FAROOQ CHEMICAL CO. (PVT.) LTD. VS COLLECTOR OF CUSTOMS, 2015 PTD-KARACHI-HIGH-COURT-SINDH 2432 (2015)

(a) Customs Act (IV of 1969)--

----S.156(1)---Customs Rules, 2001, Rr. 103(1) & 102(1)---Punishment for offences---Licensing authority proceeding under Customs Rules did not enjoy any power or jurisdiction to invoke penal clauses of S.156(1) of Customs Act, 1969---Customs Rules, 2001 do not confer any power upon Licensing Authority or authorized it to revoke license, either conditionally or by imposing a specific penalty without making any reference to violation of any specific Rule or S.156(1) of Customs Act, 1969.

(b) Customs Rules, 2001--

----Rr.95(2) & 103(2)---License, condition of---Appeal---No provision existed in Customs Rules, 2001, with regard to imposition of any penalty on licensee for alleged violation of any Rule---Licensing Authority at the most, by an order in writing could either suspend or revoke the license of licensee for alleged violation of R. 103 of Customs Rules, 2001 after issuing a show-cause notice and affording an opportunity of being heard to the licensee---Licensing Authority could either suspend or revoke the license under R.103(2) of Customs Rules, 2001 and upon such revocation, Licensing Authority could also order for forfeiture of security deposited by licensee under R.95(2) of Customs Rules, 2001 as pre-condition of issuance of license---Such forfeiture was in addition to any such penalty that licensee be found liable under Customs Act, 1969 or any other law for the time being in force.

(c) Customs Rules, 2001---

----R. 104---Customs Act (IV of 1969), Preamble---Penal Code (XLV of 1860), Preamble--- Repayment of security deposit---Conviction by a court of law---Effect---According to R.104 of Customs Rules, 2001 if a licensee was convicted by a court of law for any offence punishable under Customs Act, 1969 or for an offence involving moral turpitude or misappropriation of property or breach of trust under Penal Code, 1860 then license of such licensee should be revoked---By plain reading of said rule, it could be said that no action could be taken against a licensee in respect of an offence alleged to have been committed by him under Customs Act, 1969 unless he was convicted by a court of law, therefore, action taken by department merely upon registration of FIR against importer was unlawful and not warranted under law.

Messrs Khatri Brother v. Federation of Pakistan 2014 PTD 966 rel.

Syed Baqar Ali Naqvi for Petitioners (in C.P. No.D-2939 of 2010).

Haroon Khan holding brief Ghulam Haider Shaikh and Ilyas Ahsan, Appraising Officer, Customs for Respondents (in C. P. No.D-2939 of 2010).

Date of hearing: 23rd July, 2015.

JUDGMENT

SYED SAEEDUDDIN NASIR, J.---The instant petition as well as connected Special Customs Reference Application arise out of the same controversy, therefore, we intend to dispose off both the matters by this common judgment. Through this petition the petitioner has impugned the validity of order-in-original dated 23-2-2008 passed by the Deputy Collector, Licensing Authority (Appraisement) and order in appeal dated 12-8-2010 passed by the Collector of Customs (Appraisement), Karachi and has sought the following declaratory relief(s):--

(a) Declare that the Impugned Order-in-Appeal dated 12-8-2010 (Annexure "A") of the respondent No.1, and the Order-in- Original dated 23-2-2008 (Annexure "C") of the respondent No.2 are of no legal effect.

(b) Direct the respondents and/or the concerned officer of the Customs authorized to act as Licensing Authority under Chapter VIII of the Customs Rules, 2001, to revive the Custom House Agent License (C.H.A.L) bearing No.922 of the petitioner firm, Messrs Farooq Chemical Co. (Pvt.) Ltd.

(c) Direct the respondent No.1 to re-activate the Bonded Carrier License of the petitioner firm, Messrs Farooq Chemical Co. (Pvt.) Ltd., in accordance with the rules defined in Chapter XIV of the Customs Rules, 2001, after affording them opportunity to fulfill the requisite condition of the said rules.

2. Brief facts for the purpose of determining of the aforesaid Constitutional Petition and Special Customs Reference Application, are that the petitioner was granted Bonded Carrier-cum-Customs Agent's License by the respondent after permission granted by the Central Board of Revenue (hereinafter referred as the Board) in the year, 1997 for transshipment of bonded cargo from Karachi to up-Country Dry Port in Pakistan, in terms of procedure laid down vide; Public Notice No.02/96(A) dated 26-3-1996.

3. On 10-1-2004, the Appraising Intelligence Branch (A.I.B.) of the Collectorate had reported to the Licensing Authority that the (A.I.B.) had registered a criminal case, vide FIR No.SI/MISC/70/2002-AIB, against the petitioner Messrs Farooq Chemical Co. (Pvt.) Ltd., for their involvement in smuggling of the contraband goods (liquor) under the guise of consignment of beverages and mineral water. Accordingly, a show-cause notice dated 3-1-2004 was issued to the petitioner and hearings were conducted on 10-1-2004, 7-2-2004, 10-2-2004. However, the petitioners were acquitted by the Court of Special Judge (Customs and Taxation), Karachi vide; judgment dated: 7-7-2014.

4. While the subject case was under adjudication, the Collectorate of Customs, Dry Port, Sambrial Sialkot, vide; letter C. No.I&P/C/07/ 2003/10488 dated 21-4-2004, reported another criminal case registered by them against the petitioner vide; FIR No.7/2003 for their involvement in pilferage of bonded cargo besides violation of the procedure laid down for transshipment of the bonded cargo.

5. A second show-cause notice dated 9-6-2004 was also issued to the petitioners by the Licensing Authority and hearings were convened. Since the criminal cases were registered against the petitioners, the Licensing Authority deemed it appropriate to suspend the operation of the Bonded Carrier-cum-Customs Agent License of the petitioners vide; Circular da'ted: 10-6-2007, purportedly by exercising the powers conferred under Rule 102(4) of the Customs Rules, 2001.

6. The Quasi-Judicial proceedings with reference to impugned consignment of liquor, subject matter of FIR No. S/MISC/70/2002-AIB, was adjudicated by the adjudicating authority vide; Order-in-Original No.11/2003 dated 23-2-2008 and the petitioner was found guilty of an offence under Section 32 of the Customs Act, 1969, and thus, a penalty of Rs.3,000,000 was imposed upon the petitioner by observing as under:--

"17. I have gone through the record of the case and considered the oral and written submissions of both the department and the respondent. From the investigation conducted by the Investigating Officer, it transpires that in earlier 'consignment of the same importer, it was Messrs Farooq Chemical Co. (Pvt.) Ltd., who arranged clearance and transshipment of goods and in certain situations they were acting independently of importer. It is also an admitted fact that the Bonded Carrier/respondent used the un registered vehicles for transshipment of consignments to up country dry ports whereas 329(3)(4) of Customs Rules, 2001 prescribed that the carrier shall use only such transport unit which are owned or leased in the name of carrier and have consolidated registration with Customs House. From the above discussion it is established that Messrs Farooq Chemical Co. (Pvt.) Ltd., did not fulfill their obligations as laid down under the Transshipment Rules and therefore, their Bonded. Carrier license was liable to be cancelled. However, as they themselves did not meet the requirement of submission of security deposit of Rs.5 million, the bonded carrier license became non-operational before issuance of Show-Cause Notice. The allegations leveled in the show-cause notice dated 3-1-2004 that they failed to discharge their obligations as Bonded Carrier and Custom House Agent are established. In view of above read with Rule 341 of Customs Rules, 2001 the license of Messrs Farooq Chemical Co. (Pvt.) Ltd., Karachi (CHAL No.922) is hereby revoked with immediate effect, in terms of Rule 103(1)(i), (ii), (iii) of Chapter-VIII of Customs Rules, 2001."

7. Thereafter, the petitioner filed appeal, which was dismissed by the Appellate Tribunal vide; order dated 3-4-2006 in Customs Appeal No.K-173/2003. The Special Customs Reference Application No.50/2006, filed before the Hon'ble High Court of Sindh, by the petitioner was also dismissed vide; judgment dated 17-9-2006. Subsequently, the petitioner had filed a Civil Petition No.923/2006 before the Hon'ble Supreme Court of Pakistan and the Hon'ble Supreme Court of Pakistan, vide; order dated 5-9-2009, had remanded the case to the Appellate Tribunal for decision afresh.

8. The Appellate Tribunal, vide; order dated 13-10-2011 again dismissed the appeal of the petitioner, observing as under:--

"08. I have gone through the record of the case and considered the written as well as verbal contentions of the appellant and the departmental representatives. Following irregularities have been committed by the appellant beyond any shadow of doubt:-

(a) The appellant did act independently of the importer, as they were transshipping cargo without explicit and legitimate authorization from the importer, ironically, they were not even aware of the name of the importer, which was a serious violation of Licensing Rule- 102(1) of Licensing Rules, 2001.

(b) Appellant used in-valid/unauthorized vehicles for transshipment, which was a grave violation of the procedure prescribed for such transshipments, under the Customs Rules, 2001.

9. In view of foregoing, the order-in-original dated 23-2-2008 has been found to be just, fair and correct, in terms of relevant provisions of the law, and being free of any legal infirmity, does not warrant to be interfered with. The same Is, therefore, upheld and the appeal is rejected."

9. Being aggrieved, the petitioner filed a Reference Application (SCRA) No.22/2012, wherein the following questions of law were stated to have arisen out of the aforesaid judgment of the Appellate Tribunal:--

(1) Whether the learned Appellate Tribunal was justified to charge the applicant for his alleged failure to observe the requirement of transshipment of consignment to upcountry dry ports mentioned in Public Notice No.2/96, 7/99 and 21/2000 wherein it is provided that the transshipment of consignments to up country dry ports by a bonded carrier shall only be made on the transport units either owned or leased by the bonded carrier, whereas, in fact, the customs authorities had detained/ seized the consignment and had never allowed even processed the Transshipment Application for the purpose of remover/ transshipment of the subject consignment to up-country dry port?

(2) Whether the learned Appellate Tribunal was justified to charge the applicant for his alleged failure to follow the requirements of Public Notice No.2/96, 7/99 and 21/2000 wherein (as per the Tribunals statement) it is provided that "prior to submission of application for transshipment the bonded carrier will satisfy himself in respect of correctness of description and quantity of goods being transshipped", and which requirements were concluded by the Tribunal as this means that all bonded carrier before filing a TP for any inland dry ports, the Bonded Carrier should aware of the contents and quantity of the consignment stuffed in the container", whereas, in fact, clause 4(b) of the

Public Notice No.2/96 dated 26-3-1996 provides that "prior to submission of application for transshipment, the bonded carrier shall satisfy himself that the actual description, quantity, qualify and weight of the goods under transshipment are as per declaration in the IGM of the vessel?

(3) Whether the endorsement of the Importer on the reverse of the bill of lading in favour of the applicant's company as well as the issuance of the delivery order issued by the shipment company in favour of the applicant's company, could not fulfill the requirements of Section 208 of the Customs Act, 1969, and that still the applicant was required to obtain any formal written authority from the importer?

(4) Whether, section 208 of the Customs Act, 1969 and/or any other provision of the Customs Act, 1969, enforce any penal action, or simply authorize the customs officer to refuse permission to transact the specified business in default of production of written authority from the principal?

(5) Whether the impugned judgment of the learned Appellate Tribunal is result of misreading, non-reading of evidence and misinterpreting the law and rules and the subject matter?

10. The Licensing Authority had finally decided the case vide; Order-in-Original No.APPG/LA/1-337/81 (Part-II) dated: 23-2-2008 and ordered for the revocation of the Bonded Carrier-cum-Customs Agent License No.922 of Messrs Farooq Chemical Company (Pvt.) Ltd., Karachi. The petitioner being dis-satisfied with the order referred above has filed an appeal before the Appellate Authority i.e. Collector of Customs (Appraisement), Custom House, Karachi. The Collector of Customs, being the Appellate Authority under the licensing rules, is the final appellate authority and no appeal/review lies against the judgment of the Appellate Authority, under the licensing rules.

11. After receipt of appeal two opportunities of hearing on 27-5-2008 and 12-7-2008 were provided to the petitioners and proceedings were kept in abeyance till production of final verdict, regarding the role of the petitioner by Hon'ble Special Judge Customs and Taxation, Karachi as well as Lahore/Sialkot and also to produce orders of the Appellate Tribunals in Karachi and Lahore/Sialkot as the case of the petitioner with reference to "Liquor" smuggling case and the pilferage of the bonded goods' case were sub judice with the above forums.

12. The petitioner, being aggrieved with the pendency of their Appeal, had filed a Complaint No.202/KHI/CUST(101)/812/2010, before the Hon'ble FTO. The grievances of the petitioner for not finalization the appeal was, therefore, redressed and the -appeal, filed by the petitioner, before Appellate Authority i.e. Collectorate (Appraisement), against revocation of their customs agent license, was rejected on its merit, vide; Order-in-Appeal dated 12-8-2010. The Hon'ble FTO vide; its finding dated 22-9-2010 held that there is nothing on record to indicate that the appeal was kept pending for any ulterior motives and the complaint is/was, therefore, consigned to records, vide; decision dated: 22-9-2010.

13. The learned counsel for the petitioner Mr. Syed Baqar Ali Naqvi has inter alia contended that the findings of the respondent No.1 rejecting petitioner's appeal and upholding the Order-in-Original is contrary to the facts and documentary evidence available on the record for the reasons that the endorsement of import documents made by the importer in favour of the petitioner is on record, which is sufficient to establish that the petitioner was acting as the bona fide, hired bonded carrier on behalf of the importer, and was not operating independently, therefore, there is no ground to say that the petitioner had no legitimate authorization to file the impugned T.P. application; that no violation of Licensing Rules 102(1) of the Licensing Rules, 2001 is made out against the petitioner as alleged in the impugned Order-in-Original. The reliance placed by the respondent No.1 upon such rule is totally misconceived, as this rule relates to the Customs Agent, whereas the petitioner merely acted as Bonded-carrier and, therefore, does not fall within the purview of said Rule; that the petitioner did not violate the 102(1) of the Licensing Rules; that the impugned consignment had been detained by the Customs Department before T.P. application was filed the petitioner had never left the Customs custody, therefore, the question of use of an invalid/ unauthorized vehicle by the petitioner for transshipment of the goods does not arise at all; that the impugned show-cause notice dated: 3-1-2004 issued to the petitioner, never disclosed the specific registration numbers of the vehicles that the petitioner allegedly used, hence; the allegation is merely concocted; that the respondent No.2 issued the impugned show-cause notice dated 3-1-2004 to the petitioner under the Customs Agent Licensing Rules, 2001 read with public notice 02/96 dated: 26-3-1996, whereas the Customs House Agent License No.922 of the petitioner was revoked by -the respondents in terms of Rule 341 of the Customs Rules, 2001, which provision was non-existence at the relevant point in time i.e. 6-6-2002. Therefore, the verdict of respondent amounts to giving retrospective effect to this provision, which is totally unwarranted under the law; the impugned order in appeal cannot be termed as a speaking order as required under Section 24-A of the General Clauses Act, 1897, and is, therefore, bad in law. Lastly, the learned counsel for the petitioner has further submitted that he has placed on record statement dated 15-10-2014 along with judgment of Special Judge (Customs and Taxation), Karachi dated 7-7-2014 whereby the present petitioner has been acquitted by the said Court from all the charges, therefore, Order-in-Original as well as judgment of Customs Appellant Tribunal can also not sustain.

14. Conversely, the learned counsel appearing for the respondents has stated that the proceedings under the Licensing Rules are independent of the adjudication proceedings under Section 179 of the Act. The facts and circumstances of the case are proving that the petitioners have failed to perform their responsibilities, as envisaged in terms of Rules 101 and 369 of the Customs Rules, 2001; the criminal case registered against the petitioner has been decided entirely on its own merits, on the basis of evidence available with the prosecution and has no bearing as far as the orders impugned in the instant petition are concerned, which have been passed on the adjudication side of Customs. The learned counsel further submitted that the Special Judge (Customs and Taxation), Karachi has acquitted the accused Dawood Paracha the petitioner herein, by giving benefit of doubt only due to the late filing of FIR and the acquittal was just and technical grounds and not on merits; the license of the petitioner is inactive as the petitioner has failed to submit the requisite security deposit of Rs.50,00,000 required for operation of Bonded Carrier License, at the relevant point of time, as per prevailing prescribed procedure/rules. The petitioner is involved in misdeclaration of goods on the basis of fake GD's/shipping bills purportedly prepared by the petitioner and such act of the petitioner in violation of Rules 103(1) of the Customs Rules, 2001, as contained in Chapter VIII and, therefore, the order passed by the Licensing Authority dated: 10-6-2004 is in accordance with law, therefore, the instant petition is liable to be dismissed.

15. We have heard the learned counsel for the parties examined the material available on record of the case including the impugned orders and show-cause notices with their able assistance.

16. Upon examining the impugned order-in-original we see that the findings of the respondent No.1 rejecting petitioner's appeal and upholding the Order-in-Original is contrary to the facts, circumstances and documentary evidence available on the record for the reasons that the endorsement of import documents made by the importer in favour of the petitioner is on record, which is sufficient to establish that the petitioner was only acting as the bona fide, hired bonded carrier on behalf of the importer, and was not operating independently, therefore, there is no ground to say that the petitioner had no legitimate authorization to file the impugned T.P. application. Therefore, no violation of rule 102(1) of the Licensing Rules, 2001 is made out against the petitioner as alleged in the impugned Order-in-Original. The reliance placed by the respondent No.1 upon such rule is totally misconceived, as this rule relates to the Customs Agent, whereas the petitioner merely acted as Bonded-carrier and, therefore, does not fall within the purview of said Rule, therefore, it can be said that the petitioner did not violate rule 102(1) of the Licensing Rules, 2001.

17. We have also noticed that the order-in-original dated 28-2-2003 passed by the Collector of Customs Adjudication-(1) as reproduced in para-6 above does not specify as to under what provision of law the penalty was imposed upon the petitioner. The Order-in-Original has merely referred to Chapter VIII of Customs Rules, 2001 and nothing else. There is nothing specifically mentioned as to which particular rule or sub-rule has been violated by the petitioner and under which specific and particular rule and penalty had been imposed.

18. There is no cavil with regard to the fact that the licensing authority while proceeding under the Licensing Rules does not enjoy any power or jurisdiction to invoke penal clauses of Section 156(1) of the Customs Act, 1969, whereas it is interesting to note that none of such penal clauses have been invoked either in the show-cause notice or in the order-in-original.

19. Upon careful examination of the Customs Rules, 2001, we have come to .the conclusion that there is no provision in the said rules with regard to imposition of any penalty on the licensee for the alleged violation of any one of these rules. The Licensing Authority at the most can, by an order in writing, either suspend or revoke the license of the licensee for the alleged violation of any of the sub-piles of Rule 103 of the Customs Rules, 2001, however, that also after issuing a show-cause notice and affording an opportunity of being heard to the licensee.

20. The Customs Rules, 2001 do not confer any power upon the Licensing. Authority or authorize it to revoke the license, either conditionally or by imposing a specific penalty, and that too, without reference to violation of any specific rule or any other provision or clause of Section 156(1) of the Customs Act, 1969.

21. The Licensing Authority under Rule 103(1) of the said Rules would either suspend or revoke the license and under sub-Rule (2) of Rule 103, upon such revocation, can also order for forfeiture of the security deposited by the licensee under Rule 95(2) of the said Rules as a precondition for the issuance of license. It is further contemplated under Rule 95(2) of the Customs Rules, 2001 that such forfeiture is in addition to any such penalty that the licensee may be found liable under the Customs Act, 1969, or any other law for the time being in force.

22. The learned counsel for the petitioner has submitted that the trial in criminal case, registered vide: FIR No.SI/MISC/70/2002-AIB, against the petitioner Messrs Farooq Chemical Co. (Pvt.) Ltd., for their alleged involvement in smuggling of the contraband goods (liquor) under the guise of consignment of beverages and mineral water has concluded and the petitioners have been acquitted by the Court of Special Judge (Customs and Taxation), Karachi vide; judgment dated: 7-7-2014. The learned counsel has also placed on record certified copy of the aforesaid judgment along with statement dated 30-8-2014, which has been taken on record.

23. Even otherwise, Rule 104 of the Licensing Rules, contemplates that if a licensee is convicted by a Court of law for any offence punishable under the Customs Act, 1969, or for an offence involving moral turpitude or misappropriation of property or breach of trust under the Pakistan Penal Code, the license of such licensee shall be revoked. Therefore, by plane reading of the said rule one can say that no action can be taken against a licensee in respect of an offence alleged to have been committed by him under the Act unless he is convicted by a Court of law, and, therefore, action taken by the respondents merely upon the registration of FIR against the petitioner was unlawful and not warranted under the law. Mere initiation of criminal proceedings against the petitioner before the Special Judge (Customs and Taxation), Karachi should not have any bearing as far as suspension of license is concerned inasmuch as the same could only have been done under Rule 104 upon conviction of the petitioner, whereas in the instant case the Licensing Authority has acted the other way around, that is to say by taking an extreme action of revocation of the license of the petitioner before his conviction as aforesaid, which action could have been taken after conviction of the petitioner by the Special Judge (Customs and Taxation), Karachi.

24. Therefore, in our view the suspension/revocation of the license of the petitioner on the sole ground that the criminal case was pending against him before. the Special Judge (Customs and Taxation), Karachi, and prolonging the suspension till such time as the decision of the criminal case was announced, was totally unwarranted under the law and cannot be sustained.

25. We are further fortified in our view by the judgment of a Division Bench of this Court in the case of Messrs Khatri Brother v. Federation of Pakistan reported in 2014 PTD 966, wherein it held as under:--

"In our view these are the only options available to the Licensing Authority under this rule i.e. Rule 103. The reference to any other penalty as referred to in Rule 103(2) of the Rules does not confer any such power on the Licensing Authority to impose any penalty for violation of any of the Licensing Rules, as penalty cannot be imposed through and under the Rules, and is only permissible once an adjudicating authority after a proper Show-Cause Notice with specific allegations and the alleged violation of the relevant provisions of the Act punishable under section 156(1) of the Act, passes an Order after following the requirement as contemplated under section 180 of the Act. In the instant matter none of those actions have been followed and the penalty has been imposed while exercising jurisdiction under an altogether irrelevant provision/rule and the petitioner has been penalized without any lawful authority. Therefore we an., of, the view that the 'imposition of penalty in the instant matter was without any lawful authority and jurisdiction conferred upon the Licensing Authority. Consequently, we hold that the imposition of penalty of Rs.500,000 through the impugned Order dated 7-11-2006 cannot be sustained and is hereby set aside."

26. We are clear in our mind that when the very basis on which the licenses of the petitioner i.e. Custom House Clearing License (CHAL) bearing No.922 and the Bonded Carrier License were revoked by the respondents, has seized to exist, on account of acquittal of the petitioner in FIR No. SI/MISC/70/2002-AIB, by the Court of Special Judge (Customs and Taxation), Karachi vide; judgment dated 7-7-2014, there is no reason why the impugned orders should remain in field and should not be set-aside. Therefore, we hold that the petitioner is entitled for restoration of its licenses, which are under suspension since long, even before passing of the impugned order-in-original dated 23-2-2008.

27. Therefore, in view of the facts and circumstances of the case narrated herein-above the instant petition is allowed. The impugned order-in-original dated 23-2-2008 and order-in-original dated 12-8-2010 are hereby set-aside the respondents are directed to restore the licenses of the petitioner i.e., Custom House Clearing License (CHAL) bearing. No. 922 and the Bonded Carrier License forthwith.

28. Consequently, in view of decision passed in aforesaid petition in the above terms relating to the same controversy which was subject matter before the Customs Appellate Tribunal, Karachi in Appeal No.K-476/2005 (old No. K-173/2003), filed by the petitioner. We would dispose of the Special Customs Reference Application No.22/12 in terms of the aforesaid judgment and do not deem it appropriate to submit response to the questions proposed in the aforesaid reference application as the purpose of filing reference has already been achieved.

RR/F1-15/SindhOrder accordingly.