FRONTIER CORPORATION, PESHAWAR VS COLLECTOR OF MCC, PESHAWAR
2017 P T D (Trib.) 1993
[Customs Appellate Tribunal]
Before Ch. Muhammad Shabbir Gujjar, Judicial Member
Messrs FRONTIER CORPORATION, PESHAWAR
Versus
COLLECTOR OF MCC, PESHAWAR and 3 others
Cus. Appeal No. 279/PB of 2015, decided on 02/05/2016.
Customs Act (IV of 1969)---
----Ss. 25, 32, 80 & 156(1)(4)---Determination of customs value of goods and assessment of duty---Misdeclaration---Audit team duly constituted for post clearance audit, pointed out that "Lead acid batteries" imported by the importer vide different Goods Declarations, were misclassified under PCT Heading 8506.8000 attracting customs duty at 10%, instead of correct classification under PCT Heading 8507.2000 attracting Goods Declaration at 20%---Collector of Customs (Adjudication)/Adjudicating Authority vide its consolidated order-in-original ordered the importer to deposit the short amount of duty/taxes paid into Government Treasury---Adjudicating Authority also imposed a personal penalty upon the importer in terms of cl.(14) of S.156(1) of the Customs Act, 1969, which had been challenged by the importer before the Appellate Tribunal---No chemical examination of any laboratory was produced to establish that Batteries in question were "Lead acid Batteries" falling under PCT heading i.e. 8507.2000, attracting Goods Declaration at 20%---Department was not in possession of any sample so that, it could have been referred to a laboratory for chemical analysis and its composition---No extra weightage, in circumstances, could be given to picture of the battery alone, when its chemical composition could not be substantiated from an independent laboratory report---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 the importer had paid short amount of duty/taxes---When a system was laid for the purposes of determination of correctness of declaration, it had to be adhered to and appreciation of any evidence in that respect; had to be in conformity with what was prescribed; because otherwise depending on something outside the laid methodology, would amount to an aberration and upon hearsay; which could damage the requirement given by the law---Examination report tendered by the Customs Authorities, constituted in itself an independent piece of evidence, which itself negated the departmental stance and on the contrary fortified view point of the importer---All the important 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 documentary evidence, which could rebut or nullify the documentary evidence of import, purchases and examination report of the examiner---Customs authorities, though had disputed the description of the subject goods on the basis of said "image", but the Adjudicating Officer did not analyze the authenticity and legal sanctity of the "image"---'Image' could not be taken as conclusive evidence---Importer had submitted the entire requisite commercial documents viz., commercial invoice, packing list, certificate of origin of bill of lading before the customs authorities---Said documents 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, had revealed that no misdeclaration was found during the physical examination---Impugned order-in-original, passed by Adjudicating Authority did not stand the thrust of actual and prime course of justice---Order-in-Original was set aside to the extent of the importer---Order of Adjudicating Authority would mutatis mutandis stand applicable to the appeals being identical in nature, having similar question of law and fact.
2011 PTD (Trib.) 174; 2005 PTD (Trib.) 135; 2009 PTD 467; 2004 PTD 1048 and PLD 1991 SC 963 ref.
Danish Ali Qazi for Appellants.
Azeem Khan, DS, Ruhul Amin Inspector and Abdul Hadi, Appraiser Customs for Respondent.
Date of hearing: 7th March, 2016.
JUDGMENT
CH. MUHAMMAD SHABBIR GUJJAR, JUDICIAL MEMBER.---This appeal has been filed by M/s Frontier Corporation, Peshawar (appellants herein) against a consolidated Order-in-Original Nos.179-195 of 2015, dated 16.02.2015, passed by the Collector Customs (Adjudication), Islamabad, Camp at Peshawar.
2.Brief facts of the case are that an Audit team was constituted by the Headquarter Office vide 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 Frontier Corporation Peshawar vide different GDs during the above period were 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. 25553/- Sales Tax Rs. 4344/- AST Rs. 767/- and AIT Rs. 1687/- (Aggregating to Rs. 32351/-).
3.Subsequently, on adjudication of the matter, the Collector of Customs (Adjudication), Islamabad, Camp Office, Custom House, Peshawar vide his consolidated Order-in-Original Nos. 179-195 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:--
I.That impugned Order and Show-Cause Notice are erred both in law and facts and based on misreading and non-reading of evidence placed before it rather on conjectures and surmises, thus, not sustainable in the eyes of law.
II.That through the instant proceedings, respondents have profaned their mala fide.
III.That Show-Cause Notice is bad in law for not mentioning the detail of GD alleged, thus, due to aforesaid deficiency in the Show Cause Notice, Appellant is in dilemma as to how to respond to the allegations leveled against him which has rendered Appellant virtually handicap to even offer any thing in his defense.
IV.That Show-Cause Notice issued under Section 3 of the Sales Tax Act, 1990 is void ab initio as firstly Show-Cause Notice for recovery of the sales tax cannot be issued under Section 3 ibid which as a matter of fact is a charging provision, moreover, secondly under Chapter VI of the Sales Tax Act, 1990, an officer of the Customs is not an officer of Inland Revenue / Sales Tax and only an Commissioner Inland Revenue or an officer empowered by him can issue a Show-Cause Notice for recovery of sales tax.
V.That moreover as the demand of sales tax / income tax relates to period prior to July-2014, therefore, keeping in view the Finance Act, 2014, wherein the word "tax" has been inserted in both subsections (3) and (3A) of Section 32 ibid, therefore, even under the aforesaid two subsections, the demand of sales tax and income tax are unlawful.
VI.That through Respondents conceded that instant proceedings are not under Section 32(3) ibid yet for mala fide reasons are prosecuting the Appellant under the provisions of Section 32(3A) ibid.
VII.That without prejudice, even subsection (3A) of Section 32 ibid has been wrongly invoked, as whole audit exercise is based on examination of documents provided by the Appellant during filing GD, which as a matter of fact cannot be touched as evident from subsection (3A) of Section 32 ibid.
VIII.That moreover though the charge of under-valuation was also dropped, yet exactly the same amount of duty and taxes have been held recoverable as was alleged in the show-cause notice on the basis of both under-valuation and mis-classification.
IX.That without prejudice the amount of duty and taxes of Rs.32,351/- are appeared to be miscalculated as at one stage the amount of duty and taxes were Rs. Reported as Rs. 12,374/- only.
X.That without prejudice, post clearance determination of value of goods under subsection (5) of Section 25 of the Customs Act, 1969 by the audit team and adjudicating officer is void ab initio firstly for the reason that determination of value of the goods is the sole duty of assessing officer(s), secondly subsection (5) of Section 25 ibid can be invoked only during examination/ assessment/clearance of goods and cannot be applied post clearance of the goods, thirdly subsection (5) of Section 25 ibid only come to action when the value of goods cannot be determined under subsection (1) of Section 25 whereas in the instant case, admittedly the value of goods were determined and there was no dispute on its value, thus, rendering whole exercise nullity in the eyes of law.
Xl.That without prejudice above, discarding the examination report of the officer who physically examined the goods on the basis of WeBOC photographs, is without any rhyme and renders the whole statutory protected exercise of examination officer as futile which act, most humbly submitted is in violation of the Customs Act, 1969.
XII.That besides above, as no sample was drawn, therefore, classification in absence of sample / specimen is not maintainable in the eyes of law for obvious reasons of basing on conjectures and surmises.
XIII. That without prejudice to the merit of the case and also to the fact that so far the audit report and WeBOC images have not been shared with the Appellant, the whole exercise of audit contain certain short comings and mala fide as all the "Torch Batteries" are assumed to fall under PCT Heading 8507.2090 without assigning any specific reason as to how the conclusion of such a classification has been reached.
XIV. That without prejudice to above, it is humbly submitted that Appellant has rightly declared "Battery Torch" under PCT Heading 8506.8000, therefore, the demand is unlawful as all over the country identical goods have been classified under PCT Heading 8506.8000.
XV.That here it is worth to note that each and every consignment was duly examined by the competent officer at the time of declaration and clearance, therefore, nothing adverse should have been assumed in the impugned audit.
XVI. The goods once cleared, classified and assessed to duty and taxes could not be re-classified and re-assessed under section 80 of the Customs Act, 1969 as there exists no provision where such goods could be re-assessed to duty and taxes after the same leave the Customs Dryport after clearance and having been made out-of-charge under section 83 of the Customs Act, 1969.
XVII. That classification of goods and assessment of duty and taxes made by the Customs at the import stage on the basis of valuation data/evidentiary data available on Customs' data base was final in terms of Section 80 of the Customs Act, 1969. It was not a provisional classification/assessment within the meaning of section 81 thereof. The assessed duty and other taxes were paid by the appellant and the Customs allowed clearance of the goods from the Customs area by making the same out of Custom charge thereby making the assessment a closed transaction which cannot be reopened.
XVIII. That an order passed for the Clearance of imported goods under section 83 of the Customs Act, 1969 after having satisfied the correctness of the particulars of import, including declaration, assessment and considering the fact that the import of goods is not prohibited or in breach of any restrictions or conditions applying to the import of such goods could not be questioned.
XIX. That without prejudice prosecution was, therefore, required to re-open the said Order under section 195 of the Customs Act, 1969 in case it was of the view that the order passed by the competent officer under section 83 of the Customs Act, 1969 was suffering from any illegality or impropriety.
XX.That without prejudice in the instant case goods were examined and assessed by competent customs officer, therefore, at such a belated stage challenging both classification and valuation is barred by law as once the consignment is examined, assessed, out of charged, removed from customs area, it becomes past and closed transaction as evident from judgments reported as 2011 PTD (Trib.) 174 and 2005 PTD (Trib.) 135
XXI. That it has also been held that by the superior court in a case reported as 2009 PTD 467 that "after assessment has become out of charge invoking provision of section 32 on the basis of another ruling does not find support from the language of section 32". In the aforesaid judgment, it has also been held that "Section 32 does not speak of ignorance of the applicable value at all".
XXII. That the whole cause is based on the supposition that goods should have been assessed, classified, valued and charged on such and such heading and valued at such and such rate, however, it has been held in the aforesaid citation that "Section 32 should not be invoked only on the basis of the mere estimates, gossips, personal whims or feelings that the value could have been enhanced or it could fetch more".
XXIII. That Show-Cause Notice is also hit by Section 29 of the Customs Act which provides that once goods have been removed from the customs area, its declared value, quantity and description thereof cannot be questioned.
XXIV. That from the above, it is quite clear that after clearance of goods and removal of consignment from customs area, customs authorities are functus-officio is re-open the case again as it becomes past and closed transaction.
XXV. That without prejudice Show-Cause Notices instead of admitting the failure on part of the appraising and assessing staff to perform their duties within the meaning of section 199 of the Customs Act, 1969 and also Sections 25, 80 and 83 ibid, has burdened the Appellant with the charge of mis-declaration within the meaning of subsections (3) and (3A) of Section 32 and officials/officers responsible for such lapse have not been slightly edged to come forward and defend their position for the charges which obviously relate to them.
XXVI. That without prejudice to the merit of the cause with all due respect it is humbly submitted that impugned Cause is against the principle of consistency and natural justice as any misjudgment if at all could be attributed to the Importer / Clearing Agent, the same is true for the Custom Officer who examined and assessed the consignment, however, their cause if at all has been condoned.
XXVII. That from the above, it is evident that Audit Officer has picked the GD in blatant violation of principles of law wherein choose and pick for mala fide reasons are not permissible.
XXVIII. That under the circumstances, the Appellant being dealt discriminately by the Department in violation of Articles 4, 18 and 25 of the Constitution.
Penalty and default surcharge:
XXIX. That it was also hold by the Superior Courts that mense rea or willful default are essential ingredient for imposing penalty and in the present case no mense rea or willful default can be attributed to the Appellant. Attention is invited case reported as 2004 PTD 1048, PTCL 2005 CL 335(sic).
XXX. That without prejudice a case of legitimate error could not be equated with a willful evasion specially when there is no motive for evasion involved, thus under the circumstances of the case, the Appellant is not liable to any penal provision of Customs Act, 1969.
XXXI. That without prejudice of the other submissions, in Show Cause Notice there is no mens rea attributed to the Appellant, hence, no punitive provision of the Customs Act, 1969 is attracted to the Appellant cause, thus, penalty imposed is not sustainable.
XXXII. That penalty under section 156 of the Customs Act, 1969 are not an intractable liability of a tax payer in as much it all depend upon the attitude of the tax payers in suffering the default which if not deliberate, intentional, or contumacious would qualify for being visited the same. In this regard attention is invited to PLD 1991 SC 963.
XXXIII. That even otherwise, the invocation of section 156 of the Act is also against the norms of justice. The honourable Supreme Court of Pakistan in its judgment reported as GST 2004/79 settled the punitive provisions. The operative part is reproduced below for ready reference.
28. Each and every case has to be decided on its own merits as to whether the evasion or payment of tax was willful or mala fide, decision on which would depend on the question of recovery of additional tax. In fact and circumstances of this case, we find that non payment of sales was within tax period neither willful nor it could be construed mala fide evasion or payment of duty, therefore, the recovery of additional tax as penalty or otherwise was not justified in law."
XXXIV. That Appellant, however, reserves the right to present further arguments verbally or in writing and to present evidence to prove their case etc.
4.On the contrary, the respondent-department submitted their para wise comments as follows:--
I.That both the show-cause notice and the order-in-original are according to law and facts as the appellant failed to put forth plausible rebuttal to the charges leveled against him in the show-cause notice that he had misclassified imported lead acid batteries under HS Code 8506.8000 attracting Customs duty @ 10% instead of correct classification under HS Code 8507.2090 attracting Customs duty @ 20%.
IINot admitted being incorrect. The respondents have acted according to law and facts of the case and no mala fide whatsoever is involved.
IIINot admitted being incorrect. The reply was considered and made part of the order-in-original, the same was however, not acceptable being carrying no plausible defence.
IV.Not admitted being incorrect. This contention of the appellant that detail of GDs was not given along with show-cause notice is just a lame excuse. The detail of GDs was given along with SCN and if the same was not even given, it could be demanded at any stage for submission of reply to show-cause notice. On one hand the appellant says that detailed reply to the show-cause notice was given while on the other hand he contends that due to non provision of detail of GDs he is in dilemma as to how to respond to the allegations levelled against him.
V.Not admitted being incorrect. No doubt Section 3 of the Sales Tax Act, 1990 is charging section and in the instant case the appellant was legally supposed to pay the leviable amount of sales tax in compliance with the above said section of the Sales Tax Act, 1990. The appellant however, failed to pay the leviable amount of sales tax which act on his part is violation of section 3 of the Sales Tax Act, 1990.
Not admitted being incorrect. In terms of Section 6 of the Sales Tax Act, 1990, collection of leviable amount of sales tax on import is the responsibility of the Collectorate of Customs. The said section provides that tax in respect of goods imported into Pakistan shall be charged and paid in the same manner and at the same time as if it were a duty of Customs payable under the Customs Act, 1969 and provisions of the said Act shall apply. In view of the above, even before the amendment in section 32(3) & (3A) of the Customs Act, 1969 charging/realization of sales tax on import was domain of the Collectorate of Customs.
VINot admitted being incorrect. Section 32 (3 A) of the Customs Act, 1969 provides for audit and in the instant case audit was conducted under the provisions of the aforesaid section of the Act, as a result short payment of duty/taxes was detected.
VIINot admitted being incorrect. Apart from Section 32 (3A) of the Customs Act,1969, there is another provision of law i.e. section 25(12) of the ibid Act, whereunder the Board or Collector of Customs may order for audit for ascertaining the correctness of declarations, documents records and value of imported goods. In the instant case the audit was conducted in pursuance of order of the competent authority.
Not admitted being incorrect. In the instant case there is no charge of under valuation against the appellant rather the single allegation against him is that he has misclassified his imported item i.e. lead acid batteries under PCT heading 8506.8000 attracting Customs duty @ 10% instead of PCT heading 8507.2090 attracting Customs duty @ 20% which resulted into short payment of duty/taxes amounting to Rs.32.351/-,
X.Not admitted being incorrect. This is not the case of determination or re-determination of value of imported consignment. As at Para-IX above, the case against the appellant is of misclassification of the item which resulted into short payment of duty/taxes.
XI.Incorrect as stated. The Customs department has to facilitate trade through speedy clearance. In case of non-detection of any mis-declaration on the part of any importer at import stage, necessary provisions have been kept in the statute for audit so that the errors, if any, are detected and rectified.
XII.Incorrect as stated. In the WeBOC system images of the imported items are also uploaded along with examination report. In the event of lack of clarity in the declared/reported description of any item, help for identification thereof is taken from the images so uploaded. In the instant case the images clearly show the item being lead acid batteries correctly classifiable under PCT heading 8507.2090 attracting Customs duty @ 20% instead of PCT heading 8506.8000 attracting Customs duty @ 10%. The misclassification resulted in short realization of duty/taxes.
XIIIThat hard copies of images of the items cleared by the appellant are at Annex-A.
XIVIncorrect as stated. The PCT heading 8506.8000 applied in the case of the appellant is meant for 'Primary Cell' which is not rechargeable. The said PCT heading attracts Customs duty @ 10% while the lead acid batteries imported by the appellant are rechargeable and are correctly classifiable under PCT heading 8507.2090 attracting Customs duty @ 20%. The classification of lead acid batteries under PCT heading 8507.2090 attracting Customs duty @ 20% is not only confirmed from Valuation Ruling No.600 of 2013 but also from the import data of other countries (Annex-B). Contention of the appellant is thus not tenable.
XV.Incorrect as stated. Already explained at Para-XI above.
XVL. Incorrect as stated. Already explained at Para-VI above.
XVII Incorrect as stated. Already explained at Para-VI above.
XVIII Not admitted being incorrect. Section 32(3A) of the Customs Act, 1969 provides for audit and in the instant case audit was conducted under the provisions of the aforesaid section of the Act, as a result short payment of duty/taxes was detected.
XIXNot admitted being incorrect. Section 32(3A) of the Customs Act, 1969 as well as Section 25(12) of the ibid Act, provides for audit for ascertaining the correctness of declarations, documents records and value of imported goods. In the instant case the audit was conducted in pursuance of order of the competent authority as a result misclassification of the item imported by the appellant and short payment of duty/taxes was detected.
XX.Not admitted being incorrect. As stated at Para-XIX above.
XXI. Incorrect as stated. As explained at Para XIX above. Moreover, in the instant case, valuation is not the issue rather of the misclassification resulting into short payment of duty/taxes.
XXII. Incorrect as stated. In the instant case it is proved beyond doubt that the item i.e. lead acid batteries has been misclassified under PCT heading 8506.8000 attracting Customs duty @ 10% instead of correct classification under PCT heading 8507.2090 attracting Customs duty @ 20%. Therefore, Section 32 of the Customs Act, 1969 has been rightly invoked.
XXIII. Incorrect as stated. Section 29 of the Customs Act, 1969 relates to restriction on amendment in the GD whereas in the case in hand question of amendment in GD is not involved.
XXIV. Not admitted being incorrect. Section 32 (3A) of the Customs Act, 1969 and Section 25(12) of the ibid Act, provides for audit for ascertaining the correctness of declarations, documents records and value of imported goods.
XXV. 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 and in pursuance of orders of the competent authority. 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.
XXVI. Incorrect as stated. As stated at Para- XXV above.
XXVII. Incorrect as stated. As stated at Para- XXV above.
XXVIII. Incorrect as stated. There discrimination with the appellant is absolutely out of question as cases of identical nature have been framed against other importers as well, having committed same offence.
XXIX. That the penalty imposed in the instant case is not stressed upon and the honourable Appellate Tribunal may like waive off the penalty imposed on the appellant.
XXX That the appellant has admitted his error which resulted in short payment of duty/taxes, therefore, he is now legally as well principally supposed to pay the short paid amount of duty/taxes. The penalty imposed against him is not stressed upon as the department is also of the view that the short payment is due to error and not a willful act on the part of the appellant.
XXVIII. As at Para-XXX above.
XXXII. As at Para-XXX above.
XXXIII. As at Para-XXX above.
XXIV. That right of the appellant to offer any further arguments verbally or in writing and to present evidence in his defence is not denied.
5.During the course of arguments, learned counsel for the appellants, while reiterating the above grounds of appeal, contended that the Show Cause Notice is bad in law for not mentioning the detail of GD alleged, thus, due to aforesaid deficiency in the Show-Cause Notice, Appellant is in dilemma as to how to respond to the allegations leveled against him which has rendered Appellant virtually handicap to even offer any thing in his defense. He further contended that Show Cause Notice issued under Section 3 of the Sales Tax Act, 1990 is void ab initio as firstly Show-Cause Notice for recovery of the sales tax cannot be issued under Section 3 ibid which as a matter of fact is a charging provision, moreover, secondly under Chapter VI of the Sales Tax Act, 1990, an officer of the Customs is not an officer of Inland Revenue/ Sales Tax and only an Commissioner Inland Revenue or an officer empowered by him can issue a Show-Cause Notice for recovery of sales tax. He stated that as the demand of sales tax/income tax relates to period prior to July-2014, therefore, keeping in view the Finance Act, 2014, wherein the word "tax" has been inserted in both subsections (3) and (3A) of Section 32 ibid, therefore, even under the aforesaid two subsections, the demand of sales tax and income tax are unlawful. He further stated that subsection (3A) of Section 32 ibid has been wrongly invoked, as whole audit exercise is based on examination of documents provided by the Appellant during filing GD, which as a matter of fact cannot be touched as evident from subsection (3A) of Section 32 ibid. The counsel submitted that the post clearance determination of value of goods under subsection (5) of Section 25 of the Customs Act, 1969 by the audit team and adjudicating officer is void ab initio firstly for the reason that determination of value of the goods is the sole duty of assessing officer(s), secondly subsection (5) of Section 25 ibid can be invoked only during examination/assessment/clearance of goods and cannot be applied post clearance of the goods, thirdly subsection (5) of Section 25 ibid only come to action when the value of goods cannot be determined under subsection (1) of Section 25 whereas in the instant case admittedly the value of goods were determined and there was no dispute on its value, thus, rendering whole exercise nullity in the eyes of law. He proceeded on to say that discarding the examination report of the officer who physically examined the goods on the basis of WeBOC photographs, is without any rhyme and renders the whole statutory protected exercise of examination officer as futile which act, most humbly submitted is in violation of the Customs Act, 1969 and that besides above, as no sample was drawn, therefore, classification in absence of sample / specimen is not maintainable in the eyes of law for obvious reasons of basing on conjectures and surmises. He stated that without prejudice to the merit of the case and also to the fact that so far the audit report and WeBOC images have not been shared with the Appellant, the whole exercise of audit contain certain short comings and mala fide as all the "Torch Batteries" are assumed to fall under PCT Heading 8507.2090 without assigning any specific reason as to how the conclusion of such a classification has been reached and that without prejudice to above, it is humbly submitted that Appellant has rightly declared "Battery Torch" under PCT Heading 8506.8000, therefore, the demand is unlawful as all over the country identical goods have been classified under PCT Heading 8506.8000. That here it is worth to note that each and every consignment was duly examined by the competent officer at the time of declaration and clearance, therefore, nothing adverse should have been assumed in the impugned audit. He elaborated that goods once cleared, classified and assessed to duty and taxes could not be re-classified and reassessed under section 80 of the Customs Act, 1969 as there exists no provision where such goods could be re-assessed to duty and taxes after the same leave the Customs Dryport after clearance and having been made out-of-charge under section 83 of the Customs Act, 1969. That classification of goods and assessment of duty and taxes made by the Customs at the import stage on the basis of valuation data/evidentiary data available on Customs' data base was final in terms of Section 80 of the Customs Act, 1969. It was not a provisional classification/assessment within the meaning of section 81 thereof. The assessed duty and other taxes were paid by the appellant and the Customs allowed clearance of the goods from the Customs area by making the same out of Custom charge thereby making the assessment a closed transaction which cannot be reopened. That an order passed for the Clearance of imported goods under section 83 of the Customs Act, 1969 after having satisfied the correctness of the particulars of import, including declaration, assessment and considering the fact that the import of goods is not prohibited or in breach of any restrictions or conditions applying to the import of such goods could not be questioned. The learned counsel submitted that it has been held by the Superior Courts that mense rea or willful default are essential ingredient for imposing penalty and in he present case no mense rea or willful default can be attributed to the appellant. In this respect, he relied on the case reported as 2004 PTD 1048, PTCL 2005 CL 335(sic). He lastly prayed for acceptance of the appeal.
6.On the other hand, Representatives of the respondent-department, while reiterating their para wise comments, contended that the contention of the appellant that detail of GDs was not given along with show-cause notice is just a lame excuse. The detail of GDs was given along with SCN and if the same was not even given, it could be demanded at any stage for submission of reply to show cause notice. On one hand the appellant says that detailed reply to the show-cause notice was given while on the other hand he contends that due to non provision of detail of GDs he is in dilemma as to how to respond to the allegations leveled against him. He further contended that no doubt Section 3 of the Sales Tax Act, 1990 is charging section and in the instant case the appellant was legally supposed to pay the leviable amount of sales tax in compliance with the above said section of the Sales Tax Act, 1990. The appellant however, failed to pay the leviable amount of sales tax which act on his part is violation of Section 3 of the Sales Tax Act, 1990. He stated that Section 32(3A) of the Customs Act, 1969 provides for audit and in the instant case audit was conducted under the provisions of the aforesaid section of the Act, as a result short payment of duty/taxes was detected. He further stated that apart from section 32(3A) of the Customs Act, 1969, there is another provision of law i.e. Section 25(12) of the ibid Act, whereunder the Board or Collector of Customs may order for audit for ascertaining the correctness of declarations, documents records and value of imported goods. In the instant case the audit was conducted in pursuance of order of the competent authority. He submitted that in the instant case there is no charge of under valuation against the appellant rather the single allegation against him is that he has misclassified his imported item i.e. lead acid batteries under PCT heading 8506.8000 attracting Customs duty @ 10% instead of PCT heading 8507.2090 attracting Customs duty @ 20% which resulted into short payment of duty/taxes. He contended that in the WeBOC system images of the imported items are also uploaded along with examination report. In the event of lack of clarity in the declared/reported description of any item, help for identification thereof is taken from the images so uploaded. In the instant case the images clearly show the item being lead acid batteries correctly classifiable under PCT heading 8507.2090 attracting Customs duty @ 20% instead of PCT heading 8506.8000 attracting Customs duty @ 10%. The misclassification resulted in short realization of duty/taxes and that he PCT heading 8506.8000 applied in the case of the appellant is meant for 'Primary Cell' which is not rechargeable. The said PCT heading attracts Customs duty @ 10% while the lead acid batteries imported by the appellant are rechargeable and are correctly classifiable under PCT heading 8507.2090 attracting Customs duty @ 20%. The classification of lead acid batteries under PCT heading 8507.2090 attracting Customs duty @ 20% is not only confirmed from Valuation Ruling No.600 of 2013 but also from the import data of other countries (Annex-B). Contention of the appellant is thus not tenable. He lastly prayed for dismissal of the appeal.
7.Both the parties heard. Record perused. No chemical examination of any laboratory was produced to substantiate that the batteries were "lead acid batteries" falling under P.C.T heading i.e. 8507.2090. It was inquired from the DR whether department is in possession of any sample so that it can be referred to a laboratory for chemical analysis and its composition thereof to which department replied in negative. In such circumstances, no extra weightage can be given to picture of the battery alone when its chemical composition cannot be substantiated from an independent laboratory report duly signed by an expert in the field of chemical analysis of composition of a substance, specifically when the pictures fails to show the ingredients of battery as was noted that there was no mention of ingredients on the batteries on the pictures. 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.
8.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.
9.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.
10.It may not be out of place to mention here that clause "C" of the paragraph titled "Directorates Post Clearance Audit (South) Karachi and (North) Lahore" of CGO No.03/2009 stipulates that only Directorate of Post Clearance Audit Islamabad can conduct post Clearance Audit and Collectorates can only identify the cases and sectors for audit to Director General Post Clearance Audit is exclusive jurisdiction of the Directorate of Post Clearance Audit and as such. That's in my view both constitution of the Post Clearance Audit by Collector Peshawar and Post Clearance Audit conducted by aforesaid team is without lawful authority and violation of CGO No. 03/2009 and as such any building built upon such an unlawful act is liable to fall.
11.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.1500/- 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 their para wise 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 subsections (3) and (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.179-195/2015 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.
12.This judgment, shall mutatis mutandis, apply to the following appeals being identical in nature, having similar question of law and facts:--
| S. No. | Appeal No. | Appellant(s) | Respondent(s) | Order-in-Original and date |
| 1. | Cus.280/PB/2015 | Messrs Global International Peshawar. | Coll: Customs | 179-19/ 2015 dated 16.02.2015 |
| 2. | Cus.281/PB/2015 | Messrs Lodhi Enterprises Peshawar | Coll: Customs | 179-195/ 2015 dated 16.02.2016 |
HBT/133/Tax(Trib.) Appeal allowed.