GADOON TEXTILE MILLS LTD. VS COLLECTOR OF CUSTOMS MODEL CUSTOMS COLLECTORATE, PESHAWAR, 2019 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 1006 (2018)

2019 P T D (Trib.) 1006

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Dr. Syed Muhammad Anwar, Members (Judicial) and Qurban Ali Khan, Member (Technical)

Messrs GADOON TEXTILE MILLS LTD.

Versus

COLLECTOR OF CUSTOMS MODEL CUSTOMS COLLECTORATE, PESHAWAR and another

Cus. No.245/PB of 2016, decided on 03/04/2018.

Per Qurban Ali Khan, Member (Technical) Syed Sardar Hussain Shah Hussain, Member

(Judicial) not agreeing [Minority view]

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

----Ss. 156(1)(10-A)(14), 18, 19 & 32(3A)---Customs Rules, 2001, R. 307A---Violation of condition in respect of exempted goods---Short-levied duty---Unaccounted-for un-exported goods---Show-cause notice---Scope---Department during post exportation audit of DTRE approval observed that the appellant/unit had deposited duty/taxes on the left-over quantity of goods not consumed during the validity period of DTRE on concessionary rates---Collector of Customs (Adjudication) assessed the left-over quantity of DTRE bond to statutory duty---Validity---Appellant had two options under the DTRE rules; firstly, either it could have sought extension from the concerned authority for utilization of the goods in question for manufacturing; secondly, appellant could have sold out those goods to another DTRE user without payment of duty and taxes---Appellant did not exercise any of the said two options, but used one concessionary regime, which was DTRE and hence, could not avail another exemption notification at the same time for the same goods---Appellant had sold out the goods in question in open market at market price and did not deserve to claim concessionary treatment, as the benefit of exemption could not be extended to local market---Concessionary notification, which appellant could have availed for local disposal of goods related to import stage, had already passed in the case---Appellant having obtained permission of the Regulatory Collector before local sale of goods,mala fide could not be attributed to the appellant---Appeal was allowed to the extent of imposition of penalty. [Minority view]

Per Syed Sardar Hussain Shah, Member Judicial and Dr. Syed Muhammad Anwar, Member Judicial agreeing[Majority view]

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

----Ss. 156(1)(10-A)(14), 18, 19 & 32(3A)---Customs Rules, 2001, Rr. 307A, 352(6a)---SRO 450(I)/2001 dated: 18.06.2001---SRO No.567(I)/2006 dated: 05.06.2006---Sales Tax Act (VII of 1990), S.4---SRO No. 1125(I)/2011 dated: 31.12.2012---Income Tax Ordinance (XLIX of 2001), Second Schedule, Part II, Clause (9C) [since omitted]---Violation of condition in respect of exempted goods---Short-leviedduty---Ex-bond Goods Declaration---Unaccounted-for un-exported goods---Show-cause notice---Scope---Appellant was a DTRE user who applied for import of raw material, which could be used for manufacturing products for export---Appellant was allowed exemption from payment of duty and taxes and he imported the goods---Bond wherein raw material was stored remained suspended for a considerable period by Customs Authorities due to certain cases, which were decided by the Federal Board of Revenue in favour of the appellant---Meanwhile, appellant lost his client in the international market---Appellant applied for ex-bonding of raw material imported under manufacturing bond in DTRE scheme against just payment of leviable taxes and duty---Model Customs Collectorate allowed clearance of goods subject to payment ofleviable duty/taxes including additional duty/taxes---Appellant paid customs duty at the rate of 6 percent, sales tax at the rate of 2 percent and advance income tax at the rate of 1 percent against clearance of bonded goods for home consumption/local sale---Audit was conducted and no objection was raised---Audit report was re-examined and it was found that appellant had deposited duty and taxes on concessionary rates and not on statutory rates---Validity---Appellant had applied to Customs Authorities for release of balance quantity of staple fiber, which was allowed---S.R.O. No.567(I)/2006 dated: 05.06.2006, Serial No. 124 of Table (ii) under H.S. Code No. 5503-2010 provided customs duty at the rate of 6 percent on the goods in question---SRO No. 1125(I)/2011 dated: 31.12.2012 provided leviable duty of sales tax at the rate of 1 percent for manufacturer---Clause (9C) of Part II, Second Schedule of Income Tax Ordinance, 2001 provided the payable income tax at the rate of 1 percent---Objection that appellant had availed benefits/concessions/ exemptionsoftwoschemessimultaneouslywasmisconceived--- Appealwasallowed and order of Collector of Customs (Adjudication) was set aside.

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

----S. 179---Power of adjudication---Show-cause notice---Delay of 270 days---Order on show-cause notice was passed after 270 days of its issuance---Plea of department was that technicalities of law should not be allowed to impede the interest of justice or should become an insurmountable hurdle for that purpose---Validity---Mandate and compliance of law was not a technicality, rather it was a stipulation of law, which had to be adhered to and complied with in letter and spirit.

(d) Constitution of Pakistan---

-----Art. 4---Right of individuals to be dealt with in accordance withlaw---Scope---Everypersonhadtobedealtinaccordancewithlawand it was an inalienable right of every citizen to be so dealt with.

Istiaq Ahmad for Appellant.

Muhammad Azeem, Supdt. andFayaz Khattak, Inspector for Respondents.

Date of hearing: 29th January, 2018.

JUDGMENT

QURBAN ALI KHAN, MEMBER (TECHNICAL).---This judgment is directed to dispose of Custom Appeal No.245/2006 filed by Messrs Gadoon Textile Mills Ltd., Gadoon Amazai against the Order-in-Original No.92/2016 dated 29.09.2016 passed by the Collector of Customs (Adjudication), M.C.C., Peshawar.

2.Brief facts of the case as per Contravention Case No.01/2015 dated 23.11.2015 are that in compliance of HQ Office, MCC, Peshawar's Letter C.No.Tech-49/2009/384 dated 16.07.2014, a team was constituted to conduct post exportation audit of DTRE Approval No.PESH/3748/02072010 dated 05.08.2010 availed by Messrs Gadoon TextileMills(Pvt.)Ltd.,GadoonAmazai.Duringthecourseofauditit was observed that the unit has deposite duty/taxes on the left over quantity of 988877.40kgs of PSF (Polyester staple fiber) not consumed during the validity period of the subject DTRE on 06 Goods Declarations (GD's) on concessionary rates. According to Federal Board of Revenue, Islamabad's letter C. No.04(29) DTRE/1010/64766-R, dated 07.05.2012 duty/taxes on the left over quantity of DTRE bond and other concessionary regimes are chargeable to the statutory rate of duty. In this way the DTRE User namely M/s Gadoon Textile Mills short paid/evaded duty/taxes amounting to Rs. 4,27,14,508/- as per details given below:--

CD @ 10%Rs. 6,298,505/-

ST @ 17%Rs. 26,107,308/-

AIT @ 5%Rs. 8,430,236/-

Penal Surcharge @ 1%Rs. 1,878,459/-

Total:Rs. 4,27,14,508/-

3.Aggrieved of the order of Adjudicating Officer, the appellants filed appeal before this Tribunal on the following grounds:--

1. That it is deemed appropriate that before going into the merits of the case, the illegality and impropriety of the impugned order may be brought to surface. The /impugned order is badly time barred and it is well settled that time barred order is not sustainable in the eyes of law. Kind attention is invited to section 179 of the Act wherein subsection (3) of the said section provides as follows:-

"The cases shall be decided within one hundred and twenty days of the issuance of show-cause notice or within such period extended by the Collector for which reasons shall be recorded in writing, but such extended period shall in no case exceed sixty days."

The time between the show-cause notice and the impugned order is 285 days and if the statutory time i.e. one hundred twenty days and further sixty days is deducted, the impugned order is time barred by one hundred and five days. Needless to mention that the Collector shall record reasons in writing while extending the time for further sixty days. None of the conditions of section 179(3) was fulfilled by the Collector which he was' bound to comply with. Thus the order is time barred and liable to be set aside.

2. That without prejudice to the above, the appellant is a textile manufacturer and operates under S.R.O. 1125(I)/2011 for the purposes of sales tax at the Import and Exports state as well as local supply stage. The benefit of SRO is available to every such person doing business in textile whether he is manufacturer, importer, exporter and wholesaler. The appellant being manufacturer is entitled to the benefits of SRO 1125(I)/2011 irrespective of the fact whether or not operating under DTRE scheme. The entire imports and entire local supply of the appellant is regulated by SRO 1125(I)/2011. Therefore, after approval of the Regulatory Collector for clearance of goods imported under DTRE scheme, such goods were to be treated as normal import and should have been cleared under SRO 1125(I)/2011 for the purposes of Sales Tax. However for the purposes of Customs, the import duty is to be assessed under SRO 567(I)/2006 @ 6% (now under fifth schedule @ 6%), therefore, the appellant is subjected to duty and tax in the following manner:-

i.Customs duty @ 6%.

ii.Sales tax @ 2%.

iii.Income Tax @ 1%.

Explanation.

i.Customs duty

Customs duty was chargeable on staple fiber under the first schedule to the Act @ 10% however the said rate was reduced by the Federal Government in exercise of its powers under section 19 through SRO 567(I)/2006, to 6% of the value. This reduction in duties was never for specific importers or any concessionary scheme or for that matter DTRE scheme but for all importers without any discrimination. Therefore, assessment in excess of 6% is violative of SRO 567(I)/2006. Thus illegal and unconstitutional.

ii.Sales tax

Sales tax was chargeable on staple fiber @ 17% however the said rate was reduced by the Federal Government in exercise of its powers under section 3(2)(b) of the Sales Tax Act, 1990 through S.R.O. 1125(I)/2011 to 2% of the value. This reduction was specific for the persons doing business in textile. Since appellant is textile manufacturer therefore, the appellant normally makes imports under S.R.O. 1125(I)/2011. The clearance of goods by the appellant was to be assessed under S.R.O. 1125(I)/2011. Now this has further been incentivized to zero rate under Notification No. S.R.O. 1125(I)/2011. The appellant made payment in accordance with S.R.O. 1125(I)/2011 being manufacturer of textile goods.

iii.Income Tax

Income Tax on import was chargeable @ 1% in case of manufacturers and 3% in a case of commercial importers covered under Notification No. 1125(I)/2011. This reduced rate was inserted in Second Schedule (Part-II) of the Income Tax Ordinance vide S.R.O. No. 212(I)/2013 against entry No. clause 9(c). Since the appellant w as covered under the aforesaid Notification S.R.O. No. 1125(I)/2011 therefore, the appellant made payment in accordance with S.R.O. 212(I)/2013. This notification to be without any stipulation and this concession was available to all manufacturers including the appellant covered under S.R.O. No. 1125(I)/2011. (Copy of the S.R.O. 1125(I)/2011 annexed as 'Q'). (Copy of S.R.O. 212(I)/2013 annexed as 'P').

3. That the advance tax collected under section 148 at import stage is not a final tax rather adjustable against payable tax on taxable income of the tax payer. Kind attention is invited to subsection (7) of section 148 whereby the advance tax payable by the appellant is not a final tax. It is well settled that liability of tax cannot be determined before the date when the return of tax income is due to be furnished. The officer has erred in law to conclude the income tax liability against the appellant before filing of the tax return. That deliberating upon similar situation, the Honorable Supreme Court in a case reported as 2000 PTD 3748, Chairman CBR v. Pak Saudi Fertilizer Ltd. held as under:-

"In view of the aforesaid reasoning's and the provisions of law, the Assessing Officer/Deputy Income Tax not being authorized by law cannot effect recovery of advance tax in case of failure to pay the same on time under section 53, consequently the impugned demand notice was rightly declared by the learned Division Bench of the High Court to be without jurisdiction and unlawful. In the circumstances, we find no substance in the contention of the learned counsel for the petitioners."

It is therefore, abundantly clear that the observation raised in the show-cause notice with regard to income tax is illegal and of no legal effect.

4. That the interpretation given by the department is strange for the reason that when a concession has been granted for the chargeability of duty lesser than the statutory duty, in exercise of valid powers given by the statute by the Federal Government and such concession available across the Board, how can the department subject the appellant to higher rate of duty or tax. All the rates of duties and taxes have been determined through various SROs and an SRO is the abbreviation of STATUTORY REGULATORY ORDER. Every statute is either implemented directly or regulated through statutory regulatory order issued by the Executive, deriving powers from the respective Statues. Therefore, if the rate of duty or tax is lower or higher than as prescribed in thestatute, is lawful if the same has been issued within the paradigm of law. The reference made to the leviable duties and taxes are the rates applicable to textile manufacturer in the normal regime. Had the appellant been not DTRE user, the same rates duty and taxes would have been applicable at import stage. The appellant is required to be treated for the purposes of rate of duties and taxes in accordance with the provisions of section 30 of the Customs Act, 1969 as if the goods were imported on the day of ex-bonding in terms of section 104 ibid. The interpretation is therefore, perverse, illegal and against the law rather an attempt to exact more and more money from the citizen which is against constitutional guarantees available to the citizen of Pakistan in the Constitution, 1973.

5. That the duties of customs chargeable from the importers are set out in the First Schedule to the Customs Act, 1969. In addition to the statutory rate, the Federal Government is also empowered to levy regulatory duty and additional duty under subsections (2) to (6) of section 18 of the Customs Act and likewise in sales tax and income tax but at the same time the Federal Government or Central Board of Revenue, as the case may be, has power under sections 19 and 20 of the Act, section 13 of the Sales Tax Act and under section 53 of the Income Tax Ordinance to exempt goods from, levy of customs duty and taxes on various terms and conditions. The exact duties of customs and taxes, therefore, chargeable are the duties and taxes after allowing the exemptions, if any. The excess amount is being demanded only to have more deposits in the account of the appellants for meeting their annual targets. The demand of excess amount of duty and taxes is violative of fundamental rights envisaged in Articles 18 and 24 of the Constitution.

6. That the interpretation of the department (annex- L) for the terms "statutory" is beyond understanding to the effect that if the goods are cleared for local sale in terms of rule 307A of the DTRE rules, as per departmental interpretation statutory rate of 10% shall be attracted. However rate of duty leviable is 6%, sales tax 2% and Income Tax 1% instead of 10%, 17% and 5% respectively as notified by the Federal Government through notifications aforestated. None of the provisions of the customs, sales tax and income tax law or rules made thereunder, supports the interpretation of the customs. It is submitted, without prejudice, that the Words "statutory rates" are conspicuous by their absence in Rule 307A of the Customs Rules, 2001. Rule 307A ibid states, that in the event of the impugned failure of the DTRE user, "he shall be liable to pay duties and taxes including additional duty or additional tax and penalty leviable on such goods under the relevant Acts or the Ordinance." It is a well settled law, that leviable duties and taxes are computed on the basis of the rates under Section 18 Section 3 and Section 148 of the Customs Act, Sales Tax Act and Income Tax Ordinance, less the concessions granted under Section 19 of the Customs Act, 3(2)(b) of the Sales Tax Act, and second schedule to the Income Tax Ordinance, 2001.

7. That Section 18 of the Act is a charging Section which provides for levy of Customs duties as such rates as are prescribed in the first schedule of the Act on goods imported into Pakistan. Beside leviability of customs duty under section 18 of the Act and Fifth Schedule to the Act, the Federal Government enjoys general power of exemption from customs duties under section 19 of the Act, with prior approval of the Economic Coordination Committee of Cabinet. The Federal Government exercise such powers whenever circumstances exits to take immediate action in the following cases.

i.National security,

ii.National disaster.

iii.National food security in emergency situation,

iv.Protection of National Economic Interest in situation arising out of abnormal fluctuation in the international commodity prices, removal of anomalies in duties,

v.Development of backward areas and

vi.Implementation of bilateral and multilateral agreements.

Such exemptions on import or export shall be notified by the Federal Government in the official gazette subject to such conditions, limitations or restrictions if any as it deems fit to impose. Therefore, the Federal Government issued Notification No. SRO 567(I)/2006 dated 05/06/2006 whereby the rates of different items were reduced to the extent as mentioned therein. The goods imported by the appellant were subjected to customs duty @ 10% specified in the First Schedule to the Customs Act however through the aforesaid notification it was reduced to 6%. Therefore, the statutory rate of duty was reduced for all importers including the appellant. Therefore, the demand in excess of 6% customs duty is illegal and violative of S.R.O. 567(I)/2006.

8. That the aforesaid SRO was rescinded on 26/06/2014 vide S.R.O. 563(I)/2014 but at the same time Fifth Schedule was added to the Customs Act vide Finance Act, 2014 which was assented to by the President of Pakistan on 25th June, 2014 and corresponds to subsection (1A) of section 18 of the Act. Subsection (1A) thereof commencing with non obstante clause reads as under:-

"Notwithstanding anything contained in subsection (IA), customs duties shall be levied at such rates on import of goods or classes of goods as are prescribed in the Fifth Schedule, subject to such conditions, limitations and restrictions as prescribed therein."

The legislature in its wisdom, introduced Fifth Schedule to the Act and the concession which was Available to the appellant was shifted to the Fifth Schedule prior to rescinding of aforesaid notification. Meaning thereby the concession still exit on the statutes with regard to customs duty, sales tax and Income tax for the appellant. The demand of duty and taxes on clearance of goods for local sale in excess of 6%, 2% and 1% respectively, is therefore, unlawful and unconstitutional.

4.Messrs Gadoon Textile Mills Ltd, Industrial Estate, Gadoon Amazai, aggrieved by the order dated 29.09.2016 of the Collector of Custom (Adjudication) Islamabad, filed this appeal.

5.We have heard arguments for the counsel of the appellant as well as of the representative of the respondents. Our Observations are as under:--

Brief stated of the filed facts that of the appellant over raw material. However, the appellant made this payment at concessionary rate of duty/taxes provided under different concessionary notification. This payment of duty/taxes at concessionary rates was, it has been alleged, in violation of Board's ruling C.No.4 (29) DTRE/1010/64766-R dated 07.05.2012. In this ruling, the Board has clarifiedthat the duty/taxes on any leftover raw material imported under DTRE scheme are to be paid at statutory rates. According to prosecution, payment of duty/taxes on left over raw material at statutory rate equals Rs. 42,714,508/- Prosecution accordingly submitted before me a Contravention Report No. 01/2015 dated 23.11.2015 for adjudication seeking action against the appellant under Section 156(1)(10-A)(14) of the Customs Act, 1969 for violation of Sections 18, 19 and 32(3-A) of the Customs Act and Rule 307-A of Custom Rules, 2001.

6.The appellants had two options under the DTRE Rules. Firstly, either it could have sought extension from the concerned authority for utilization of the goods in question for manufacturing. Secondly, they could have sold out these goods to another DTRE user without payment of duty and taxes. However, the appellants did not exercise these two options. Further, the appellants have used one concessionary regime, which is DTRE and hence it could not avail another exemption notification at the same time for the same goods. The appellants have sold out the goods in question in open market at market price and hence does not deserve to claim concessionary treatment, as the benefit of exemption cannot be extended to local market. Further, the concessionary notification, which the appellants have availed for local disposal of the said goods relates to import stage, which has already passed in this case, as the goods have already been imported under the DTRE and hence this concessionary notification cannot be applied to local sale. As regards the penalty of Rs. 500,000/- (Five hundred thousand only), since the unit obtained the permission of the regulatory Collector before local sale of the goods, therefore, no mala fide can be attributed. The said penalty of Rs.500,000/- is illegal and the appeal of the appellant is partly accepted and the order dated 29.09.2016 of the Collector Custom (Adjudication) is modified to the extent of penalty of Rs. 500,000/-.

Sd/-

(Qurban Ali Khan)

Syed Sardar Hussain ShahMember (Technical)

Member (Judicial)

SYED SARDAR HUSSAIN SHAH, MEMBER (JUDICIAL).---I have read the judgment authored by my learned colleague, Member Technical Mr. Qurban Ali Khan but I cannot bring myself to agree therewith. Before proceedings to highlight the points of disagreement it should be appropriate to set out the background and certain material facts.

8.The appellant is a DTRE user who applied for import of raw materials, which could be used for manufacturing products for export. Under the DTRE scheme, the DTRE users are exempted from payment ofdutyandtaxes.TheappellantwasallowedunderapprovalNo. tech-49/2009/6902, dated 05/08/2010 to import the various raw materials, but the appellant confined himself to Polyester Staple Fiber. The approval indicated quantity of 2 million of Staple Fiber.

9.The Federal Government issued a Notification No.S.R.O.567(I)/ 2006, dated 05.06.2006inexerciseofitspowersunder Section 19oftheCustomsAct,1969.ThesaidNotificationprovidesexemptionfor the imported goods in column No.3 of the table, falling under the HS Codes specified in column No.2 of those tables, from so much of the custom duty in the first schedule to the said Act, as is in excess of the rates specified in column No.4. The concession in the customs duty @ of 6% is available at column No.4 against Serial No.124 of the said Notification. After that fifth schedule was added to the Act vide Finance Act, 2014 (IX of 2014) assented on 25.06.2014, and entry No.71 was inserted and the said concession was entered in the Customs Act, 1969 on 26.06.2014. The Federal Government vide S.R.O. 563(I)/2014 rescinded Notification No. S.R.O.567(I)/2006, dated 05.06.2006.

10.The appellant imported the raw material i.e. Polyester Staple Fiber in Manufacturing Bond No.01/99 under DTRE scheme. The appellant due to unavoidable circumstances could not consume the total quantity. The bond wherein the raw material was stored remained suspended for a considerable period by the Customs authorities due to certain cases, which were decided by the FBR in favour of the appellant. Meanwhile the appellant had lost his valuable client in the international market, as the appellant was not allowed to ex-bond the raw material due to suspension. During the period of suspension and after restoration, there was slump in the International market. The appellant applied to the Collector of Customs. MCC, Custom House, Peshawar vide letter dated 09.04.2014 for ex bonding of raw material to the extent of balance quantity of Staple Fiber imported under Manufacturing Bond in DTRE scheme against just payment of leviable taxes and duty. The MCC, Peshawar vide letter dated 11.06.2014 and allowed clearance of the above mentioned goods in terms of Rule 307A(2)(c) and Rule 352(6a) of Customs Rules, 2001 issued under S.R.O. 450(I)/2001, dated 18.06.2001 with the directions to ensure leviable duty/taxes including additional duty/taxes surcharge, if any may be collected as prescribed under the law.

11.The appellant paid an amount of Rs.15,154,924/- against clearance of bonded goods for home consumption/local sale in the following manner:--

Customs duty leviable @ 6% in terms of S.R.O.567(I)/2006	= Rs. 9,447,761/-
Sales tax leviable @ 2% in terms of S.R.O. 1125(I)/2011	= Rs. 3,338,209/-
Advance Income Tax @ 1% in terms of the second schedule to the Ordinance	= Rs. 1,702,486/-
Surcharge @ 1%	= Rs.666,468/-
Total:-	= Rs. 15,154,924
(Copies of the paid treasury Challans is annexed with the appeal as Annexur G-1 to G-11)

12.The audit was conducted and no objection was pointed. The Deputy Collector, Customs, I.E., Gadoon Amazai recommended for release of the indemnity bond and post dated checque. When this recommendation was reached before the Collector of Customs, he ordered the Deputy Collector of Customs, Gadoon to revisit, the audit report vide letter -49/2009/or-1/9436, dated 17.02.2015. The audit report was re-examined and found that the units has deposited duty/taxes on the left over quantity of 98877.40 Kg of PSF amounting to Rs.15,154,924/- on concessionary rate of duty while it comes to Rs.57,869,435/- approximately on statutory rate of duty as per law and huge amount of Rs.42,714,511/- of short has been paid by the user.

13.On the audit report the duty/taxes were re-calculated and demand notices were issued to the appellant unit which he replied, thereafter the respondent issued a Show-Cause notice on 18.12.2015 to the appellant which was replied on 24.09.2016 and on 29.09.2016, the Collector of Customs (Adjudication), Islamabad passed the impugned order.

14.It is evident from the record that as to the lapse of time for DTRE user applied to the Customs authority to allow him to Ex-Bond the balance quantity of staple fiber, which was duly allowed by the Customs authorities and was cleared accordingly. The appellant applied to the authorities under sub-rule 2(c) of Rule 307-A framed under S.R.O. 450(I)/2001, dated 18.06.2001. The relevant provision of the said Rules is reproduced as under:--

(2) Notwithstanding sub-rule (1), a DTRE user may with the permission of the Regulatory Collector dispose of the input goods or output goods within the prescribed utilization period in the following manner, namely:-

(a)return to person who had supplied the input goods;

(b)sale, by a DTRE user to another DTRE user for export;

(c)local sale on payment of [duties and taxes leviable at the time of such sale] and on production of no objection certificate from the Ministry of Commerce in case input goods are banned or restricted for import:

"Provided further that the permission for local sale of input goods as specified in this clause shall be granted by regulatory Collector in case of DTRE user's inability to manufacture and export output goods for reasons beyond his control; ]"

(d)destruction after approval of the Regulatory Collector if goods are not fit for consumption or sale with remission of duty and taxes; and 481

(e)local sale of B-grade products, factory rejects or wastage on payment of leviable duties and taxes and subject to the provisions of the prevalent Import Policy Order:

Provided that where any of the above option is allowed, the Regulatory Collector shall reduce equivalent quantity of output goods or input goods as the case may be. by feeding them into PACCS as per Appendix II.

The appellant chooses sub-clause (c) of clause (2) of Rule 307A andtakeouthimselffromthemechanismofDTREuserunderclause (c) of Rule 307A. The authorities allowed appellant vide letter No.tech-01/99/Part-II, dated 11.06.2014 for local sale on payment of duties and taxes leviable at the time of such sale. The question arises that what are the leviable taxes and duties at the time of sale, which are to be paid by the appellant. The appellant is a manufacturing unit, and imported Polyester fiber staple. Serial No.124 of table (ii) under H.S.Code No.5503-2010 of S.R.O. 567(I)/2006, dated 05.06.2006 provide customs duties @6% on polyester not exceeding 2.22 decitex at the time of sale. The same S.R.O. 567(I)/2006, 05.06.2006 was inserted as subsection (1A) of section 18 of the Customs Act, 1969, which is reproduced below:--

18. Goods dutiable.- (1) Except as hereinafter provided, customs duties shall be levied at such rates as are prescribed in the First Schedule or under any other law for the time being in force on,-

(a) goods imported into Pakistan; (b) goods brought from any foreign country to any customs station, and without payment of duty there, transshipped or transported for, or thence carried to, and imported at any other customs station; and (c) goods brought in bond from one customs station to another.

105(1A) Notwithstanding anything contained in subsection (1), customs duties shall be levied at such rates on import of goods or class of goods as are prescribed in the Fifth Schedule, subject to such conditions, limitations and restrictions as prescribed therein.

15.The conditions (i) and (ii) of S.R.O. No.1125(I)/2011, dated 31.12.2012 issued under section 4 of the Sales Tax Act of 1990, provide leviable sale tax @ 1% for manufacturer. The appellant already paid 2% which otherwise was not payable for being import made by an importer of textile unit in terms of conditions (i) and (ii) of SRO No.1125(I)/2011, dated 31.12.2012. The said S.R.O. Notification is reproduced as under:--

S.R.O.1125(I)/2011, dated 31.12.2011. In exercise of the powers conferred by clause (c) of section 4 read with clause (b) of subsection (2) and subsection (6) of section

3, clause (b) of subsection (1) ofsection 8 and section 71 of the Sales Tax Act, 1990, and in supersession of its Notification No.S.R.O. 1058(I)/2011, dated the 23rd November, 2011, the Federal Government is pleased to notify the goods specified in columns (2) of the Table below under the PCT heading numbers mentioned in column (3) of the said Table, including the goods or class of goods mentioned in the conditions stated in this notification, to be the goods on which sales tax shall, subject to the said conditions to charged at zero-rate or, as the case may be, at the rate of five per cent, whenever applicable to the extent and in the manner as specific in the aforesaid conditions, namely:--

Including in TABLE from Serial No.1 to Serial 128.

Conditions

(i)The benefit of this notification shall be available to every such person doing business in textile (including jute), carpets, leather, sports and surgical goods sectors, who is registered as:--

(a)manufacturer;

(b)importer;

(c)exporter; and

(d)wholesaler;

(ii)on import by registered manufacturers of five zero-rated sectors mentioned in condition (i) above, sales tax shall be charged at the rate of zero per cent on goods useable as industrial inputs;

(iii)the goods imported by, or supplies made to manufacturers, other than manufacturers mentioned in condition (i) above, shall be charged, sales tax at the rate of five per cent;

16.S.R.O. No.1125(I)/2011 has been inserted in the Income Tax Ordinance, 2001 (XLIX of 2001) by SRO No.2012(I)/2013.

S.R.O. 2012(I)/2013:-In exercise of the powers conferred by subsection (2) of section 53 of the Income Tax Ordinance, 2001 (XLIX of 2001), the Federal Government is pleased to direct that the following further amendment shall be made in the Second Schedule to the said Ordinance, namely:--

2. In the aforesaid Schedule, in Part-II, after clause (9B), a new clause shall be inserted, namely:-

"(9C) Tax under section 148 shall be collected at the rate of 1% in case of manufactures and 3% in case of commercial importers covered under Notification No.S.R.O. 1125(I)/2011, dated the 31st December, 2011.

In view of the above Section (9C), the payable Income Tax is @ 1%.

17.The allegation that appellant has availed the benefits/concessions/ exemptions of two such scheme simultaneously is misconceived as if the appellant had been availing the benefits of DTRE scheme, appellant would not have needed to avail the benefit of 5th Schedule of Customs Act, 1969, and of the S.R.O. 1125(I)/2011 and clause (9C) of Part-II of the Second Schedule of Income Tax Ordinance, 2001. Under DTRE no customs duty or Sales Tax or Income Tax was payable. It is also worthy to mention that appellant duly informed the Collector Customs videletter No. Nil, dated 09.04.2014, of his inability to avail the benefits of DTRE scheme and the Collector Customs permitted the appellant to dispose of the goods. Thus from the above, it is abundantly clear that the appellant has not availed two benefits/concessions; exemptions at the same time.

18.The letter C.No.4(29)DTRE/2010-64766-R, dated 07.05.2012, of the Secretary (Duty Remission and Drawback) is of no concern to the case of the appellant and is not relevant to the facts, law and circumstances of the case. In presence of law, rules and notifications/ SROs, the letter dated 07.05.2012 has no legal standing to add explanatory notes or to interpret any matter. Levy of the customs duties will depend upon on the language used in the notification, and the Board has no legal standing to add explanatory notes or to interpret notification, once they have been issued and rights of the parties have been created from the general reading. The statutory rate of duty and leviable taxes are both statutory. It is to be seen that which one is applicable to the case of the appellant. In view of the above stated discussions this letter has no relevancy with the case of the appellant.

19.Besides, the above discussions the Show-Cause notice was issued on 18.12.2015 and the impugned order was passed on 29.09.2016 which is after more than 270 days of the issuance of Show-Cause notice. Subsection (3) of Section 179 of Customs Act. 1969 provides; "that the cases shall be decided within 120 days of the issuance of Show-Cause notice or within such period extended by the Collector for which reasons shall be recorded in writing, but such extended period shall in no case exceed 60 days."

20.The learned lower fora has failed to examine the law on subject and not applied its independent mind by ignoring the mandate of law. According to Article 4 of the Constitution of Islamic Republic of Pakistan, 1973 every person has to be dealt in accordance with law and it is an inalienable right of every citizen to be so dealt with. The order dated 29.12.2016 is not within time frame provided by subsection (3) of section 179 of the Customs Act, 1969.

21.The arguments of the learned representative of the respondents that the technicalities of law should not be allowed to impede the interest of justice or should become an insurmountable hurdle for that purpose, suffice it to say that the mandate and compliance of law is not a technicality, rather it is a stipulation of law, which has to be adhered and complied with letter and spirit. I find it conspicuously contrary to Article 4 of the Constitution of Islamic Republic of Pakistan, 1973 that the law has not been taken into account by the learned Collector (Adjudications), Islamabad. Thus the impugned order passed by the learned Collector of Customs (Adjudications), Islamabad is not in accordance with law.

22.In view of the above discussions, I accept this appeal and set aside the order dated 29.09.2016 of the Collector of Customs (Adjudication), Islamabad.

Sd/-

(Syed Sardar Hussain Shah)

Member (Judicial)

Najeeb-ur-Rehman Abbasi for Appellant.

Musa Khan, Superintendent, M.C.C. Peshawar on behalf of Respondent/Department.

Date of hearing: 26th June, 2018.

DR. SYED MUHAMMAD ANWER, MEMBER (JUDICIAL).---Musa Khan, Superintendent representative of the M.C.C., Peshawar present in the Court has admitted the Federal Board of Revenue (FBR) clarification issued vide letter No.4(29)/DTRE/2010-64766 dated 07.05.2012 has been withdrawn vide Board's clarification bearing No.4(29)/DRD/2010-48357 dated 13.04.2018. He has further admitted that Department has no objection if the appeal is accepted.

In view of the above admission of the Departmental Representative, this appeal is accepted, the impugned Order-in-Original No.92 of 2016 dated 29.09.2016 passed by Collector (Adjudication) Islamabad is set aside and the case is disposed of in above terms.

Sd/-

(Dr. Syed Muhammad Anwer)

Member (Judicial)

HBT/48/Tax(Trib.)Appeal accepted.