AL-FAJAR ASSOCIATES, KARACHI VS DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATIONS-FBR, KARACHI, 2016 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 2125 (2014)

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

----Ss. 179, 32, 14, 14A & 156(1)---Income Tax Ordinance (XLIX of 2001), S. 162(1)---Contention of department was that word 'taxes' had been inserted in S. 179 of Customs Act, 1969 through Finance Act, 2014, which was quite enough for exercising jurisdiction corresponding to taxes---Held, such understanding was based on misconception as the word "taxes" was inserted by legislature for calculation of involved amount of duty and taxes on basis of which adjudicating authority as defined in S. 179 of Customs Act, 1969 determined his powers---Inspite of insertion of word "taxes", adjudicating authority had to issue show-cause notice within respective applicable provision of Customs Act, 1969 and not under charging provision of S. 162(I) of Income Tax Ordinance, 2001---Charging section for short paid amount of income tax was S. 162(I) of Income Tax Ordinance, 2001 under which Commissioner of Income Tax was the only authority to proceed in matter---No mis-declaration was apparent on part of importer, therefore, invoking of Ss. 32, 14, 14A & 156(1) of Customs Act, 1969 was manifestly wrong as these provisions could not be invoked in the matter of income tax attracting S. 162(1) of Income Tax Ordinance, 2001---Department acted without power/jurisdiction as the same was usurpation of powers of authority expressed in S. 162(1) of Income Tax Ordinance, 2001---Department was not empowered to proceed in the matter of income tax---Order accordingly.

Case law referred.

(b) Jurisdiction---

----If mandatory condition for exercise of jurisdiction was not fulfilled, entire proceeding which followed became illegal and suffered from want of jurisdiction---No deviation from notified jurisdiction could be made---If an action had been taken or order had been passed without having competency under respective provision of law same had to be declared illegal and without jurisdiction.

Case law referred.

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

----S. 179(3)---Order in appeal---Delay of 14 days---Show-cause notice was issued on 6-5-2013---Order should have been passed within 120 days i.e. on or before 3-9-2013 as against 27-9-2013---Validity---Order under S. 179(3) of Customs Act, 1969 had to be passed within 120 days from date of issuance of show-cause notice or within further extended period of 60 days by department upon availability of "exceptional circumstances" and recording of said exceptional circumstances prior to expiry of initial period of 120 days after serving notice to person concerned---Held, that extension obtained by department for passing order after expiry of stipulated initial period of 120 days was without any valid reason as no "exceptional circumstances" were either available to it and no notice was served on importer despite mandated---Rendering the extension was non-existent as same was accorded by Collector without any lawful authority and after expiry of initial period of 120 days on which order passed by department was completely silent---Once matter became barred by time, subsequent enhancement in period of limitation should not have effected reopening of past and closed transaction.

Case-law referred.

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

----Ss. 32,32(2), 80, & 83---Customs Rules, 2001, R. 438 & 442---Allegation of mis-declaration on filing of goods declaration---Department charged appellant for mis-declaration under S. 32 of Customs Act, 1969 merely on basis of filing of good declaration---No charge had been leveled under S. 32(2) of Customs Act, 1969 against appropriate officials who passed assessment/clearance order under Ss.80 & 83 of Customs Act, 1969 and Rr. 438 & 442 of Customs Rules, 2001---Held, that inspite of standing on same pedestal, importer had been meted out with partial treatment by department which was not permitted under Art. 25 of the Constitution---Treatment given to importer was violative of Arts. 4 & 25 of the Constitution---Appeal was allowed in circumstances.

Case law referred.

Obayd Mirza and Nadeem Ahmed Mirza for Appellants.

Muhammad Aqil Alam for Respondent.

Date of hearing: 9th September, 2014.

ORDER

ADNAN AHMED, MEMBER (JUDICIAL-II).---The appeal, filed by the appellant, is directed against Order-in-Original No.160/2013-2014 dated 27.09.2013 passed by the Additional Collector of Customs (Adjudication-1), Custom House, Karachi.

2.Briefly facts of the case as stated in memo of appeal are that the appellant is a proprietorship company and operates under the name and style of Messrs Al-Fajar Associates, Room No.25-A, 1st Floor, Pak Chamber, West Wharf Road, Karachi is being registered with the Custom House, Karachi as clearing forwarding agent vide No. 1596. During the course of his business activities he was approached by Messrs Gulzar Metal Works , Gujranwala, registered with FBR under NTN No. 0312206 and STR No. 2500740700137 in the capacity of manufacturer/ importer and exporter for clearance of his imported goods. The appellant after obtaining online verification from the FBR Portal, extended his acceptance for undertaking the job of clearance of his consignment. Consequent to which Messrs Gulzar Metals Works forwarded him documents for clearance, on the strength of which he filed good declaration with the Collectorate of Customs-PMBQ vide GD No. KPPI-HC-12452-29092012 which instead of processing the GD for levy of duty and taxes referred the same for examination under section 198 of the Customs Act, 1969 and Rule 435 of sub Chapter III of Chapter XXI of Customs Rules, 2001. The goods were found in accordance with the declaration, resultant, the assessing officer passed assessment order under section 80 of the Customs Act, 1969 and Rule 438 for levy of duty and taxes, after payment of those, the Principal Appraiser allowed the clearance in exercise with the power vested upon him under section 83 and Rule 442 ibid. Thereafter, the appellant obtained the delivery from the port and transported the same to the importer. The Directorate General of Intelligence and Investigation-FBR (here-in-after referred as respondent No. 1) after lapse of several months framed contravention report and forwarded to the Additional Collector of Customs, Adjudication-I, Collectorate of Customs, Karachi here-in-after referred as respondent No. 2) with the allegation that the importer Messrs Gulzar Metal Works, Gujranwala imported remeltable scrap for disposal in the local market in the same state other than raw material for in house consumption without payment of leviable Income Tax @ 5 % in terms of notification No 722(1)/2012 dated 26.06.2012 and got those cleared on payment of 1% reduced rate of income tax as applicable to industrial concern. The goods were disposed off by the importer in the local market to retailers and other un-registered person without any manufacturing process. On the strength of which respondent No. 2 issued show cause notice dated 06.05.2013, since there was nothing for the appellant to reply, restraint himself. Notwithstanding the respondent No. 2 passed order-in-original dated 27.09.2013 through which a penalty of Rs. 25,000.00 was imposed on the appellant, relevant portion of order is reproduced here-in-below:--

"Rs. 25,000.00 (twenty five thousand) is also imposed on each of the Clearing Agent I.D. Messrs Express Freight Links (CHAL-2207). Al- Bashir lmpex (CHAL-2658) and Messrs Al-Fajer Associates (CHAL-1596)"

3.The appellant M/s.AI-Fajar Associates , Karachi has challenged the order of the respondent No. 2 by way of Appeal No. 160/2013-2014 dated 27.09.2013, through Mr. Obayd Mirza/Nadeem Ahmed Mirza (Advocates/Consultants) on the strength of the grounds incorporated in the memo of appeal and which are inter alia:

(i)The respondent No. 1 is not designated an "Officer of Inland Revenue" under Section 230 of the Income Tax Ordinance 2001 under which Directorate General Investigation, Inland Revenue has been designated as officer of Inland Revenue and they had been delegated powers under Section 207 of the Income Tax Ordinance, 2001. Resultant, respondent No. 1 acted without powers/jurisdiction, rendering their act of preparation of contravention report, without power and jurisdiction, hence "coram non judice" as held in reported judgment Major Syed Walayat Shah v. Muzaffar Khan and 2 others (PLD, 1971 SC 184), Omer and Company v. Controller of Customs, (Valuation): (1992 ALD 449 (1) Karachi AAA Steel Mills Ltd. v. Collector of Sales Tax and Central Excise Collectorate of Sales Tax (2004 PTD 624), PLD 1976 Supreme Court 514. Ali Muhammad v. Hussain Buksh and others and PLD 2001 Supreme Court 514 Land Acquisition Collector, Noshehra and others v. Sarfraz Khan and others, 2006 PTD 2237, Pak Suzuki Motors, Company Ltd., Karachi v. Collector of Customs, Karachi, 2009 PTD (Trib.) 1996 and 2010 PTD (Trib.) 832.

(iii)That similarly respondent No.2 is also not designated an "Officer of Inland Revenue" under Section 207 of the Income Tax Ordinance, 2001 and as such is not empowered to issue show cause notice and pass any order in original in respect of matter relating to Section 162(1) of Income Tax Ordinance, 2001. Hence, by issuing show cause notice and passing order-in-original by him deems to usurpation of the powers of "Officer of Inland Revenue" to which he is not vested with, rendering the show cause notice and order-in-original without powers/ jurisdiction , hence void and ab-initio and corum non judice as held in reported judgment Major Syed Walayat Shah v. Muzaffar Khan and 2 others (PLD 1971 SC 184), Omer and Company v. Controller of Customs, (Valuation): (1992 ALD 449 (1) Karachi AAA Steel Mills Ltd. v. Collector of Sales Tax and Central Excise Collectorate of Sales Tax (2004 PTD 624), PLC 1976 Supreme Court 514 Ali Muhammad v. Hussain Buksh and others and PLD 2001 Supreme Court 514 Land Acquisition Collector, Noshehra and others v. Sarfraz Khan and others, 2006 PTD 2237, Pak Suzuki Motors Company Ltd., Karachi v. Collector of Customs, Karachi, 2009 PTD (Trib.) 1996 and 2010 PTD (Trib.) 832.

(iii)That in terms of proviso of subsection (3) of section 179 of the Customs Act, 1969 the Adjudication proceeding has to be completed within 120 days of the issuance of show cause notice or within such period extended by the Collector for which reason shall be recorded in writing but such extended period shall in no case exceed 60 days provided that any period during which the proceeding are adjourned on the account of stay or alternative dispute resolution proceeding or the time taken through adjournment by the petitioner not exceeding 30 days shall be excluded for the computation of the aforesaid period meaning thereby, the total period can be extended from 120 days to 180 days or 210 days.

(iv)That since, the period for passing order in the instant case in terms of the section 179 of the Customs Act, 1969, has to be calculated from the date of issuance of show cause notice i.e. from 06.05.2013 , meaning therein, the order by the respondent should had been passed by 03.09.2013 i.e. prior to expiry of initial period of 120 days or within further extended period of 60 days prior to expiry of initial period based on exceptional circumstances and recording of those after giving notice to the appellant as held by Hon'ble Supreme Court of Pakistan in reported judgment 1998 SCMR 1881, Khalid Mahmood v. Collector of Customs, Custom House, Lahore.

(v)That the extension obtained as stated by the respondent in para 3 of the order is without any legal sanction as the same has been obtained after the expiry of initial period of 120 days, beside if the extension was given by the Collector it was nullity to the provision of Section 179(3) of the Customs Act, 1969 by virtue of non availability of exceptional circumstances and not intimating to the appellant as held by Supreme Court of Pakistan. Once the matter become barred by time "then the subsequent enhancement in the period of limitation shall not have the effect of reopening the past and closed transaction. The board in this case while extending the time limit acted beyond its mandate. Reliance is placed on reported judgment 2010 PTD (Trib.) 81 and 2007 PTD 117, rendering the order barred by time by 14 days as such without power/jurisdiction as held in reported judgment 2008 PTD 60, Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax, Gujranwala and 2008 PTD 578 Messrs Hanif Strawboard Factory v. Additional Collector (Adjudication) Customs, Sales Tax and Central Excise Gujranwala, 2009 PTD 762 Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax and 4 others and 2009 PTD (Trib.) 1263, Messrs Syed Bhai Lighting Limited, Lahore v. Collector of Sales Tax and Federal Excise, Lahore and 2 others 2009 PTD 1628, Leo Enterprises v. President of Pakistan and others 2010 PTD (Trib.) 1010 Innovative Impex v. Collector of Customs, Sales Tax and Federal Excise (Appeal), 2011 PTD (Trib.) 79 Fazal Ellahi v. Additional Collector of Customs, MCC of PaCCS, 2011 PTD (Trib) 987 Unique Wire Industries v. Additional Collector of Customs, MCC of PaCCS, 2011 PTD (Trib.) 1146 Kaka Traders v. Additional Collector of Post Clearance Audit and 2012 PTD (Trib.) 1650 Pak Electron Ltd. v. Collector of Customs, Lahore and others.

(vi)That irrespective of the referred in above gross illegality, it is appropriate for the appellant to state that the declaration whatsoever transmitted through the GD to MCC of PMBQ under Section 79(1) of the Customs Act, 1969 and Rule 433 of Sub-Chapter III of Chapter XXI of Customs Rules, 2001 by the appellant for the clearance of the goods imported by Messrs Gulzar Metals Works, Gujranwala was based on the import documents and that has not been found incorrect in any material particular as evident from the GD. Instead the crux of matter is that the importer obtained the clearance of the goods on the basis of his status as "manufacturer" and the said status was allowed to him by the FBR and the effect of the same was fed accordingly in the database by the FBR against its NTN and STRN. Appellant just entered the NTN number in the system and rest of the data was picked by the system itself. Nothing can be attributed to appellant in this regard he has to rely upon on the status fed in the system and the system itself honoured that and so the officers of customs passing assessment/clearance order under Sections 80, 83, and Rules 438 and 442 of the Customs Act, 1969 Customs Rules, 2001, No question of appellant connivance or collusion is apparent in the light of referred facts.

(vii)That it is also imperative for the appellant to state that it is ridiculous on the part of respondents Nos. 1 and 2 in regards to formed opinion that the appellant "connived and colluded" with the importer Messrs Gulzar Metals Work, Karachi on the basis of available data on the GD. When the custom officials who completed the assessment order under section 80 of the Customs Act, 1969 and Rules 438 and 442 of Customs Rules, 2001 and passed order of clearance under section 83 ibid, while relying upon the available data of the importer in the data base of the system, they are let escort free, despite standing on the same pedestal. The said of the respondent amounts to giving a partial and differential treatment to the appellant. A person placed at the same pedestal cannot be treated differently as it would constitute a negation of Articles 4 and 25 of Constitution of Islamic Republic of Pakistan. The Honourable High Court of Sindh in its reported judgment 2002 PTD 976 held that "vacating the show cause notice in one case and taking action against another person in similar situation, is amount to discrimination which is hit by Article 25". In reported judgment 2002 SCMR 312 and PTCL 2010 CL 671 the Hon'ble Superior Courts have observed that "there exists no power to target incidence of tax in such a way that similarly placed person be dealt not only this similarly, but discriminatingly". Whereas, in reported judgment 2005 SCMR 492 the Hon'ble Supreme Court held that "A facility allowed to some one and denied to other is discrimination". The Apex Court further held in reported judgment 2010 SCMR 431 that:--

"Doctrine of equality, as contained in Art. 25 of the constitution, enshrine golden rules of Islam and states that every citizen, no matter how high so ever, must be accorded equal treatment with similarly situated persons---State may classify persons and objects for the purpose of legislation and make laws applicable only to persons or objects within a class---In fact all, legislations involve some kind of classification whereby some people acquire rights or suffer disabilities whereas others do not---What however, is prohibited under principle of reasonable classification, is legislation favouring some within a class and unduly burdening others---Basic rule for exercise of such discretion and reasonable classification is that all persons placed in similar circumstances must be treated alike and reasonable classification must be based on reasonable grounds in given set of circumstances but the same in any case must not offend spirit of Art. 25 of the Constitution."

The treatment given to the appellant against the principle enshrined in Articles 4 and 25 of the Constitution of Pakistan violate the settled law laid down by the Superior Courts in their judgments reported as 1990 SCMR 1072, 1990 SCMR 1059, 1975 SCMR 352, PLD 1995 SC 396, 1998 SCMR 1404, PLD 1997 SC 582, PLD 1997 SC 334 and 1997 SCMR 1874.

(viii) The appellant carves his right to add any fresh grounds at the time of hearing beside placing any valid incriminating evidence/documents.

4.No cross objection were submitted within the stipulated period given in Subsection (4) of Section 194A of the Customs Act, 1969 by the respondent No. 1. Nevertheless, Mr. Muhammad Aqil Alam, intelligence Officer stated that the question of jurisdiction does not arise in the case as the official of respondent No. 1 are empowers to scrutinized the pitch of payment of income tax leviable on the goods so imported by the client of the appellant. He was asked to prove mala fide on the part of the appellant in the light of sections 79(1), 80, 83 of the Customs Act, 1969 and Rules 433 to 442 of Customs Rules, 2001 and the invoked Section 148 of Income Tax Ordinance, 2001, astonishingly nothing was available with him either in the shape of documents or arguments in support of the allegation leveled in the show cause notice and passed order-in-original against the appellant for imposing penalty of Rs. 25,000.00.

5.Rival parties heard and case record perused, this case can be decided on the short points of powers/jurisdiction of the respondent in the matter pertaining to Income Tax. Hence, it is beneficial to reproduce Sections 148, 162, 207, 230 and 230A of Income Tax Ordinance, 2001 for determination of their jurisdiction/powers and which are:--

Section 148:- Imports:--(1) The Collector of Customs shall collect advance tax from every importer of goods on the value of the goods at the rate specified in Part II of the First Schedule.

(2) Nothing contained in subsection (1) shall apply to any goods or class of goods or persons or class of persons importing such goods or class of goods as may be specified by the Board.

(5) Advance tax shall be collected in the same manner and at the same time as the customs duty payable in respect of the import or, if the goods are exempt from customs duty, at the time customs duty would be payable if the goods were dutiable.

(6) The provisions of the Customs Act, 1969 (IV of 1969), in so far as relevant, shall apply to the collection of tax under the section.

(7) The tax collected under this section shall be final tax on the income of the importer arising from the importer subject to subsection (1) and this subsection shall not apply in the case of import of :-

(a)raw material, plant, machinery, equipment and parts by an industrial undertaking for its own use;

(b)fertilizer by manufacturer of fertilizer and

(c){motor vehicles in CBU condition by manufacturer of {motor vehicles}

(d)Large import houses, who--

(i)Have paid-up capital of exceeding Rs. {250} millions

(ii)Have imports exceeding Rs. 500 million during the tax year;

(iii)Own total assets exceeding Rs. {350} millions at the close of the tax year.

(iv)Is single object company

(v)Maintain computerized records of imports and sale of goods;

(vi)Maintain a system for issuance of 100% cash receipts on sales.

(vii)Present accounts for tax audit every year

(viii) Is registered with Sales Tax Department; and

(ix)Make sales of industrial raw material of manufacturer registered for sales tax purposes}

(8) the tax collected from a person under this section on the import of edible oil {and packing material for a tax year shall be (minimum tax)

(9) In this section--

"Collector of Customs" means the person appointed as Collector of Customs under section 3 of the Customs Act, 1969 (IV of 1969), and includes a Deputy Collector of Customs in Additional Collector of Customs or an officer of customs appointed as such under the aforesaid section;

[Value of goods" means the value of the goods as determined under the Customs Act, 1969 (IV of 1969), as if the goods were subject to ad valorem duly increased by the customs duty federal excise duty and sales tax, if any payable in respect of the import of the goods.

Section 162 ... Recovery of tax from the person from whom tax was not collected or deducted---(1) Where a person fails to collect tax as required under Division II of this Part {or Chapter XIII or deduct tax from a payment as required under Division III of this Part {or Chapter XII], the Commissioner may {pass an order to that effect and) recover the amount was not collected or deducted from the person from whom the tax should have been collected or to whom the payment was made.

(2) The recovery of tax under subsection (1) does not absolve the person who failed to deduct tax as required under Division III of this Part or Chapter XII] from any other legal action in relation to the failure, or from a charge of additional tax or the disallowance of a deduction for the expense to which the failure relates, as provided for under this Ordinance.( Emphasis is ours)

[207 Income Tax authorities . (1) These shall be the following Income tax authorities for the purposes of this Ordinance and Rules made there-under, namely:-

(a)Board

(b)Chief Commissioner Inland Revenue.

(c)Commissioner Inland Revenue

(d)Commissioner Inland Revenue (Appeals)

(e)Additional Commissioner Inland Revenue

(f)Deputy Commissioner Inland Revenue

(g)Assistant Commissioner Inland Revenue

(h)Inland Revenue Officer

(i)Inland Revenue Audit Officer

(j)Superintendent Inland Revenue

(k)Inspectors Inland Revenue; and

(l)Auditor Inland Revenue

(m)Officer of Inland Revenue with any other designation.

(2)the Board shall examine, supervise and oversee the general administration of this Ordinance.

(3)Income Tax Ordinance Tax authorities specified in subsection (1) except in clause (a) shall be subordinate to the Board]

[(3A) Commissioner Inland Revenue, Additional Commissioners Inland Revenue, Deputy Commissioners Inland Revenue, Assistant Commissioners Inland Revenue, Inland Revenue Officers, Inland Revenue Audit Officers, Superintendents Inland Revenue, Auditors Inland Revenue Audit, Inspectors Inland Revenue shall be subordinate to the Chief Commissioners Inland Revenue]

(4)Subject to Subsection (5) Additional Commissioner Inland Revenue, Deputy Commissioner Inland Revenue, Assistant Commissioner Inland Revenue, Inland Revenue Audit Officers, Superintendent Inland Revenue, Auditor Inland Revenue and Inspectors Inland Revenue shall be subordinate to the Commissioner Inland Revenue

(4A) Deputy Commissioners Inland Revenue, Assistant Commissioners Inland Revenue, Inland Revenue Audit officers Inland Revenue, Superintendents Inland Revenue, Auditors Inland Revenue and Inspectors Inland Revenue shall be subordinate to the Additional Commissioner Inland Revenue]

(5) An officer vested with the powers and function of Commissioner shall be subordinate to the Chief Commissioner Inland Revenue.

"230. Directorate General (Intelligence and Investigation), Inland Revenue:---(1) The directorate General (Intelligence and Investigation) Inland Revenue shall consist of a Director General and as many directors, Additional director, Deputy directors and Assistant Directors and such other officers as the Board, may by notification in the official Gazette, appoint.

(2)The Board may, by notification in the official Gazette,

(a)Specify the functions and jurisdictions of the Directorate General and its officers and

(b)confer the powers of authorities specified in section 207 upon the Directorate General and its officers.

230A Directorate General of Withholding Taxes---(1) The Directorate-General of withholding Taxes shall consist of Director General and as many Directors, Additional Directors, Deputy directors and Assistant directors and such other officers as the Board, may by notification in the official Gazette appoint.

(2)the board may, by notification in the official Gazette specify the functions jurisdiction and powers of the Directorate General of withholding Taxes.

6.Upon perusal of Section 230 of the Income Tax Ordinance, 2001 inserted through Finance Act, 2012, I found that the respondent No. 1 has not been appointed/designated as officer of Inland Revenue by the legislature, instead the officials of Directorate General of Intelligence and Investigation-Inland Revenue who have been delegated powers under Section 207 ibid for acting and proceeding as like officer of Inland Revenue under the respective provision of the Income Tax Ordinance, 2001. For overseeing the collection of withholding Tax by the Clearance Collectorate at import stage in terms of Section 148 ibid the Directorate General of Withholding Taxes has been established under Section 230A of the Income Tax Ordinance, 2001. The respondent No.1 figures no where in either of the section i.e. Sections 148, 230 and 230A of the Income Tax Ordinance, 2001 for collection of withholding tax or to investigate the payment of withholding tax on the imported consignment during the process of clearance or even clearance. Its officials laid hands on the matter of Income /withholding tax while transgressing the powers vested with Clearance Collectorate, Directorate General of Intelligence and Investigation -Inland Revenue, DG Withholding Tax, which is not permitted on any pretext or circumstances, rendering their act without any lawful authority and jurisdiction.

7.I have noted with great concern that acting without powers/ jurisdiction is the order of the day among the officials of respondent No. 1 and the Collectorate of Customs (Adjudications) which also include respondent No. 2, which derived powers for adjudication under the provision of Section 179 of the Customs Act, 1969 in the matter relating to Customs Duty not Income Tax, the plea taken that the word taxes has been inserted in the said provision through Finance Act, 2014 is quite enough for exercising jurisdiction corresponding to taxes. This understanding is based on misconception as the word taxes were inserted by the legislature for the calculation of involved amount of duty and taxes on the basis of which the adjudicating authority defined in Section 179 of the Customs Act, 1969 determines his powers. The correct approach is that in spite of insertion of the word taxes, the adjudicating authority including the respondent No. 2 has to issue show cause notice within the respective applicable provision of the Customs Act, 1969 and not under the charging provision of Section 162(1) of the Income Tax Ordinance, 2001, which is non existence in the show cause notice and charge against the appellant has been leveled under Section 148 ibid; which is a machinery section and defined procedure for collection of income tax/withholding tax at import stage by the Clearance Collectorate. The appellant has nothing to do with the collection under section 148 ibid, hence no charge can be leveled against him under Section 148. The charging section for the short paid amount of income tax is section 162(1) ibid, under which Commissioner of Income Tax is the only authority to proceed in the matter and by none else. I have also noted that the respondent No. 2 has also relied upon clauses (14) and (14A) of Section 156(1) of the Customs Act, 1969, applicable in the case of mis-declaration falling within the ambit of Section 32 of the Customs Act, 1969. No mis-declaration is apparent on the part of the appellant as admitted by the representative of respondent No. 1, therefore invoking of section 32 of the Customs Act, 1969 is manifestly wrong and so the punishable clauses (14) and (14A) of Section 156(1) of the Customs Act, 1969, as these cannot invoked in the matter of income tax attracting section 162(1) ibid. The respondent No. 2 acted without power/jurisdiction due to usurpation of powers of the authority expressed in Section 162(1) which is Commissioner of Income Tax. This Tribunal and the Hon'ble High Courts of Pakistan held time and again that the customs officials are not empowered to proceed in the matter of income tax. For instance the case of Messrs AGP (Pvt.) Ltd. v. Additional Collector of Customs, Karachi reported at 2011 PTD (Trib) 110, it was held that:--

"Escaped 'advance tax' cannot be followed and/or recovered by the 'customs officials' under the powers conferred upon them under section 148(5) (6) of the Income Tax Ordinance, 2001, rather it is the Commissioner of Income tax who under section 162 of the Income Tax Ordinance, 2001 can follow and collect the short recovery of any tax chargeable under section 148(5)(6) of the Income Tax Ordinance, 2001."

8.Similarly, the Customs Appellate Tribunal, Islamabad Bench in the case of Messrs Global Marketing Services and another v. Model Customs Collectorate and another reported at 2010 PTD (Trib.) 2086 held that:--

"Only the Commissioner of Income Tax can exercise his powers under section 162 of the Income Tax Ordinance, 2001, on account of default or non payment of tax or if there is a lapse on the part of collecting officer, it could not be said that the collecting officer can himself automatically presume the jurisdiction of recovery of amount of Income Tax on the basis of assumption or being the officer of Customs or as a collecting officer under section 148 of the Income Tax Ordinance, 2001, until the specific powers have been given to him under the law. Hence, it is observed that the Collector of Customs do not have the authority to recover the Income Tax later on but he is only getting the power of collection of tax under section 148 of the Income Tax Ordinance, 2001 therefore mere collection does not mean that he can go for the recovery at the later stage, if the default is made by the persons. To whom the amount of Income Tax is due, the best possibility of recovery according to scheme of law is that after realizing the amount of Income Tax in form of audit or investigation, the collecting officer can refer the matter to the Commissioner of Income Tax for taking the action of recovery under section 162 of the Income Tax Ordinance, 2001. This is also a settled principal of law that a person cannot be tried on the same offence by two forums, he could be tried only where the clear cut provisions of law are available, therefore, in my opinion section 148 of the collection to the Customs Department and the power of recovery in case of default under Section 148 of the Income Tax Ordinance, 2001 vests with Income Tax Department and the Commissioner of Income Tax as prescribed can go for recovery."

"The power to collect the advance Income Tax under Section 148(5) of the Income Tax Ordinance, 2001 cannot have the effect of converting Income Tax into Customs duty. Merely providing the manner of collection of tax as an advance tax under any tax enactment, the nature of the tax could not be changed, hence, the short recovery of any tax collectable under Section 148(5)(6) of the Income Tax Ordinance, 2001 to a person in form of short collected short levied or not so collected, either on account of misdeclaration of the importer, or, on account or error, or in-advertence or under mistake, vests with the Commissioner of Income Tax along under section 162(1) of the Income Tax Ordinance, 2001. The Collector of Customs do not have the authority to go for the recovery, it is the only the Commissioner of Income Tax alone under section 162(1) of the Income Tax Ordinance, 2001. The Collector of Customs do not have the authority to go for the recovery, it is the only Commissioner of the Income Tax who can start the proceedings of recovery against the person in case of default on short collected, short levied or not so collected, either on account of mis-declaration of the importer, or on account or error, or inadvertence or under mistake, so the adjudication by the respondent's to the point of recovery of Income tax against the appellants is not legal, justifiable and not tenable in the eye of law and the exercising of jurisdiction on this point by the respondent and also the adoption of recovery procedure by them are hereby set aside."

"It is declared that the respondent's wrongly assumed the jurisdiction on the show cause notice and over the corrigendum, therefore, their exercise of jurisdiction was not legal justifiable and also not within the four corners of law. It is further declared that the respondents action/procedure for recovery to recover the amount of Income Tax from the appellants is also not legal, voide ab initio without any legal jurisdiction/authority and the same is also against the mandatory provision of law."

This judgment was challenged before the Islamabad High Court through Customs Reference No. 01/2010 by the Collector of Customs, Islamabad and was dismissed by the order dated 15.05.2013, while answering all the questions in negative and against the petitioner. Similarly, Bench-I of this Tribunal held in reported judgment 2014 PTD (Trib.) 299 M.I. Traders v. Additional Collector of Customs held that

"It is my considered opinion that respondent does have the authority to collect sales tax, Income Tax and Federal excise duty at import stage. In the capacity of collecting agent and not empowered to adjudicate the cases of short payment/ recovery due to any reason as expressed in respective sections of the Acts/Ordinance, hence the contention of the respondent representative that customs is empowered to adjudicate the cases of sales tax, income tax and Federal Excise Duty is not legal, justifiable and tenable in the eyes of law. Instead void and ab-initio and coram non judice."

In the issue similar to subject appeal the Hon'ble High Court of Sindh held in reported judgment 2004 PTD 801 Al-Haaj Industrial Corporation (Pvt.) Ltd., Peshawar v. Collector of Customs (Appraisement) that:

"it already stand decided that merely by providing manner and time of collection of tax under any tax enactment, the nature of the tax shall not be changed , meaning thereby that if advanced tax under section 50(5) of the Ordinance can be collected as customs duty and can be recovered by the Customs official under section 202 of the Customs Act, 1969 it will not change the nature of the tax and the income tax shall not become the custom duty... the power to collect the advanced income tax under section 50(5) of the Ordinance by the Collector of Customs, shall not have the effect of converting the income tax into customs duty and consequently the customs officials shall be empowered by virtue of the provision contained in the income Tax and Customs Act, merely to collect the determined amount of tax and shall not have the Authority to resort the chargeability or assessment of a tax. When the income tax shall not be changed into customs duty, the applicability of Section 156 of the Customs Act, 1969 shall be excluded as a logical conclusion."

Similarly, the Division Bench of High Court of Sindh in an unreported case of Messrs Lucky Cement Ltd. v. Federation of Pakistan and others through judgment dated 26.02.2013 in C.P. No. D-216/2013 set-aside and quashed the proceeding emanating out of FIR registered under the Customs Act, 1969 before the Court of Special Judge Customs and Taxation, Karachi by exercising the jurisdiction under Article 199 of the Constitution. The FIR in the matter has been registered for the alleged evasion of advanced Income Tax liable to be deducted at import stage. In spite of reaching to the conclusion that the petition was liable to pay advance tax at import stage, held in paras 25 to 28 that:--

"25- The FIR has been registered by invoking clauses (14), (14A) and (77) of Section 156(1) of the Customs Act. Now clause (14) makes a criminal offence of a violation of section 32(1) and clause (14A) makes a criminal offence of a violation of section 32A(1) provides as follows: "if any person, in connection with any matter of customs...." And then follows the prescribed acts that are criminalized in clause (14). Section 32A(1) opens as follows "if any person, in connection with any matter related to customs...." And again, then follow the prescribed acts that are criminalized in clause (14A). It will be seen that it is of the essence in each case that the offence should have been committed in connection with any matter of or relating to customs. In our view, this essential element is entirely, and necessarily, missing in the present case. Whatever is done in terms of section 148 is in connection with or relating to income tax and not to customs. The jurisdiction conferred on the Collector of customs is obviously only by way of administrative convenience. He is a creature of the Customs act and is empowered and obligated under that statute to collect, and if necessary recover and enforce, customs duty. The 2001 Ordinance (like the 1979 Ordinance) found it expedient to empower him to a carefully limited extent in respect of collection of advance income tax. But the fact that the Collector of Customs is dealing with such collection does not make the matter of it a matter of or relating to customs. It remains and retains its character of being a matter exclusively of income tax. Since a key element, laid down at the very beginning of sections 32 and 32A is entirely (and necessarily) not applicable in relation to section 148, it follows that no offence under the former provisions could be made out for the purposes of clauses (14) and (14A) of section 156(1) of the Customs Act in respect thereof.

26. Clause (77) of Section 156(1) has three sub-clauses of which only the first could conceivably apply in the present case this provides as follows (emphasis supplied).

"if any person counterfeits, falsifies or fraudulently alters or destroys any declaration, statement or documents in the transaction of any business relating to the customs or any seal, signature, initials or other mark made or impressed by any officer of customs in the transaction of any business relating to customs" [he then commits an offence]

As the portions emphasized indicate, the same reasoning applies in relation to clause (77) as just noted in relation to section 32/clause (14) and section 32A/clause (14A). Therefore, it likewise follows that no offence under this clause could be made out in respect or for purposes of anything done in relation to section 148.

27. It is also pertinent to note that in the FIR, itself, in para No. 9 where the nature of the offence has to be stated, it is noted as follows: "attempt to evade income Tax @ 5% amounting to Rs.44795897/- through fraudulent documentation by misusing exemption". Thus, even the customs authorities themselves expressly recognize that the matter was one relating solely and exclusively to income tax and not to anything in relation to or in connection with customs. This serves to further confirms the conclusions already arrived at.

28. In view of the foregoing, we are of the view that the customs authorities had no jurisdiction to register the FIR under the customs Act in relation to the petitioner's claim that it is not obligated to pay advance income tax and in any case, that matter being entirely in relation to income tax could not be an offence under any of the three clauses of section 156(1) that have been invoked. It follows that the FIR is a nullity and completely contrary to law. It cannot be sustained and is liable to be quashed in view of the foregoing position. It is not necessary for us to examine the matter on the merits in relation to the FIR."

The Hon'ble High Court of Sindh in reported judgment 2014 PTD 1963 Shujabad Agro Industry (Pvt.) Ltd. v. Collector of Customs and 8 others held that:--

"the customs authorities has no powers under law to restrict release of 'duty paid consignment' on the plea that imported goods were liable to be assessed at the rate of 5% of 'advance tax' [prescribed for one's own manufacturing used] and not at reduced rate of 3% of `advance tax' [prescribed for industrial used]. Such act of custom authority was without jurisdiction and lawful authority. Custom authorities under law were merely collection agent on behalf of Inland Revenue Department for collection of 'advance tax'. Denying refusal of the consignment on the pretext that income tax is payable @ 5% as against 3% on the basis of reduced rate certificate issued by the Commissioner of Inland Revenue is not only arbitrary, mala fide but also without any jurisdiction, hence illegal , void and ab initio".

9.The Hon'ble High Court of Sindh in yet another recent judgment dated 23.09.2014 in C.Ps. Nos. D-3830/2014, D-3629/2014, D-3630/ 2014, D-3950/2014 and D-3693/2014 of Mr. Muhammad Measum and 3 others v. FOP and 3 others of to entitlement of zero rating in terms of section 4 of the Sales Tax Act, 1990 on the imported goods under Sales Tax Notification No. S.R.O. 670(I)/2013 dated 18.07.2013 and collection of Income Tax by the Clearance Collectorate under Section 148 of the Income Tax Ordinance, 2001 where the Collector of Customs-Appraisement-West established an FIR on the premise that the claimed zero rating of Sales Tax payment of Income Tax on reduced rate to the petitioner was/is not available to due to non availability of manufacturing facility quashed the FIR while observing that:--

"In so far the invoking of Section 148 of the Income Tax Ordinance, 2001, are concerned the same appears to be misconceived in as much as, the said provision only deals with the manner and mechanism for collection of advance tax on the goods at import stage. By implication, it does not convert the levy of Income Tax into a custom duty merely for the fact that it is being collected at import stage. The jurisdiction conferred upon the Collector of the Customs under section 148 of the Income Tax Ordinance, 2001 is only by way of convenience and as an administrative measure and under no circumstances and by no stretch of imagination the collection of advance income tax at import stage would convert it into custom duty, for the recovery of which provision of Section 32 of the Customs Act, 1969 punishable under clause (14) of Section 156(1) ibid could be invoked, hence the FIR in this respect is also unwarranted, without jurisdiction and any lawful authority and is liable to be quashed".

10.It is basic principle that if a mandatory condition for exercise of jurisdiction is not fulfilled then the entire proceeding which follows become illegal and suffer from want of jurisdiction as laid down by the Hon'ble Apex Court in Mansab Ali's (PLD 1971 SC 124). In the case of Chittaranjan Cotton Mills Ltd. v. Staff Union reported as PLD 1971 SC, 197, it was held that "Whereas the court is not properly constituted at all the proceeding must be held to be coram non judice and, therefore, non-existent in the eyes of law. There can also be no doubt that in such circumstances "it could never be too late to admit and give effect to the plea that order was a nullity", as was observed by the Privy Council in the case of Chief Kwame Asante, Treahon v. Chief Kwame Tawia "and in the case of Raunaq Ali's [PLD 1973 SC 236], it was held that "It is now well established that where an inferior tribunal or Court has acted wholly without jurisdiction or taken any action "beyond the spheres allotted to the tribunal by law and, therefore, outside the area within which the law recognizes a privilege or err", then such action amounts to a "usurpation of power unwarranted by law" and such an act is a nullity; i.e. to say, "the result of a prescribed exercise of authority which has no legal effect whatsoever". In such a case, it is well established that a superior court is not bound to give effect to it, particularly where the appeal is to the later's discretionary jurisdiction. The courts would refused to perpetuate, in such circumstances, something which would be patently unjust or unlawful". No deviation from the notified jurisdiction could be made, if an action has been taken or order has been passed without having competency under the respective provision of Act/Ordinance, same is to be declared illegal and without jurisdiction,

11.The order under Section 179(3) has to be passed within 120 days from the date of issuance of show cause notice or within further extended period of 60 days by the Collector of Customs upon availability of "exceptional circumstances" and recording of those prior to expiry of initial period of 120 days after serving notice to the person concerned as held in reported judgment 1998 SCMR 1881 Khalid Mahmood v. Collector of Customs, Custom House, Lahore. In the instant case show cause notice to the appellant was issued on 06.05.2013 and order by the respondent should had been passed on or before 03.09.2013 as against 27.09.2013 as nothing restraint him to do so as the appellant has not submitted reply to the show cause notice due to the reason that the show cause notice infact was issued to Messrs Gulzar Metals Works, Gujranwala not to appellant. As stated by respondent No. 2 in para 3 that he obtained extension for passing order after the expiry of stipulated initial period of 120 days from the Collector of Customs is without any valid reasons as no exceptional circumstances were either available to him or to Collector in the case of appellant nor any notice was served on the appellant despite mandated, rendering the extension non existent as the same was accorded by the Collector without any lawful authority and after expiry of the initial period of 120 days, on which the order passed by the respondent is completely silent. Once the matter became barred by time then the subsequent enhancement in the period of limitation shall not have the effect of reopening of past and closed transaction, rendering the order barred by time by 14 days hence, without any lawful authority and jurisdiction and cannot be enforceable under law as held by the Superior Judicial Fora in umpteenth reported judgment referred by the appellant in para 3(v) supra.

12.It also disturbed me that what the appellant has to do with the status of the importer, which has been allowed by the FBR after due survey of the manufacturing unit and was fed itself in the reservoir portal of FBR as manufacturer. The appellant at the time of filing good declaration under section 79(1) of the Customs Act, 1969 and Rule 433 of Customs Rules, 2001 logged in WeBOC and inserted NTN of Messrs Gulzar Metal Works, Gujranwala and the system itself picked all the relevant data of the importer including the status of "manufacturer" and calculated leviable duty and taxes on the basis of the said status. Similarly, the appropriate officer completed the assessment under section 80 and Rule 438 ibid of the good declaration after going through the examination report loaded by the concerned examining official after carrying out the same in terms of Section 198 and Rule 435 ibid. for payment of additional amount of duty and taxes, which were paid by M/s. Gulzar Metal Works, Gujranwala and the authority defined in section 83 and Rule 442 passed clearance order. Consequent to which the appellant obtained the delivery from the port/terminal and transported the same to the importer namely Messrs Gulzar Metal works, Gujranwala. The said aspect is of vital importance for establishing the fact that the appellant is a non entity in allowing status to the importer as manufacturer.

13.The respondent No. 1 on one hand charging the appellant for mis-declaration under the provision of Section 32 of the Customs Act, 1969 merely on the basis of filing good declaration. Whereas on the other hand no charges has been leveled under section 32(2) against the appropriate officials who passed assessment/clearance order under sections 80 and 83 and Rules 438 and 442 ibid. on the basis of same fed status of Manufacturer by the FBR. In spite of standing on the same pedestal the appellant has been meted out with partial treatment by the respondents, which is not permitted under Article 25 of the Constitution of Islamic Republic of Pakistan and the law laid down by the Superior Judicial Fora in the relied upon judgment by the appellant in para 3(vii) supra, therefore I hold that the treatment given to the appellant is violative of Articles 4 and 25 of the Constitution of Islamic Republic of Pakistan.

14.In view of the above foregoing the contravention report/show cause notice are based upon proceeding which are infested with patent illegalities and which are held to be null and void. As such the order-in-original dated 27.09.2013 passed by respondent No.2 to the extent of appellant is set aside and appeal is allowed.

RR/36/Tax(Trib.)Appeal allowed.