SHAUKAT SOAP AND GHEE INDUSTRIES (PVT.) LTD., GUJRANWALA VS ADDITIONAL COLLECTOR OF CUSTOMS (ADJUDICATION), GUJRANWALA
2019 P T D (Trib.) 50
[Customs Appellate Tribunal]
Before Omar Arshad Hakeem, Member (Judicial) and Imran Tariq, Member (Technical)
Messrs SHAUKAT SOAP AND GHEE INDUSTRIES (PVT.) LTD., GUJRANWALA
Versus
ADDITIONAL COLLECTOR OF CUSTOMS (ADJUDICATION), GUJRANWALA
C.A. No.125/LB of 2016, decided on 28/04/2017.
(a) Customs Act (IV of 1969)---
----Ss. 18, 32, 79, 80, 156(1)(12-A), 194-A & 202---DTRE Rules, Rr.337-A & 337-F---Object of 'DTRE' Scheme---S.R.O. No.450(I)/ 2001, dated 18-6-2001---Recovery of evaded duties and taxes---Appellant unit acquired 'DTRE Approval' for duty and taxes remitted in import of one of its raw materials i.e. inedible tallow' for the purpose of consumption in Laundry Soap---DTRE Approval was accorded on the condition of consumption of import revenue remitted merchandise in export to Afghanistan---Non-compliance with the condition laid out under 'DTRE Scheme', triggeredrecoveryproceedingswhichwascrystallizedbyforumsbelow---DTRE Scheme was wrapped round duty and tax remission for the purpose of exports---Object of DTRE Scheme was to neutralize the incidence of duty and taxes on the imported or locally procured content of the export product---Neutralization was provided by way of grant of duty and tax remission against the exported goods, subject to fulfilment of certain mandatory condition, stipulated thereunder---Objective condition embodded in said scheme was that the remitted goods be consumed in exported merchandise---Legislative logic behind those remissions was to assist the genuine bona fide exporters to become more competitive and thus enhance the annual foreign exchange earnings of the country---When the appellant unit voluntarily opted for Duty and Tax Remission Scheme and undertook to abide by the conditions stipulated under it ipso facto waived the provisions of S.32 of the Customs Act, 1969; through application of 'doctrine of waiver' and was absorbed in the schematics of 'DTRE Scheme' and the conditions and recovery provisions entailed thereunder---Liability to return duty and taxes arising subsequent to the date of clearance of goods on account of infringement of the conditions stipulated under the 'DTRE Scheme', was akin to continuing obligation and the date of clearance of the goods, could not be the date for determining limitation---In the light of the recovery provision enshrined under Rr.307-A, 307-E of the DTRE Rules, the date for raising demand, could be counted only from the date of show-cause notice when infringement was alleged---Shield of limitation constructed by appellant against impugned demand being based on gross misinterpretation of law, was rejected---Recoveries, effected through the impugned show-cause notice being unaffected by the shackles of limitation, were held to be in accordance with law---Appeal was dismissed; impugned order-in-original was upheld and authorities were directed to enforce recoveries of the evaded/adjudged duties and taxes, along with default surcharge/additional duties under S.202 of the Customs Act, 1969 and penalty under S.156(1)(12-A) of the Customs Act, 1969.
(b) Words and phrases---
----"Remission"---Meanings, explained.
Webster's Third New International Dictionary (Unabridged) and Black's Law Dictionary ref.
Abu Zar for Appellant.
Muhammad Jamil, Audit Officer for Respondent.
JUDGMENT
OMAR ARSHAD HAKEEM, MEMBER (JUDICIAL).---This judgment shall dispose of an appeal filed against Order-in-Original No.116/2016 dated 25.04.2016 passed by the learned Additional Collector of Customs, (Adjudication) Lahore.
2.Precise facts of the core controversy involved in the instant appeal are that during scrutiny of DTRE Approvals No. GJN/ 3749/ 02072010 dated 02.07.2010 and GJN/3855/25082010 dated 25.08.2010 granted to Messrs Shaukat Soap and Ghee Industries (Pvt.) Limited, Gujranwala, it was observed that the DTRE user applied for DTRE facility on the basis of contract. The DTRE user furnished reconciliation statement under Rule 307D of the DTRE Rules. It was further observed that shipping Bill No. 11321 dated 23.09.2010 has been filed by the DTRE user under S.R.O. 212(I)/2009 dated 05.03.2009 for claim under rebate and examination report of Shipping Bill also confirms that this consignment is a claim under rebate. The detecting agency called for records but the appellant did not comply, therefore the appellant was charged with various violations of DTRE Scheme. Accordingly, a show-cause notice was issued for contravention of the provisions of Section 32(3A) of the Customs Act, 1969 further read with Sections 3, 6, 7, 11, 22 and 26 of the Sales Tax Act, 1990, Section 14 of the Federal Excise Act, 2005 and Rules 306, 307, 307A, 307C, 307D and 307E of Sub-chapter (7) of DTRE Rules notified vide S.R.O. 450(I)/2001 dated 18.06.2001 for recovery of duties and taxes amounting to Rs.21,17,963/- (Customs Duty Rs. 5,03,498/-, Sales Tax Rs. 12,18,465/-, Special FED Rs. 55,385/-, Withholding Tax Rs.3,40,616/-) along with default surcharge/additional duties (to be calculated at the time of payment) under Section 202A of the Customs Act, 1969 read with Section 205 of the Income Tax Ordinance, 2001, under Section 34 of the Sales Tax Act, 1990, punishable under clause 156(1) of the Customs Act, 1969 and Section 33 of the Sales Tax Act, 1990 read with DTRE Rules 307A of the Customs Rules, 2001 issued vide S.R.O. 450(I)/2001 dated 18.06.2001. The adjudicating proceedings culminated into passing of an order-in-original, which reads as under:--
"In view of the above. I am of the opinion that charges as mentioned in the Contravention Report No. 13/2015 dated 18.11.2015 issued under endorsement C. No. PCA/LHR/ DTRE/I1/2014/80/1705 dated 18.11.2015 stand established against the respondent. I therefore order for recovery of the short paid duty/taxes amounting to Rs. 21,17,963/- along with default surcharge/additional duties under section 202A of the Customs Act, 1969. A penalty of Rs.15,000/- (fifteen thousand rupees only) is also imposed on the importer under Section 156(1)12A of the Customs Act, 1969."
3.Being aggrieved from the aforesaid order of the Additional Collector of Customs (Adjudication), Lahore the appellant has filed the instant appeal before this Tribunal.
4.During the course of hearing before us the sole point stressed by the learned counsel for appellant is that of limitation, precisely speaking the learned counsel has argued that the impugned demand is barred by time as the show-cause notice was issued even beyond the enlarged limitation period of five years envisaged under Section 32 of the Customs Act, 1969, with context to the threshold date for calculating the limitation period he explained that the same would be calculated from the date of import clearance of remitted merchandise. Conversely the departmental representative refuted appellant's stance and averred that the objects of limitation envisaged under Section 32 of the Customs Act, 1969 cannot empower recoveries triggered by later stage breaches of conditions of DTRE Scheme specially whence the corporate guarantees securing the remitted amounts had been tendered by the appellant unit which in the instant case were still with the department. To bolster his stance he also placed reliance on a judgment of this Tribunal rendered in C.A. No. 568/LB/2015 dated 29.06.2016.
5.We have given our anxious considerations to the contentions of both the parties and perused the records.
6.Brief portfolio of the case is that appellant unit a renowned manufacturer of soap acquired a DTRE Approval for duty and tax remitted imports of one of its main raw material i.e. inedible tallow for the purpose of consumption in Laundry Soap. The DTRE Approval was accorded on the condition of consumption of import revenue remitted merchandise in exports to Afghanistan, however non compliance with the conditions laid out under the DTRE Scheme triggered recovery proceedings which was crystallized by the forums below, hence this appeal.
7.When we look at the taxonomy of DTRE Scheme, it is seen that the same is wrapped around duty and tax remissions for the purposes of exports; The term 'remission' as per Webster's Third New International Dictionary (Unabridged) means, cancellation or relinquishment of the whole or a part of a financial obligation, voluntary release of a debt or claim to a debtor or person liable to a creditor or claimant having legal capacity to alienate; relief from a forfeiture or a penalty. In Black's Law Dictionary, remission is described as a cancellation or extinguishment of all or part of a financial obligation. In context of conventional remission, under Civil Law, it is understood as remission expressly granted to a debtor by a creditor having capacity to alienate.
8.The mechanism devised under the DTRE Scheme enables import or local procurement of duty and tax free inputs for export purposes, the objective of DTRE Scheme is to neutralize the incidence of duty and taxes on the imported or locally procured content of the export product. The neutralization is provided by way of grant of duty and tax remission against the exported goods, subject to fulfillment of certain mandatory conditions, stipulated thereunder.
9.The pivotal question which crops up out of appellant's assertions is as to whether subsequent to breach of conditions of DTRE Notification the delinquent can claim immunity under the umbrella of limitation prescribed under Section 32 of the Customs Act, 1969.
10.It is seen that DTRE Scheme prescribed under sub-Chapter (7) to SRO 450(I)/2001 dated 18.06.2001 contemplates demanding of duty in the event of non-compliance with the conditions stipulated therein (Rule 307-A ibid). It also provides under Rule 300(2)(a) ibid for execution of a bond or guarantee of the remitted amounts by the claimant to enable the department to make recovery in terms of such bond or guarantee.
11.An overview of the Scheme would reveal that the objective condition embedded therein is that the remitted goods be consumed in exported merchandise, it thus is clear that the legislative logic behind these remissions is to assist the genuine bona fide exporters to become more competitive and thus enhance the annual foreign exchange earnings of the Country.
12.When the factual matrix of instant case is examined in the aforementioned perspective, it is seen that the appellant unit had availed conditional remission of customs duties and taxes under the DTRE Scheme and the neutralization of remissions on non edible tallow could solely be availed on its consumption in exported Laundry Soap. In line with the precondition of Rule 300(2)(a) of DTRE Scheme appellant unit had also tendered corporate guarantees indemnifying the remitted amounts of duties and taxes and promised to abide by the conditions entailed under the Scheme however, manifestly it did not abide by the Scheme, it failed to consume the remitted raw material in exported merchandise.
13.We are of the considered opinion that whence the appellant unit voluntarily opted for Duty and Tax Remissions Scheme and undertook to abide by the conditions stipulated under it ipso facto waived the provisions of Section 32 through application of doctrine of waiver and was absorbed in the schematics of DTRE Scheme and the conditions and recovery provisions entailed thereunder.
14.A question then arises as to whether the recovery of escaped duties and taxes is traceable solely to Section 32?
15.We have travelled through the whole gamut of charging, assessment and recovery provisions devised under the Customs Act, 1969 and it is seen that the charging provision i.e. Section 18 authorizes imposition/levy of customs duty, while Section 79 read with Section 80 specifies the procedure for assessment of merchandise and subsection (3) to Section 80 confers upon the Officer of customs to reassess the imported goods for duty if at a later stage it is found that the assessment made at the instance of importation was pivoted upon mis-declaration. A further reading of the Act of 1969 revealed that Section 202 ibid is the provision which actually deals with the recovery of sums due to the state exchequer; Thus a combined scrutiny of the impugned provisions brings us to the conclusion that jurisdiction of a Customs Officer to effectuate proceedings for recovery of duties and taxes which have escaped collection is not traceable to Section 32 ibid rather to Section 202 ibid.
16.The Hon'ble Supreme Court of Pakistan when faced with a similar situation in a judgment reported as 2012 SCMR 1860 ruled as follows:--
"We are of the opinion that since the exemption which was granted was a contingent exemption, it can be assumed that the appellant was liable to pay the duties unless he fulfilled the conditions on which the exemption was contingent and not fulfilling these conditions was violation thereof will render them liable to pay the Government dues on the date of the clearance and there is no time limit for collection of such Government dues. We are therefore of the considered opinion that even the show-cause notice or the order-in-original was not needed to collect these dues and a simple demand notice would have suffixed. We, therefore, hold that the action leading to the recovery of the disputed dues was not barred by the period of limitation."
17.In light of what has been discussed, we hold that the liability to return duty and taxes arising subsequent to the date of clearance of the goods on account of infringement of the conditions stipulated under the DTRE Scheme is akin to a continuing obligation and the date of clearance of the goods cannot be the date for determining limitation. We are of the considered opinion that in light of the recovery provision enshrined under Rule 307-A Ibid 307-E of DTRE Rules, the date for raising such demand can be counted only from the date of show-cause notice when infringement is alleged, thus the shield of limitation constructed by the learned counsel for appellant against the impugned demand being based on gross misinterpretation of law stands rejected/ Shattered.
18.Upshot of the above discussion is that the recoveries effectuated through the impugned show-cause notice being unaffected by the shackles of limitation are held to be in accordance with law, consequently the instant Customs appeal is dismissed, impugned order-in-original is upheld and the respondents are directed to enforce recoveries of the evaded/adjudged duties and taxes amounting to Rs.21,17,963/- along with default surcharge/additional duties under section 202 of the Customs Act, 1969 and penalty of Rs.15,000 under section 156(1)12A of the Customs Act, 1969.
19.Parties be informed through registered post A.D. or by UMS.
20.File be/consigned to record after completion.
HBT/89/Tax(Trib.)Appeal dismissed.