CHARMANG CORPORATION VS ADDITIONAL COLLECTOR CUSTOMS, ADJUDICATION, PESHAWAR, 2017 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 680 (2015)

Customs Act (IV of 1969)---

----Ss. 32 & 156(1)(14)---Misdeclaration and misclassification of imported goods---Observations of Audit Team pointed out that "lead acid batteries" were under-valued as Valuation Ruling No. 60 dated 24-10-2013 and 2-12-2013, were not applied; besides, the item in question was also misclassified under P.C.T. Heading 8506.8000 (attracting customs duty at the rate of 10%) instead of correct classification under P.C.T. heading 8507.2090 (attracting customs duty at the rate of 20%) which resulted in short realization of customs duty---Importer allegedly had evaded duty/taxes to the tune of Rs.325730 by violating S.32(3)(3A) of the Customs Act, 1969, which were recoverable from importers/Clearing Agent, besides taking penal action against the importer under S.156(1)(14) of the Customs Act, 1969---Collector Customs (Adjudication) after issuing show-cause notice to the importers and after observing of necessary formalities, vide order-in-original, ordered the importers to deposit the short paid amount of duty/taxes, with penalty---Validity---Importers had imported 'lead acid batteries', description of which was not specifically declared in the goods declaration and other allied documents---Importers, declared quantity of the imported lead acid batteries, in Dozens instead of correct unit of measurement of the item i.e. Kgs---Non-declaration of correct measurement unit of said batteries, non-application of the valuation ruling thereon, coupled with mis-classification of the same, resulted in short payment of duty/taxes---Importers had not been able to point out any material irregularity or infirmity in the impugned order-in-original, they were liable to pay short paid amount, duty/taxes into the Government Treasury---No mens rea having been attributed to the importers in the show-cause notices, no punitive provision of Customs Act, 1969, was attracted---Personal penalty imposed on the importers, was not sustainable, which accordingly was ordered to be remitted, in circumstances.

2011 PTD (Trib.) 174 and 2005 PTD (Trib.) 135 ref.

Danish Ali Qazi for Appellants.

Muhammad Arshad, Inspector for Respondents.

Date of hearing: 25th November, 2015.

JUDGMENT

CH. MUHAMMAD MAQSOOD-UL-HASSAN, MEMBER (JUDICIAL).---This judgment shall dispose of ten above mentioned appeals which have been filed through Mr. Danish Ali Qazi, Advocate against Order-in-Original No.196 of 2012/2015 dated 22.12.2014 and Order-in-Original Nos.172-176 dated 10.2.2015 and Nos.179-195/2015 dated 16.02.2015 passed by Additional Collector of Customs (Adjudication) Peshawar because all the appeal are similar in nature and identical question of law and facts are involved in all the above mentioned appeals.

2.This judgment is being written in Appeal No. Cus-282/PB/2015 titled Messrs Charming Corporation, FF-330A, Deans Trade Centre, Peshawar Cantt. Versus The Additional Collector Customs (Adjudication) Peshawar and Superintendent Customs Dry Port Peshawar. Brief facts of the case as reported by the Superintendent Customs Dry Port Peshawar are that an audit team was constituted vide Headquarter 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 Dry Port for the period from July, 2013 to March, 2014. The audit team vide audit observation No. 06 pointed out that lead acid batteries imported by Messrs Charmang Corporation, Peshawar vide GD/GDs shown in the statement 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. 141,885/-, Sales Tax 124,212/-, AST Rs. 11,958/- and AIT Rs. 47,675/- (aggregating to Rs, 325,730/-).

3.In view of the facts stated above, it was alleged that Messrs Charmang Corporation, Peshawar evaded duty/taxes to the tune of Rs.325730/- by violating section 32(3)(3A) of the Customs Act, 1969 read with section 3 of the Sales Tax Act, 1990 which were recoverable from the importer/clearing agent concerned besides taking penal action against him/them under section 156(1)(14) of the Custom Act, 1969 and section 33 of the Sales Tax Act, 1990.

A show-cause notice C.No.Cus/Adj/ADDL.C/ 123/2014/3019 DATED 20.10.2014 was issued. After observing of necessary formalities, the Additional Collector Customs Adjudication, Peshawar vide Order-in-Original Nos.196-210 of 2015 dated 16.02.2015 ordered the appellants to deposit the short paid amount of duty/taxes to the tune of Rs.325730/- into Government Treasury. A personal penalty of Rs.16000/- was also imposed upon the appellants. Feeling aggrieved of the said Order-in-Original the appellants filed instant appeal before Custom's Appellate Tribunal Peshawar Bench which was later on entrusted to the undersigned by the Hon'ble Chairman of the Tribunal for disposal. Mr.Danish Ali Qazi, Advocate, learned counsel for the appellants argued as under:--

1.That impugned order and show-cause notice are erred both in law and facts and based on misreading and non-reading

2.That through instant proceedings, respondents have profane their mala fide.

3.That the appellants have been condemned unheard.

4.That the show-cause notice is bad in law firstly for not mentioning the detail of G.D. alleged, secondly for filing to give the necessary evidence, on the basis of which Appellant's goods were assessed.

5.That show-cause notice to the extent of recovery of Sales Tax/ Income Tax is void ab initio.

6.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 during filing GD, which as a matter of fact cannot be touched as evidence.

7.That discarding the examination report of the officer who physically examined the goods, mere on the basis of WeBOC photographs, is without any rhyme and reason and also renders the whole statutory protected exercise of examination officer as futile.

8.That 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.

9.That appellant has rightly declared "Torch Battery" under PCT Heading 8506.8000, thus Valuation Ruling No.600 dated 24.10.2013 and dated 02.12.2013 are not applicable to the appellant's import, besides appellant has decaled its correct value of US$0.6 per dozen, therefore, the demand that it should have been valued as US$ 1.72 per kg is also misconceived.

10.That goods once cleared, classified and assessed to duty and taxes could not be re-classified/re-assed 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 Dry port after clearance and having been made out of charge under section 83 of the Customs Act, 1969.

11.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.

12.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.

13.That respondents could 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.

14.That 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 are, it becomes past and closed transaction. Reliance was placed at 2011 PTD (Trib.) 174 and 2005 PTD (Trib.) 135.

15.That the show-cause notice is also hit by Section 29 of the Customs Act, 1969 which provides that once goods have been removed from the customs area, its declared value, quantity and description cannot be questioned.

16.That the show-cause notice 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 33 ibid, has burdened the appellants 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.

17.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.

18.That it has been held by the superior court that mens rea or willful default are essential ingredient for imposing penalty and in the present case no mense rea of willful default can be attributed to the appellant.

19.That a case of legitimate error could not be equated with a willful evasion specially when there is no motive for evasion involved, thus the appellant is not liable to any penal provision of Customs Act, 1969.

20.That 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 and penalty imposed is not sustainable.

In the last it was jointly prayed in all the above appeals that Orders-in-Original may kindly be set aside.

4.Mr. Muhammad Arshad, Inspector appearing on behalf of respondents opposed the arguments advanced by learned counsel for the appellants. He supported the impugned orders of the Additional Collector Adjudication, Peshawar. He also prayed that appeals may kindly be dismissed and the impugned orders may be maintained.

5.I have heard the arguments advanced by both the parties and have gone through the case record minutely. The appellants had imported lead acid batteries the description of which was however not specifically declared in the Good Declarations and other allied documents 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 8506.80000 which attracts customs duty @ 10%. As in the WeBOC system images of the imported items are uploaded from which correct description of any item can easily be identified accordingly the Audit Team after consulting the WeBOC data identified the impugned item being 'lead acid batteries' so assessed to duty/taxes from images of the items loaded in the system along with examination reports of the respective consignments. It is further observed that appellants declared quantity of the imported lead acid batteries in dozen instead of correct unit of measurement of the item i.e. Kgs as is evident from the respective valuation ruling. The non-declaration of correct measurement unit of lead acid batteries, non application of the valuation ruling thereon coupled with mis-classification of the same resulted in short payment of duty/taxes reported in the contravention case.

6.Keeping in view the above discussion, it is held that appellant side has not been able to point out any material irregularity or infirmity in the impugned Orders-in-Original. Therefore, appellants Messrs Charmang Corporation, Peshawar are liable to pay short paid amount of duty/taxes i.e. Rs.325730/- into Government Treasury. All the other nine appellants mentioned above are also directed to pay short paid amount of duty/taxes into Government Treasury. So far as the imposition of personal penalty in all the ten appeal cases mentioned above is concerned, in the respective Show-Cause Notices there is no mens rea attributed to the appellants, hence, no punitive provision of the Customs Act, 1969 is attracted to the appellants. Thus personal penalty imposed is not sustainable which is accordingly remitted in all the ten appeal cases mentioned above.

7.Before parting with the judgment, I observe with anguish that a huge loss has been caused to Government exchequer mainly due to the negligence of relevant functionaries of the Customs Department against which action must be initiated by the Collector Customs, MCC, Peshawar, for dereliction of duty and being inefficient which amounts to misconduct and a report in this regard be furnished to this Tribunal within a period of one month for perusal of the Bench in Chamber.

8.The impugned Order-in-Original is modified to the extent of personal penalty only. This judgment shall mutatis mutandis apply in all the above mentieond nine other appeals. All the tens appeal are disposed of accordingly.

9.After completion of necessary formalities, the file be consigned to record room.

HBT/125/Tax (Trib.) Order accordingly.