MUHAMMAD AFZAL SHAHEEN VS FEDERATION OF PAKISTAN through Secretary, Islamabad, 2014 PTD-LAHORE-HIGH-COURT-LAHORE 1919 (2014)

Customs Act (IV of 1969)---

----S.207---Finance Act (IV of 1999), S.18 (I)(c) & Table-III---Constitution of Pakistan, Art.199---Constitutional petition---Amendment-in-law---Extending of benefit---Petitioner was customs clearing agent who filed import documents of respondent for clearance---Customs authorities cleared the consignment against Zero rating, by extending benefit of amendment in law before it was applicable---Petitioner raised the plea that later on authorities could not demand duty and taxes from him---Validity---No wilful act or negligence or default on the part of petitioner was on record and benefit of Zero tax was given by appraising officer---In view of express and un-ambiguous language of the proviso to S.209(3), Customs Act, 1969 amount being claimed from petitioner was not recoverable from him---Letter of appraising officer also showed that neither petitioner made any request nor applied for exemption---Department itself extended benefit of S. 18 of Finance Act, 1999, on the basis of Finance Bill prior to coming it into force, by following the practice adopted by Customs House (Karachi) and the same could not be termed as wilful act or negligence or default on the part of petitioner---High Court declared, attachment order issued by authorities and adopting coercive measures for recovery of amounts claimed from petitioner which were adjudged against importer by adjudicating authority and direction to Chairman International Airport for deducting such amount from the shares or as the case might be profit/dividend of petitioner, illegal, without lawful authority and of no legal effect---Petition was allowed in circumstances.

Mian Abdul Ghaffar and Raza Ahmad Cheema for Petitioner.

Ch. Zafar Iqbal for Respondents.

Date of hearing: 10th April, 2014.

JUDGMENT

IJAZ UL AHSAN, J.---The brief facts giving rise to this lis are that petitioner was functioning as a Custom House Agent licenced under section 207 of the Customs Act, 1969 for respondent No.2. The petitioner, however, surrendered his licence in 2007 on closing his business.

2.During 1996, respondent No.6 imported two units of old and used wheel excavators falling under PCT heading 8429.5990 from Japan and engaged petitioner's agency for clearance of the said machinery. Under instructions and on the basis of documents provided to him by respondent No. 6, the petitioner filed bills of entry No. 2059 dated 28-6-1999 and 2077 dated 30-6-1999. He got the machinery examined, assessed and out of charged on payment of levy-able taxes. There-after, the machinery was delivered to respondent No.6. While making assessment, customs duty and sales tax were not charged in view of the fact that according to respondents Nos.2 to 4, the said machinery was exempt in terms of section 18(1)(c)(5) of the Finance Act, 1999. However, the petitioner was directed to give an undertaking on behalf of respondent No.6 to pay the differential amount of duty and taxes, if found due at a subsequent stage. The petitioner gave such undertaking on the reverse of the bill of entry. This undertaking was sought on the ground that although the excavators could be released because they were exempt/zero rated, to be on the safe side a undertaking should be taken to cater for a situation where later on the department may find that its interpretation was not correct.

3.It appears that when the documents in question were filed by the petitioner on behalf of respondent No.6, he never claimed any exemption and offered to pay tax and duty at the rate of 25%. However, respondents Nos.2 to 5 informed him that no duty or taxes were payable and the goods could be released without payment of taxes and duties. It is stated that the exemptions were not claimed, but were granted by respondents Nos.2 to 4 on their own volition.

4.Subsequently, a show-cause notice dated 17-1-2000 was issued to respondent No.6 alleging that the excavators imported by him were subject to duty and taxes, as the Finance Act, 1999, granting exemption was promulgated on 1-7-1999, while the machinery was imported on 28-6-1999 and 30-6-1999. Respondent No.6 did not respond. Consequently, respondent No.4 claimed an amount of Rs.6,89,683 vide order dated 10-2-2000. The said respondent passed the following order:--

"I have thoroughly examined the record and observed that as the goods were imported prior to 1st July, 1999, therefore, the same were NOT exempted from levy of taxes vide subsection (5) of section 18(1)(c) Table-III of Finance Act, 1999. I am, therefore, convinced that the demand is correct, therefore, the same is enforced ex parte. The importer is hereby ordered to pay the amount short levied immediately. The Customs Clearing Agent Messrs Shaheen Agencies, Near Dry Port Samberial is also ordered to facilitate the Customs staff regarding recovery of legitimate Government dues. "

5.It appears that respondent No.6 did not pay said amount. Consequently, a notice dated 20-10-2001 was served upon the petitioner directing him to provide correct and detailed address of respondent No.6 and help the department to recover government dues. The petitioner vide his letter dated 26-10-2001 provided a copy of NIC of respondent No.6. He also furnished complete address of respondent No.6 to the department. He also volunteered to provide such other information that the department required in order to recover the dues. It appears that the petitioner also provided a copy of the passport of respondent No.6 to the department.

6.Instead of recovering the amount in question from the importer, the respondent-department vide recovery notice dated 22-4-2004 called upon the petitioner to deposit the aforenoted amount, failing which he was informed that all documents of the petitioner shall be blocked at dry-port Samberial. The petitioner responded by taking the position that there was neither any adjudication against him nor was he under any obligation to pay amount adjudged against respondent No.6. It is alleged that respondent-department has started using coercive measures for recovery of the aforenoted amount from the petitioner, which has given rise to his cause of action to approach this Court.

6.The learned counsel for the petitioner submits that he was neither served with any show-cause notice nor any liability was adjudged against him. Therefore, any and all coercive measures including orders for attachment of his assets are illegal and void. He maintains that the show-cause notice as well as the order for recovery was passed against respondent No.6. At best, the department can recover the said amount from the said respondent, while the petitioner has nothing to do with it. The learned counsel further submits that the petitioner as an agent at the time of filing of bills of entry never claimed exemption. It was granted by the Customs Authorities on their own volition by following the practice adopted by the Customs House Karachi in terms of section 18 of the Finance Act, 1999. In this regard he has referred to section 209(3) of the Customs Act to argue that no power vests with the department to recover amount being claimed by it from the petitioner. He further maintains that the petitioner has been rendering assistance and facilitating the department by providing all requisite information for recovery of adjudged amount from respondent No.6, who was the importer. Even otherwise, he argues that respondent No. 5 has no authority to direct all the Collectorates of Customs and Commissionerates Inland Revenue to recover the amount adjudged against the importer from the petitioner.

7.The learned counsel for the respondent-department on the other hand has defended the orders passed by the Customs Authorities including the attachment order dated 26-8-2012. He submits that admittedly, the petitioner had given an undertaking to the department, stating that. he would be responsible for payment of the differential amount of duty and taxes, if such differential arose due to confusion of rate of duty of 0% to 25%. He submits that in view of the fact that the importer is not trace-able, the duty can be recovered from the petitioner, who was the clearing agent on the basis of his undertaking.

8.I have heard the learned counsel for the parties and examined the record filed with the petition.

9.The only question requiring determination by this Court is whether the department is entitled to rely upon section 209 of the Customs Act, 1969 and recover the duties and taxes from the petitioner, who was admittedly an agent of the principal, who had imported the equipment. On hearing the learned counsel for the parties and examining the record, the answer to the said question is in the negative for the following reasons:--

(I)It is a common ground between the parties that the petitioner filed bills of entry on behalf of respondent No.6. He never claimed exemption from taxes. The bill of entry indicated that he had filled the relevant column to the effect that 25% duty was payable. However, the Customs Authorities on their own volition and following the practice adopted by the Customs House Karachi in terms of section 18 of the Finance Act, 1999 granted exemption and released the goods without payment of customs duty treating the imported equipment as exempt. It is significant to note that in this regard a letter was issued by the Custom Department, which stated as follows:-

"The above cited importer has imported one unit of Excavator of which the rate of duty is zero percent as per Finance Bill, 1999-2000 under section 18 of the said Act. The Karachi Customs House is releasing the identical goods under PCT heading 8429-5990 @ 0% rate of duty. However, to be on the safe side we have asked for the undertaking from them as they will be responsible for any change of Customs duty if occurs."

The aforesaid letter clearly indicates that the exemption was not claimed by the petitioner, but was granted by the respondents on the basis of the practice being followed by the Karachi Customs House. Nevertheless, an undertaking on non-judicial stamp paper duly signed by respondent No.6 was obtained, which is also available on the record, whereby respondent No.6 undertook to pay the requisite duties, if they were found due. As an additional measure, the petitioner was also directed to endorse on the bill of entry an undertaking to pay the differential amount of duty and tax, in case some was found due.

In the aforenoted situation, the question whether or not the petitioner, who is admittedly an agent is liable to pay the amount of duty, can be determined by perusal of section 209 of the Customs Act. The relevant portion is reproduced below for ease of reference.

(3)When any customs agent is expressly authorized by the principal to be his agent under subsection (1) of section 208 in respect of such goods for all or any of the purposes of this Act, such agent shall, without prejudice to the liability of the principal, be deemed to be the principal of such goods for such purpose:

Provided that where any duty is not levied or is short-levied or erroneously refunded on account of any reason other than wilful act, negligence or default of the agent, such duty shall not be recovered from the agent. "

(II)In the facts and circumstances of the present case, the provisions to section 209 of the Customs Act are sufficient to clinch the matter. It is clear and obvious that where any duty is not levied or short charged or erroneously refunded on account of any reason other than wilful act, negligence or default of the agent, such duty cannot be recovered from him. I am in no manner of doubt that there is neither any wilful act nor negligence or default on the part of the petitioner. The benefit of zero tax was given by the appraising officer, as is evident from the language of the letter reproduced above. In these circumstances, the express and un-ambiguous language of the proviso, the amount being claimed from the petitioner is not recoverable from him.

(III)The letter of the appraising officer also clearly shows that neither the petitioner made any request nor applied for exemption. The department itself extended benefit of section 18 of The Finance Act, 1999 on the basis of Finance Bill prior to coming it into force on 1-7-1999 by following the practice adopted by the Customs House Karachi. This cannot by any stretch of imagination be termed as wilful act or negligence or default on the part of the petitioner.

(IV)The petitioner was never issued a show-cause notice nor was any adjudication made against him. The order of the adjudicating officer is also clear in as much as he has ordered that the petitioner to facilitate the custom staff regarding recovery of legitimate dues of the department. There is enough material on record that the petitioner had been rendering assistance to the department by providing copy of NIC, passport and the address of respondent No.6 available with him. The order of the adjudicating officer dated 10-2-2000 cannot be interpreted to saddle the petitioner with any liability to pay the aforenoted amount. In the above background, I have asked the learned counsel for the respondent to show under what authority of law respondent No.5 has issued a direction to all Collectorates of Customs and Commissionerates of all over the country to recover amounts adjudged against the importer (respondent No.6) from the petitioner. 1 have further asked him to show under what provision of law, respondent No.5 has any jurisdiction to direct the Chairman Sialkot International Airport Ltd. to deduct the said amount from the shares and or profit/ dividend of the petitioner against said shares. The learned counsel for the respondent has not been able to point out any provision of law that may confer such authority on respondent No.5. Further, in the absence of any adjudication against the petitioner, it is not hard to conclude that such authority/power does not and cannot vest in respondent No.5 in the facts and circumstances narrated above.

(V)The learned counsel for the respondents has attempted to argue that the petitioner is bound by the undertaking given by him on the bill of entry. I am afraid the said argument is not tenable. The undertaking given by the petitioner would bind him only if there was any wilful act, negligence or default on the part of the agent, which led to non-levy, short levy or erroneous refund of any duty of any account for any reason. It is not the case of the respondents that there was any act, negligence or default on the part of the petitioner. As such the proviso is fully attracted and comes to aid of the petitioner by absolving him of any obligation in terms of recovery of the duties in question. Even otherwise, the undertaking cannot over-ride an express provision of law, as incorporated in the proviso to section 209 of the Customs Act, 1969.

10.For the reasons recorded above, the attachment order dated 26-8-2012 issued by respondent No.5 and adoption of coercive measures for recovery of the amounts being claimed by department from the petitioner which were adjudged against the importer by the adjudicating authority vide order dated 10-2-2012 and the direction to the Chairman International Airport for deducting the said amount from the shares or as the case may be profit/dividend of the petitioner, are declared to be illegal, without lawful authority and of no legal effect. The respondents are at liberty to recover the said amount in accordance with law from respondent No.6 against whom it was adjudged by the competent authority. This Court is, however, sanguine that the petitioner would provide all necessary information available with him regarding respondent No.6 in order to facilitate recovery of the amounts of duties from respondent No.6.

11.Petition allowed.

MH/M-211/LPetition allowed.