IQRA INTERNATIONAL, PESHAWAR VS COLLECTOR OF CUSTOMS, MCC, PESHAWAR, 2017 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 1744 (2016)

Customs Act (IV of 1969)---

----Ss. 25, 32, 79, 80, 81, 83, 156(1)(14) & 194-A---Mis-declaration---Order to deposit short paid amount of duty/taxes and imposition of penalty---Audit team vide audit observation, pointed out that 'acid batteries' imported by importer, were undervalued as Valuation Ruling No.600 dated 24-10-2013 and 2-12-2013 were not applied---Besides, the item in question was also misclassified under PCT heading 8506.8000 attracting duty at 10%, instead of correct classification under PCT heading 8507.2090 attracting customs duty at 20%---Said irregularity resulted in short realization of customs duty---Additional Collector Customs (Adjudication), vide his consolidated order-in-original, ordered appellant/importer to deposit the short paid amount of duty/taxes---Adjudicating Authority also imposed a penalty in terms of cl.14 of S.156(1) of the Customs Act, 1969---Conclusion of short realization of duty/taxes, was mainly drawn by the department on the basis of image available in 'WeBOC' data---Such an image, could not be made "material in particular" to substantiate that importer had paid short amount of duty/taxes, as the same did not provide necessary corroboration in the form of any legal sanctity in terms of S.2(kka) of the Customs Act, 1969---Section 32 of the Customs Act, 1969 provided that phrase "reason to believe" and "in any material particular", could not give space to any vague estimate, however strong it could be---Said phrase, could only be used where definite and positive belief could be estimated with regard to the submission of the incorrect documents, or wrong statement---When a system was laid for the purpose of determination of correctness of declaration, it had to be adhered to and appreciation of any advice in that respect had to be in conformity with what was prescribed---Examination report tendered by the Customs Authorities, constituted an itself an independent piece of evidence, what itself negated the departmental stance and on the contrary fortified the point of view of the importer---All the import documents stood verified by the customs at the time of examination/assessment and the Adjudicating Officer could not substantiate its observation or view point with any document and evidence which could rebut or nullify the documentary evidence of import---Documents submitted by importer sufficed the legal requirements of submission of prescribed documents to be submitted by the importer to the customs at the time of importation---Examination report revealed that no mis-declaration was found during the physical examination---Appeal filed by the importer was allowed and impugned order-in-original, would not stand the thrust of actual and prime course of justice, same was set aside to the extent of importer.

Aamir Bilal for Appellants.

Azeem Khan, DS, Ruhul Amin Inspector and Abdul Hadi, Appraiser Customs for Respondents.

Date of hearing: 7th March, 2016.

JUDGMENT

CH. MUHAMMAD SHABBIR GUJJAR, MEMBER (JUDICIAL).---This appeal among the other appeals, has been filed by Messrs Iqra International Peshawar (appellants herein) against a consolidated Order-in-Original Nos.196-210 of 2015, dated 16.02.2015, passed by the learned Collector of MCC, Peshawar.

2.Brief facts of the case are that an Audit team was constituted by the Headqarter Office order C.No.Cus-PCA/02/2012/14146 dated 18.04.2014 followed by order C.No. 14381 dated 25.04.2014, for post clearance audit of import section of Peshawar Dryport for the period July, 2013 to March, 2014. The Audit team vide audit observation No. 06 pointed out that lead acid batteries imported by Messrs Iqra International Peshawar vide different GD/GDs during the above period were undervalued as Valuation Ruling No.600 dated 24.10.2013 and 02.12.2013 were not applied. Besides, the item in question was also misclassified under PCT heading 8506.8000 attracting customs duty @ 10% instead of correct classification under PCT heading 8507.2090 attracting CD @ 20%. The irregularities resulted in short realization of customs duty amounting to Rs. 1284267/- Sales Tax Rs. 1155085/- AST Rs. 115851/- and AIT Rs. 443605/- (Aggregating to Rs. 2998808/-).

3.Subsequently on adjudication of the matter, the Additional Collector of Customs (Adjudication), Islamabad, Camp Office, Custom House, Peshawar vide his consolidated Order-in-Original Nos.196-210 of 2015, dated 16.02.2015, ordered the present appellant to deposit the short paid amount of duty/taxes to the tune of Rs.32351/- into Government Treasury. He also imposed a personal penalty of Rs.1500/- upon the appellant-unit in terms of clause 14 of Section 156(1) of the Customs Act, 1969. Hence this appeal before this Tribunal on the following grounds:--

1. That, in the instant case hearing date was fixed by the adjudication officer vide Show Cause Notice Cus/Adj/Addl. C/132/2014/3002 and 3013 dated 20.10.2014 on 28.10.2014 and 07.01.2015 in his office situated at Customs House, Peshawar, while the appellant reached on the specified time and date at the place mentioned in the notice. Without prejudice, it was the paramount responsibility of the authority who himself, fixed the date of hearing, the make sure of his availability in his office. Regretfully, the adjudication officer was not available in the office, however, during the period (i.e., 28.10.2014 to 07.01.2015) the respondent has submitted 02 application but they neither replied nor informed him of the fate of his applications.

2. Even issuance of a proper show cause notice to a person is an essential ingredient of the expression "audi alterm partem" which literally means that no man shall be condemned unheard. The right of being issued with a show cause notice and the right of being personally heard are inseparable and inalienable rights of the defendant and cannot be denied to the person concerned under any circumstances.

3. That the declaration and relevant documents presented by the appellant at the time of import/clearance before the competent authority were found true and correct in all aspects.

4. That no specific act of omission or of commission to bring the conduct of the appellant within the fold of alleged offences has been specified; except images available in WeBOC system; a study of concluding para of the impugned order dated 16.02.2015 would reveal that the appellant was held guilty and a judgment was passed without providing him an opportunity to defend the allegations, or to know the evidence or the basis for arriving at the said conclusion.

5. Here the only charge against the appellant is that, although the examiner including other concerned authorities, after physical examination at the time of clearance accepted, verified and confirmed the description made in the relevant documents, as true/ correct, even it was not denied by the adjudication officer in his SCN/impugned order but, without any solid/ authentic evidence passed a perfunctory, non-speaking order against the appellant.

6. That the examination report which in itself an independent piece of evidence tendered by customs authorities support description of goods as given in commercial documents presented by appellant before customs authorities, it negates audit team/adjudication officer stance.

7. That the appellant has submitted/presented the entire requisite commercial documents viz. Commercial invoice, packing list, certificate of origin and bill of lading before the competent authority and these documents suffice the legal requirements of submission of prescribed documents to be submitted by the appellant to the customs at the time of importation/clearance. As such invoice/packing list duty incorporates name/brand, quantity in addition to weight in net and gross and certificate of origin. The foregoing narration amply substantiates the veracity of the declaration of the appellant and negates the view point of the audit team/adjudication officer. The appellant has discharged his initial or persuasive burden of proof through production of all commercial documents which are compatible with one another and in other words complement one another. However, the stance nurtured by the audit team/adjudication officer is arbitrary, capricious, whimsical, even does not appeal to common sense.

8. That the value determined vide valuation ruling No.600 dated 24.10.2013 and 02.12.2013 was applicable as contended by the audit team/adjudication officer have no nexus with the consignment imported by the appellant.

9. The assumption of the adjudication did take place due to the images in the SeBOC data. The contention of the adjudication officer that the appellant has mis-declared the imported goods as "torch batter" under PCT Heading 8506.8000 instead of so-called" lead acid batter" classifiable under 8507.2090 was caused upon the presumptive investigation, based on the images in the WeBOC data. However, the charge against the appellant was wholly misconceived, as nothing has been found with the images which identify that the imported goods were actually " lead acid batter".

10. The perusal of the order would reveal that, as for the audit team there was hardly any justification that, how they ascertained from the reflection of the images, that the goods were so-called 'lead acid batter" instead of "torch battery". As shown in the data available in the SeBOC system in-respect of clearances of the same item from other customs stations of the country i.e., Karachi and LAPR also does not support the contention of the audit team/adjudication officer.

11. No evidence was placed on record to substantiate the said stance nor, was any material placed on record that the appellant has mis-declared the consignment. Infact, the respondent has paid all the leviable duty/taxes on the basis of assessment done by the competent authority under Section 80 of the Customs 1969 read with S.R.O. 371(I)/2002 dated 15.06.2002. So no case of short assessment or mis-declaration was established against the appellant, but the same has been ignored by the audit team/adjudication officer. In view of the foregoing the adjudication officer cannot invoke provisions of section 32 of the Customs Act, 1969 by misinterpretation of classification/ valuation ruling, only on the basis of mere estimates, gossips, personal whims or feelings that the value could have been enhanced or it could fetch more taxes etc.

4.On the contrary, representative of the respondent-department filed their parawise comments to the following effect:--

1. That the adjudicating authority after issuing show-cause notice gave three (3) opportunities to the appellant to submit written defence and to appear for hearing in person or through authorized representative on 28.10.2014, 24.11.2014 and 07.01.2015. The appellant however neither submitted written reply to the show-cause notice nor appeared for hearing in person or through authorized representative, therefore, ex parte adjudication of the case was justified.

2. As at Para - 5 above.

3. Incorrect as stated. The appellant did not specifically declare the actual description of the batteries in the relevant GD and other allied documents with a mala fide intention to evade duty/taxes which was detected during the course of audit. This contention of the appellant that the documents presented by him were found true and correct is not base on fact as no invoice/packing list was found inside container as required under Rule 389 of the Customs Rules, 2001 for which a personal penalty of Rs. 5000/- was imposed on him through a built-up mechanism in the WeBOC system.

4. Incorrect as stated. The appellant did not specifically declare actual description of the item imported by him due to which the item could not be identified as "lead acid batteries". And as a result the item also could not be correctly classified under the relevant PCT heading i.e. 8507.2090 attracting Customs duty @ 20% rather under PCT heading 8506.8000 which attract Customs duty @ 10%. As in the WeBOC system images of the imported items are uploaded along with examination report from which correct description of any item can easily be identified. In the instant case, correct description was identified from the images and the omission/commission on the part of the appellant was established.

5. Incorrect as stated. With a view to facilitate trade and to ensure speedy clearance of imported consignments, cursory examination of the goods is carried and as such the possibility of omissions/oversights on the part of examiners cannot be ruled-out. For detection of such like fraudulent play on the part of tax evaders and rectification of omissions/oversights on the part of Customs periodical audits are conducted under the relevant provisions of law. Moreover, as stated above, commercial documents i.e. invoice and packing list of the relevant manufacturer were not found available inside containers as is required under Rule 389 of the Customs Rules, 2001 for which a penalty of Rs. 5,000/- was imposed on the importer.

6. As at Para-9 above.

7. As at Para-8 above.

8. Incorrect as stated. A copy of valuation Ruling No.600 dated 24.10.2013 and dated 02.12.2013 is enclosed herewith which clearly shows that "lead acid batteries" are correctly classifiable under HS Code 8507.2090. The appellant mis-declared the item under an irrelevant HS Code attracting low rate of Customs duty, thus he succeeded in evading duty/taxes. Plea of the appellant is not correct. He can verify actual description of item from images taken in his presence and uploaded in the WeBOC system.

9. As at Para-12 above.

10. Incorrect as stated. In the WeBOC system uploading of images of each and every imported along with examination reports has been made mandatory. This has been done for proper identification of an item for correct classification. In the instant case the uploaded images clearly show actual description of the item. Act of the appellant of misclassifying the imported goods resulted in evasion of duty/taxes which is offence within the meaning of Section 32 of the Customs Act, 1969 which is punishable under Section 156(1) (14) of the Customs Act, 1969 besides initiation of proceedings of realization of the evaded amount of duty/taxes.

11. Incorrect as stated. The images uploaded of goods pertaining to GD No.1655 dated 06.11.2013 and GD No. 2139 dated 06.12.2013 include the image of "lead acid batteries" from which the item in question can be easily identified. The cornputerized/WeBOC data substantiates the order-in-original under appeal Contention of the appellant that no evidence has been brought on record is amazing in the presence of WeBOC data.

5.During the course of arguments, learned counsel for the appellants, while reiterating the above grounds of appeal, contended that the only charge against the appellant is that, although the examiner including other concerned authorities, after physical examination at the time of clearance accepted, verified and confirmed the description made in the relevant documents, as true/ correct, even it was not denied by the adjudication officer in his SCN/impugned order but, without any solid/authentic evidence passed a perfunctory, non-speaking order against the appellant. He further contended that the examination report which in itself an independent piece of evidence tendered by customs authorities support description of goods as given in commercial documents presented by appellant before customs authorities, it negates audit team/adjudication officer stance. The learned counsel stated that the appellant had submitted/presented the entire requisite commercial documents viz. Commercial invoice, packing list, certificate of origin and bill of lading before the competent authority and these documents suffice the legal requirements of submission of prescribed documents to the submitted by the appellant to the customs at the time of importation/clearance. As such invoice/packing list duty incorporates name/brand, quantity in addition to weight in net and gross and certificate of origin. The foregoing narration amply substantiates the veracity of the declaration of the appellant and negates the view point of the audit team/adjudication officer. The appellant has discharged his initial or persuasive burden of proof through production of all commercial documents which are compatible with one another and in other words complement one another. However, the stance nurtured by the audit team/adjudication officer is arbitrary, capricious, whimsical, even does not appeal to common sense. He further stated that the value determined vide valuation ruling No.600 dated 24.10.2013 and 02.12.2013 was applied as contended by the audit team/adjudication officer have no nexus with the consignment imported by the appellant and that the assumption of the adjudication did take place due to the images in the WeBOC data. The contention of the adjudication officer that the appellant has mis-declared the imported goods as "torch batter" under PCT Heading 8506.8000 instead of so-called" lead acid battery" classifiable under 8507.2090 was caused upon the presumptive investigation, based on the images in the WeBOC data. However, the charge against the appellant was wholly misconceived, as nothing has been found with the images which identify that the imported goods were actually "lead acid battery". He proceeded on to say that perusal of the order would reveal that, as for the audit team there was hardly any justification that, how they ascertained from the reflection of the images, that the goods were so-called "lead acid batter" instead of "torch battery". As shown in the data available in the WeBOC system in-respect of clearances of the same item from others customs stations of the country i.e., Karachi and LAPR also does not support the contention of the audit team/adjudication officer. The learned counsel submitted that no evidence was placed on record to substantiate the said stance nor, was any material placed on record that the appellant has mis-decalared the consignment. Infact, the respondent has paid all the leviable duty/taxes on the basis of assessment done by the competent authority under section 80 of the Customs 1969 read with SRO 371(I)/2002 dated 15.06.2002. Son no case of short assessment or mis-declaration was established against the appellant, but the same has been ignored by the audit team/adjudication officer. In view of the foregoing the adjudication officer cannot invoke provisions of Section 32 of the Customs Act, 1969 by misinterpretation of classification/valuation ruling, only on the basis of mere estimates, gossips, personal whims or feelings that the value could have been enhanced or it could fetch more taxes etc. The learned counsel for the appellants has urged that, no specific act of omission or of commission to bring the conduct of the appellants within the fold of alleged offences has been specified; a study of impugned Show Cause Notice would reveal that the appellants were held guilty and an order was passed without providing them any opportunity to defend the allegations, or to know the evidence or the basis for arriving at the said conclusion. The learned counsel for the appellants contended that the prosecution failed to produce any direct evidence against appellant as provided under Article 117 of the Qanun-e-Shahadat Order, 1984, whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist. The learned counsel for the appellants further contended that as such the contents of Show Cause Notice were mutually contradictory, a study of Show Cause Notice reveals that the importer has made mis-declaration which relates to Subsections (1)(2) of section 32, while at the same time the appellant was charged under subsection (3) of Section 32 which refers inadvertence, error and mis-construction. The learned counsel for the appellants urged that even subsection (3A) of Section 32 ibid has been wrongly invoked, as whole audit exercise is based on examination of documents provided by the appellants at the time when the goods were imported, which as a matter of fact/law cannot be touched as evidence.

6.The learned counsel for the appellants pointed out that, as evident from the record the appellant did not conceal anything from Customs, it was un-fair to allege that the appellant had committed an offence under Section 32(1)(2) of the Act. None of the conditions stated in Section 32(3) are answered. He submitted that the personal penalty imposed on the appellant is also unlawful and against the norms of natural justice. He lastly prayed for acceptance of the appeal.

7.On the other hand, Representatives of the respondent-department strongly opposed the contentions of the learned counsel for the appellants by supporting the impugned Order-in-Original and submitted that the appellant did not specifically declare the actual description of the batteries in the relevant GD and other allied documents with a mala fide intention to evade duty/taxes which was detected during the course of audit. This contention of the appellant that the documents presented by him were found true and correct is not based on fact as no invoice/packing list was found inside container as required under Rule 389 of the Customs Rules, 2001 for which a personal penalty of Rs. 5000/- was imposed on him through a built-up mechanism in the WeBOC system. He further submitted that with a view to facilitate trade and to ensure speedy clearance of imported consignments, cursory examination upto the extent of 10% as required under the customs examination manual of the goods is carried and as such the possibility of omissions/oversights on the part of examiners cannot be ruled-out. For detection of such like fraudulent play on the part of tax evaders and rectification of omissions/oversights on the part of Customs periodical audits are conducted under the relevant provisions of law, which has overriding effect on the clearances sections, such as sections 79, 80, 81 and 83 of the Customs Act, 1969. The DR also contended that the appeals in the similar nature of cases have been dismissed by the Customs Appellate Tribunal, Islamabad Bench. He contended that in the WeBOC system uploading of images of each and every imported goods along with examination reports has been made mandatory and this has been done for proper identification of an item for correct classification. In the instant case the uploaded images clearly show actual description of the item. Act of the appellant of misclassifying the imported goods resulted in evasion of duty/taxes which is offence within the meaning of Section 32 of the Customs Act, 1969 which is punishable under Section 156(1) (14) of the Customs Act, 1969 besides initiation of proceedings of realization of the evaded amount of duty/taxes. He stated that the images uploaded of goods pertaining to GD No.1655 dated 06.11.2013 and GD No.2139 dated 06.12.2013 include the image of "Lead Acid Batteries" from which the item in question can be easily identified and that the computerized/ WeBOC data substantiates the Order-in-Original under appeal Contention of the appellant that no evidence has been brought on record is amazing in the presence of WeBOC Data. He lastly prayed for dismissal of the appeal.

8.Both the parties heard. Record perused. When confronted with the submission of the learned counsel for the appellants that the prosecution has failed to produce any direct evidence against appellant as provided under Article 117 of the Qanun-e-Shahadat Order, 1984, whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist emanating from the Show Cause Notice, the DR conceded that the grounds on which customs proposed to take action against the appellant were never revealed in the Show Cause Notice. As such, initiation of action against the appellant was thus in violation of the provisions of Section 180 of the Customs Act, 1969, as the very essence of any notice is to enable any person affected thereby to know the particulars of the charges mentioned in the notice. In the impugned show cause notice, the basis of such allegations is not known to the appellant.

9.In the instant case, the conclusion of short realization of duty/taxes was mainly drawn by the respondent department on the basis of image available in WeBOC data. However, such an image cannot be made "material in particular" to substantiate that the appellant has paid the short amount of duty/taxes, as the same does not provide the necessary corroboration in the form of any legal sanctity in terms of clause (iv) of Section 2(kka) of the Customs Act, 1969. For the sake of convenience, the relevant provisions are reproduced below:--

"(KKa) "documents means a goods declaration, application for claim of refund, duty drawback or repayment of duty, import or export general manifest passenger manifest, bill of lading, airway bill, commercial invoice and packing list or similar other forms or documents used for customs clearance or making a declaration to customs, whether or not signed or initiated or otherwise authenticated, and also includes:--

(iv) a photograph, film, negative, tape or other device in which one or more visual images are embodied so as to be capable (with or without the aid of some other equipment of being reproduced; and)".

Furthermore, as provided under Section 32, the phrase "reason to believe" and later "in any material particular" cannot give space to any vague estimate howsoever strong it may be. Regarding the phrase "material particular" this given is very restrictive. The term "material" used here means "Pertaining to the subject matter" while "particular" is synonymous to accurate, appropriate, definite, detailed, distinct, exact etc. The phrase, therefore, can only be used where definite and positive belief can be established with regard to the submission of the incorrect documents or wrong statement. When a system is laid for the purposes of determination of correctness of declaration, it has to be adhered to and appreciation of any evidence in this respect has to be in conformity with what is prescribed because otherwise depending on something outside the laid methodology would amount to an aberration and upon hearsay and can damage the requirement given by the law. The examination report tendered by the customs authorities constitutes in itself an independent piece of evidence which itself negates the departmental stance and on the contrary fortifies the appellant's view point. All the import documents stand verified by the customs at the time of examination/assessment and the adjudicating officer could not substantiate its observation or view point with any documentary evidence which could rebut or nullify the documentary evidences of import, purchase and examination report of the examiner. Although, the customs authorities have disputed the description of the subject goods on the basis of image, besides the fact that such an image does not bear the complete, comprehensive and actual facts and details, but the adjudication officer also did not analyze the authenticity and legal sanctity of the images. No evidence worth mentioning was on record to even faintly connect the impugned image with the contention of the respondent department hence, the image cannot be taken as conclusive evidence. In doing so, the respondents are saddled with the responsibility to produce cogent and admissible material to establish the genuineness, authenticity and credibility of the image.

10.It is an admitted position that the appellant has submitted the entire requisite Commercial documents viz. Commercial invoice, packing list, certificate of origin and bill of lading before Customs Authorities. These documents suffice the legal requirements of submission of prescribed documents to be submitted by the importer to the customs at the time of importation. The methodology of ascertaining the actual PCT classification by the examination staff through physical examination of the imported goods, and the cross check of the appraisement staff, through the samples drawn by the examination staff, as evident from the examination report, is an age-old practice at Dry Port Peshawar, hence, it was also important for the adjudication officer to take into consideration these important facts before passing the order in the instant case, but none of these were answered by the adjudication officer in the impugned order.

11.By virtue of the fact that to check the description/specification of the imported goods rests on the part of the examiner concerned examining the goods under section 198 of the Act (ibid). Whereas to check PCT heading, value, rate of duty and taxes paid amount of duty and taxes rests on the part of scrutinizing Appraiser in terms of sections 25 and 80 of the Act. Whereas, clearance is being allowed by the Principal Appraiser after receiving of confirmation regarding all the aspect from the scrutinizing Appraiser, and in case of using the term 'incorrect declaration' it is the manifest duty of the examiner to correct the same, and the customs staff is deputed for the said job, otherwise there is no need of the customs staff and such is the case with WeBOC, wherein the scrutinizing staff checks each and every aspect in the light of examination report, before recommending out of charge to the Principal Appraiser electronically through his allotted personal secret code, which is not known to anyone except him, as per devised procedure of the WeBOC. In the light of the deeming provisions of section 198 of the Act, the examining officer examined the said goods including their weighing and sampling, as he deemed fit and proper up-to his satisfaction and prepared his examination report for onward submission to the concerned scrutinizing authorities. However, the examination report reveals that no mis-declaration was found during the physical examination.

12.As regards the issue raised by the respondent department that no invoice was found inside the container is not tenable, because, it has attained finality and a personal penalty of Rs.5000/- was already imposed on appellant through a built-up mechanism in the WeBOC system and the appellant also paid the same before the clearance of goods. This has been a settled and long standing departmental practice which has been in vogue for years. During arguments, it was also contended by the respondent department in Para-7 of their parawise comments that the appellant did not specifically declare the actual description, while, on the other hand as evident from Para 2 of the impugned Show Cause Notice the adjudication officer charged the appellant for violation of the provisions of Subsection (3) & (3-A) of Section 32 of the Act, which relates to inadvertence, error or misconstruction. As such the stance/ submissions made by the respondent department are mutually contradictory. Subsection (2) and Subsection (3) are two separate provisions of Section 32 which have no overlapping features, as the respondent department wishes to establish. Accordingly, it is evident that the said provisions of law are not attracted in this case. It was the paramount responsibility of the Customs that, before embarking upon any allegation the state functionary must already possess some definite material so as to establish any illegal action having been taken by the importer. Having said that the appeal is allowed and the impugned Order-in-Original Nos.196-210/2015 dated 16.02.2015 does not stand the thrust of actual and prime course of justice, hence the same is set aside to the extent of present appellant only.

13.This judgment, shall mutatis mutandis, apply to the following appeals being identical in nature, having similar question of law and facts:--

HBT/106/Tax(Trib.) Appeal allowed.