ADDITIONAL COLLECTOR OF CUSTOMS VS K.S. SULEMANJI ESMAILJI AND SONS (PVT.) LTD., 2015 PTD-KARACHI-HIGH-COURT-SINDH 1276 (2014)

Customs Act (IV of 1969)---

----Ss. 33, 194-A & 196---H.S. Codes 3920-2020 & 3920-2040---Refund claim---Reference to High Court---Importer, who had imported 26 consignments, claimed assessment under H.S. Codes 3920-2020 & 3920-2040, chargeable to statutory rate of customs duty at 25%---All consignments imported by the importer, were allowed, and released on the basis of such declaration; as importer at the relevant time was enjoying the facility of "ACP" (Automatic Clearance Procedure), without scrutiny of the documents, and examination of the goods---Importer after clearance of the goods, filed application for refund of customs duty in terms of S.33 of the Customs Act, 1969, on the ground that the goods imported by him, were appropriately classifiable under H.S. Code 3920-2030 chargeable to statutory rate of Customs Duty at 20%, as against H.S. Code 3920-2020 & 3920-2040 on which the importer had paid statutory rate of customs duty at 25%---Adjudicating Authority, rejected the claim of refund filed by the importer, vide order-in-original, against which the importer filed appeal and Appellate Authority, having dismissed appeal, importer filed further appeal before Customs Appellate Tribunal, who vide common order set aside orders passed by the forums below, and allowed the appeals of the importer---Validity---Appellate Tribunal had dealt with the factual aspects, as well as merits of the case, and had arrived at a definite findings of facts, which could not be questioned or agitated any further in the present Reference application of the department---Impugned order passed by the Customs Appellate Tribunal, being based on correct appraisal of facts and proper application of law, no exception could be drawn in that regard---Reference application, was dismissed, in circumstances.

Messrs Fecto Belarus's case PLD 2005 SC 605; Abdul Ghaffar Bhundi through attorney v. Federation of Pakistan 2008 PTD 1475; Messrs A-One Feeds through Managing Partner v. Deputy Collector, Adjudicating-I Karachi and others 2008 PTD 1029; Collector of Customs, Custom House, Lahore v. S. M Ahmed and Company (Pvt.) Limited, Islamabad, 1999 SCMR 138; Messrs Gold Trade Impex v. Appellate Tribunal of Customs, Excise and Sales Tax 2012 PTD 377; Japan Storage Battery Limited v. Commissioner of Income Tax 2003 PTD 2849 and Collector of Customs v. Messrs Qasim International Container Terminal (Pak) Ltd., 2013 PTD 392 ref.

Kashif Nazir along with Ilyas Ahsan, Appraising Officer, Customs Department for Applicant.

Parvez Iqbal Kasi for Respondent.

Date of hearing: 9th December, 2014.

JUDGMENT

MUHAMMAD JUNAID GHAFFAR, J.---Through this common judgment we will dispose of Special Customs Reference Applications Nos.08 of 2011 to 33 of 2011 (26 identical Reference Applications) filed on behalf of the applicant against the common order dated 20-8-2010 passed by the Customs, Excise and Sales Tax Appellate Tribunal, Karachi Bench-II in Customs Appeals Nos. K-550 to 575 of 2010 as they involve common controversy and questions raised on behalf of the applicant. The applicant in the aforesaid Customs Reference Application(s) proposed six questions, however, at the time of hearing of the aforesaid reference application(s), learned counsel for the applicant has pressed only three questions i.e. questions Nos. (i), (ii), and (v), which according to learned counsel, are the questions of law arising out of the impugned order of the Customs Appellate Tribunal dated 20-8-2010. The said questions are reproduced hereunder:--

(i)Whether for the purpose of classification in the First Schedule to Customs Act, 1969 (IV of 1969), the Board is final authority to determine classification of any item meant to be imported or exported or not?

(ii)Whether on the facts and circumstances of the case the learned Single Bench of Appellate Tribunal traveled beyond its jurisdiction to set aside the Classification Ruling issued vide Public Notice No.12/2009 dated 15-12-2009 by the Collectorate?

(iii) Whether on the facts and circumstances of the case, the learned Tribunal erred in law to allow refund without fulfillment of statutory requirement under Section 19-A of the Customs Act, 1969, which was settled by the Hon'ble Supreme Court of Pakistan in case of Messrs Fecto Belarus's case (reported as PLD 2005 SC 605)?

2.Briefly, the facts of the case as stated are that the respondent imported 26 consignments of "BOPP" Printed Laminated Packaging Film (Metalized) chiming assessment under H.S Codes 3920.2020 and 3920.2040 chargeable to statutory rate of customs duty @ 25%. All these consignments imported by the respondent were allowed release on the basis of such declaration, as respondent at the relevant time was enjoying the facility of "ACP" (Automatic Clearance Procedure) without scrutiny of the documents and examination of the goods. Out of these 26 consignments, two consignments hearing IGM No.861/2005 dated 4-5-2005 and 2025/2004 dated 31-12-2004, were released under the normal procedure of assessment and examination. It is further stated that the respondent, after clearance of the goods, filed an application for refund of Customs duty in terms of Section-33 of the Customs Act, 1969, on the ground that the goods imported by the respondent were appropriately classifiable under HS Code 3920.2030 chargeable to statutory rate of Customs duty @ 20% as against the determined HS Code No.3920.2020 and 3920.2040 on which the respondent had paid statutory rate of Customs duty @ 25%. It is further stated that at the request of the respondent, the matter for appropriate Classification of the goods in question, was referred to the Classification' Committee of the Appraisement Collectorate, who vide its decision Notified vide Public Notice No.12/2009 dated 15-12-2009, came to the conclusion that the appropriate HS Code for classification of the goods in question is 3920.2040, chargeable to statutory rate of Customs duty @ 25%. The adjudicating authority thereafter rejected the claims of refund filed by the respondent vide Order-in-Original No.06/2010 dated 22-2-2010, against which an appeal was preferred by the respondent before the Collector of Customs (Appeals), Karachi, who vide Order-in-Appeals Nos. 3762 to 3787/2010 dated 4-5-2010 dismissed the appeals, against which, the respondent had preferred further appeals before the Customs Appellate Tribunal, in terms of Section 194-A of the Customs Act, 1969, who vide a common order dated 20-8-2010 passed in Customs Appeals Nos.K-550 to 575 of 2010 has been pleased to set aside the order passed by the forums below, and has allowed the appeals of the respondent, against which, the applicant Department has preferred the aforesaid Custom Reference Applications and has proposed the aforesaid questions of law for the opinion of this Court.

3.Mr. Kashif Nazeer, learned Counsel for the applicant duly assisted by the Departmental representative M. Ilyas Ahsan, Appraising officer, Customs, has contended that the learned Tribunal has over ruled the decision of the Classification Committee which has been constituted under Customs General Order No. 12 of 2012, for which the Tribunal had no authority in law. Learned counsel further contended that the decision of the Classification Committee was based on proper appreciation of facts and law, whereas, the respondent was afforded full opportunity of being heard and to present its case before the said Committee. Per learned counsel, the Committee after considering the version of the Department as well as of the respondent, came to the conclusion that by virtue of Rule 3(C) of the General Rules of Interpretation (GIR) of the Harmonized System and Pakistan Rules-I, the goods in questions are appropriately classifiable under HS Code 3920.2040 and no exception could be drawn to such findings of the Classification Committee. Learned counsel contented that in view of such position, the proposed questions of law may be answered in favour of the applicant Department and the order passed by the Tribunal may be set aside in favour of the applicant Department.

4.Mr. Pervez Iqbal Kasi, learned counsel appearing on behalf of the respondent contended that the learned Tribunal has passed a reasoned order, whereby, the Tribunal after having considered the Classification Committee's decision, examination of the material placed before it, as well as the samples which were produced before the Tribunal, has come to a conclusive finding of fact in favour of the respondent, which cannot be questioned and agitated by the applicant Department in the instant Reference application, which has a very limited scope for rendering its opinion only on a question of law arising out of the order of the Customs Appellate Tribunal. Per learned counsel, even, the findings of the Classification Committee as Notified through Public Notice No.12/2009 dated 15-12-2009, are not based on proper appreciation of law, as the Classification Committee had considered four different headings while deciding the dispute and came to the conclusion that by virtue of Rule 3(c) of the General Rules of Interpretation of the Harmonized System, which provides that when goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading, which occurs last in numerical order among those which equally merit consideration, the classification has been determined under HS Code 3920.2040, whereas, even on the basis of application of Rule 3(c) of the General Rules of Interpretation of the Harmonized System, the appropriate classification heading should have been 3920.2090 and not 3920.2040, as the last heading in numerical order was 3920.2090. In support of his contention, learned counsel for the respondent has relied upon the case of Abdul Ghaffar Bhundi through attorney v. Federation of Pakistan (2008 PTD 1475) and the case of Messrs A-One Feeds through Managing Partner v. Deputy Collector, Adjudicating-I Karachi and others (2008 PTD 1029).

5.We heard both the learned Counsel and perused the record. Since a short controversy is involved in the matter, hence, by consent of both the learned counsel, instant reference applications are being disposed of finally at Katcha Peshi stage.

6.It appears that the respondent had imported 26 consignments of BOPP Printed Laminated Packaging Film (Metalized)" and sought clearance under the Automatic System by claiming assessment under HS Code 3920.2020 and 3920.2040, attracting statutory rate of Customs Duty @ 25%. After clearance of the consignments, the respondent claimed refund of Customs duty by filing separate refund applications under section 33 of the Customs Act, 1969 whereby, according to the respondent, the appropriate H.S Code for the goods in question was 3920.2030, which attracted Customs duty @ 20% instead of 25%, which had already been paid by the respondent. It further appears that at the request of the respondent, the matter for determination of correct classification of the goods was referred to the Classification Committee of the Appraisement Collectorate, Karachi, which has been constituted by the Federal Board of Revenue (FBR) in terms of Para-2 of CGO 12 of 2012. The Classification Committee, before finalizing the classification, referred the samples for Laboratory Test and thereafter finally held that the goods in question were appropriately classifiable under H.S Code 3920.2040 by applying the provision of Rule 3(c) of the General Rules of Interpretation of the Harmonized System. Thereafter, the adjudicating authority passed Order-in-Original No.06/2010 dated 22-2-2010, whereby, the refund claims of the respondent were rejected, by observing that since the Classification Committee has decided the issue against the respondent, hence, the respondent was not entitled for any refund of Customs duty. It further appears that the Appeals preferred against the said Order-in-Original were also dismissed by the Collector of Customs (Appeals), Karachi by a common order dated 4-5-2010, against which, the respondent preferred further Appeals in terms of Section 194(A) of the Customs Act, 1969, which have been allowed by the Customs Appellate Tribunal, Karachi, by holding that the goods in question, are appropriately classifiable under HS Code 3920.2030, chargeable to Customs duty @ 20%. It would be appropriate to refer to the relevant findings of the Customs Appellate Tribunal, who appears to have passed the impugned order after eloquently discussing the merits as well as factual aspect of the instant case, which reads as under:--

7. Rival submissions heard. Case record examined. The main bone of contention in these appeals relates to the classification of BOPP metalized film under the most appropriate PCT heading. In the first place, the samples of the subject goods were produced during the course of hearing by the appellant. On physical examination with the naked eye the subject BOPP metalized film indicated that it consists of two layers of polypropylene films:---

(i)BOPP printed film of 20 microns

(ii)Cast polypropylene (CPP) metalized film of 25 microns.

8. In view of the above it is a combination of CPP film of 25 microns and BOPP printed film of 20 microns. It is very essential at this stage to understand that lamination is a process incidental to metalizing. Lamination is an ancillary process to impart metalizing into its body fabric which gives the product its trade name (BOPP film metalized) specific description and essential character. In other words printed BOPP film has become metalized film due to the process of lamination since the product on lamination acquired the essential character of a BOPP metalized film in combination with a CPP Cast Polypropylene film of 25 microns. Rule 3(a) states that "the heading which provides the most specific description shall be preferred to headings providing a more general description". In terms of specific description the goods are metalized BOPP film and need to be classified under PCT heading 3920-2030. Again being composite goods consisting of two different layers one of BOPP printed film and other of CPP Cast polypropylene film they need to be classified in terms of the material or component which gives them their essential character. As such the subject goods in terms of this criterion need to be classified under heading 3920.2030 since metalizing provides the subject product a barrier against moisture, sunlight and environmental hazards thereby enhancing the presentation as well as sealing characteristics. This film cannot be classified as a BOPP laminated film since laminated film would cover a case where a plain BOPP film of heading 3920.1000 would be laminated with a printed film of heading 3920.2020 and which on lamination acquires the description and character of a laminated printed BOPP film of heading 3920.2040 and does not acquire specific description and essential character of a metalized BOPP film of heading 3920.2030 as in the case of subject goods.

9. As pointed out earlier Rule 3 (c) has been misinterpreted and mis-applied by the PCT Committee. Rule 3(c) states that when the goods cannot be classified by reference to 3(a) or 3(b) they shall be classified under the heading which occurs last in numerical order amongst those which equally merit consideration. In the subject case the BOPP film acquires its common parlance as well as trade name, its commercial identity and its essential character due to being a metalized film. The BOPP laminated film is a more general description as against the most specific description of being a BOPP metalized film. The subject goods in terms of General Interpretative Rules, are, therefore, correctly classifiable under PCT heading 3920.2030 chargeable to customs duty @ 20%. As such the impugned orders are set-aside and the subject appeals are accordingly allowed".

7.From perusal of the above conclusion drawn by the Customs Appellate Tribunal, it appears that the Appellate Tribunal has dealt with the factual aspect as well as merits of the case and has arrived at a definite finding on facts, which according to us cannot be questioned or agitated any further in the instant reference applications by the applicant. Though in appropriate cases, determination of classification of goods is a mixed question of law and fact (See Collector of Customs, Custom House, Lahore v. S. M Ahmed and Company (Pvt.) Limited, Islamabad, (1999 SCMR 138)), however, the finding arrived at by the Customs Appellate Tribunal in the instant case(s) is predominantly based on finding on facts, which otherwise, depicts correct legal position and does not require any interference by this Court under its reference jurisdiction. The Customs Appellate Tribunal in the instant case (s) has also examined the samples of the goods in question as well as the material placed before it, and has come to the conclusion that the goods in question are though laminated, however, lamination is a process which is incidental to metalizing, which in fact is the essential character of the goods in question, as printed BOPP film has become a metalized film, only because of the process of lamination and therefore, by virtue of Rule 3(a), instead of Rule 3(c), of the General Rules of Interpretation of the Harmonized System, the goods in question are to be classified under HS Code 3920.2030, as Rule 3(a) ibid, provides that the heading which covers the most specific description shall be preferred to a heading providing a more general description, and since the goods in question are metalized BOPP film, hence, the appropriate classification would be 3920.2030. The Appellate Tribunal has further come to the conclusion that in view of such position, Rule 3(c) of the General Rules of Interpretation of the Harmonized System would not be applicable, as the goods are specifically covered under HS Code 3920.2030. The Appellate Tribunal has further observed that the printed BOPP film has become a metalized film, due to the process of lamination and on such lamination, has acquired an essential character of a metalized BOPP film in combination with a CPP Cast polypropylene film of 25 microns, whereafter it no more remains an ordinary laminated film which would fall under heading, 3920.2040, and the appropriate classification of goods in question would be 3920.2030 by virtue of Rule 3(a) of the General Rule of Interpretation of the Harmonized System. In our view, the above exercise carried out by the Customs Appellate Tribunal while determining the HS Code of the goods in question is primarily based on facts, which otherwise is not perverse or illegal, hence, cannot be disturbed by this Court under its advisory jurisdiction in terms of section 196 of the Customs Act, 1969, which can only be invoked to seek opinion of this Court purely on a question of law arising out of the order of the Customs Appellate Tribunal and does not confer any jurisdiction on this Court to upset any such findings of fact rendered by the Appellate Tribunal. Reference in this regard may be made to the case of Messrs Gold Trade Impex v. Appellate Tribunal of Customs, Excise and Sales Tax [2012 PTD 377] wherein a learned Division Bench of this Court has held as under:--

"Before giving our opinion on the common questions proposed through instant reference applications, we may observe that in terms of section 196(1) of the Customs Act, 1969 and in view of the judgments of superior Courts on the subject, only substantial questions of law, arising out of the order of the Tribunal, can be referred for opinion of this Court through reference application, whereas questions of disputed facts cannot be examined by this Court under reference jurisdiction. " A point of law" could not be equated with expression "question of law", whereas a question of law referred for opinion of this Court in real sense must be a disputed or disputable question of law. We may further observe that the questions of law referred for opinion by this Court must be formulated in such a manner that the reply to such question referred to this Court may be either in affirmative or negative and it should normally settle a pattern of guidance both for the Revenue as well as the assesse. Factual controversies should not be allowed to be converted into legal issues only by employing legal language in such a manner, which is usual to the forming of such questions. Reference in this regard can be made to the case of Commissioner of Income Tax v. Messrs Immion International, Lahore 2001 PTD 900 and Japan Storage Battery Limited v. Commissioner of Income Tax 2003 PTD 2849."

8.Similar view has been taken in the case of Japan Storage Battery Limited v. Commissioner of Income Tax 2003 PTD 2849 and Collector of Customs v. Messrs Qasim International Container Terminal (Pak) Ltd., (2013 PTD 392).

9.Though, we have come to the conclusion that the order of the Tribunal is correct in law and facts, whereas, the same is based on factual determination of the case, hence, does not require any interference by this Court. However, while examining the Public Notice No.12/2009 dated 15-12-2009, on which the entire case of the applicant is based, we have noticed that in fact, the Classification Committee while determining the classification of subject goods, had considered four possible H.S. Codes for its decision. In this regard, we would refer to Para 3 of the said Public Notice, which reads as under:--

3.The following possible PCT headings were considered in the Classification Committee meeting:-

(i)3920.2020(ii) 3920.2030

(iii)3920.2040(iv) 3920.2090

10.The Classification Committee, after considering the possibility of classifying the subject goods under any one of the above mentioned HS Codes came to the conclusion that appropriate HS Code is 3920.2040. The relevant observation/conclusion in this regard is stated at Paras 8, 9 and 10 of the Public Notice No. 12/2009 dated 15-12-2009, which reads as under:--

8. Perusal of representative sample and test report reveals that the goods being Printed, Laminated and Metalized Bopp Film are composite in nature and therefore, are required to be classified in terms of GIR-Rule No. 3 of H.S. Explanatory Notes. Rule 3(a) suggests that classification in a heading which provide the most specific description shall be preferred to headings providing a more general description. Similarly Rule 3(b) is not applicable as all the three aforesaid headings are significant and merit equal consideration for classification. Therefore, in terms of Rule 3(c), the classification is to be determined under the heading which occurs last in numerical order among those which equally merit consideration.

9. Importer's claim that product falls under the category of "Others" PCT heading 3920-2090 has also been considered, the PCT Committee is of the view that the same is not tenable as all types of Biaxially Oriented Polypropylene (BOPP) Films are classifiable under sub-headings 3920.2010 to 3920.2040 and only films/sheets of polypropylene other than BOPP fall for classification under three dash heading 3920.2090 (Others).

10. From the foregoing discussion, the Committee concluded that impugned product namely BOPP Printed, Laminated Packaging Film (Metalized) by virtue of Rule 3(c) of General Rules of Interpretation (GIR) of the Harmonized System and Pakistan Rules-I is appropriately classifiable under PCT heading 3920.2040".

11.The position which emerges from perusal of the above finding of the Classification Committee, specially at Para-8 above, is that the Classification Committee had decided the classification of the goods by applying Rule 3(c) of the General Rules of the Interpretation of Harmonized System and the Pakistan Rules-I, which provides that the classification of the goods is to be determined under the heading, which occurs last in numerical order, amongst those which equally merits consideration. We may observe without going into further details that as to which of the H.S. Codes was proper and appropriate for classification of subject goods on merits and its factual determination, the conclusion drawn by the Classification Committee in application of Rule 3(c) ibid, is itself not correct. The Classification Committee in Para 3 as aforesaid, considered four H.S. Codes and even if the applicability of the Rule 3(c) is held to be correct, the proper HS Code could not have been 3920.2040, rather should have been 3920.2090 which is the HS Code falling last in the numerical order as considered by the Classification Committee in Para 3 of the Public Notice as aforesaid. Therefore, we are of the view that the Classification Committee, by itself, has drawn a wrong conclusion, while applying Rule 3(c) of the General Rules of Interpretation of the Harmonized System, hence, even on this ground, the order passed by the Adjudication Authority and the learned Collector Appeals, who have primarily relied upon Public Notice No.12/2009 dated 15-12-2009, cannot be sustained in law.

12.In view of hereinabove facts of the instant case(s), we are of the view that the impugned order passed by the Customs Appellate Tribunal is based on correct appraisal of facts and proper application of law; hence no exception can be drawn in this regard. Accordingly, we would submit our response to question No. (ii) first and would answer the same in negative, against the applicant and in favour of the respondent, whereas, in view of the answer to question No. (ii) as above, we do not find it appropriate to answer question No. (i). Insofar as question No. (iii) is concerned, we have observed that the same was neither raised before the Customs Appellate Tribunal, nor there is any finding recorded on it by the Appellate Tribunal, hence cannot be said to be a question of law arising out of the order of the Tribunal, therefore need not be answered by this Court.

13.Consequently, all the aforesaid Reference application(s) are dismissed. The Registrar of this Court is directed to send copy of this order under the seal of this Court to the Customs Appellate Tribunal, Bench-II, Karachi, for information.

HBT/A-1/SindhApplication dismissed.