SOOR GHAR TRADERS VS ADDITIONAL COLLECTOR (ADJUDICATION-II), 2015 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 1563 (2014)

Customs Act (IV of 1969)---

----Ss. 25, 32, 32-A, 79, 80, 156(1)(14)(14-A)(45) & 194-A---S.R.O. No.499(I)/2009 dated 13-6-2009---Mis-declaration in terms of unit of measurement and value of imported goods---Confiscation of goods and imposition of penalty---Importer filed 'Goods Declaration' for the imported goods, sought clearance of the same by determining the liability of taxes---Goods Declaration was selected for scrutiny, and examination report revealed that the importer had declared the Unit of Measurement (UOM) as roll, instead of Kg, which allegedly was not in accordance with 'UOM' mentioned in Pakistan Customs Tariff; and violation of the same was punishable offence under S.R.O. 499(I)/2009 dated 13-6-2009---Offending goods were confiscated, with option to the importer to redeem goods within 15 days on payment of penalty---Adjudicating Authority had observed that the declared value worked out to be more than 30%, redemption fine along with addition of duty and taxes was imposed at 35% as prescribed under S.R.O. 499(I)/2009 dated 13-6-2009---Wisdom behind the said SRO was to evaluate, not a quantum of loading, but the quantum of under invoicing that was required to be determined for invoking penal action in excess of under-invoicing if it was 30%---In the present case, fine could be imposed on the goods with the simple ground that the extent of difference between the declared and ascertained value, would come to 23.53% which equated up to 20% of the difference---Adjudicating Authority, in circumstances, passed impugned order with least application of judicious mind, and made the observation perverse to the evidence and failed to consider the criteria of the formula prescribed for such kind of assessment value---To establish "untrue statement and mis-declaration" in terms of S.32(2) of Customs Act, 1969, there must be evidence and mens rea; and evidence of collusion---No evidence about the element of mens-rea as well as collusion was found in the present case---Adjudicating Authority passed the impugned order with least application of judicious mind, pitch of fine and penalty imposed, not corresponded with gravity of offence---Impugned order was modified---Importer, would only be liable to pay adjudicated amount of additional duty and taxes accordingly.

Customs Appeal No.K-118/2008 dated 5-4-2010; 2002 PTD (Trib.) 3077; 2007 SCMR 1357 = 2007 PTD 1858; 2008 PTD 1478; 2004 PTD 2993; Superior Textile Mills Ltd. v. FOP 2000 PTD 399; Collector of Sales Tax and others v. Superior Textile Mills Ltd., and others PLD 2001 SC 600; Saleem Raza v. FOP and others 2012 PTD 302; Messrs Weave and Knit (Pvt.) Ltd. v. Additional Collector of Customs (Adjudication) Karachi and others 2004 PTD 2981; Messrs Liver Brothers of Pakistan Ltd. v. Customs, Sales Tax and Central Excise Appellate Tribunal and others 2005 PTD 2462; Omalsons Corporation v. The Deputy Collector of Customs (Adjudication) Karachi-SBLR 2002 Tribunal 57; Moon International v. Collector of Customs (Appraisement) Lahore PTCL 2001 CL 133; Union Sport Playing Cards Co. v. Collector 2002 YLR 2651; Al-Hamd Edible Oil Ltd. v. Collector 2003 PTD 552; A.R. Hosiery Works v. Collector of Customs (Export) 2004 PTD 2977; Ibrahim Textile Mills Ltd. v. F.O.P. PLD 1989 Lah. 47; Central Board of Revenue v. Jalil Sheep Co. 1987 SCMR 630 and Cargill Pakistan Seeds (Pvt.) v. Tribunal 2004 PTD 26 ref.

Muhabbat Hussain Awan for Appellant.

Abdul Ghani for Respondent.

Date of hearing: 10th November, 2014.

ORDER

MUHAMMAD NADEEM QURESHI, MEMBER (JUDICIAL-I).--We intend to dispose of the instant appeal filed by Messrs Soor Ghar Traders, against the Order-in-Original No. 63521/2013 dated 31-1-2013 passed by the Additional Collector Adjudication-II, Customs House, Karachi.

2.Brief facts of the case are that importer Messrs Soor Ghar Traders (NTN-3334005) electronically filed a Goods Declaration bearing CRN No. KCSI-HC-90499-08012013, for the import of PVC Coated Fabric, quantity 821 Rolls at unit value declared as US$ 32.8870/Rolls. The importer sought clearance of the same under section 79(1) of the Customs Act 1969, by determining the liability of taxes at their own. In order to check as to whether the importer has correctly paid the legitimate amount of duties and taxes and importability of the subject impugned goods, the under reference GD was selected for scrutiny in terms of section 80 of the Customs Act, 1969. Scrutiny of the Goods Declaration, in the light of examination report revealed that the importer had declared the Unit of Measurement (UOM) as roll instead of Kg. The misdeclaration of the unit of measurement which is not in accordance with UOM mentioned in Pakistan Custom Tariff is a punishable offence as defined under Sr. No.1 B(g) of S.R.O. 499(I)/2009 dated 13-6-2009. Furthermore, Custom Value which is ascertained in instant case as US $ 3/kg is almost 100% higher than the declared value, hence the importer had also misdeclared the value of the impugned goods. It is pertinent to mention that in PaCCS while filing the GD, it is mandatory for the importers to provide the correct relevant information / data but in the instant case the importer deliberately concealed the required information i.e. weight in this automated environment just to avoid higher tariff rate. Aforesaid facts proved that the importer had deliberately mis-declared the unit of measurement and value to suppress the taxes and attempted to evade an amount of Rs.1330141. The value as per ninety days data available in the system of the offending goods comes to Rs. 7009440.

3.The Additional Collector of Customs, Adjudication, Customs House, Karachi, vide Order-in-Original No. 63521/2013, passed the order as under:--

"I have carefully gone through the case record including the written reply of the importer as well as comments thereon by the Department and have also heard patiently the verbal submission of both sides. It has been alleged that the importer has misdeclared in terms of unit of measurement and value of the instant consignment. The representative of the importer while denying the allegation argued that examination of goods has confirmed that there is no difference in the number of rolls declared and ascertained and accordingly the declaration of UOM is inconsequential. He contended the ascertained value of the goods on the basis of past clearances cited by him. His grievance regarding valuation has been addressed after confirmation of AV as US$1.5/kg. The difference between that ascertained value also confirmed by the trader himself, and the declared value works out to be more than 30%. Also, there is no denying of the fact that UOM of goods has not been declared in accordance with that given in Customs Tariff. In the light of above discussion, I am convinced that the charges levelled in the show-cause notice stand established. Accordingly the offending goods are confiscated under clauses 14,14A and 45 of section 56(1) of the Customs Act, 1969 for violation of provisions of Sections 32(1), 32(2), 32(A) and 79(1) ibid. However, an option is given to the import or to re down goods under Section 181 of Customs Act, 1969 within 15 days of this Order on payment of a fine equal to Rs.1.226,652 @ 35% of the ascertained value (Rs.3,504,720) of offending goods. The redemption fine so offered is as prescribed at S. Nos. 1(d) and 1(g) of Table of S.R.O. 499(I)/2009 dated 13th June 2009 and will be in addition to duty and taxes otherwise leviable on goods. A penalty of Rs.300,000 is also imposed under clauses (14) and (14A) of Section 156(1) of Customs Act, 1969 on the importer."

4.Being aggrieved and dissatisfied with the impugned order-in-original the appellant filed the instant appeal before this Tribunal on the grounds incorporated in the Memo. of Appeal.

5.On the date of hearing Mr. M.H. Awan, Advocate appeared on behalf of the appellant reiterated and adopted the contents of facts and grounds mentioned in the Memo. of Appeal. He further contended that the appellant is regular importer of fabric of various types and known as renowned importer of this product in Pakistan. He also argued that the declared value is transactional value which cannot be enhanced without written evidence as well as support of 90 days computerized data and prior information of importer. The value is enhanced arbitrarily without disclosing the evidence or giving reasons of such enhancement which is liable to be set aside.

6.He further contended that the case of enhancement of value, the Assessing Officer should have referred the case to Valuation Directorate under Section 81 of the Custom Act, 1969, but he did not do so. Fairly speaking, he has violated the requirements of Section 81 of Custom Act, 1969. He further argued that the Adjudicating Officer has crossed the limits of his powers and violated the provisions of Section 25 of the Custom Act, 1969 as he has passed order-in-original which is ab anitio illegal and against the prevailing practice of Custom House and the same is liable to be set aside. He also argued that the concerned Deputy Collector and Principal Appraiser have categorically confirmed in writing that as per prevailing practice and available 90 days computerized data, the correct, assessable value of the goods was US$1.5/Kg, But respondent has arbitrarily enhanced the value @ US$ 3/Kg without recording any reason in his order-in-original.

7.The Advocate for the appellant referred that, on the same issues, that it is held by Honourable Appellate Tribunal Karachi in Customs Appeal No.K-118/2008 dated 5-4-2010 as following:--

"Rejection of value without production of evidence has been held to be inadmissible and of no legal significance in terms of the judgments of the Hon'ble High Court reported as 2002 PTD 1464 and 2004 PTD 2592 and 2007 PTD 1858."

8.He further contended and argued that the Declared value of the consignment of 22500 Kg is US$ 27000 i.e. US$ 1.2/Kg and 90 days data value is US$ 1.5/Kg, therefore, difference between declared and ascertained value is 20%. As per S.R.O 499 (I)/2009 dated 13-6-2009, penal action under section 32 of the Custom Act, 1969 will not be initiated in case where difference of ascertained and declared value is less than 30%. Therefore invoking of Section 32 of the Custom Act and imposing of penalty under S.R.O. 499/2009 are illegal which are required to be set aside. He further argued that the correct goods declaration with correct description of goods is undisputed as per examination report and the appellant did not misdeclared any material particular, therefore, penal action for mischief of Section 32 of Custom Act, 1969 does not warrant. He prayed that the order-in-original is not maintainable in the eyes of law and therefore liable to be set aside.

9.The Advocate for the appellant referred the various decisions of courts and Section 25 of the Custom Act, 1969 which provide guidance for determination of transaction value as follows:--

(i)A transactional value cannot be rejected because there are some contemporaneous imports at higher price. It has to be shown that invoice price is not genuine and does not show the real price paid for the imports.

(ii)An invoice price cannot be routinely discarded except on the strength of a clear evidence that the invoice is not genuine and it does not show the real price as has been transacted between the importer and foreign supplier and that something else has passed clandestinely between the importer and foreign supplier.

(iii)The plea of enhancement is not tenable where no evidence has been produced to justify any enhancement of the invoice value of imported goods.

(iv)No evidence to show that the disputed transaction is false or is an outcome of a fraudulent activity, has been produced by the customs they have only relied upon a previous transactional value having no relationship with the changed scenario between the imports and export, no evidence exists to reject the commercial documents represented by the appellants, the impugned orders suffers from serious illegalities the same is therefore accordingly set aside 2002 PTD (Trib.) 3077.

(v)Rejection of declared value of goods and fixation of its enhanced value without disclosing adequate material or reason is arbitrary, whimsical, capricious and incomplete disregard of Section 25. 2007 SCMR 1357 = 2007 PTD 1858.

(vi)In the absence of material on record and a consequential speaking order affirming the impugned version of price on the basis of evidentiary material, an importer ought not to be saddled with an attributed value to sustain liability. 2008 PTD 1478.

(vii)The enhancement in value made on the recommendation of a Committee not supported with any evidence, cannot be accepted by a judicial forum. 2004 PTD 2993.

(viii) Law relating to identical goods is provided in subsection (5) of section 25 of the Custom Act which comes into effect only when the value cannot be determined under section 25(1). 2002 PTD (Trib.) 3077.

10.He pointed out that the total declared value of the consignment is Pak Rs. 26, 79,927 and total assessed value is Pak Rs. 35,04,720 with difference of Rs. 8,24,793 which is 23.53% of ascertained value (3504720-2679927=824793/3504720x100=23.53%) copy of order passed in Appeal No. 2054 of 2009 dated 30-9-2009 wherein formula for calculation of percentage is determined. The threshold for taking penal action in cases of under invoicing is 30% and the extent of under invoicing in this case is 23.53%, therefore, the case falls outside the preview of Notification S.R.O 499(I)/2009. The case of mis-declaration of unit of measurement (UOM) is baseless. The importer has declared the total net weight of the consignment as 22500 Kg, therefore, there was no mis-declaration. Section 32 of Customs Act, 1969 does not invoke because there was no evasion of duty and taxes. In this case, mentioning of incorrect unit of measurement would have led to assessment on higher side. There was no mala fide on the part of appellant/importer on this account and aforesaid clause (g) is not attracted and imposition of fine was not warranted. The Adjudicating Officer has also not imposed prescribed fine @ 20% under S. No. 1(g) of S.R.O. 499(I)/2009, therefore, the contention of Adjudicating Officer is looked to be very much clear that he had not considered this omission as an offence on the part of appellant/importer. The appellant is ready to accept the assessed value of the goods and ready to pay adjudged amount of additional duty and taxes, subject to remission of fine and penalty.

11.No cross objection under subsection (4) of Section 194-A of the Customs Act, 1969 were submitted by the department/respondent. However, on behalf of the respondents, Mr. Abdul Ghani, E.O, appeared and stated that the Adjudicating Officer at the time of passing the Order-in-Original are in conformity with the legal requirements and needs not to be interfere and without prejudice prayed that the subject appeal is liable to be rejected in the best interest of justice.

12.Arguments heard by both the parties, thoroughly examined the entire case record and given careful consideration to the arguments, it has been observed that on the basis of mis-declaration as allegedly made and caused by the respondent in terms of unit of measurement and value of the consignment, at the time of passing the order the adjudicating officer from the evidences observed that the declared value worked out to be more than 30% and redemption fine along with the addition of duty and taxes was imposed @ 35% as prescribed in the S.R.O. 499(I)/2009 dated 13-6-2009. For better understanding to conceive the wisdom given by the legislature behind their mind the contents of the subject SRO required to be placed here where an option is given to pay fine in lieu of confiscation, in respect of offences specified in column (2) of the Table shall be at a rate specified in column (3) of that Table and shall be over and above the customs duties and other taxes and penalties imposed under the relevant law, namely:--

1. (d) value with difference of more than 30% in declared viz, ascertained value determined on the basis of direct evidence after due process of adjudication.

13.The wisdom behind the subject SRO is to evaluate, not a quantum of loading but the quantum of under-invoicing that is required to be determined for invoking penal action in excess of under invoicing if it is 30 %. In this present case, according to the formula which was in fact declared for the calculation of such kind of quantum defines as AV-AD---X/AVx100, customs value mentioned in the invoice, fine can be imposed on the goods in the simple reason that the extend of difference between the declared and ascertained value, according to the said formula in the present case the difference in between declared value and ascertained value comes to 23.53% which equate up to 20% of the difference. Since the threshold for taking penal action in cases of under invoicing. In this case difference is 23.53%, as such the case falls outside the purview of notification SRO-499(I)/2009 dated 13-6-2009 and the adjudicating officer passed the impugned order with least application of judicious mind and made the observation perverse from the evidence as well as fail to consider the criteria of the formula prescribed for such kind of assessment of value. However, through 1st proviso the Board through an order can specify the goods or class of goods where such option shall not be given, whereas 2nd proviso of Section 181 refers to the amount of fine which the Board may fix on any goods or class of goods imported in violation of the provisions of Section 15 or a notification issued under Section 16, or any other law for the time being in force. The 1st proviso limit the powers of the adjudicating authority with regard to certain goods or class of goods, wherein, no option for redeeming the goods be given, instead be outrightly confiscated. In 2nd proviso the Board can notify the pitch of fine through a notification on the goods imported in violation of the provision of Section 15 or notification issued under Section 16. Confirming that the Board cannot fix any pitch of fine on any goods or class of goods not falling within 1st and 2nd proviso of Section 181 of the Customs Act, 1969. The goods imported through the instant consignment by the appellant are not those of Section 15 nor of those where any notification has been issued under Section 16 of the Customs Act, 1969 or any other law for the time being in force. Instead a case of sections 32 and 32A of the Customs Act, 1969, for which Board is not empowered to issue notification with fixation of pitch of fine under Section 181 ibid. The legislature intentionally left the imposition of fine on the discretion of the Adjudicating Authority, who has to use that sparely and in the benefit of the tax payer as held by Superior Judicial Fora in plethora of reported judgments, rendering the fixation of redemption fine on the goods or class of goods other than of sections 15 and 16 ibid through notification No.499(I)/2009 dated 13-6-2009 as ultra vires to the provision of section 181 of the Customs Act, 1969 and as such without lawful authority as held in reported judgment 2000 PTD 399 Superior Textile Mills Ltd., v. FOP, PLD 2001 SC 600 the Collector of Sales Tax and others v. Superior Textile Mills Ltd., and others, 2012 PTD 302 Saleem Raza v. FOP and others. Notwithstanding to the fact, that it is for the legislature or the Board to revisit the provision of Section 181 or the Notification No.499(I)/2009 dated 13-6-2009 in the light of observation made in the instant judgment. The Tribunal also intend to resolve the bone of contention that what does the word "custom value" mean in the notification. Although this controversy already has been laid to rest by the Hon'ble Division Bench of the High Court of Sindh in reported judgment 2004 PTD 2981 Messrs Weave and Knit (Pvt.) Ltd., v. Additional Collector of Customs, (Adjudication) Karachi and others. In the said case the fine was imposed on the basis of total amount of duty and taxes of the consignment instead of the amount of duty and taxes evaded, under Notification No.1374(I)/98 dated 17-12-1998, which is the parent notification containing the word "value of the goods", which meant the value defined in Section 179 of the Customs Act,1969 for assuming the jurisdiction for adjudication, in the said Section, the value mean, the amount of duty and taxes involved in the consignment, i.e. the amount arrived at said to be short paid/evaded and fine has to be imposed in accordance with the evaded involved amount, while holding that in case of confiscation of goods the redemption fine was to be worked out with reference to the duty and taxes attempted to be evaded and not duty and taxes leviable on the whole consignment. The said notification was amended from time to time by the FBR and the latest notification in series is 499(I)/2009 dated 13-6-2009. No drastic changes were made in the proceeding notifications instead of number and date, the column 3 of the notification remains the same since 1998 to this date reading as "custom value" for levy of duty and taxes to be determined under Section 25 of the Customs Act, 1969, this does not mean that the determined custom value is for levy of fine instead for fine the value has to be taken as given in Section 179 ibid as this is in accordance with the provision of Section 181 of the Customs Act, 1969 and intention of the legislature and the judgment of the High Court, even otherwise the notification has to be read in harmonious manner and for the benefit of the tax payer.

14.In case of "untrue statement and mis-declaration" in terms of Section 32, subsection (2) for proof must have evidence and mens-rea and evidence of collusion and by reason of these the person should be liable to be charged under these sections. In this case no evidence about the element of mens-rea as well as collusion was never submitted nor placed in the Show-Cause Notice. The element of mens rea to be seen when a criminal liability is required to be established against a person and not for the cases of assessment whether even duty/taxes has been detected, that view was observed by the Honorable High Court of Sindh in its reported judgment of Messrs Liver Brothers of Pakistan Ltd., v. Customs, Sales Tax and Central Excise Appellate Trinual and others (2005 PTD 2462). Further perusal of section 32 of the Act reveals, that in addition to declaration any communication, or answers to questions, put by customs officers and found wrong in material terms, constitute an offence within the framework of the said section. "So, in order to bring an act, or action within the framework of the word 'false', as used in section 32 of the Act, the act should either be a conscious wrong, or culpable negligence and should be untrue either knowingly or negligently. [Omalsons Corporation v. The Deputy Collector of Customs (Adjudication) Karachi-SBLR 2002 Tribunal 57]. Mala fide and mens-rea are necessary ingredients for committing any offence, including that of smuggling. [Moon International v. Collector of Customs (Appraisement) Lahore PTCL 2001 CL 133]. There are two questions which need to be addressed before invoking section 32 of the Customs Act, 1969, for mis-declaration (a) whether mens-rea which is essential element for the purpose of subsection (1) of section 32 has been proved and (b) whether a demand for short recovery can be made under the provisions of sub-section (2) of section 32, without proving any guilty intention, knowledge, or mens-rea on the part of the maker of the statement. If element of mens-rea is not visible and guilty intention is not proved hen provisions of Section 32 cannot be invoked as held in the judgments. Union Sport Playing Cards Co. v. Collector 2002 YLR 2651, Al-Hamd Edible Oil Limited v. Collector 2003 PTD 552 and A.R. Hosiery Works v. Collector of Customs Export) 2004 PTD 2977. This celebrated principle of law in customs jurisprudence that mis-declaration charges under Section 32 of the Customs Act, 1969, shall not be invoked has now been well settled in large number of cases, i.e. Ibrahim Textile Mills Limited v. F.O.P. PLD 1989 Lahore 47, Central Board of Revenue v. Jalil Sheep Co. 1987 SCMR 630, State Cement Corporation v. G.O.P. C.A. No.43 of 1999 and Cargill Pakistan Seeds (Pvt.) v. Tribunal 2004 PTD 26.

15.By getting the strength, what has been stated and observed herein above particularly the interpretation of law and legal prepositions in the light of prescribed law and to follow the ratio decidendi in the judgments of Superior Courts along with our additional observations made thereon, we are of considered view that, the adjudicating officer passed the impugned order with least application of judicious mind, pitch of fine and penalty imposed not corresponded with the gravity of offence, we hereby order to modify the impugned order passed during the hierarchy of the customs. Appellant is only liable to pay adjudged amount of additional duty and taxes accordingly.

16.This being so, the impugned order is modified to this extent only. The appeal is accordingly disposed off in above terms with no order as to cost.

17.Order passed and announced accordingly.

HBT/178/Tax(Trib.)Order accordingly.