SINGER PAKISTAN LTD. VS COLLECTOR OF CUSTOMS, 2017 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 481 (2015)

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

----S. 4---Income Tax Ordinance (XLIX of 2001), Ss. 162 & 166---Recovery of short levied tax---Contention of Importer was that in terms of S. 148 of Income Tax Ordinance, 2001, Customs Department had power only to collect income tax on imported goods at the time of export and thereafter Commissioner Income Tax alone had power to recover short levied tax under S. 162 of Income Tax Ordinance, 2001, therefore, issuance of show-cause notice by Customs Department was beyond jurisdiction---Validity---Provision of S. 4 of Customs Act, 1969 had authorized and delegated certain powers to customs officers and at the same time imposed some restrictions---When S. 4 of Customs Act, 1969, was interpreted in light of Ss. 148(5) & 162 of Income Tax Ordinance, 2001, then no ambiguity was left that recovery of short payment of income tax was exclusive prerogative of Income Tax Commissioner----Under S. 4 of Customs Act, 1969, customs department in addition to customs duty can collect sales tax, income tax etc. only at the time of import or export, but thereafter, once that stage had passed, they had no jurisdiction to demand short levied taxes---Issuance of show-cause notice by Customs Department for short recovery of Income Tax was against the very spirit of law---Customs Department could not recover any short payment of Income Tax under S. 162 or 166 of Income Tax Ordinance, 2001, nor could invoke jurisdiction to such effect under Customs Act, 1969.

(b) Income Tax Ordinance (XLIX of 2001)---

----Preamble---Sales Tax Act (VII of 1990), Preamble---Income Tax Ordinance, 2001, and Sales Tax Act, 1990 not only provided specific procedure for collection of taxes but had also constituted forums for enforcing law---Both statutes provided independent mechanism for recovery of uncollected taxes.

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

----Ss. 194C(7) & 194C(8)---Customs Appellate Tribunal---Scope of powers---According to Ss. 194(7)-C & 194(8)-C of Customs Act, 1969, Customs Appellate Tribunal would be deemed to be a court, governed partially under Civil Procedure Code, 1908---Any proceedings before Customs Appellate Tribunal would be deemed to be judicial proceedings---Provisions of C.P.C. were also applicable to proceedings pending/decided before such forum.

Pervez Iqbal Kansi and Nasir Ahmad Malik for Appellants.

Rana Kamran - Deputy Collector, Arslan Majeed Assist. Collector Ghulam Muhammad Deputy Director, Qadeer Khan, AO, Khan Muhammad AO and Arif Maqbool Senior Auditor for Respondents.

Date of hearing: 8th May, 2015.

JUDGMENT

CHAUDHARY MUHAMMAD TARIQ/CHAIRMAN.---These appeals have been directed against the Order-in-Originals Nos. 50 of 2014 dated 12.08.2014, 94 dated 20.11.2014, passed by the Collector, Customs (Adjudication-II), Karachi and Order-in-Appeal dated 21.04.2015 passed by the Collector Customs Appeals Karachi. Since the matter at issue in all these appeals is identical, these appeals are disposed of by this single consolidated judgment.

2.Brief facts of the case as reported by the Directorate General of Post Clearance Audit (PCA), Custom House Karachi vide its contravention reports are that during scrutiny of the import data pertaining to concessionary rate of 3% Income Tax admissible on import of material, vide clause (9A) of Second Schedule Part II of the Income Tax Ordinance, 2001 to the industrial undertakings for their own use, defined under subsection (29C) of section 2 ibid, it was observed that the appellants imported various consignments of components/parts and finished articles on concessionary rates of Income Tax against actual standard payable rate. The aforesaid inadmissible concession resulted in short payment of Income Tax.

3.The Directorate General Post Clearance Audit (PCA), Karachi issued audit observations. The importer responded through their consultants/Advocates.

4.Subsequently, the Directorate of Post Clearance Audit (PCA), Karachi forwarded contravention reports vide S.No. PCA/2606/2012/ Audit/6060/ (CR-12-2012/T.A/166) dated 10.12.2012, for adjudication. Accordingly, the Show-Cause Notice No. Adj-II/Coll/SCN-47/PCA-2606/ Singer Pakistan Ltd. 2014 dated 21.02.2014 was issued to Messrs Singer Pakistan Ltd. (NTN-829267), 608 6th Floor, Beaumont Plaza, Beaumont Road, Karachi asking as to why the short payment of Rs.5300892/- may not be recovered from them, and penal action not taken against them under the provisions of section 32(1)C (2) and (3A) of the Customs Act, 1969 and section 148 of Income Tax Ordinance, 2001 read with clauses 14 and 14A of Section 156(1) of Customs Act, 1969.

5.During the course of hearing Mr. Haider Pirwani (Appraising Officer) and Mr. Arif Maqbool, Senior Auditor both appeared on behalf of Directorate of Post Clearance Audit, Karachi and they reiterated the same argument as mentioned in the contravention report. Messrs Ferguson and Co. forwarded an adjournment on behalf of the respondent vide letter No. DST 695 dated 11.05.2014 which request was granted and another opportunity for hearing to the respondents on 25.03.2014 was given. Similar show cause notice were also issued to the other appellants.

6.The appellants replied to the show cause notices and denied the allegations. However, after adopting codal formalities the matter was referred to the Collector Customs Adjudication-II, Karachi, who disposed of the matter. The operative part of Order-in-Original passed in the case Messrs Singer Pakistan Ltd., is reproduced as under:-

"I have examined the record of the case, written reply of importer, and heard arguments of the departmental representative. The Crux of the matter is as to whether concessionary rate of income tax @ 3% was available to goods imported by the respondent in terms of clause (9A) of Second Scheduled Part II of the Income Tax Ordinance, 2001 to industrial undertakings defined under subsection (29C) of Section 2 ibid for their own use. The importer in the instant case has imported Components/parts and finished articles, which do not qualify as raw material in terms of definition provided in chapter-I(definition of Customs General Order 12/2002). Therefore, standard rate of income tax and 50% was chargeable. The representative of departmental retaliated their position as mentioned in the para wise comments.

The undersigned carefully examined the case and perused written replies of the respondents and agree with the contention of the department. The request of respondents for transferring the case to LTU Lahore was also examined but was found not tenable as under the provision of Section 148(5) and (6) of Income Tax Ordinance, 2001, Income tax at import stage is to be collected in the same manner and the same time as Customs Duty and the relevant provisions of the Customs Act, 1969 are also applicable thereto. Moreover, Federal Board of Revenue vide letter C.No. 3(32) Tar-I/90 dated 06.08.2012 superseded previous clarification bearing C.No. 6(8) S/IR-Ops/2012-8259-R dated 16.01.2012 and C.No. 6(8) S/IR-Ops/2012-R dated 18.01.2012, previously Board had authorized Inland Revenue officer to adjudicate those cases. Relevant Para of the letter is reproduced below for references:--

The relevant officers of Customs may, therefore, continue the adjudication proceedings already initiated and take cognizance of all the cases of FED, Sales Tax, withholding Tax pertaining to import stage in future as well.

Therefore, in view of above, the undersigned is competent to adjudicate the case, the charges leveled in the show cause notice stand established accordingly, the respondents are directed to pay Rs.5,300,892/ - along with the default surcharge into the Government treasury. As the offending goods in this case have already been released, therefore, the same cannot be confiscated at this stage. However, a penalty of Rs.2,00,000/ - in terms of clause 14 of subsection (1) of section 156 of the Customs Act, 1969 is imposed on the respondents."

7.Hence these appeals on the grounds mentioned therein.

8.Arguments of both the sides heard. Record perused.

9.Learned counsel for the appellants argued the case at a considerable length and focused his arguments in relation to their jurisdiction of this Tribunal regarding collection of short levied Income Tax and contended:--

"In terms of section 148 of the Income Tax Ordinance, 2001, Collectorate of Customs has the power only to collect income tax on the imported goods at the time of export. Thereafter it is a Commissioner income tax alone who has the power to recover short levied tax under section 162 of the Income Tax Ordinance, 2001. Therefore, issuance of show cause notice by collector of customs is beyond jurisdiction. As such the notice is void-ab-initio and liable to be set aside. It was also argued that Collector of customs have the authority to recovery the income tax only at the time of export afterward he has no authority of collection of income tax under section 148 of the Income Tax Ordinance, 2001. Further contended that the Honourable High Court of Sindh in case No.C.P. No.216 has also decided that customs authorities cannot recover short levied income tax. At best they can make reference to the income tax department. Therefore appeal be accepted and impugned order be set aside."

10.Conversely the D/R appearing on behalf of respondents vehemently opposed the contention of appellants' side and argued the appeal in the light of a directive dated 06.08.2012 issued by Revenue Division/Federal Board of Revenue, Islamabad.

11.In order to address the controversy, let us take up the provisions of Section 4 of Customs Act 1969, reproduced below:--

4. Powers and duties of officers of customs.---An officer of customs appointed under section 3 shall exercise such powers and discharge such duties as are conferred or imposed on him by or under this Act [or the rules made there under]; and he shall also be competent to exercise all powers and discharge all duties conferred or imposed upon any officer subordinate to him: Provided that, notwithstanding anything contained in this Act or the rules, the Board may, by general or special order, impose such limitations or conditions on the exercise of such powers and discharge of such duties as it thinks fit.

12.This provision authorizes and delegates certain powers to the customs officers and at the same time imposes some restrictions. When we interpret Section 4 of the Customs Act, 1969, in concrete manner in the light of Sections 148(5) and 162 of the Income Tax Ordinance, 2001, then no ambiguity is left that the recovery of short payment of income tax is the exclusive prerogative of the Income Tax Commissioner/Inland Revenue Authorities. Under Section 4 of the Customs Act, 1969, the customs authorities in addition to customs duty can collect sales tax, income tax etc only at the time of import or export, but thereafter, once that stage has passed, they have no jurisdiction to demand short levied taxes.

13.The main cause of controversy is that initially the Customs Appellate Tribunal was a combined authority known as Federal Customs, Excise Sales Tax, Appellate Tribunal which had the jurisdiction over the recovery of duty/ taxes including recovery of Excise and Sales Tax. Eversince, the bifurcation of this Tribunal, and entrustment of his appellate functions relating to Federal Excise and Sales Tax to the (renamed) Inland Revenue Tribunal, necessary concomitant amendment was not brought out in the Customs Act, 1969, creating the ambiguity.

14.The provisions of sections 148 and 162 of Income Tax Ordinance, 2001 are reproduced, respectively, here under:--

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[(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.

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 XII] or deduct tax from a payment as required under Division III of this Part [or Chapter X11,] the Commissioner may [pass an order to that effect and] recover the amount not collected or deducted from the person.

15.The Income Tax Ordinance, 2001, as well as Sales Tax Act, 1990, not only provide a specific procedure for the collection of taxes but have also constituted fora for enforcing the law. Both the statutes provide independent mechanism for the recovery of uncollected taxes. Federal Customs Appellate Tribunal is constituted and performs its functions mainly under Sections 194, 194-A, 194-B, 194-C, 195-B of the Customs Act, 1969.

16.According to subsection (7) and subsection (8) of Section 194-C of the Customs Act, 1969, Customs Appellate Tribunal shall be deemed a court, governed partially under the Civil Procedure Code, 1908. Any proceedings before the Appellate Tribunal shall be deemed judicial proceedings. Provisions of subsection (7) and subsection (8) of Section 194-C ibid are reproduced as under:--

(7) The Appellate Tribunal shall, for the purposes of discharging its functions, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (V of 1908), when trying suit in respect of the following matters, namely:--

(a)Discovery and inspection;

(b)Enforcing the attendance of any person and examining him on oath;

(c)Compelling the production of books of account and other documents; and

(d)Issuing commissions.

(8) Any proceeding before the Appellate Tribunal shall be deemed to be judicial proceeding within the meaning of sections 193 and 228 and for the purpose of section 196 of the Pakistan Penal Code (Act XLV of 1860), and the Appellate Tribunal shall be deemed to be a Court for all the purposes of sections 480 and 482 of the Code of Criminal Procedure, 1898 (Act V of 1898).]

17.A very important aspect of the case is that all the three laws i.e. Customs Act, 1969, Sales Tax Act, 1990 and Income Tax Ordinance, 2001 provide legal fora for adjudicating matters under the respective legislations. The provisions of Civil Procedure Code, 1908, are also applicable to the proceedings pending/decided by such fora. The spirit of clause (i) of Section 56 of Specific Relief Act could be made a guide line which is reproduced here under:--

"An injunction cannot be granted when equally efficatious relief can certainly be obtained by any other usual mode of proceeding except in case of breach of trust".

18.The Arguments advanced by the learned D/R that Customs Authorities can recover the short levied Income Tax in the light of Notifications dated 06.08.2012 issued by the Revenue Division/Federal Board of Revenue, Government of Pakistan has no force in the light of the law laid down by the Honorable Supreme Court of Pakistan in suo-motu case No. 13 of 2009 reported as PLD 2011 SC 619 and PLD 1996 Lah.180 thereby it was held that:--

"No Rule can be made which is inconsistent with the parent statutes".

19.Issuance of show cause notice by the Customs Officer for the short recovery of Income Tax is against the very spirit of law and the Maxim.

"UBI JUS IBI REMEDIUM"

which means that where ever there is a right, there is a remedy. The Income Tax department and its legal fora are already functioning under a statute. Customs department has been authorized only to collect advance Income Tax under sections 148(5) of the Income Tax Ordinance. However, the department cannot recover any short payment of Income Tax under Section 162 or 166 of the Income Tax Ordinance, 2001, nor can invoke jurisdiction to such effect under the Customs Act, 1969. The guidance is also derived from the plethora of judgments in which the Honourable High Courts of all the Provinces declined to invoke their constitutional jurisdiction on the ground that adequate/alternate and remedy is available to a party.

20.The upshot of above discussion is that this Bench of Appellate Tribunal is unanimously of the view that the Customs authorities cannot demand the short levied taxes. Therefore Appeal No.1113/14 and Appeal No.661/15 are allowed. Impugned orders are set aside.

21.Announced.

22.Parties may be informed accordingly.

RR/83/Tax(Trib.) Appeal allowed.