M.M. SILK MILLS (PVT.) LTD. VS DEPUTY COLLECTOR OF CUSTOMS, 2015 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 1817 (2014)

Customs Act (IV of 1969)---

----Ss. 25, 81 & 194-A---Provisional determination of classification of imported goods---Value of goods and liability of importer---Importer, imported a consignment, filed Goods Declaration, and got cleared goods against an undertaking to the effect that the matter would be referred to the classification centre for determination of classification of the imported goods; and that importer would pay the differential amount of customs duty, taxes, if required as a consequence of the determination of classification---P.C.T. Committee, ruled vide Public Notice, that goods imported in the case were correctly classified---Subsequently, after more than one and half years, importer, vide impugned order was asked to pay differential amount---Validity---Under S.81(2) of Customs Act, 1969, assessment in the case, was required to be finalized within six months of the date of provisional determination---Assessment finalized after one and half years, was violative under the law, in circumstances, when goods were released provisionally under S.81 of the Customs Act, 1969, it was mandatory duty and legal obligation of the department to issue notice for demand/recovery for any discrepancy, which was found in the case, subject to the prescribed period of limitation of six months, but same had not been done, in the case---Matter having not been finalized within stipulated period of six months, provisional determination, had attained finality, in circumstances.

M.H. Awan for Appellant.

Ghulam Yasin, P.A., for Respondents.

Date of hearing: 4th September, 2014.

ORDER

MUHAMMAD NADEEM QURESHI, MEMBER (JUDICIAL-I).--This order will dispose of Customs Appeals Nos.K-732 and 733/2011 filed by the Messrs M.M. Silk Mills (Pvt.), Ltd., against the Order-in-Appeals Nos.5275 to 5276 of 2011 dated 11-5-2011, passed by Collector of Customs (Appeals), Karachi. These appeals have identical issue of law and facts therefore, being heard dealt with and dispose of simultaneously though common order in the light of the judgment of the Honourable High Court of Sindh in Customs Reference No.157 of 2008, S.M. Naqi son of Syed Muhammad Hussain, Karachi v. Collector of Customs (Adj-I) and others.

2.Brief facts of the case are that the appellant imported a consignment declared to contain Floprint TA-160 (pigment thickner) weighing 91000 Kgs from the UAE and filed a Goods Declaration (GD) bearing No.HC-KAPR-HC-1864 dated 21-8-2008 for clearance thereof at declared value @ US$ 26845 (Pak Rs.20,12,485) under PCT heading 3906.9030 attracting customs duty @ 0% Sales Tax @ 0% in terms of S.R.O. 509(I)/2007 dated 9-6-2007. The goods were cleared against an undertaking to the effect that the matter would be referred to the Classification Centre for determination of classification of the goods and that the appellant would pay the differential amount of duty / taxes if required as a consequence of the aforesaid determination of classification. Subsequently, the PCT Committee ruled, vide Public Notice No. 06/2009, that the goods imported in this case were correctly classifiable under PCT heading 3906.9040. Since the goods were subject to 10% customs duty and benefit of Notification S.R.O.509(I)/2007 dated 9-6-2007 was also not available to the same, the appellant was asked to pay the differential amount of Rs.1,273,140 vide the impugned order. The operative part of the same is reproduced as under:--

"I have gone through the record available and found that due opportunity was provided to importers for persisting their view point but the importers or their authorized representative failed to prove their claim documentary in support of their defence. On the basis of record, the allegation in the show-cause notice stands established. Therefore the importer is hereby directed to make payment amounting to Rs.606, 656 in terms of above mentioned provision of law".

3.Dis-satisfied with the impugned Order-in-Original, the appellant filed an appeal before the Collector (Appeals), Karachi, who his Order-in-Appeal hold the impugned order and rejected the same. The operative part of the order read as under:--

"I have thoroughly examined the entire case record and have given very careful consideration to the arguments advanced before me. It is an admitted position that the goods were allowed to be conditionally cleared under PCT heading 3906.9030 as per the appellant's declaration on payment of customs duty @ 0% and on zero rating of sales tax in terms of the above referred notification on the strength of an under taking to the effect that the matter would be placed before the PCT Committee of the Custom House for determination of classification of the goods and if the aforesaid Committee determined classification of the goods under PCT heading 3906.9040 the appellant would pay the differential amount of duty/axes on demand by the department. Subsequently, the PCT Committee determined, vide Public Notice No.2006/2009, classification of the goods under PCT heading 3906.9040. Therefore, the appellant was bound by his own word to pay the differential amount of Rs.1,273,140 as there is no dispute as to the amount of duty/taxes payable under the aforesaid PCT heading. The appellant's argument that the above mentioned public notice could not be applied retrospectively is without merit as the goods imported by the appellant had been conditionally cleared subject to determination of classification by the PCT Committee and by no stretch of imagination the matter could be treated as closed. The argument regarding provisional assessment of the goods in terms of section 81 of the Act and non-observance of the time limit prescribed therein is equally belied by the evidence on record: there is nothing on the Goods Declaration to suggest that the goods had been provisionally assessed under section 81 of the Act: instead, the same had been conditionally released subject to determination of classification of the goods by the PCT Committee on the specific request and in execution of a specific undertaking submitted by the appellant in this regard. For the foregoing reasons, I rule that the arguments advanced by the learned counsel, reproduced at para 3 above, are untenable and that the short-paid amount of Rs.1,273,140 is recoverable from him under the law. Consequently, I hold that the impugned orders are correct in law and on facts and there is no reason to interfere with the same. The appeals are rejected accordingly."

4.Being aggrieved and dis-satisfied with the impugned Order-in-Appeal the appellant filed the instant appeal before this Tribunal on the grounds incorporated in the Memo. of Appeal.

5.On the date of hearing, on behalf of the appellant Mr. M.H.Awan, Advocate appeared and reiterated the grounds of appeal and argued that the subject impugned goods after filing the Goods Declaration (GD) in August. 2008 were released provisionally under section 81(2) of the Customs Act, 1969. The assessment was required to be finalized within 6 month, but admittedly the assessment was finalized after one and half year, which is voilative under the law and under this violation the Superior Courts in the different judgments observed and held that, the declared assessment of the importer is required to be accepted. He also stressed on the point that the impugned Order-in-Original was passed on the basis of a Public Notice No.06/2009, wherein PCT heading has been changed from 3906.9030 to 3906.9040. He strongly emphasized neither the said Public Notice is related to our import (Floprint TA-160) nor the test reports/results quoted in the said Public Notice are of drawn from our consignment. As such, the reliance attributed by the department, with reference to the test report also not applicable specially as Para-2 of CGO No. 12/2002, the classification Committee's decisions are not applicable retrospectively. He further contended and argued that in terms of Para 74 of CGO 12/2002 the consistent practice of PCT heading cannot be changed abruptly and for making a change in an established practice, prior doing so, the department shall issue notice which is mandatory under the law. He also emphasized on the point that the claimed exemption on the impugned goods is available and there is no dispute about its specification and application and as such even otherwise the change of PCT heading does not effect the exemption available to the goods. He further contended that Note No. (i) of Schedule VI of the Sales Tax Act, 1990, clearly says that the exemption shall admissible on the basis of description of goods as mentioned in column (ii) of the Schedule/SRO and PCT headings are only provided for ease of reference. On the basis of the arguments he prayed that the Deputy Collector while passing the Order-in-Original reluctantly failed to consider the substantial evidence and passed the said impugned order arbitrarily without considering the legal prospective of law and statute. The learned Collector while passing the impugned order also observed about the dispute that there is nothing on record that the Goods Declaration (GD) had been provisionally assessed under section 81 of the Customs Act, 1969, but the same had been conditionally released that aspect is perverse from evidence and as such both the orders are liable to be set aside and prayed that the subject appeal may please be allowed in the interest of justice.

6.On behalf of the respondents/department Mr.Ghulam Yasin, Principal Appraiser appeared and contended the contents of counter objections and relied on the same. He further argued that at the time of import of subject impugned goods the department was of the considered view that the goods were classifiable under PCT heading 3906.9040 attracting customs duty and the exemption in terms of Notification S.R.O.509(I)/2007 dated 9-6-2007 was not available to the subject goods. However, as a measure of trade facilitation the goods were allowed to be conditionally cleared under PCT heading 3906.9030 as per the appellant's declaration executed in shape of bond and on the strength of that undertaking the matter was placed before the PCT Committee of the Custom House for determination of classification of the goods. He also pointed out that the appellant categorically undertakes that if the aforesaid Committee determines classification of the goods under PCT heading 3906.9040 the appellant would pay the differential amount of the duty and taxes on demand by the department. On other issue raised by the appellant through their arguments he stated that the same were aimed only diverting attention from the real issue involved in the cases and in fact afterthoughts. He accordingly pleaded that the impugned orders may be upheld and the appeal may be dismissed in the interest of justice.

7.Arguments heard and concluded after the perusal of the record as well as scrutiny of the show-cause notice and observations made during the hierarchy of the customs passed through order-in-original as well as the Order-in-Appeal, being a custodian of law it is important for me to clarify some of the legal ambiguities which are apparently available on the surface. Evidently the Public Notice No.06/2009 has been issued on 29-7-2009, that Public Notice is with regard to the dispute about classification of the product namely "Lyoprint PTRV" (Alcoprint PTRV) pigment printing thickener. According to that Public Notice, the Committee relied on the test reports and the literature provided by the importer, Committee observed that the goods being Acrolie Polymer falls under classifiable under PCT heading 39.06 and to this extent there is no dispute. However, the dispute lies in determination of classification of sub-headings as indicated in the said Public Notice. Committee placed the Lyoprint PTRY under PCT heading 3906.9040. It is also evident from the record that samples were not recovered from the impugned consignment imported by the appellant nor report is available on record to cause any distinction about any alteration in the PCT heading, admittedly the appellants' goods were declared as Floprint TA 160 (pigment thickner) and the Committee placed the subject goods in the said Public Notice under the PCT heading 3906.9030 as "pigment thickner" and the observations thereon made and caused during the hierarchy of the customs are perverse from the evidence and are derogatory in its true nature, on part of the department. The other ground taken by the respondent/department about the provisional release and denial to treat the same as provisional assessment/release as per Section 81 of the Customs Act, 1969 does not have any warrant under the law. It is statutory obligation assigned and defined by the legislature which can never been avoided for dispensation of authority during the course of duty by the officers of the customs. Admittedly in the show-cause notice the appellant was called upon to deposit the differential amount under Section 81(3) of the Customs Act, 1969. By invoking that jurisdiction, clearly reflected the transgressional attitude and behavior on part of the department and by no starch of imagination the matter could be treated otherwise.

8.It is further observed that methodology of ruling in order to implement the recommendations regarding the introduction of the program for binding pre-entry classification, information and improvement required to be done under certain procedure as laid down in Chapter II Para-2 of CGO 12 of 2002. In this instant case the PCT Committee after detailed deliberation assailed that the pigment thickner shall be classified under PCT heading 3906.9030 through a Public Notice No.06/2009. It is mandatory under the aforesaid CGO that, the classification determined by the Committee shall be subject to approval by Collector of Customs Appraisement. After approval by the Collector the Ruling shall be communicated in writing to the importer and all Customs Collectorates as soon as possible but not later than 10 days of the approval by the Collector. It is also mandatory that the importer or their representative shall also invite for discussion by Classification Committee before making any decision. The decision of the said Classification Committee will be binding on the authorities for a Period of one year from the date of its issue. It is also mandatory under the Rules that in certain cases whether the Ruling constitute a change in the existing practice, such change in practice will not have retrospective effect but will be applicable from the date of the Ruling. In this case all prescribed para-meters and rules are vividly denied and found derogatory through their acts and omissions. In the light of the interpretation of law which is a continuous process and till a period it is not altered it shall be effective from the date of its doing so, such orders would have no retrospective effect.

9.Now coming the point of Section 81 of the Customs Act, 1969 the provisional determination of the liabilities were evidently performed by the department at the time of release of the said impugned goods and the importer accordingly submitted the undertaking and the department accepted the importers request. It is the mandatory duty of the respondent and have legal obligations when the goods were released provisionally under Section 81 of the Customs Act, 1969, department could have issued the notice for demand/recovery under Section 81 for any discrepancy which was found in the case subject to the period of limitation prescribed under/by Section 81, on that particular point the Honourable High Court in the case of Messrs Abdul Aziz Ayoub v. Assistant Collector reported at PLD 1990 Karachi 378 which confirmed in Messrs Hussain Trading v. Central Board of Revenue reported as 2004 PTD 1979. The same point has also been observed by the Honourable High Court of Sindh in the case of Messrs Abdul Sattar v. Federation of Pakistan and 2 others reported as 2000 PTD 2006 CL 456 where its was held that "any agreement for the payment of the tax not recoverable under the tax statue would be repugnant to Article 77 of the Constitution of Pakistan, after expiry of its period of one and half years neither the final assessment can be made under Section 81 of the Customs Act ibid nor any action for the recovery by co-called short levy duty and taxes can be initiated under section 32 or section 72 of the Contract Act, 1872. In case of any violation that should be declared as violation of statutory obligations and in any manner when such kind of violations should be caused that shall never been considered or to be declared as technical violation, but it should be considered and declared only as legal violation.

10.It is well settled law that if the matter there under is not finalized within the stipulated period, then the provisional determination was deemed to have become final. The honourable Sindh High Court had came to the same conclusion as before namely that if the matter under section 81 was not finalized within the stipulated period, the provisional determination attained finality. Since the Rehan Umar case was decided by a Division Bench, the matter of the proper interpretation of section 81, as presently relevant, stood decided. This position has been reconfirmed in the Dewan Farooque case (supra) and to Collector of Customs v. Pak Arab Refinary 2010 PTD 900. Therefore, the provisional determination has attained finality in the impugned case as well and final assessment by the learned respondent which militates this legal position has no legal value.

11.On the strength of the judgments passed by the Honourable Supreme Court and in conformity of the aforesaid observations stated and discussed herein above particularly the interpretations on a preposition referred in the light of prescribed law the case proceedings are seriously infested with inherent legal infirmities and substantive illegalities and as such the Order-in-Appeal being devoid of law hereby set aside and the appeal is allowed with no order as to cost.

12.Orders passed and announced accordingly.

HBT/126/Tax(Trib.)Appeal allowed.