PT. SYNERGY OIL NUSANTARA through Duly Constituted Attorney, Karachi VS EVERGREEN MARINE CORPORATION (TAIWAN) LTD., 2015 PTD-KARACHI-HIGH-COURT-SINDH 279 (2014)

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

----S.138---Frustrated cargo, dealing of---Principle---Term 'frustrated cargo' is applied if either (a) goods are brought into customs-station by reason of inadvertence or misdirection; or (b) having been brought into a customs-station, the consignee is untraceable---Inadvertence or misdirection relevant for the purposes of S. 138 of Customs Act, 1969, must relate to bringing of goods into a customs-station---If inadvertence or misdirection relates to any other matter, that is not relevant for the purposes of S. 138 of Customs Act, 1969.

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

----S. 138---Customs Rules, 2001, Rr. 86, 87, 88 & 89---Suit for declaration and injunction---Frustrated cargo---Permission to re-export---Plaintiff was a foreign company and goods in question were shipped to Pakistan for onward transmission to Afghanistan under Pak-Afghan Transit Trade Treaty against bill of lading in the name of Pakistani company---Original importer backed out and there was a new importer willing to import goods to Afghanistan but Customs authorities did not permit and directed to auction the goods---Plea raised by plaintiff was that goods in question had become "frustrated cargo" and plaintiff was to be allowed to re-export them without payment of any duties and taxes etc.---Validity---Manifest error was made by authorities and actual exercise as required by law (i.e. under S. 138 of Customs Act, 1969 and Rr. 86 to 89 of Customs Rules, 2001) was not carried out---Focus remained exclusively on IGM and in effect, subsequent bills were disregarded---Relevant documents were not examined from correct statutory perspective and the exercise must be carried out in accordance with law so that a proper determination was made as to whether or not the goods could be re-exported---Such exercise could not be carried out by High Court as civil court, as it was statutory duty of Collector of Customs---High Court directed Collector of Customs to carry out such exercise, as it had already not undertaken by him---High Court further directed Collector of Customs to give a hearing to plaintiff and after taking into consideration the IGM as well as all relevant "other documents" (which must include two subsequently issued bills and documents relating to transactions regarding the goods) and to decide whether they were "frustrated cargo" within the meaning of S. 138 of Customs Act, 1969, by reason of consignee being untraceable and if he would so conclude, then goods were to be allowed to be re-exported without payment of any taxes and duties etc.---Suit was disposed of accordingly.

Sohail Muzaffar and Imtiaz Mazhar Lari for Plaintiff.

Shakeel Ahmed for Defendant No.3.

Dates of hearing: 14th February and 10th March, 2014.

ORDER

MUNIB AKHTAR, J.---This suit, and the two applications that fall to be determined, arise in somewhat unusual circumstances. By means of the first application, C.M.A. 9174/2013, the plaintiff seeks permission to re-export certain goods as therein described, imported into Pakistan and lying at a container terminal in Karachi. On this application, no interim orders were made and it appears that the Customs Department (subsequent to the filing of the Suit) gave a final reminder for payment of the duties, taxes, etc. being claimed in respect of the importation of the goods, failing which they were to be put up for auction. This prompted the second application, C.M.A. 14478/2013, whereby the plaintiff seeks interim orders restraining the auction of the goods. Of course, the plaintiff seeks re-export without payment of any duties, taxes, etc.

2.The plaintiff is an Indonesian company, which is engaged in the refining, sale and export of edible oil. It appears to have entered into a contract with an Afghan buyer, Messrs Yahya Qureshi Ltd., for the sale of edible oil in 13,120 Jerry cans (of 20 liters each) to be shipped in ten 20 foot containers and having a C&F value of USD 273,552 ("Goods"). The Goods were shipped from Singapore to Karachi and were to pass through Pakistan under the Pakistan-Afghanistan Transit Trade Treaty. Learned counsel for the plaintiff drew attention to the fact that in the bill of lading issued for the Goods, which was to order, the notify party was the defendant No. 6, Messrs Muslim Trading Co., trading at Karachi and which apparently handled such matters. The bill of lading stated on the face of it as follows: "Cargo are in transit to Afghanistan under consignee's own risk, cost and arrangement on merchant's account and risk".

3.Learned counsel submitted that when the Goods arrived at Karachi and the shipping line (through its local agents) (respectively the defendants Nos. 1 and 2) filed the IGM, a mistake was made and it was not noted therein that the Goods were destined for Afghanistan under transit trade arrangements. The defendant No. 6 was shown as the importer. On such IGM being filed, the Customs Department refused to treat the Goods as being in transit to Afghanistan and sought to levy the duties, taxes, etc. that would normally be payable on the importation of edible oil into Pakistan. When the defendants Nos. 1 and 2 were approached to file an amended IGM, they expressed their inability to do so unless the bill of lading was revised to show the Afghan buyer, Messrs Yahya Qureshi Ltd, as the consignee (with defendant No. 6 as the notify party). Such revised bill of lading was eventually issued, and an application made for amendment of the IGM, but by then the Afghan buyer had backed out of the transaction and refused to take the Goods. This obviously placed the plaintiff in some difficulty. Learned counsel submitted that it was able to locate another Afghan buyer, Messrs Hayat Qureshi Ltd. This naturally required the issuance of another revised bill of lading, this time showing the new buyer as the consignee (and also the notify party). However, the IGM was not revised and the Department took the position that such amendment was not possible, since the request was not in relation to anything that was an obvious error or omission within the meaning of section 45. In the meantime, the second buyer also backed out of the transaction.

4.Learned counsel submitted that since the plaintiff was unable to locate some other buyer, it eventually decided to have the Goods re-exported to the port of loading, Singapore. While the defendants Nos. 1 and 2 had no objection in this regard and indeed, corresponded with the Department to facilitate this happening, the latter failed or refused to allow re-export. This led to the filing of the Suit and the two miscellaneous applications that are now before me. Learned counsel submitted that for purposes of the applications, the Goods ought to be regarded as consigned for Pakistan since that was the basis on which the IGM was filed with the Department. Learned counsel submitted that on this basis, section 138 of the Customs Act, 1969 became applicable and the Goods were "frustrated cargo" within the meaning thereof. Referring to the section, learned counsel submitted that of the three situations specified therein (which allowed for re-export) the plaintiff's case came within the scope of both "inadvertence" and "untraceability of the consignee". As to the former, learned counsel submitted that the Goods were destined for Afghanistan in terms of transit trade arrangements, but inadvertently the IGM had not indicated this, which led to the Goods being regarded as destined for consumption within Pakistan. As to the latter, learned counsel submitted that in the facts and circumstances of the case, there was no consignee as such of the Goods. Therefore, on either basis a case under section 138 was made out. Learned counsel drew attention to the application dated 3-4-2013 that had been filed with the Department seeking permission to re-export the Goods and the subsequent letter dated 21-5-2013 addressed to the FBR. By its intimation dated 3-6-2013, FBR had directed Custom House, Karachi to take "necessary action on merits under the law", but nothing had been done, forcing the plaintiff to file the present Suit on or about 29-8-2013.

5.Learned counsel also referred to the Customs Rules, 2001 ("Rules"). Chapter VII deals with re-export of frustrated cargo. It was submitted that the plaintiffs case came within the scope of Rule 86. Insofar as transit trade was concerned, learned counsel referred to section 129 of the Customs Act, which deals with goods in transit through Pakistan. Chapter XXV of the Rules contains the provisions applicable to the Pakistan-Afghanistan Transit Trade, and learned counsel relied on Rule 648, which provides for frustrated cargo in respect or on account of such trade. As I understood it, learned counsel submitted that the plaintiff's case could come within Rule 86 or Rule 648 but that on either basis the plaintiff was entitled to re-export the Goods. Learned counsel prayed for relief in such terms.

6.Learned counsel for the Department (defendant No. 3) opposed the grant of any relief. Attention was drawn to the plaint and in particular to prayer clause (a), whereby a declaration has been sought that the plaintiff is the owner of the Goods. Learned counsel submitted that this was the plaintiffs case throughout and it could not be allowed to set up a case contrary to or inconsistent with its own pleadings. Learned counsel submitted that on such basis it was only section 138 that could, if at all, be applicable. In terms of that provision, learned counsel submitted that the plaintiff was not entitled to re-export the Goods. However, if on the other hand it were to be accepted that the Goods were destined for Afghanistan under transit trade, then section 138 (and hence Rule 86) could not apply and the matter would have to be dealt with under Chapter XXV of the Rules. Rule 648, which was there applicable, would however only apply if the Goods were not destined for Afghanistan but in the situation now under contemplation that would not be true: the premise was that the Goods were destined for that country. Hence Rule 648 could not apply. Learned counsel submitted that thus on either basis the plaintiff was not entitled to have the Goods re-exported. The Goods were liable to the payment of duties, taxes, etc. in Pakistan and since this liability had admittedly not been discharged the Department was entitled to take appropriate action under the Customs Act. It was prayed that both applications be dismissed.

7.I have heard learned counsel as above and considered the record with their assistance. It will be convenient to first set out the relevant provisions. section 138(1) states as follows:--

"138. Frustrated cargo how dealt with.---(1) Where any goods are brought into a customs-station by reason of inadvertence, misdirection or untraceability of the consignee, an officer of Customs not below the rank of Additional Collector of Customs may, on application by the person-in-charge of the conveyance which brought such goods or of the consignor of such goods and subject to rules, allow export of such goods without payment of any duties (whether of import or export) chargeable thereon, provided that such goods have remained and are exported under the custody of an officer of customs."

Rules 86 to 89, and 648, of the Rules are as follows:

"86. Frustrated cargo will be such goods as are brought into a customs- station by reason of inadvertence or misdirection or where the consignee is untraceable or has dishonored his commitments and the consignor wishes to have it re-shipped to him.

87. The master of the vessel or his authorized agent or the consignor of the goods himself or through his authorized agent shall apply in writing or electronically where Pakistan Customs Computerized System Customs Computerized System is operational to the Collector of Customs concerned for permission to re-export the frustrated cargo.

88. On receipt of an application, the Collector of Customs shall satisfy himself with reference to the relevant import manifests and other documents that the goods are 'frustrated cargo' as provided in section 138 of the Act.

89. If the Collector is so satisfied, he would permit re-export of the frustrated cargo under Customs supervision without payment of duties (whether of import or export) chargeable thereon."

"648. Frustrated cargo.---Frustrated cargo shall be such transit goods which are not actually meant for transit to Afghanistan and are brought into a customs-station by reason of inadvertence or misdirection and the consignor wishes to have it re-shipped to him, subject to following conditions, namely:-

(a)the master of the vessel or his authorized agent or the consignee of the goods himself or through his authorized agent shall apply in writing to the Additional Collector of Customs concerned for permission to re-export frustrated cargo;

(b)on receipt of an application, the Additional Collector of Customs shall satisfy himself with reference to the relevant import manifests and other documents that the goods are 'frustrated cargo'; and

(c)if the Additional Collector is satisfied, he would permit re-export of the frustrated cargo under Customs supervision without payment of duties."

8.The first point to note is that for goods to be lawfully brought into this country, whether for use or consumption with Pakistan or for transit or transshipment to a destination elsewhere, they must be brought into a customs-station. As, inter cilia, the definition of smuggling in section 2(s) makes clear, anything else would be contrary to law. Thus, the Goods had to be brought into a customs-station in Pakistan if they were at all to be lawfully in this country. In other words the Goods were deliberately and intentionally brought into Karachi customs-station (i.e., the port) after having been shipped from Singapore. This is clear from the narrative given in the plaint. In my view, Rule 648 cannot apply in such circumstances, and this is so for two reasons. Firstly, as correctly pointed out by learned counsel for the Department and indeed, as is expressly the plaintiffs own case, the Goods were actually meant for transit to Afghanistan. Secondly, they were not brought into Karachi customs-station by reason of any inadvertence or misdirection. Their arrival here was, as just noted, deliberate and intentional. Neither of the two conditions specified in Rule 648 was therefore applicable.

9.It follows that, if at all, the plaintiff must look to section 138 for re-exporting the Goods. When this section is examined, it allows re-export in three situations: inadvertence, misdirection or "untraceability of the consignee". The section applies if the goods are brought into a customs-station "by reason of" any of the stipulated situations. Now, this wording is somewhat ambiguous. It is sensible to speak of goods arriving in Pakistan by reason of inadvertence or misdirection. That is understandable. However, it is somewhat difficult to see how goods can be brought into Pakistan by reason of the consignee being untraceable. In my view, the proper interpretation of section 138 therefore is that it applies if either (a) the goods are brought into a customs-station by reason of inadvertence or misdirection, or (b) having been brought into a customs-station, the consignee is untraceable. It is also pertinent to note that the inadvertence or misdirection that is relevant for purposes of the section must relate to the bringing of the goods into a customs-station. That is what the section is concerned with. If the inadvertence or misdirection relates to any other matter, that is not relevant for purposes of the section.

10.When section 138 is applied to the facts and circumstances of the present case, it is clear that the first two situations, inadvertence or misdirection, are not applicable. The reason for this is the same as in relation to the inapplicability of Rule 648: the Goods were clearly brought into Karachi customs-station deliberately and intentionally. It may be that inadvertently the IGM filed by the defendants Nos. 1 and 2 did not specify that the Goods were to be in transit for Afghanistan. That inadvertence however, related not to the bringing of the Goods into Karachi customs-station (the ambit of section 138) but rather to what was to happen to them once they arrived here, which is a different matter and one that lies outside the scope of the section. Therefore, the first two situations are inapplicable to the plaintiffs case.

11.That leaves only the third: the consignee is "untraceable". The term "consignee" is not defined in the Customs Act. However, it is significant that this specific word has been used and not some more general term or expression. In the context presently relevant, "consignee" must be understood as having the meaning ascribed to it in the law relating to the carriage of goods by sea. There, the term has a well understood meaning, and one that is linked to bills of lading issued when goods are shipped from one port to another. Thus, as presently relevant, the person who must be "untraceable" within the meaning of section 138 must be the consignee indicated on the relevant bill of lading. As is well known, bills of lading are of various types, and for present purposes, two may be noted: "straight" bills and "order" bills. A well known treatise on the subject, Carver on Bills of Lading (3rd ed., 2011), explains the nature of straight bills as follows:--

"A straight bill of lading is one which makes the goods deliverable to a named consignee and either contains no words (such as "to order or assigns") importing transferability or contains words... negativing transferability." (pg. 13)

The same treatise states that order bills may be two kinds. The nature of order bills, and the difference between the two kinds, is explained as follows (emphasis supplied)(sic):--

"An order bill is one which provides for delivery of the goods to be made to the order of a person named in the bill. Such bills are of two kinds. The first provides for delivery of the goods to a named consignee or to his "order or assigns" (or contains in some part of the bill similar words importing transferability). The second simply makes the goods deliverable "to order or assigns" (or, again, contains similar words of transferability) without naming a consignee. The first kind of order bill is said to be made out to the order of the consignee, for on the face of the bill it is the consignee who is entitled (if he does not wish the goods to be delivered to himself) to order the goods to be delivered to another person. In the case of an order bill of the second kind, no person is on the face of the bill entitled to give such orders and it is the shipper who is entitled to give orders to the carrier with respect to the person to whom or to whose order the goods are to be delivered; such bills are therefore said to be made out to the order of the shipper. In either case, the order is given by transferring the bill to the person to whom, or to whose order, the goods are to be delivered, at least if the transfer to him was on the terms that delivery was to be made to his order (or contained similar words importing transferability). This process can be repeated by successive transferees until the bill is "accomplished" by due delivery of the goods." (pp. 10-11)

The reason why these two types of bills of lading have to be kept in mind is because in the present case, the first bill of lading issued in relation to the Goods was an order bill of the second kind. Thereafter two substitute bills were successively issued, one showing the consignee as Yahya Qureshi Ltd., and the other as Hayat Qureshi Ltd. Both of these were straight bills of lading.

12.Having considered the matter, in my view a consignee is to be regarded as "untraceable" within the meaning of section 138 if a consignee is named on the bill of lading and he cannot, in fact, be traced or, even though his whereabouts are known or can be located, he does not come forward to claim the goods. However, it is important to keep in mind that there must be an ascertained or stated "consignee". It therefore follows that section 138 can apply in relation to a straight bill or an order bill of the first kind. However, the section cannot apply in relation to an order bill of the second kind. In respect of a straight bill the consignee is named on the face of the bill and the goods cannot be delivered to any person other than him (this is subject to certain exceptions not presently relevant). There is obviously a consignee within the meaning of section 138. In an order bill of the first kind, although the consignee is entitled to order the delivery of the goods to some other person, he is at least named and identified on the face of the bill. Thus, here also there is a consignee within the meaning of the section even though the actual person to whom the goods are ultimately to be delivered may not be known. However, in an order bill of the second kind there is no consignee stated on the face of the bill and the right of nominating the person to whom the goods are to be delivered lies with the shipper. It must be remembered that the persons entitled to have the goods re-exported under section 138 are either the person-in-charge of the conveyance or the consignor of the goods. The consignor is invariably the shipper and the bill of lading is issued as required by him. If he has obtained an order bill of the second kind it cannot, in my view, then lie with him to claim that the consignee is "untraceable" within the meaning of section 138. After all, he is the one who controls the delivery of the goods. He has chosen to ship the goods without identifying or nominating a consignee. Section 138 cannot apply in such circumstances. Even though in the first bill of lading issued in relation to the Goods, there was a statement on the face of it that the shipment was "under consignee's own risk, cost and arrangement on merchant's account and risk" (see para 2 herein above) that cannot in my view alter the legal nature of the bill and hence the (in)applicability of section 138 to it. There was no consignee named, stated, identified or ascertainable on the face of the bill. The consignor (i.e., shipper and here the plaintiff) cannot therefore be allowed to plead that the consignee is "untraceable" in respect of such a bill. Furthermore, the mere fact that there is a "notify" party also does not alter the position noted above: section 138 requires a "consignee".

13.The question that must now be considered is this: which of the three bills of lading issued in relation to the Goods is to be regarded as applicable for deciding whether they can be re-exported? If it is the first bill (an order bill of the second kind) then, for the reasons just stated, there was no consignee who was "untraceable", and hence Goods cannot be re-exported. If however, it is either of the two substitute bills (each of which was a straight bill), then there was a consignee who was "untraceable", since neither of those consignees, though stated and ascertained, came forward to claim the Goods. It is to be kept in mind that when the IGM was filed, it was the first bill that was in the field, and the IGM was never amended to reflect either of the two substitutions. I have carefully considered the point. Section 138 provides that the power under the section is to be exercised "subject to rules". The relevant Rules (86 to 89) have been set out above. As Rule 88 makes clear, the Collector of Customs is to satisfy himself that the goods are "frustrated cargo" "with reference to the relevant import manifests and other documents". Thus, the import manifest (or IGM) is an important document for determining whether a case has been made out for the exercise of power under section 138. Clearly, the IGM referred to in Rule 88 is as it stands for the time being. The position of the IGM in relation to the Goods has been noted. If there had only been the first bill of lading in the field, then there could not possibly be any "untraceable" consignee within the meaning of section 138. However, in the rather unusual circumstances of the present case, there were also two subsequently issued bills, both of which were straight bills. Are these subsequent bills to be disregarded altogether or do they have some relevance, notwithstanding that they were never reflected in the IGM? Rule 88 does not limit the Collector to the import manifest only. It also refers to "other documents". In my view, it is not discretionary with the Collector to choose to look simply to the import manifest and ignore everything else. He must look at the totality of the circumstances. If at all there are any other documents that are relevant, he is bound to give due consideration to the same.

14.In my view, in the facts and circumstances of the present case, the two substitute bills must be regarded as "other documents" within the meaning of Rule 88, and ones that are of relevance for the exercise to be undertaken by the Collector in terms thereof. As noted above, the Department appears to have rejected the plaintiff's case on the ground that the IGM could not be amended under section 45. In my view, a manifest error has been made. The actual exercise as required by law (i.e., under section 138 read with Rules 86 to 89) was not carried out. The focus remained exclusively on the IGM and, in effect, the subsequent bills were disregarded. Relevant documents were not examined from the correct statutory perspective. The exercise must be carried out in accordance with law so that a proper determination is made as to whether or not the Goods can be re-exported. However, in my view, this is not an exercise to be carried out by the Court in these proceedings. It is the statutory duty of the Collector and, since it has not been performed, must be undertaken by him.

15.I would therefore dispose of C.M.A. 9174/2013 in the following terms. The concerned Collector is directed to give a hearing to the plaintiff and, after taking into consideration the IGM as well as all relevant "other documents" (which must include the two subsequently issued bills and documents relating to the transaction(s) regarding the Goods) decide whether they are "frustrated cargo" within the meaning of section 138 by reason of the consignee being untraceable. If he so concludes, then the Goods may be allowed to be re-exported without payment of any taxes, duties, etc. in accordance with law. If the Collector comes to the contrary conclusion, he must do so by means of a reasoned order and the plaintiff will be entitled to have recourse to such statutory or other remedies as are available to it under law. The entire exercise is to be completed within 30 days of the date on which a certified copy of this order is received at the Collector's office (served either by the plaintiff or otherwise) or such further time, not exceeding another 15 days as the Collector may deem appropriate. Needless to say, the Collector shall carry out the exercise only in a manner that applies, and is consistent with, what has been stated herein above.

16.Since the first C.M.A. has been disposed of as above, I dispose of C.M.A. 14478/2013 in terms that the Department is restrained from auctioning the Goods or from taking any action in relation thereto that is adverse to the plaintiff till such time as the Collector makes his decision as required herein above and, should that decision be adverse to the plaintiff, for a further period of 14 days thereafter to enable the plaintiff, if it so desires, to avail such remedies as are available to it under law.

MH/P-12/SindhOrder accordingly.