DEANS INDUSTRIES VS COLLECTOR OF CUSTOMS (ADJUDICATION)
2019 P T D (Trib.) 281
[Customs Appellate Tribunal]
Before Syed Sardar Hussain Shah, Member (Judicial)
Messrs DEANS INDUSTRIES
Versus
COLLECTOR OF CUSTOMS (ADJUDICATION) and another
Appeal No. Cus. 349/PB of 2015, decided on 25/09/2018.
Customs Act (IV of 1969)---
----Ss. 3-DD, 25, 32, 79, 80, 156 & 180---Determination of customs value of goods---Mis-declaration---Recovery of short payment of duty/taxes---Audit team after scrutiny, pointed out short payment of duty/taxes on import/clearance of non-woven fabric---Contravention case was lodged against the importer---Validity---Importer in goods declaration had given the classification under PCT heading 5603-1100; quantity and value was also mentioned correctly, which was not objected to by the Officer under S.80 of the Customs Act, 1969---Goods assessed by the competent officer, were out of charge and consumed by the importer, at the stage when goods were non-existent and department had failed to draw a sample of goods at the time of examination, which could have been subjected to laboratory test, there was no method for determination of classification---Value was also declared correctly under S.25 of the Customs Act, 1969---Post clearance audit was conducted by the staff of port, which was void ab initio and coram non judice---Impugned order-in-original was passed after more than 9 months of issuance of show-cause notice; whereas order-in-original was to be passed within 120 days of the issuance of show-cause notice, extendable by 60 days by the Collector of Customs (Adjudication), but in the case Collector of Customs (Adjudication) had not extended any time and impugned order was passed beyond the time limit---Limitation provided under S.79(3) of the Customs Act, 1969 was mandate of law---Every person had to be dealt with in accordance with law---Stipulation of law had to be adhered to and complied with in letter and spirit---Appeal was allowed and impugned order was set aside.
Danish Ali Qazi for Appellant.
Muhammad Zahid, Superintendent/D.R. and Javaid Iqbal, Apraiser for Respondents.
Date of hearing: 25th September, 2018.
JUDGMENT
SYED SARDAR HUSSAIN SHAH, MEMBER (JUDICIAL).---This appeal is directed against the Order-in-Original No.33 of 2015, dated 28.04.2015 of the Collector of Customs (Adjudication), Islamabad, wherein order was passed for the recovery of short payment of duty/taxes to the tune of Rs.3,812,260/- from Messrs Deans Industries, Industrial Estate, Hayatabad, Peshawar (hereinafter called appellant).
2.Briefly stated facts of the case are that, an audit team was constituted by Headquarter vide 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 the Import Section of Dryport, Peshawar for the period from July, 2013 to March, 2014. After scrutiny of WeBOC data, the audit team vide audit Observation No. 03 pointed out that short payment of duty/taxes on import/clearance of non-woven fabric falling under PCT heading 5603.1100, 5603, 1200 and 5603. 1300 due to application of incorrect assessable value. As per audit observation non-woven fabric was imported/cleared and was assessed to duty/taxes on the basis of evidential value @ ranging from US$ 0.75 to US$ 1.34.
3.On consultation of WeBOc data, it was observed that the evidential assessable value of the item as stated above, applied at Peshawar Dryport during the period under audit was not corresponding with the one applied in other Collectorates across the country, where the item in question was assessed to duty/taxes on the basis of value @ 1.70 Kg at the minimum. The above calculation is bases on the lowest rate applied elsewhere in the country during the period under reference. Besides, the item namely "Hot Fix Tape for cloth tracing" correctly classifiable under PCT heading 3919-1090 attracting Customs duty @ 20% (FTA 16%) was misclassified under PCT heading 5603-1100 attracting CD @ 15% (FTA 12%).
4.The above under valuation and misclassification of the items resulted in short payment of duty/taxes to the tune of Rs.3,812,260/-, which were recoverable from the appellant and Clearing Agent namely Messrs Sharif Customs Agency, Namak Mandi, Peshawar and it was established that appellant and Messrs Sharif Customs Agency, Namak Mandi, Peshawar (clearing Agents) have evaded the amount of duty/taxes to the tune of Rs.3,812,260/-, by violating the provisions of Section 32 (3)(2A) of the Customs Act, 1969 and Section 3 of the Sales Tax Act, 1990, punishable under Section 156(1)(14) of the Customs Act, 1969 and Section 33 of the Sales Tax Act, 1990, which was recoverable from the Importer/Clearing Agent, besides taking penal action under the aforesaid provisions of law.
5.Subsequently, a Show-Cause Notice was issued to the appellant on 14.07.2014. The learned Collector of Customs (Adjudication), Islamabad, vide his Order-in-Original No.33 of 2015, dated 28.04.2015, ordered to the appellant to deposit the short payment of duty/taxes to the tune of Rs.3,812,260/-, into Government Treasury.
6.I heard Mr. Danish Ali Qazi, learned Advocate for the appellant as well as Mr. Muhammad Zahid, Superintendent/D.R along with Mr. Javaid lqbal, Appraiser for the respondents and perused the record of the case with their-able assistance.
7.In this case Deputy Collector Headquarter vide his Office Order C.No.Cus-PCA/02/2012/14146, dated 18.04.2014 constituted an audit team for post clearance of the Import Section of Dryport, Peshawar for the period from July, 2013 to March, 2014. The audit team after scrutiny of WeBOC data vide audit Observation No. 03 pointed out that short payment of duty/taxes on import/clearance of non-woven fabric falling under PCT heading 5603.1100, 5603. 1200 and 5603, 1300 due to application of incorrect assessable value. The audit team observed that the non-woven fabric was imported/cleared and was assessed to duty/taxes on the basis of evidential value @ ranging from US$ 0.75 to US$ 1.34.
8.On this report contravention case No.548(AO-3), dated 24.05.2014 was lodged by Superintendent of Customs Dryport, Peshawar, it is lodged that on the observation of audit team that the evidential assessable value of the item applied at Peshawar Dryport during the period under audit has not corresponding with the one applied in the Collectorates across the country, where it has been assessed to duty/taxes on the basis of value @ 1.70 Kg at the minimum. The Customs authorities' calculation is based on lowest rate. Beside this, the item namely "Hot Fix Tape For Cloth Tracing" correctly classifiable under PCT heading 3919-1090 attracting Customs duty @ 20% (FTA 16%) was misclassified under PCT heading 5603-1100 attracting CD @ 15% (FTA 12%). This under valuation and misclassification of the items resulted in short payment of duty/taxes to the tune of Rs.3,812,260/-, the allegations against the appellant is of less value declaration and misclassification. Section 79 of the Customs Act, 1969 is in respect of declaration and assessment, which is reproduced as under:--
Section 79. Declaration and assessment for home consumption or warehousing:-
(1) The owner of any imported goods shall make entry of such goods for home consumption or warehousing [or transshipment] or for any other approved purposes, within fifteen days of the arrival of the goods, by,--
(a)filing a true declaration of goods, giving therein complete and correct particulars of such goods, duly supported by commercial invoice, bill of lading or airway bill, packing list or any other document required for clearance of such goods in such form and manner as the Board may prescribe ; and
(b)assessing and paying his liability of duty, taxes and other charges thereon, in case of a registered user of the Customs Computerized System:
[Provided that if, in case of used goods, before filing of goods declaration, the owner makes a request to an officer of customs not below the rank of an Additional Collector that he is unable, for want of full information, to make a correct and complete declaration of the goods, then such officer subject to such conditions as he may deem fit, may permit the owner to examine the goods and thereafter make entry of such goods by filing a goods declaration after having assessed and paid his liabilities of duties, taxes and other charges.]
Provided further that no goods declaration shall be filed prior to ten days of the expected time of arrival of the vessel.]
(2) If an officer, not below the rank of Additional Collector of Customs, is satisfied that the rate of customs duty is not adversely affected and that there was no intention to defraud, he may, in exceptional circumstances and for reasons to be recorded in writing, permit, substitution of a goods declaration for home consumption for a goods declaration for warehousing or vice versa.
(3) An officer of Customs, not below the rank of Assistant Collector of Customs, may in case of goods requiring immediate release allow release thereof prior to presentation of a goods declaration subject to such conditions and restrictions as may be prescribed by the Board.
9.This Section makes the owner of the imported goods liable to enter such goods for home consumption or warehousing within 15 days of the arrival of goods by filing a true declaration of goods with complete and correct particulars of such goods duly supported by commercial invoice, bill of lading or airway bill, packing list or any other documents required documents for clearance of such goods in such form and manner as the board may process-able. Under Section 80 of the Customs Act, 1969, it is the duty of Customs Officer to satisfy himself whether the information given by the Importer. Under Section 79, is correct or otherwise. Under subsection (3) of Section 80 of the Customs Act, 1969 provides "action against the Importer if such declaration or document or any information so furnished is not correct." Section 80 of the Customs Act, 1969 is reproduced as under:--
Section 80.Checking of goods declaration by the Customs.---On the receipt of goods declaration under section 79, an officer of Customs shall satisfy himself regarding the correctness of the particulars of imports, including declaration, assessment, and in case of the Customs Computerized System, payment of duty, taxes and other charges thereon.
(2) An officer of Customs may examine any goods that he may deem necessary at any time after the import of the goods into the country and may requisition relevant documents, as and when and in the manner deemed appropriate, during or after release of the goods by Customs;
(3) If during the checking of goods declaration, it is found that any statement in such declaration or document or any information so furnished is not correct in respect of any matter relating to the assessment, the goods shall, without prejudice to any other action which may be taken under this Act, be reassessed to duty [taxes and other charges levied thereon].
(4) In case of the Customs Computerized System, goods may be examined [and assessed] only on the basis of computerized selectivity criteria.
(5) The Collector may, however, either condone the examination or defer the examination of imported goods or class of goods and cause it to be performed at a designated place as he deems fit and proper either on the request of the importer or otherwise.]
10.At the time of filing GDs under Section 79 of the Customs Act, 1969, the appellant given the classification under PCT heading 5603.1100, 5603. 1200, the quantity and value was also mentioned in the GDs correctly which was not objected by the Officer under Section 80 at that time. After assessment of goods by the competent officer, goods are out of charge and consumed by the Importer, thus, at this stage when goods are non existent and department has failed to draw a sample of goods at the time of examination, which could have been subjected to laboratory, there is no method for determination of its classification. The value was also declared correctly under Section 25 of the Customs Act, 1969. After that a Post Clearance Audit was conducted by the staff of Dryport, Peshawar under the direction of Deputy Collector of Customs Headquarter, Peshawar. However, Section 3DD inserted in the Customs Act, 1969, vide amendment brought through Finance Act, 2008, dated 26.06.2008, which provided for Directorate of Post Clearance Audit. The functions and powers of Directorate General of Post Clearance Audit are notified in S.R.O. 489(I)/2009, dated 13.06.2009, S.R.O. 500(I)/ 2009, 13.06.2009, S.R.O. 501(I)/2009, 13.06.2009, S.R.O. 502(I)/ 2009, 13.06.2009 and Customs General Order No.13/2008, dated 18.10.2008, which specify the organizational structure, functions, powers and rules of business for the Post Clearance Audit (PCA).
11.Paragraph "C", under the heading "Directorate of Post Clearance Audit (South), Karachi and (North) Lahore" of CGO No.03/2009, dated 13.06.2009, identify the cases and sectors where it may deemed appropriate to carry out post Clearance Audit as special case, which shall be routed for action through the office of the D.G, Post Clearance Audit, Islamabad. The same Sub-Para "C" is reproduced as under:-
Any Collector of Customs or the Director of the Post Clearance Audit may also indentify cases and sectors where it may be deemed appropriate to carry out post clearance audit as a special case. All cases so identified shall be routed for action through the office of the Director General, Post Clearance Audit, Islamabad.
Thus, according to this Para "C", the jurisdiction of Post Clearance Audit solely lies with Director General of Post Clearance Audit, Islamabad.
12.The above discussion means that Section 3DD in the Customs Act, 1969 inserted by the legislature, through which Directorate of Post Clearance Audit has been created and its officials had been delegated powers through Notifications, detailed in Para 9 supra for conducting audit of the importer under Section 26A of the Customs Act, 1969, which includes every aspects of the declaration made by the importer and assessment order passed by the competent authority of the Clearance Collectorate under Section 80 of the Customs Act, 1969 and Rules 438 of Sub-Chapter (III) of Chapter XXI of the Customs Rules, 2001, and upon finding discrepancy or any ambiguity in the declaration or contravention of law, audit observation shall be prepared and forwarded to the importer for clarification. If the importer fails to settle the issue, the issue may be referred to Collector of Customs (Adjudication) for issuance of Show-Cause Notice under section 32 of the Customs Act, 1969 and adjudication thereof under Section 180 ibid. In this case, a special Audit Team constituted by Deputy Collector (Hqr) of Customs for conducting the Post Clearance Audit, is illegal and without jurisdiction, and will render ineffective the formation of Directorate of PCA as well as legislation under Section 3DD of the Customs Act, 1969 and the powers delegated under S.R.O. 489(I)/2009, dated 13.06.2009, S.R.O. 500(I)/2009, 13.06.2009, S.R.O. 501(I)/2009, 13.06.2009, S.R.O. 502(I)/2009, 13.06.2009 and Customs General Order No.13/ 2008, dated 18.10.2008.
13.In the Show-Cause Notice, neither the GDs in question have not been mentioned, nor working of duty and taxes have been shown. The Representative referred to subsection (3A) of Section 32 of the Customs Act, 1969, that the Customs authorities can conduct an audit within a period of 05 years and there is no restrictions on the Director of Customs or Deputy Director of Customs for the conducting of audit. The contention of Departmental Representative is not tenable as sub-section (3A) of Section 32 of the Customs Act, 1969 is totally irrelevant to the matter in and i.e. "who can conduct Post Clearance Audit" and not at all circumvent the powers and functions of the Post Clearance office Directorate as envisaged under the law and rules. Moreover, the contentions of the Customs Representative that Collectorate of Customs Peshawar can conduct parallel audit other than the Post Clearance Directorate is also legally incorrect. It is astonish that how the Customs authorities in derogation of Section 3DD of the Customs Act, 1969 can conduct an audit. This type of act of the Respondents cannot be allowed to be perpetuated under any circumstances instead have to be crushed with full force for sustaining the integrity and independence of the different sovereign organs of FBR, therefore, Post Clearance Audit conducted by the staff of Customs Dryport Peshawar is void ab initio and coram non judice.
14.In this case a Show-Cause Notice issued on 14.07.2014 and Order-in-Original was passed on 28.04.2015 under Section 79(3) of the Customs Act, 1969, after a Show-Cause Notice, the order-in-original shall be passed within 120 days of the issuance of Show-Cause Notice extendable by 60 days by the Collector of Customs (Adjudication), but in this case the Collector of Customs (adjudication) has not extended any time, and order dated 28.04.2015 was passed beyond the time limit. The limitation provided under section 79(3) of the Customs Act, 1969, is mandate of law, every person has to be dealt with in accordance with law. The stipulation of law has to be adhered to and complied with in letter and spirit.
15.In light of the above discussion, this appeal is allowed and the impugned order is set aside.
HBT/88/Tax(Trib.)Appeal allowed.