FATEH TEXTILE MILLS VS COLLECTOR MODEL CUSTOMS COLLECTORATE, HYDERABAD, 2017 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 744 (2016)

Customs Act (IV of 1969)---

----S. 32---Customs Rules, 2001, R.352(3)---Import of goods---Misdeclaration---Importer, imported 26 consignments of raw material to manufacture finished goods for export---Assistant Collector of Customs issued letters to the importer to provide evidence of export under manufacturing bond---Importer having failed to provide required information; it was concluded by the department that importer had not exported the goods and importer was liable to pay leviable duty and taxes thereon---Out of 26 imported consignments used in the manufacture of goods meant for export, importer had satisfied Customs authorities about export of finished goods manufactured out of 20 consignments while whereas in the case of remaining consignments, importer had not been able to produce relevant record for reconciliation; to establish that the finished goods had been exported---Stance of the importer was that he had submitted Goods Declaration wise complete record regarding all the 26 consignments to the department---Neither the department nor Adjudicating Authority had been able to specifically identify, as to which documents were not produced by the importer---Department confirmed that 20 Goods Declarations had been reconciled through on-line system; and that 6 Goods Declarations, could not be reconciled being not legible---Department, had been changing its stance regarding submission of record by the importer---Importer submitted copy of letter, along with a statement showing consumption of raw material, and export of finished goods imported under manufacturing bonded werehouses---Importer had also handed over copy of statement and 26 files to the department---On the insistence of the importer that complete record had already been provided, it was stated on part of the department that record pertaining to remaining 6 Goods Declarations, was not legible, as such reconciliation could not be done which had confirmed that the department had been changing its position regarding provisions of complete record of all 26 Goods Declaration---Impugned order-in-original, was set aside to the extent of 6 Goods Declarations---Department, was directed to undertake on-line verification/reconciliation exercise afresh pertaining to 6 Goods Declaration on the basis of documents, already provided by the importer---Importer was also directed to extend full co-operation to the department, in case it required any information/document.

Fahim Bhayo for Appellant.

Nawabzadi Aliya Khanji, Deputy Collector, Yousaf Magsi, Deputy Collector and Qazi Tousif, Inspector for Respondent.

Date of hearing: 18th February, 2016.

ORDER

MUHAMMAD NAZIM SALEEM, (MEMBER TECHNICAL-II).--By this order, we dispose off Customs Appeals No.H-2161/2013 (Old No. H-608/2012) filed by the appellant against Customs Order-in-Original No.3 of 2012 dated 30.09.2012, passed by the Collector, Model Customs Collectorate, Hyderabad.

2.Brief facts of the case as reported are that the appellant having Sales Tax Registration No.01-01-5111-007/82, National Tax Number 0710395 and holding manufacturing bond warehouse license No.01/198, imported 26 consignments of the raw material to manufacture finished goods for export, which were cleared under manufacturing bond provisions from Custom House, Karachi and in-bonded in their manufacturing bonded warehouse at Hyderabad. The Assistant Collector has further reported that the Model Customs Collectorate, Hyderabad issued letters to the licensee to provide evidence of exports on account of imported consignments under manufacturing bond as per details given in Annex-A, vide C.No.12-Audit/MFG-Bond/DP/Hyd/2011/964 dated 15.11.2011 and 01.12.2011, however, the appellant failed to provide the requisite information. The Assistant Collector has further reported that "in view of above position, it has been observed that appellant is reluctant to provide the evidence of export. Therefore, it means Messrs Fateh Textile Mills Limited have not exported the goods hence they are liable to pay the leviable duty and taxes thereon amounting to Rs.13,835,255/- as Customs Duty, Rs.897,541/- as Regulatory Duty, Rs.46,433,381/- as Sales Tax, Rs.746,993/- as Federal Excise Duty and Rs.5,723,266/- as Income Tax, total amounting to Rs.67,636,436/-.

3.The appellant submitted reply to the show-cause notice but the Collector, Model Customs Collectorate, Hyderabad did not agree with contentions/reply of the appellant and decided the case vide Order-in-Original No.03 of 2012 dated 30.09.2012. The operative part of the order is reproduced as under:--

"40. Contents of show-cause notice, reply of respondent, comments of petitioner on reply to show-cause notice as well as verbal submissions by both sides during the course of hearing have been carefully examined. According to the show-cause notice C.No.01-Cus/Adj/ADC/FTML/DP/2012/338 dated 30.01.2012, it was stated by the officials of dry port, Model Customs Collectorate, Hyderabad that Messrs Fateh Textile Mills Limited is reluctant to provide evidence of export on account of imported consignments under manufacturing bond as detailed in the show-cause notice. It was, therefore, their conclusion that M/s. Fateh Textile Mills Limited are liable to pay the leviable duty and taxes on these consignments as mentioned in the subject show-cause notice.

41. After going through the relevant record and written as well as oral submissions made by both parties during the course of hearing and after giving due consideration to the subject matter, the conclusions are as in the paragraphs following.

42. It has been stated by the Departmental Representative vide letter dated 27.09.2012 that the relevant record produced by Messrs Fateh Textile Mills Limited pertaining to the subject export, has been examined in the light of the clearance made by them. It has been clearly pointed out by them i.e. dry port officials that out of twenty six (26) GDs, twenty (20) GDs have been reconciled in the computerized online system maintained by PaCCS. This clearly shows that consignments in respect of twenty (20) GDs have been exported by Messrs Fateh Textile Mills Limited. Therefore, duties and taxes amounting to Rs.55,187,841/- are not at all payable by Messrs Fateh Textile Mills Limited as originally shown payable by them in the show-cause notice.

43. However, Messrs Fateh Textile Mills Limited have failed to produce record and evidences of export in respect of six (06) GDs and, therefore, the same could not be reconciled. Contention of the advocate on behalf of Messrs Fateh Textile Mills Limited that non-reconciliation of six (06) GDs with the online system due to some technical fault is not tenable. Duties and tales amounting to Rs.2,923,239/- as Customs Duty, Rs.8,128,355/- as Sales Tax, Rs.1,199,273/- as Income Tax, Rs. 89,307/- as RD and Rs. 8421/- as FED, total amount Rs.12,448,595/-, on the consignments of six (06) GDs, is, therefore, payable along with penalty as prescribed under sub-rule (3) of rule 352 of Chapter XV of Customs Rules, 2001.

44. Keeping in view the above, I, therefore, order for recovery of Duty to the tune of Rs.2,923,239/-, Rs.8,128,355/- as Sales Tax, Rs.1,199,273/- as Income Tax, Rs.189,307/- as RD and Rs.8421/- as FED, total amounting to Rs. 12,448,595/- for violation of sections 19, 26, 32(1) and 2(2), 32(A), 79, 86 and 97 of the Customs Act, 1969, read with sub-rule (4) of rule 350 of chapter XV (Warehousing) notified vide S.R.O. 450(I)/2001 dated 18.06.2001, Sections 6 and 7 of the Sales Tax Act, 1990, subsections (b), 2 and 5(a) (b) of Section 3 and Section 10(a) of the Federal Excise Act, 2005 and Section 148 of Income Tax Ordinance, 2001.

45. The show-cause notice C.No.01-Cus/Adj/ADC/FTML/DP/ 2012/338 dated 30.01.2012 is, therefore, disposed of in terms of the observations stated as above.

Limitation aspect of the case.

(i) Show-Cause Notice was issued on 30.01.2012.

(ii)120 days period in terms of Section 169(3) of the Customs Act, 1969 expired on 28.05.2012.

(iii)60 days extension was granted by the competent authority on 07.05.2012.

(iv)The petitioner sought adjournment for 30 days in terms of Section 179(3) of the Customs Act, 1969. The extended period expired on 26.08.2012.

(v)90 days extension was allowed by the Board vide letter C.No.2(6)Cus.Jud/2012 dated 27th August, 2012, also placed on file, which will expire on 24.11.2012."

4.Being aggrieved and dissatisfied with the above Order-in-Appeal, the appellant has filed instant appeal before this Tribunal on the grounds which are reproduced as under:-

i.That the impugned order is opposed to the facts of the case and is contrary to law. It ignores the relevant and material considerations and based on irrelevant and immaterial considerations.

ii.The Collector, Model Customs Collectorate, Hyderabad has passed impugned order which is vague and unspeaking upto the extent of Annexure C as he has not incorporated the specific documents which were not produced by the appellant to department for their satisfaction, hence is liable to be set aside upto the extent of Annexure C.

iii.That the appellant has been a giant exporter of garments since long which fetched foreign exchange for national exchequer throughout many years. In this instant case, the respondent mills admittedly imported 26 consignments of raw material under manufacturing bond for export of finished goods manufactured from imported raw material. The imported goods which were utilized in finished goods. As alleged in the show-cause notice that the respondent mills has been reluctant to provide the evidences of export against the imported raw material was incorrect rather it took much time due to old import entries which were of 2008 to onwards. There had never been any intention of delay by the respondent mills. Moreover, the departmental presumption that the mills have not exported the goods was absolutely baseless and founded on assumptions which had no legal weight in the eyes of law. The contention of the appellant got strength when the Dry Port Authorities, Hyderabad confirmed the export against twenty (20) GDs as per Annexure B of their report dated 27.09.2012, however, surprisingly, did not consider the documents against six GDs as per Annexure C which is quite strange.

iv.That the appellant had exported the finished goods manufactured against imported raw material. Details of export consumption against each import bill of entry were provided to the department but despite they have established charge against six (06) GDs as alleged in the show-cause notice which are based on presumptions and assumptions. On the contrary the appellant had exported the finished goods against the imported raw materials which was later confirmed by the department leaving six (06) GDs for reasons best known to them.

v.That the learned Collector Model Customs Collectorate, Hyderabad has erred to apply his mind by not incorporating as to whether which specific documents were not produced by the appellant to the department which were not upto the satisfaction of Dry Port Authorities and resultantly he established the charges against the appellant on six GDs as per Annexure C which is illegal, void and ab initio and is liable to be set aside henceforth.

vi.That the appellant is a bona fide taxpayer and has always been a helping to hand the department and in this instant case has also extended corporation though the period of entries was since 2008 but despite provided all the necessary documents to establish their exports against the imported raw material.

vii.It is worthwhile to mention that the impugned order has been passed by the Collector Model Customs Collectorate, Hyderabad by acknowledging the export of finished goods against twenty (20) GDs, however, surprising denied export against remaining six GDs without bringing on record any concrete evidence despite same documents were provided for all 26 GDs which is an unfortunate.

viii.That in the light of prima facie documentary evidences, there is no single shadow of doubt left that the appellant did not export the finished goods against imported raw material rather the Collector Customs Model Collectoate, Hyderabad has erred to reconcile the data for the reasons best known to them and has deprived the appellant from legitimate relief of exemption SROs upto six GDs as per Annexure C. Hence, the impugned order passed by the learned Collector is vague, unspeaking, void upto Annexure C and is liable to set-aside henceforth.

5.The respondents submitted their para-wise comments dated: 15.09.2014 which are reproduced as under:--

1)Denied, that the order in original passed by the adjudicating authority has legal affectivity, and can not be termed as defective. All the record submitted before the adjudication authority was photo copies. This issue was debated and discussed before the chair, in presence of the Council of the Appellant and as well as respondent.

2)Denied. The appellant failed to produce the Original record before the adjudication authority. More over the photo copies provided by them does not mention "export under manufacturing bond" in terms of Customs Rules, 2001, more over remittance are not available, and hence genuineness of the entries can not be verified. The duplication/repetition have been found in most of the ex-bond entries. Besides this, in the Computer "one customs", against entries of the Export GDs neither the MR number, nor weight or value exists. The entries shown in annexure C do not exits in the Export list provided by the Export Collectorate, Karachi. All these facts have been considered by "the adjudicating authority and passed an speaking order.

3)Denied. The appellant failed to produce the Original record before the adjudication authority. Moreover the photo copies provided by them does not mention "export under manufacturing bond" in terms of Customs Rules, 2001, more over remittance are not available, and hence genuineness of the entries can not be verified. The duplication / repetition have been found in most of the ex-bond entries. Besides this, in the Computer "one customs", against entries of the Export GDs neither the MR number, nor weight or value exists. The entries shown in annexure C do not exits in the Export list provided by the Export Collectorate, Karachi. All these facts have been considered by the adjudicating authority and passed a speaking order.

4)Denied. The appellant failed to produce the Original record before the adjudication authority. More over the photo copies provided by them does not mention "export under manufacturing bond" in terms of Customs Rules, 2001, more over remittance are not available, and hence genuineness of the entries can not be verified. The duplication / repetition have been found in most of the ex-bond entries. Besides this, in the Computer "one customs", against entries of the Export GDs neither the MR number, nor weight or value exists. The entries shown in annexure C do not exits in the Export list provided by the Export Collectorate, Karachi. All these facts have been considered by the adjudicating authority and passed a speaking order.

5)Denied. The appellant failed to produce the Original record before the adjudication authority. More over the photo copies provided by them does not mention "export under manufacturing bond" in terms of Customs Rules, 2001, more over remittance are not available, and hence genuineness of the entries can not be verified. The duplication/repetition have been found in most of the ex-bond entries. Besides this, in the Computer "one customs", against entries of the Export GDs neither the MR number, nor weight or value exists. The entries shown in annexure C donot exits in the Export list provided by the Export Collectorate, Karachi. All these facts have been considered by the adjudicating authority and passed a speaking order.

6)Denied. The appellant failed to produce the Original record before the adjudication authority. More over the photo copies provided by them does not mention "export under manufacturing bond" in terms of Customs Rules, 2001, more over remittance are not available, and hence genuineness of the entries can not be verified. The duplication /repetition have been found in most of the ex-bond entries. Besides this, in the Computer "one customs", against entries of the Export GDs neither the MR number, nor weight or value exists. The entries shown in annexure C do not exits in the Export list provided by the Export Collectorate, Karachi. All these facts have been considered by the adjudicating authority and passed a speaking order.

7)Denied. The appellant failed to produce the Original record before the adjudication authority. More over the photo copies provided by them does not mention "export under manufacturing bond" in terms of Customs Rules, 2001, more over remittance are not available, and hence genuineness of the entries can not be verified. The duplication / repetition have been found in most of the ex-bond entries. Besides this, in the Computer "one customs", against entries of the Export GDs neither the MR number, nor weight or value exists. The entries shown in annexure C do not exits in the Export list provided by the Export Collectorate, Karachi. All these facts have been considered by the adjudicating authority and passed an speaking order.

6.We have perused the relevant record besides hearing both the contesting parties. The central issue in this case is that out of 26 imported consignments used in the manufacture of goods meant for export involving duty/taxes amounting to Rs.67,636,436/-, the appellant satisfied customs authorities about export of finished goods manufactured out of 20 consignments involving total amount of duty/taxes Rs.55,187,841/- whereas in the case of 6 remaining consignments involving duty/taxes amounting to Rs.12.448,595/-, the appellant have not been able to produce relevant record for reconciliation to establish that the finished goods have been exported. On the other hand, the appellants' stance is that they produced and submitted Goods Declaration-wise complete record regarding all 26 consignments to the respondent department. Moreover, neither the respondent department nor the adjudicating authority have been able to specifically identify as to which documents are lacking and not provided by them (Appellant). They also defended their position for not producing original Goods Declarations as they made exports through computerized system of PaCCS and the Goods Declaration is a system-generated document without any signature.

7.The perusal of impugned Order-in-Original reflects that during hearing on 27.09.2012 the respondent department confirmed before the adjudicating authority that 20 Goods Declarations have been reconciled through on-line system and added that 6 Goods Declarations as per Annexure-C could not be reconciled being not legible. The fact on record as per impugned Order-in-Original is that the respondent department has been changing its stance regarding submission of record by the appellant. During hearing before the Adjudicating Authority on 10.07.2012, the consultant representing the Appellant submitted copy of their letter dated 10.07.2012 along with a statement showing consumption of raw material and export of finished goods imported under manufacturing bonded warehouse. He also handed over copy of a statement and 26 files to the Departmental Representative. In his parawise comments, on the said record, the D.R. submitted that the record was deficient and incomplete as the same was not supported by documents like B/L, MR No. and E-Form neither fulfilled requirement of showing "Export From Manufacturing Bond" on each G.D. as per sub-rule (3) of rule 352 of Customs Rules, 2001. The Advocate of the party (now Appellant) submitted counter comments vide letter dated 24.07.2012. The relevant part is reproduced hereunder:---

"It is surprising that the departmental representative has observed that the documents are deficient without mentioning any specific, reasons or without bringing any concrete evidences which may establish their contention except asking for bill of lading, MR. No and E-Form. Moreover, it is worthwhile to mention here that all GDs were submitted online through PACCS System which can also be verified by the department on online system. We are attaching herewith a working showing GD wise consumption of raw material in finished goods and a report of PACCS showing data of export against each GD on online system of PACCS.

With regards to submission of bill of lading, MR. No and E-Form, it is humbly stated that we have already supplied all these documents against each GD which were exported through PACCS Online System, however we are again attaching herewith all above documents against each GD except MR No. as it is only needed on manual GDs and not on GDs which are submitted through PACCS online system, therefore, objection upto the extent of M.R. No. is incorrect in this case. Further, in a online system of PACCS, a GD is a system generated document which does not require any signature or stamping as the same is evident from record."

8.During hearing on 27.09.2012, the D.R. again contended before the Adjudicating Authority that record regarding 6 Goods Declarations as per Annexure-C was not provided by the party. In the same hearing, on the insistence of appellant that complete record had already been provided, the D.R. stated that record pertaining to 6 Goods Declarations was not legible, as such, reconciliation could not be done. The aforementioned position confirms that the respondent department has been changing its position regarding provision of complete record of all 26 Goods Declarations particularly pertaining to 6 Goods Declaration.

9.In view of above-detailed position, we set aside the impugned Order-in-Original No.03/2012 dated 20.09.2012 to the extent of 6 Goods Declarations only, as at para 44 of the Order-in-Original. We direct the respondent department to undertake on-line verification/ reconciliation exercise afresh pertaining to 6 Goods Declarations on the basis of documents already provided by the Appellant. The Appellant is also directed to extend full cooperation to the respondent department, in case, they require any information/document. The appeal is decided on the aforesaid terms.

10.Announced.

HBT/74/Tax(Trib.) Order accordingly.