MUMTAZ GHANI TEXTILE (PVT.) LTD. VS COLLECTOR CUSTOMS (APPEALS)
2015 P T D (Trib.) 2360
[Customs Appellate Tribunal]
Before Chaudhary Muhammad Tariq, Chairman and Khalid Mahmood, Member (Technical)
Messrs MUMTAZ GHANI TEXTILE (PVT.) LTD.
Versus
COLLECTOR CUSTOMS (APPEALS) and another
Customs No.K-610 of 2014, decided on 08/12/2014.
Customs Act (IV of 1969)--‑
----Ss. 13(1)(c), 26, 32, 156(1)(14), 194-A & 223---Customs Rules, 2001, R.459---S.R.O. No.212(I)/2009 dated 5-3-2009, Sched. Duty drawback claim---Mis-declaration---Imposition of penalty---Exporter, who exported consignments, filed duty drawback claim under Notification S.R.O. No.212(I)/2009 dated 5th March, 2009---On scrutiny, it was found that net weight of the exported goods (gloves made of PVC with Knit wrest), came to 5 to 6 grams/pair, which was quite irrational being not in conformity with the normal/routine practice---Show-cause notice was issued to the exporter as to why your duty drawback claim should not be rejected being inadmissible---Adjudicating Authority did not agree with the reply of the exporter, on the ground that value of goods and the duty drawback/rebate amount, filed or claimed against the Goods Declaration, differed abnormally---Adjudicating Authority in view of undue rebates claimed on the basis of alleged untrue facts and declaration, penalty was imposed on the exporter under clause 14 of S.156(1) of Customs Act, 1969---Appeal filed by the exporter against order of Adjudicating Authority having been dismissed by Appellate Authority below, the exporter had filed appeal before Appellate Tribunal---Contention of the exporter was that value of exported goods and admissibility of duty drawback was on "per pair" basis and not 'weight basis' and that whole exercise of creation of impugned order, was flawed and not based on legal footings---Exporter had produced documentary evidence in support of his contentions--- Validity---Federal Board of Revenue vide letter dated 29-3-2013, categorically explained that the duty drawback rates notified in S.R.O. No. 212(1)/77009 dated 5-3-2009, were on "per pair" basis without any size, weight and grammage---Both forums below travelled beyond the allegations levelled in show-cause notice, which being unacceptable in the eye of law, was riot warranted---Representative of the department also did not deny that exporter had obtained raw material from the local market---Allegation levelled in the show-cause notice against the exporter lacked appropriate basis and were not maintainable---Both orders of authorities blow were set aside, and show-cause notice issued to the exporter was vacated, in circumstances.
Collector of Sales Tax v. Zamindar Paper and Board Mills 2007 PTD 1804 ref.
Afzal Bhatti and Farrukh Saleem for Appellants.
Mukhtar Ahmed, A.O. for Respondents.
Date of hearing: 28lh November, 2014.
JUDGMENT
CHAUDHARY MUHAMMAD. TARIQ, CHAIRMAN.---This appeal has been directed against the Order-in-Appeal No.8626 of 2014 dated 25-4-2014 passed by the Collector Customs (Appeals), Karachi.
2. Brief facts of the case are .that Messrs Mumtaz Ghani Textile (Pvt.) Limited exported the consignment bearing Nos. EG-1078261- 180709, EG- 1078234-180709, EG-1072653-130709 , EG-1072549- 130709 , EG-1062581-030709, EG-1062565-030709, EG-1028232- 030609 and EG-1024311-300509 and filed the duty drawback claim under the relevant notification.
3. On Scrutiny a case in terms of Sections 26, 32 and 13(1)(c) ofl the Customs Act, 1969 read with Rule 459 of the Customs Rules, 2001 and other relevant provisions of law was made that the net weight of the exported gloves (made of PVC with knit wrest) comes to 5 to 6 grm/pair which is quite irrational being not in conformity with the normal/routine practice.
4. Accordingly on 15-4-2013 a show-cause notice was served upon the appellant/exporter and the matter was referred to the Assistant Collector/Adjudicating Officer, Collectorate of Customs Exports Karachi who after fulfilling codal formalities passed Order-in-Original No. 01/2013 dated 2-9-2013. The operative part of the order in original has been reproduced as under:--
"In the view of above discussion the undersigned thoroughly examined the entire case record and the submissions made by both the sides, consideration has been given to the arguments advanced before me. The value of the goods and accordingly the duty drawback/rebate amounts filed or claimed against the subject GD's differ abnormally. The declared unit values or pairs of gloves are exorbitantly high that are not even conceivable but also impossible taking into consideration 20 feet container. The weight of PVC Gloves pair exported against GDs/ CRNs is between 04 to 8 grams that is impossible for a 'Knit wrist style PVC coated gloves". On the other hand the percentage of rebate/drawback as compared the value of consignment per container becomes on average 30 to 39% that is totally against the rebate/drawback regime. Such high rate of rebate/drawback has no example/precedent in rebate regime of Federal Board of Revenue. On the other hand numbers of gloves per container declared by the respondent are also very high keeping in view description i.e. "PVC Gloves Knit Wrist Style". Another major contention of department was material of exported gloves this contention of the department was based on a lab-test Report No. TPL-13-02/66 dated 27th March, 2013 as highlighted in the addendum to show-cause dated 15th April, 2013 that the exported gloves were actually made of "Polyester Fabric with one side coated" this contention of the department was very much described in the para wise comments furnished to honorable Federal Tax Ombudsman copy of which was also supplied to the Respondents but he never defended the allegations of department in this regard. The contention of the department for non-mentioning of subsection (32) of Customs Act, 1969 was examined in the light of judgment of the honorable Supreme Court of Pakistan in the case of Collector of Sales Tax v. Zamindar Paper and Board Mills (2007 PTD 1804) wherein the honorable Supreme Court has ruled that merely non-mentioning of sub-rule in the show-cause notice is not a ground/cause to declare or make a show-cause notice illegal: The purpose of the export by the respondent was to claim the rebate/drawback at exorbitant rate and to cause huge loss to the National Exchequer depriving it from much needed revenue. Therefore the charge mentioned in the show-cause notice is established as the duty draw back claims are found inadmissible, bogus, fake and phony and the same are rejected. This order is passed in the light of findings/recommendations of Honorable Federal Tax Ombudsman whose attention was sought by the respondent during adjudication proceedings by department. However the respondent can claim rebate/drawback against following CRNs or Goods declarations, as these are not related with "PVC Gloves Knit Wrist Style":--
| 1 | EG-1182677-22-10-2009 | Rs.03,847 |
| 2 | EG-1192032-30-10-2009 | Rs.15,703 |
| 3 | EG-1207406-14-11-2009 | Rs.07,262 |
| 4 | EG-1217844-23-11-2009 | Rs.09,513 |
| 5 | EG-1238460-12-12-2009 | Rs.08,723 |
| 6 | EG-1238873-13-12-2009 | Rs.09,389 |
| 7 | EG-1286968-21-1-2010 | Rs.38,424 |
| 8 | EG-1483682-23-7-2010 | Rs.05, 963 |
I, therefore, rule that the arguments advanced by the learned counsel, do not find any support from the evidence available on record and the case-law quoted by him is not relevant to the facts and circumstances of the instant case. However, in view of the facts and the undue rebates claimed on the basis of untrue facts and declaration penalty of Rs.1,500,000 (Rupees 1.5 million) is imposed on the exporter under Clause 14 of section 156(1) of Customs Act, 1969 which is to be deposited in the Government exchequer within fourteen (14) days from the issuance of this order.
5. Feeling dissatisfied with the order-in-original the appellant filed appeal before the Collector Customs (Appeals) Karachi. The appeal met the same fate and learned collector, vide order-in-appeal dated 25-4-2014, dismissed the appeal and upheld the order-in-original. Hence this appeal on the following grounds:--
(i) That the actual fact is that the exported goods were PVC gloves (Knit wrist style) and value, of such gloves and admissibility of duty drawback on their exports is on per 'pair' basis and not 'weight' basis. Therefore whole exercise of creation of impugned order which has been upheld by the respondent is flawed and not based on legal footings, as he rejected the claim of duty drawback in negation to provisions of S.R.O. 212(1)/ 2009 dated 5th March, 2009.
(ii) That the export goods (PVC Gloves) were exported to UK by the appellant and duty drawback claim was submitted under relevant SRO, as per duty drawback rates notified in the gazette notification vide Schedule VII of S.R.O. 212(1)/2009 dated 5th March, 2009. In SRO the duty drawback rates are depicted on per pair basis and the duty drawback for PVC gloves (Knit wrist Style) is mentioned at Sr.No.1 of the Schedule VII of S.R.O. 212(1)/2009 dated 5th March, 2009. The unit price of impugned gloves is well defined vide invoice value and Form "E" and Annexure "A" as per pair basis not by grams /weight basis. The Foreign Exchange was received by the appellant through his authorized Bank against per pair basis, not weight basis for PVC gloves. The respondent has rejected the duty drawback claims merely on presumption, without providing any direct/indirect evidence to the appellant.
(iii) That even the customs department itself was not convinced with the perfunctory approach of the respondent. The matter was referred by the Collector of Customs, MCC (PaCCS), to the Federal Board of Revenue, for clarification regarding duty drawback @ 0.41 per pair on PVC Gloves (Knit wrist styles) in terms of S.R.O. 212(1)/2009 dated 5th March, 2009. Vide its letter C.No.MCC/Misc/118/2008-II/AC(Export)/Pt-II dated 25th March, 2013, the FBR confirmed and clarified that the duty drawback rates notified in the gazette notification vide Schedule VII of S.R.O. 212(1)/2009 dated 5th March, 2009 are on Per Pair" basis and the PVC Gloves (Knit wrist styles) mentioned at Sr. No.1 of the Schedule VII of S.R.O. 212(I)/ 2009 dated 5th March, 2009, are notified without any size, weight and gram. Under Section 223 of Customs Act, 1969, "all officers of customs and other person employed in the execution of this Act shall observe and follow the orders, instruction and direction of the Board". Therefore, the direction of the Board had to be complied with in letter and spirit.
(iv) That the exported goods are made of PVC Gloves wherein during manufacturing the raw material such as (i) Polymer (ii) Pevikon (iii) Vinnal (iv) Socal (v) Unimoal & (6) DOP oil are used. Detailed work sheets confirming basis used of raw material, quantity, wastage and value of exported goods, exported by the exporter, unit and Kg wise, was provided to respondent. The appellant exported the goods in-question and declared them correctly on export GDs and at the time of export and examination of the in-question goods no objection was raised and no adverse remarks were depicted in the examination report generated at the time of export. The respondent accorded "allow for export permission" and "allow for loading", was granted and impugned goods were exported.
6. In addition to the above grounds, learned counsel for the appellant also produced documentary evidence in support of his contentions and prayed that appeal be accepted, and both the impugned orders be set aside.
7. Conversely, the DR appearing on behalf of respondents vehemently opposed the arguments raised by learned counsel for the appellant and prayed that the impugned orders be maintained.
8. Arguments heard. Record perused.
9. On 15-4-2013, the appellant was served with a Show-Cause Notice. Para No.2 and Para No. 3 of Show-Cause Notice are relevant which are reproduced hereunder:--
"On Scrutiny of the case made in terms of sections 26, 32 and 13(I) of the Customs Act, 1969 read with Rule 459 of the Customs Rules, 2001 and other relevant provisions of law, it has been found that net weight of the exported gloves (made of PVC with knit wrist) comes to 5 to 6 grm/pair which is quite irrational being not in conformity with the normal/routine practice.
You are therefore called upon to show cause as to why your claim should not be rejected being inadmissible on the ground mentioned above. Your written reply to the show-cause notice should reach this office within 7 days of the receipt thereof."
10. The appellant replied to the show cause notice but the Assistant Collector did not agree with the reply on the grounds that the value of the goods and the duty drawback/rebate amounts filed or claimed against the subject GDs differed abnormally. The declared unit values or pairs of gloves are exorbitantly high which is not even conceivable but also impossible taking into consideration 20 feet container. The weight of PVC gloves pair exported against GDs/CRNs is between 4 to 8 grams that is impossible for a "Knit Wrist style PVC coated gloves". On the other hand, percentage of rebate/drawback as compared to the value of consignment per container becomes on average 30 to 39% that is totally against the rebate/drawback regime, and passed the order-in -original.
11. Thereafter the appellant went in appeal which met the same fate and the learned collector (Appeals) Karachi dismissed the appeal and observed that:-‑
"I myself explored the internet looking for this particular item i.e. "PVC Gloves (with knit wrist)" and with a little effort deduced that such gloves may vary in weight from 25 grams/ pair to 55 grams/pair with a much higher value than the value given by the appellants. However I, do not observe any pair weighing even close to 5-6 grams/pair as in the case under discussion. The only type of gloves which matched the weight under discussion were "disposable latex examination and disposable latex surgical gloves" weighing between 5-10 grams".
12. This Tribunal has minutely scanned the record of the case. Show cause notice was issued on 15-4-2013. The relevant part i.e. the allegation against the appellant has been mentioned in Paras Nos. 2 and 3 of the show cause notice which are reproduced as under:--
(i) "On Scrutiny of the case made in terms of Sections 26, 32 and 13(I) of the Customs Act, 1969 read with Rule 459 of the Customs Rules, 2001 and other relevant provisions of law, it has been found that net weight of the exported gloves (made of PVC with knit wrest) comes to 5 to 6 gram/pair which is quite irrational being not in conformity with the normal/routine practice.
(ii) You are therefore called upon to show cause as to why your claim should not be rejected being inadmissible on the ground mentioned above. Your written reply to the show-cause notice should reach this office within 7 days of the receipt thereof."
13. About the discrepancy of weight, the matter was referred to the Federal Board of Revenue, which vide letter dated 29-3-2013 categorically explained that the duty drawback rates notified in S.R.O. 212(1)/2009 dated 5-3-2009 are on per pair basis without any size, weight and grammage. The clarification of FBR is reproduced as under:-‑
Government of Pakistan
(REVENUE DIVISION) FEDERAL BOARD OF REVENUE
******
C.No. 3(33)DRD/2008/40367Islamabad, the March 29,2013.
From Dr. Tahir Qureshi,
Secretary (DRD)
ToThe Collector,
Model Customs Collectorate of PaCCS,
Customs House, Karachi.
Subject: CLARIFICATION REGARDING DUTY DRAWBACK 0.41 PER PAIR ON PVC CLOVES (KNIT WRIST STYLE) IN TERMS OF S.R.O. 212(1)/2009 DATED 5-3-2009.
I am directed to refer to your letter C. No MCC/Mist/118/2008 11/AC(Export)/Pt-I] dated 25-3-2013 on the subject noted above.
It is clarified that the duty drawback rates notified in the gazette notification vide Schedule VII of S.R.O. 212(1)/2009 dated 5-3-2009 are on "per pair" basis and the PVC gloves (knit wrist style) mentioned at Sr. No.1 of the Schedule VII of S.R.O. 212(1)/2009 dated 5-3-2009 is notified without any size, weight and grammage.
Sd/-
(Dr. Tahir Qureshi)
Secretary (Duty Remission and Drawback)
14. The fact of the matter is that admittedly, the exported goods were PVC gloves (knit wrist style). The value of such gloves and admissibility of duty drawback on their exports is on per 'pair' basis and not on the basis of 'weight' as further clarified by the Federal Board of Revenue vide its letter dated 29-3-2013, both the forums below travelled beyond the allegations leveled in the Show-Cause Notice; which being unacceptable in the eye of law is not warranted. DR has also not denied that appellant has obtained raw material from the local market and after 210 days of the export, the appellant claimed the drawback as mentioned on the GDs.
15. The upshot of above discussion is that this Tribunal is of the unanimous opinion that the allegations leveled in the show-cause notice against the appellant/exporter lack appropriate basis and are unmaintainable. Therefore, this appeal is accepted. The order-in-original dated 5-4-2014 and order-in-original dated 2-9-2013 are hereby set aside and the show-cause notice is vacated.
16. Announced.
17. Parties may be informed accordingly.
HBT/176/Tax(Trib.)Appeal accepted.