TATA TEXTILE MILLS LTD. VS COLLECTOR OF CUSTOMS EXCISE AND SALES TAX, APPELLATE TRIBUNAL, LAHORE, 2015 PTD-LAHORE-HIGH-COURT-LAHORE 1356 (2015)

Customs Act (IV of 1969)---

----Ss. 79, 80, 81, 98, 108 & 196---Terms 'warehousing' and 'warehoused'---Scope---Dispute of importer with authorities was on the definition of terms 'entered for home consumption' or 'warehousing' and 'warehoused'---Authorities imposed customs duty on the imported goods on the ground that importer failed to remove goods in question within time prescribed under S.98 of Customs Act, 1969---Order-in-original was maintained by Appellate Authority and Appellate Tribunal---Validity---Concepts of 'entered for home consumption' or 'warehousing' and 'warehoused' were in consonance with the scheme of Customs Act, 1969---Owner of imported goods was to make entry of such goods for home consumption or warehousing within fifteen days of arrival of the goods---Such had to be done by prescribed procedures given in Customs Act, 1969---When any dutiable goods entered for warehousing and assessed under S.80 or 81 of Customs Act, 1969, the owner of such goods had to apply for leave to deposit the same in any warehouse appointed or licensed under Customs Act, 1969---Two procedures were different incidents and had different purpose---Reason for enactment of S.108 of Customs Act, 1969, and benefit contained therein was that while the goods had not been cleared or delivered to the owner of the goods and for all practical purposes, were still at the customs port, the same should be in the power and possession of department and its officers---High Court found it fair and equitable to diminish duty leviable thereon in proportion to diminution of their value---High Court answered in affirmative, the question of law raised in reference application and orders of forums below were modified---Reference was allowed accordingly.

Messrs TATA Textile Mills Ltd. through Director v. Assistant Collector (Recovery Officer), Customs Central Excise and Customs, Multan and another PLD 2000 Lah. 286 ref.

Messrs Qurel Cassettes Ltd. through Managing Director, Islamabad v. Additional Secretary, Government of Pakistan, Central Board of Revenue Karachi and 5 others 2004 PTD 315 and Sargodha Jute Mills Ltd. v. Collector and others 2004 PTD 1911 rel.

Salman Akram Raja for Applicant.

Sh. Iazhar ul Haq for Respondent.

Date of hearing: 9th February, 2015.

JUDGMENT

SHAHID KARIM, J.---A historical background of the instant case is that the applicant company imported a consignment of 439 cases of textile machinery and a bill of entry for placing these in a Customs Bonded Warehouse at Multan was approved on 27-11-1990. It is the case of the applicant that the goods were not placed in the warehouse. However, before the goods could be moved to the bonded warehouse, 26 cases of machinery out of the total 439 cases, were destroyed in a fire. This was duly informed to the respondent. On 10-10-1991 the applicant company filed an ex-bond bill of entry for the clearance of the 26 cases of machinery which had been burnt and gutted claiming that the same were of 'no commercial value'. It will be noticed that 413 cases had been removed from the warehouse on different dates on payment of leviable duty. On 24-10-1993 the applicant was issued a show-cause notice as to why action may not be taken against it for having violated the provisions of sections 32, 86, 98, 100, 111 and 112 of the Customs Act, 1969 (Act) for failure to remove the 26 cases within time prescribed under section 98 of the Act. Vide Order-in-Original No. 11 of 1994 dated 28-2-1994 it was held by the Collector of Customs, Central Excise and Sales Tax, Multan that since the applicant had failed to clear the consignment of 26 cases within the statutory period, the applicant was liable to the payment of customs duty and sales tax with surcharge. An appeal was filed with the Member (Judicial), Central Board of Revenue which was dismissed on 23-10-1994. An application was filed with the Government of Pakistan, Ministry of Finance and Chairman C.B.R., Islamabad which was transferred to the Customs, Central Excise and Sales Tax, Appellate Tribunal and which was, in turn, converted into an appeal. The said appeal was dismissed on 6-8-1995. However, it was recommended in the said order of the Appellate Tribunal that the Collector of Customs, Multan should immediately take up the issue with the CBR for grant of special exemption under the provisions of section 20 of the Act, 1969. The applicant company thereupon filed the instant reference application.

2.In the meantime, the applicant company received a notice on 14-4-1999 demanding the payment of the adjudicated amount. In short, a Constitutional petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 was filed which was clubbed to be heard along with this reference application. On 7-12-1999 the Constitutional Petition No.5904/99 as well as this reference application were decided in the following terms:--

"In view of what has been stated above, this petition is allowed and the impugned demand of the respondents is declared to be without any lawful authority and of no legal effect. Resultantly, Reference Application No.1 of 1996 has become infructuous and is disposed of accordingly."

The learned counsel for the applicant has pointed out that the judgment has been reported as Messrs TATA Textile Mills Ltd. through Director v. Assistant Collector (Recovery Officer), Customs Central Excise and Customs, Multan and another (PLD 2000 Lahore 286). At paragraph 8 of the said judgment, the following observations are also pertinent:--

"Mr. A. Karim Malik, learned counsel for the respondents submitted that application for reference is pending in this Court, that should be decided before the Constitutional petition is adjudicated upon.

We are, however, of the opinion that as the subject-matter of the application for reference as also the Constitutional petition is the same, it would be advisable to dispose of all the matter together in order to avoid multiplicity of litigation especially when the dispute turns upon the interpretation of the relevant provisions of the Customs Act, 1969."

3.A Civil Appeal bearing No.298 of 2003 was filed before the Supreme Court of Pakistan which vide its order dated 24-1-2007 remanded the matter in the following terms:--

"Thus, in view of such circumstances the appeal is allowed, impugned judgment is set aside with the observation that the learned High Court shall dispose of the Reference under the relevant provisions of the law expeditiously as it is pending since long as far as possible with a period of three months preferably. Parties are left to bear their own costs."

4.The learned counsel for the applicant has submitted that it is admitted on all hands that 26 cases of machinery were destroyed and gutted in fire and the only issue before this Court is regarding the benefit of section 108 of the Act to be granted to the applicant company or not. He submits that the case of the applicant is fully covered by the provisions of section 108 of the Act and the benefit of the said section ought to have been extended to the applicant company. He has relied upon the judgment passed by this Court referred to above and submits that the findings are in accord with the construction to be put on section 108 of the Act and its applicability to the case of the applicant company. He has further relied upon two judgments viz Messrs Qurel Cassettes Ltd. through Managing Director, Islamabad v. Additional Secretary, Government of Pakistan, Central Board of Revenue Karachi and 5 others (2004 PTD 315) and Sargodha Jute Mills Ltd. v. Collector and others (2004 PTD 1911).

5.The learned counsel for the respondent-department has supported the impugned orders of the forums below and submits that the applicant company was liable to pay the leviable duties and surcharge as the case of the applicant company was outside the scope of section 108 of the Act.

6.We have heard the learned counsel for the parties.

7.The present case turns on the construction of section 108 of the Act and its applicability to the facts of the case of the applicant company. The findings of the learned Division Bench of this Court on the matter in the previous round (reported as PLD 2000 Lahore 286), are reproduced as under:--

"10. According to section 108 of the Customs Act, 1969 if any goods are damaged or deteriorated due to an unavoid-able accident or cause after they have been entered for warehousing and assessed under section 80 and before they are cleared for home-consumption, their value in the damaged state may be appraised, according to either of the methods provided in subsection (2) of section 27. According to the petitioner, once a bill of entry for warehouse is filed, the goods are deemed to have been entered for warehousing and the actual physical removal of the goods to the warehouse is not essential in order to attract section 108 of the Customs Act, 1969."

11.A cumulative reading of various provisions of the Customs Act, 1969 shows that the term "warehoused" carries a different meaning from "entered for warehousing" and the two expressions are not interchangeable. In support of this conclusion, reference may be made to section 84 of the Customs Act, 1969 which reads as under:

"Application to warehouse.-When any dutiable goods have been entered for warehousing and assessed under section 80, the owner of such goods may apply for leave to deposit the same in any warehouse appointed or licensed under this Act:

Provided that the Collector of Customs, for reasons to be recorded in writing, may disallow the warehousing of goods or any class of goods or goods belonging to a particular importer."

From the above-cited provision, it is quite evident that while "entered for warehousing" means that an application for "warehousing" of the goods has been made, the actual "warehousing" takes place once the goods are deposited in the "warehouse". Consequently, since the petitioner had entered the goods for warehousing before the same were burnt and gutted, the petitioner was entitled to the relief provided by section 108 of the Customs Act, 1969.

12. The other contention raised by the learned counsel for the petitioner that the respondents have acted illegally in applying section 27(1) rather than section 27(2) of the Act, is equally well-founded. Section 108 of the Customs Act, refers to subsection (2) of section 27 which provides method for valuation of the goods. It neither refers to subsection (1) not has the same been made applicable by reference. Section 27(1) of the Act is, therefore, in any case, not attracted. It is also pertinent to mention that admittedly 26 cases of machinery which were lying at the port and were destroyed by fire at the time when the petitioner had filed bill of entry but the goods had not been cleared or removed to a warehouse. The petitioner was in no way responsible for the fire which occurred due to some unavoidable circumstances as has been found by the Tribunal itself. The goods were not in possession or control of the petitioner at that time and have, as a matter of fact, not even cleared the customs barrier. In these circumstances, it is highly anomalous to demand the payment of customs duty on the goods which have yet to be cleared either for home-consumption or for warehousing, as the case may be, at a time, when the petitioner was not admittedly, in possession of the goods."

8. The learned Division Bench in its judgment has dilated upon the interpretation of section 108 of the Act and the distinction between the term "warehoused" and "entered for warehousing" and it was held that the two expressions were not interchangeable and have separate and distinct connotation. It is admitted on all hands that the goods in this case had not been warehoused but since a bill of entry for warehouse had been filed, the goods were deemed as having entered for warehousing. It was further brought out in the said judgment that 'entered for warehousing' meant that an application for warehousing of the goods has been made while the actual warehousing takes place once the goods are deposited in the warehouse itself. On the basis of this interpretation, it was held by the learned Division Bench that since the applicant company herein had entered the goods for warehousing before the same were burnt and gutted, the applicant was entitled to the relief provided by section 108 of the Act.

9.We are in agreement with the findings of the learned Division Bench in the earlier round of litigation and the extract of the relevant portion of which has been reproduced above. We are in no doubt that the goods in this case were damaged due to an unavoidable accident or cause after they had been entered for warehousing and assessed under section 80 and before they were cleared for home-consumption. These facts are not disputed by the respondent-department. We, therefore, see no reason why the benefit of section 108 of the Act should not be extended to the case of the applicant company and the goods may not be appraised by an officer of the Customs and the duty leviable thereon be diminished in proportion to the diminution of their value. The concepts of 'entered for home consumption' or 'warehousing' and 'warehoused' are in consonance with the scheme of the Act; By section 79, the owner of the imported goods shall make entry of such goods for home consumption or warehousing within fifteen days of the arrival of goods. This has to be done by the prescribed procedures given in the Act. When any dutiable goods have been entered for warehousing and assessed under section 80 or 81 of the Act, 'the owner of such goods may apply for leave to deposit the same in any warehouse appointed or licensed under this Act'. This amply demonstrates that the two procedures are different incidents and have different purpose. Perhaps the reason that comes to our mind for enactment of section 108 of the Act and the benefit contained therein is that while the goods have been entered for warehousing, those goods have not been cleared or delivered to the owner of the goods and for all practical purposes, are still at the customs-port and thus in the power and possession of the department and its officers. It is thus fair and equitable to diminish the duty leviable thereon in proportion to the diminution of their value.

10.In Sargodha Jute Mills Ltd. v. Collector and others (2004 PTD 1911), it was stated that:--

" The damage/deterioration or diminution in value of the goods imported cannot be partial only. There can be total loss resulting into zero value of damaged or deteriorated goods in a number of situations.

9. The facts in hand as noted above being admitted the goods though entered for warehousing were not yet actually warehoused and therefore, admitted damage to them could not be denied on technicalities. The fact that surveyor recommended 70% compensation to the importer or that during the proceedings partial payment on account of customs duties/taxes to enjoy interim relief was made by the Insurance Company is again of no relevance when the petitioner duly informed the department of the damage done to the goods "

11.Further in Messrs Qurel Cassettes Ltd. through Managing Director, Islamabad v. Additional Secretary, Government of Pakistan, Central Board of Revenue Karachi and 5 others (2004 PTD 315), it was also held:--

" There is no denial that the goods were damaged after they were entered for warehousing and this being so, the petitioner is entitled to relief in terms of section 27(2) of the Customs Act, 1969 "

12.In view of the above discussion, the question of law raised in this reference application is answered in the affirmative and the reference application is accepted. The orders of the forums below are modified accordingly.

A copy of this judgment shall be sent to the Tribunal under seal of the Court.

MH/T-10/LReference allowed.