A. QAYYUM AND SONS VS COLLECTOR OF CUSTOMS COLLECTORATE OF CUSTOMS (ADJUDICATION-II), 2015 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 2474 (2015)

Customs Act (IV of 1969)---

----Ss. 32, 156(1)(14), 194-A, 202 & 209---S.R.O. 480(I)/2007 dated 9-6-2007, S.R.O. 525(I)/2008, dated 11-6-2008---Imposition of penalties on Clearing Agents on allegation of facilitating the importer in alleged illegal designs---Collector Customs (Adjudication) after fulfilling codal formalities, imposed penalty of Rs.100,000 each, who were Customs House Clearing Agents, on ground that they facilitated the importer in his illegal designs---Validity---Sole function of Clearing Agent was to prepare the goods declaration on the basis of import documents, showing the description of goods, its weight, quantity, value and PCT Headings, which they had done---Importer had sold the imported raw material in open market, instead of using the same in manufacturing---Clearing Agent was not responsible for the subsequent treatment of goods imported by his client, whether the importer utilized the imported goods in manufacturing or disposed of in the local market---Cogent evidence was required for holding a Clearing Agent liable for act of commission or omission---Imposing of penalty of Rs. 100,000 on each appellant/Clearing Agents in circumstances, was unjustified---Prosecution had failed to point out any evidence of mens rea against appellants/Clearing Agents---Appellants were charged on a presumptive collusion, which was not warranted under the law---Impugned order to the extent of imposing penalty upon the Clearance Agents/appellants, was set aside.

Muhammad Younis Rao for Appellants.

Abdul Rashid I.O. for Respondents.

Date of hearing: 7th January, 2015.

JUDGMENT

CHAUDHRY MUHAMMAD TARIQ, CHAIRMAN, ISLAMABAD.---These appeals have been directed under section 194-A of the Customs Act, 1969, against Order-in-Original No.10 of 2013 dated 7-8-2013. All the above appeals are identical in nature. Therefore, all the above appeals are hereby decided by this single consolidated judgment.

2. Briefly the facts of the case are that the Directorate General of Intelligence and Investigation FBR (Regional Office), Karachi reported that in pursuance of an information that miscellaneous taxable goods/ ready-to-sell food/spices items were being imported and cleared by M/s. Marcs International as raw material for in house consumption without payment of value addition tax and on payment of reduced rate of income tax as applicable to industrial concerns under Sales Tax Special Procedure Rules, 2007, vide S.R.O. 480(I)/2007, dated 9-6-2007, read with S.R.O. 525(I)/2008, dated 11-6-2008. However, the finished items like almonds, cloves, black pepper, mace, ground nut kernels, small cardamom, peanut kernels, dry coconut, cassia whole, copra, tamarind, coriander seeds, sago seeds, cinnamon, desiccated coconut, caraway seeds, betel nuts, children shoes, gum copal, monosodium glutamate, sodium formaldehyde sulfoxylate, medical herbs and crude drugs, fennel seeds imported and cleared by the importer were subsequently disposed of by him locally.

3. The matter was adjudicated upon. The Collector Customs (Adjudication-I), Karachi after fulfillment of codal formalities passed the impugned order, the relevant portion has been reproduced as under:--

11. "In view of foregoing and taking into account that no manufacturing facility was found at the registered address together with the statement of the premises owner that when the importer had a manufacturing facility on the said premises, he never dealt in spices / food items but instead dealt in textile / hosiery only, I find that the charges as detailed in the show cause notice stand established.

12. 1 therefore order Messrs Marcs International situated at 215, 2nd Floor, Panorama Centre, Fatima Jinnah Road, Karachi to pay Rs.42,850,278 (Additional Sales Tax of Rs.2,23,42,870 and Income Tax of Rs. 2,05,07,408) under section 32 of the Customs Act, 1969, Section 36 of the Sales Tax Act, 1990, Sections 148 and 161(2) of the Income Tax Ordinance, 2001, read with Section 202 of the Customs Act 1969. I also impose penalty of Rs.5,000,000 (Rupees five million only) under clause 14 of the Customs Act, 1969.

13. Though the submissions made by the clearing agents that they had prepared Goods Declaration on the basis of documents furnished by the importer including Sales Tax Registration which showed the status of the importer as manufacturer as well and that they had not connived in any mis-declaration leads me to give benefit that they might not have colluded to mis-declare and thereby evade taxes, nonetheless, I find them negligent to observe that the importer who was importing substantial quantities of raw materials through them under concession as "manufacturer" did not deal in manufacturing of those raw materials/goods nor did he have a manufacturing facility for them. I therefore, impose a penalty of Rs.100,000 (Rupees one hundred thousand only) each on the four Custom House Agents, Messrs Younus Sons, Messrs Ahsan International, Messrs Qayyum and Sons and Messrs KAKA Traders under clause 14 of section 156(1) of the Customs Act, 1969."

4. Hence these appeals on the grounds mentioned in the body of appeal.

5. Arguments of both the parties heard and record perused.

6. The appellants who are clearing agents have assailed the impugned order, whereby a personal penalty of Rs.100,000 each was imposed upon them on the ground that the appellants facilitated the importer in his illegal designs. The appellants prepared Goods Declaration on the basis of documents furnished by the importers and as a result, the importer sold the raw material in the open market instead of using the imported raw material in manufacturing, which is result of negligence of appellants.

7. This Tribunal do not agree with the findings of learned Collector, because the sole function of clearing agent is to prepare the Goods Declaration on the basis of import documents, showing the description of goods, its weight, quantity, value and PCT Headings. We fully agree with the argument of learned counsel for the appellants that the clearing agent is not responsible for the subsequent treatment of the goods imported by his client that whether the importer utilize the imported goods in manufacturing or disposes of in the local market.

8. This Tribunal is also of the opinion that to hold a clearing agent liable for the act of commission or omission, cogent evidence is needed.

9. To further elaborate the issue, we will like to reproduce section 209 of the Customs Act, 1969, for a ready reference.

"Liability of principal and agent.---(1) Subject to the provisions of sections 207 and 208, anything which the principal is required or empowered to do under this Act may be done by any person expressly authorized by the principal for the purpose.

(2) Where this Act requires anything to be done by the principal and if any such thing is done, by an employee or representative expressly authorized by the principal under subsection (2) of section 208, unless the contrary is proved, shall be deemed to have been done with the knowledge and consent of such principal so that in any proceedings under this Act, the principal shall be liable as if the thing had been done by himself.

(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 willful act, negligence or default of the agent, such duty shall not be recovered from the agent."

10. The upshot of above discussion is that imposing of penalty of Rs.100,000 on each appellant in this case is unjustified. The prosecution has failed to point out any evidence of mens rea against the appellants. The appellants in this case were charged on a presumptive collusion which is not warranted under the law. Therefore, all these appeals are allowed. The impugned order to the extent of imposing penalty upon the clearing agents/appellants is set aside.

HBT/10/Tax(Trib.)Appeals allowed.