiture of the security deposited by the Licensee under rule 95(2) of the said rules at the time of issuance of the license. It is further provided that such forfeiture is in addition to any penalty to which the Licensee may be liable under the Act or any other law for the time being in force. On a critical analysis of this rule, it is explicitly clear that the Licensing Authority after ordering suspension of a License can proceed further by revocation of the License through a reasoned order incorporating all the prerequisites of a judicial order, which is further appealable before the Collector of Customs, Appraisement, concerned. However, the Licensing Authority is not authorized to impose any penalty in lieu of the restoration of the License or even otherwise. It can only revoke the License and order for the forfeiture of the security deposit and if not, then restore the License simplicitor, and admittedly in the instant matter the License has not been revoked. In our view these are the only two options available to the Licensing Authority under this rule i.e. rule 103. The reference to any other penalty as referred to in Rule 103(2) of the Rules does not confer any such power on the Licensing Authority to impose any penalty for violation of any of the Licensing Rules, as penalty cannot be imposed through and under the Rules, and is only permissible once an adjudicating authority after a proper Show-Cause Notice with specific allegations and the alleged violations of the relevant provisions of the Act punishable under section 156(1) of the Act, passes an Order after following the requirement as contemplated under section 180 of the Act. In the instant matter none of these actions have been followed and the penalty has been imposed while exercising jurisdiction under an altogether irrelevant provision/rule and the petitioner has been penalized without any lawful authority. Therefore we are of the view that the imposition of penalty in the instant matter was without any lawful authority and jurisdiction conferred upon the Licensing Authority. Consequently, we hold that the imposition of penalty of Rs.500,000 through the impugned Order dated 7-11-2006 cannot be sustained and is hereby set aside.

10.The other condition which was imposed for restoration of the petitioner's License was in respect of the criminal case and its finalization by the Special Judge (Customs and Taxation). This in our view was even harsher than the unlawful imposition of penalty. The petitioner has been convicted practically even before the trial as the License was restored with a condition that until the petitioner is proven to be innocent, he is guilty and his License would remain suspended. The Licensing Authority has acted without any application of an independent mind and has not appreciated the very rules under which the impugned action was initiated. Under rule 104 of the Licensing Rules it has been provided that if a Licensee is convicted by a Court of Law for any offence punishable under the Act, or for an offence involving moral turpitude or misappropriation of property or breach of trust under the Pakistan Penal Code, the License shall stand revoked. The rule is very clear and does not require any further interpretation except that if any action is to be taken in respect of an offence alleged against a Licensee under the Act, the same could only be taken upon its conviction from a Court of law and not merely on the basis of registration of F.I.R. However, the learned officer acting as Licensing Authority has acted vice versa by taking the extreme action which in fact ought to have been taken only in case of conviction of the petitioner through revocation of its License. The proceedings being conducted before the Special Judge (Customs and Taxation) have no effect in so far as the suspension of License is concerned as it would only be relevant if any action is being taken in terms of Rule 104 after the conviction has been done. The continued suspension of the License on this ground is un-warranted in law and cannot be appreciated and allowed to be used as a tool to penalize the petitioner by prolonging such suspension till the decision of the criminal case. The rules have taken care of such a situation by providing for revocation of the License, once the Licensee has been found guilty by the said Court. As already discussed above, the said Court vide its judgment dated 4-2-2013 has already acquitted the petitioner, for want of evidence and the conduct of the prosecution. Since the respondents have preferred a Special Customs Acquittal Appeal against the said judgment, therefore, we would not like to comment on the merits or de-merits of the said judgment, but would like to observe that mere pendency of the acquittal appeal would not prove the guilt of the petitioner who has been acquitted by the trial court on merits and after appreciating the evidence led by the prosecution. Further, neither the appeal has been admitted nor the impugned judgment has been suspended, therefore as of today there is no case pending against the petitioner; hence the second condition imposed in the Order-in-Original dated 7-11-2006 for restoration of the License of the petitioner also stands satisfied by virtue of the acquittal of the petitioner. Therefore, the petitioner is entitled for the restoration of its License which is under suspension since long even before passing of the impugned order-in-original dated 7-11-2006.

11.Therefore in view of hereinabove the instant petition is allowed. The impugned order-in-original dated 7-11-2006 and the order-in-appeal dated 27-12-2007 are hereby set aside. The respondents are directed to restore the License of the petitioner forthwith.

MH/K-5/SindhPetition allowed.